Facebook (NASDAQ:FB) plans to unbundle its services due to the changing tech landscape. Some have speculated that Facebook is becoming more like Google+ (NASDAQ:GOOG) (NASDAQ:GOOGL). But nothing could be further from the truth.
According to MIT Technology review:
But three years into that effort it now looks more like Facebook is following Google+ than the other way round. At least, that's an implication of what Facebook CEO Mark Zuckerberg has begun saying about his strategy. In an interview with the New York Times last month he explained that his company is now working on "unbundling the big blue app." That means taking what Facebook has been up to now - a website or app you visit to see a feed of updates from friends and post your own - and splintering it into many separate and more specialized services.
Facebook becomes small yet practical
Facebook has been developing secondary applications from Facebook, like messenger, home, and etc. Sometimes Facebook acquires applications outright (WhatsApp, Instagram).
In the case of mobile, the user interface has to become specialized and simplified. The various form factors carry their different strengths and weaknesses, which forces application developers to design software that leverages the unique use-case of each separate web capable device.
For example, Facebook mobile is used to read status messages, Instagram is used to look at pictures, WhatsApp is used for group chat, and Facebook messenger is used for chatting. The good news? By separating these apps into more specialized services, Facebook has four apps that can work across mobile, wearables, laptops, and desktops. Specialization allows the user experience to carry over to other web capable devices.
Facebook's apps are better suited for communication
Facebook's social apps are extremely similar, but make no mistake they're different. Some alien from outer space would probably laugh at all the different applications that transmit text, voice, and video. But just because the same applications are capable of the same exact things, doesn't mean people will actually use them in the same way.
There are cases where private conversational dialogue is preferred, which is why Facebook designed a separate instant messenger app. Unlike SMS, instant messengers are far more responsive, giving users an experience similar to a real world conversation.
WhatsApp is intended for either group chat, or a way to send messages that can be transmitted and read at a later point. This makes it similar to a text message, but different from online chat. You can also form group chats, which gives it an added edge when compared to traditional SMS and messenger services (most users, use WhatsApp for its group chat functionality).
Facebook, completely ignores e-mail. Initially e-mail was used to communicate and share with friends. But now it's a promotional tool used by businesses. Furthermore, co-workers converse via e-mail, but friends don't. E-mail usage for business use is trending higher whereas personal use is trending lower, making it an "un-social" app. Also, there are tons of free e-mail clients making it harder to monetize.
Google attempted to integrate Gmail with Google+. Google+ never took off, and part of it had to with Google's mishmash of incompatible services. Maybe if Gmail was integrated with a service similar to LinkedIn, the concept might have worked better. But at the present moment, YouTube is fun, Gmail is boring, and Google+ is devoid of any practical utility.
Google allows users to have anonymous identities on YouTube. Google+ has a hard time integrating user's social lives, because anonymous user names co-exist with a person's real identity. Breaking out of this niche has become exceedingly difficult for Google. Either, Google remains a multipurpose entity that doesn't emphasize social, or it attempts to become more social, but alienates its core userbase in the process.
Comparing monetization strategies
Facebook hasn't really re-invented the wheel. The company has ads that look similar to billboard ads, or TV ads. Corporate to consumer communication via status message has become near non-existent. Facebook changed its algorithm so that only a small percentage of Facebook users can read status messages from companies or organizations.
Facebook wants the newsfeed to be a relevant source of information for people within a specific social circle. Therefore, users can read about a marriage, break-up, high school drama, that much sooner. The more messy the social feed looks, the better it gets. Of course, you have to throw in a couple ads here and there, but who cares? People are now able to see pictures of friends getting jacked up on Grey Goose, or look at the latest batch of selfies. Some people are writing poetry on their timelines, or quoting a script from a movie. It's rewinding Facebook back to the days where there weren't any ads, and people shared everything on Facebook.
Google+ on the other hand, lacks scale, or engagement. Advertising only works when you have eyeballs looking at your web page. Therefore, Google+ at best, is a profile that saves user preferences across Google search, YouTube, Google, news, e-mail, maps, navigation, and etc. It hardly has any sex appeal. Which is why Facebook is the reigning champ of social networking.
Google+ Versus Facebook
Overall, Facebook is becoming less and less like Google. Not only is the advertising strategy different. Facebook's priority as a social network has shifted from making user experiences centered around desktops and laptops to mobile devices. This requires Facebook to miniaturize the service into separate yet related applications.
Google+ on the other hand gets confused with Google's various other services, as almost nothing Google does has anything to do with social networking. E-mail is not a replacement for peer-to-peer communication, and Google doesn't have a rabidly successful messenger service, or newsfeed service that people want to subscribe to.
Therefore, Facebook is not a Google+ wannabe. Google is not a Facebook wannabe. The two companies will never converge on a path that make the two equivalent.
Thankfully, Google's business won't suffer in the event Google+ doesn't become a wildly successful social network. Google's ad business continues to grow, and closely integrates with some of its other services like analytics, and Gmail. Luckily, Google's ecosystem of web based services are appropriate for small, medium, and large businesses that want to advertise. Furthermore, the growth trajectory of the business looks relatively sound when compared to other web based properties like AOL (NYSE:AOL), and Groupon (NASDAQ:GRPN).
Facebook's growth trajectory is also soundly intact. As I have mentioned, Facebook's core niche is in social networking, and there's no other company that can offer a better suite of social applications that link to a central profile on the web. Furthermore, because Facebook's contact books can closely integrate with its ecosystem of social applications (Instagram, and WhatsApp), it's even more unlikely that any other competitor will miraculously reach Facebook's ever impressive scale.
Both companies operate sound businesses, but for extremely different reasons. I would recommend investors to own both, as they're stalwarts in their own respective space.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.