IN HIS SPARE time Mark Zuckerberg likes to run. In 2016 Facebook’s boss pledged to cover 365 miles (587km) that year and, ever the overachiever, completed the challenge by July. He does not practise martial arts, but his almost discomfiting poise could lead you to mistake him for a master of something like aikido. That would be appropriate, for in his professional life Mr Zuckerberg is trying to turn his opponents’ energy against them.
When in early March he announced that Facebook would follow a “privacy-focused vision for social networking”, complete with encrypted messages that even the firm cannot peer into, observers interpreted this as a defensive move. Some discerned a belated response to outrage over privacy abuses on the world’s largest social network. Others saw the plan to knit together its instant-messaging services, chiefly Messenger and WhatsApp, as a way to make the company harder to break up, as some American politicians demand. Others still spied a ruse to escape liability for violent user content, now that Facebook would no longer be able to read any of it.
All three rationales probably played a part. Yet the firm’s “privacy pivot” is perhaps better seen as an aikido-like redirection of detractors’ momentum. Mr Zuckerberg’s speech at his firm’s annual developer conference in San Jose on April 30th suggested as much. Far from retreating, he is limbering up for a new contest—to reinvent social networking, this time around messaging. “The future is private,” he declared grandiosely. Though he might not admit it in public, he seems keen to turn Facebook into a Western version of WeChat, the Chinese messaging app whose array of mobile services, from payments to filing court paperwork, has made it ubiquitous in China—even if his recent pledge to store user information only in countries that respect the rule of law is an implicit admission that he has given up on the Chinese market, where Communist minders insist that Western firms must keep all data locally.
Older. And wiser?
Facebook’s core business is maturing, as its boss clearly sees. Its operating margins—42%, excluding $3bn set aside to cover an expected fine by America’s Federal Trade Commission for privacy violations—remain the envy of the tech world (see article). In the latest quarter revenue grew by 26% compared with the previous year, exceeding $15bn. But user growth is slowing. In some rich countries, especially European ones, it is flat. The young prefer social media which are more “intimate” and “ephemeral”, like Snapchat, which pioneered “stories”, messages and pictures that disappear after 24 hours—and which Facebook aped. More than 500m users of Instagram, Messenger and WhatsApp now post stories every day.
Mr Zuckerberg expects migration from the online “town square” to a digital “living room” to continue; stories may soon outnumber posts on Facebook’s newsfeed. The plan is to build it around WhatsApp, which already offers secure texting. It would let users find each other, pay digital and offline shopkeepers, or purchase a cornucopia of online services—perhaps one day using Facebook’s own currency. In time, the thinking goes, it may become as indispensable to Westerners as WeChat is in China.
Some elements of the new platform already exist; WhatsApp is testing a payment service in India. Others, such as new shopping features on Instagram, were launched in San Jose. All this falls short of a full-blown business plan. But the contours of Mr Zuckerberg’s vision are taking shape. The 34-year-old is proceeding more cautiously than in Facebook’s early years, when he was guided by the now infamous injunction to “move fast and break things”—but no less deliberately.
That is just as well, for “platform shifts” are tricky. Microsoft did not see smartphones coming and Facebook itself almost missed the rise of mobile apps. To succeed, it must clear a number of hurdles. The first is technical. Facebook wants an Instagram user to be able to send a note directly to a friend on WhatsApp. Creating a common phone book for these services, with a combined total of 2.7bn users and different source codes, presents a knotty problem for programmers. Chris Cox, one of Mr Zuckerberg’s top lieutenants, is rumoured to have left the company in March because he did not think it could be done (this week Mr Cox attributed his departure to “artistic differences” with his boss).
The second challenge is economic. WeChat could become the platform of choice on smartphones because China had no dominant app stores. Facebook must contend with incumbents such as Apple and Google. Since you can’t sell microtargeted adverts against encrypted messages your algorithms cannot see, the new platform will need a fresh way to make money. For all its ubiquity, WeChat is no cash cow (Tencent, its owner, makes most of its revenue from online games). Maintaining Facebook’s fat margins would require new revenue sources, such as charging businesses to contact users or taking a cut of any purchases, as credit-card issuers do.
Lastly, there are the entwined issues of privacy and competition. Mr Zuckerberg accepts that a lot of people dismiss Facebook’s sincerity here—his recent article in the Washington Post, imploring governments to regulate social media, notwithstanding. It will continue to collect plenty of data. Integrating these, and the underlying apps, could in turn enable Facebook to convert its dominance in public social networking into power over private messaging. This reminds seasoned competition regulators of Microsoft’s attempts to bundle its operating system with a web browser in the mid-1990s in a bid to control cyberspace. With the internet’s rise, the stakes today are bigger: no country wants one firm to become society’s de facto operating system.
Since its services cost nothing, Facebook says, it is not gouging users. It could argue that a single dominant social network is easier to police than lots of smaller ones and has greater financial and technical capacity to keep users safe from harmful content. And it would be a bulwark against WeChat, which might otherwise become a force outside China—bringing the Chinese surveillance state with it.
Indeed, Mr Zuckerberg’s Washington Post article looks like a bid to broker a 21st-century version of the Kingsbury Commitment of 1913, when AT&T, then America’s telephone monopoly, accepted government oversight and agreed to spin off some of its businesses in exchange for not being nationalised or broken up. The difference is that, unlike AT&T, Facebook’s reach extends beyond America and spans a growing range of industries, from advertising to finance. It must grapple with politicians, regulators and rivals. If enough opponents gang up at once, even the most gifted aikido master may struggle to fend them off.
This post was originally posted at https://www.economist.com/business/2019/05/02/mark-zuckerberg-wants-to-build-wechat-for-the-west.