Today Google has announce Google Fiber has started enrolling customers, so it is a no-brainer point to say that Google is interested to become your next phone carrier, both on land phones but also on your cell phone with Google Project Fi. What you may have not thought about is that Facebook tries to do the same, in a brilliant, indirect (i.e. thus more risky) strategy.
Facebook follows a reverse innovation strategy combined with the network effects power to beat the phone carriers in their own game.
Lately you may have read about Internet.org as a vehicle to give internet access to developing world where Facebook will be a basic internet application for users (and how India reacted on that), or about the Facebook Lite version of the largest social network as an application to give faster and cheaper access to users with small data plans or slow connections. Zuckerberg has even announced publicly that they have such intentions.
What you might have missed is Facebook’s acquisition of Ascenta, a solar, drone company back in 2014, and the announcement of test flights by Facebook in 2015. The acquisition of many compression algorithms like QuickFire Networks signal their interest to enter less technologically developed networks. Even Facebook’s greatest acquisition ever, the outstanding $22b deal (at the end) with WhatsApp (somebody believes it is the best deal ever), apart from a mobile strategy and a defensing tactical move against the chatting apps, was an entry point to many devices around the world and of course in their SMS/chat applications.
The interesting thing is that few believe that Facebook is going to make it, and this is the most brilliant part of their strategy. In the Internet.org deal, some of the greatest infrastructure companies have signed in, like Ericsson. As an Ericsson manager told me back in 2014 when the deal was up, after a Barcelona mobile conference he attended, “Facebook is like a kid that tries to play with its toys, we do the serious work on the antenna-level with algorithms to improve services on the network level while they want to use our technology to expand“. What this point misses is that Facebook -like a smart kid- absorbs more information and learns faster than its teacher, while it uses them as a vehicle to enter an anticipated market of billion of users.
Telecommunications have by definition strong social characteristics
“But still, you didn’t tell us why I may buy a service plan from Facebook” you might say. This is the best part in my opinion. Facebook follows a reverse innovation strategy combined with the network effects power to beat the service providers in their own game. In detail, as Facebook tests networking infrastructure in remote areas (like the Project Loon by Google) but no one expects to see soon such a solution in developed world. But in remote areas where a smartphone is the only access point to the internet, Facebook wants to capture those users, give them an access to the Internet through its platform, reduce the cost of media loading and subscribe them to its Facebook application with a social profile. In other words, each application or technology in the broader Facebook ecosystem works in favor of a dominance strategy in those areas. When Facebook will improve the networking technologies, after tested in extreme environments, while Google operates on high-end technological networks mainly. Facebook will be then able to enter also the mainstream markets of technologically developed world with their innovations on wireless networks; the definition of a disruptive innovation. And together with the technology will bring a community of billion of users to its existing products. Just brilliant… if it works.
So the question is who is going to win this race for vertical solutions in the telecommunication game. We will see what carriers will achieve in response to this threat with the net neutrality pressure, and how hardware companies (e.g. Ericsson, Huawei) will team up in this game. Google has taken the lead with a bigger cash pile and existing operational projects both in developed and developing world. Facebook follows a different approach as it plays its bet on the game it knows best; enter unsaturated markets and win through the virality of its offerings. At the end, telecommunications have by definition strong social characteristics… Let the battle begin!