Facebook is betting big on the future and plans to lose money in the process
By Caitlin McGarry
MacworldOCT 29, 2014 3:52 am PDT
quarterly earnings report, another slam dunk for Facebook. The company made $3.2 billion in the third quarter, up 59 percent year-over-year, and grew to 1.35 billion monthly active users. More than 700 million people check Facebook on their phones every single day. These are impressive numbers. But Facebook is about to toy with the hearts and minds of investors, shareholders, and analysts by spending the next year investing heavily in its passion projects: WhatsApp, Oculus, and Internet.org.
Facebook has proved that its advertising business is strong. The company makes money hand-over-fist every single quarter. But founder and CEO Mark Zuckerberg is more interested in the long-term, and unlike most execs, Zuck is happy to share what his priorities will be over the next three, five, and 10 years.
Internet.org is Facebook’s initiative to connect everyone in the world to the Internet. Since introducing the coalition and its plan last summer, Zuckerberg has trotted around the globe meeting with heads of state to champion the cause.
“Industry and governments are seeing expanding Internet access as one of their core priorities,” Zuckerberg said during Tuesday night’s earnings conferencecall with analysts. He noted that the
Internet.org app, which connects people in Zambia to basic services (including Facebook) via phones at no charge, is going to soon roll out to other countries.
A billion users for every app
Facebook dropped about $19 billion on
popular messaging service WhatsApp earlier this year, despite the fact that the network has its own standalone messaging app, Facebook Messenger. Zuckerberg seems to believe these apps can coexist—and that they’ll both reach 1 billion users in the next few years. But don’t expect either app to become a full-fledged business in the near future.
“For us, products don’t really get that interesting to turn into businesses until they have about a billion people using them,” Zuckerberg said during the earnings call. “Over a five-year time frame, we have a number of services that are well on their way to reaching a billion people: Messenger, WhatsApp, Instagram, search. I can’t think of that many companies or products that have multiple lines of products that are on track to reach and connect a billion people.”
He has a point.
WhatsApp and Messenger are both adding users at a fast clip, and are seeing similar growth in many of the same countries. Zuckerberg said that people use Messenger as an extension of Facebook and don’t check their messages immediately. WhatsApp serves as a replacement for traditional text messaging—it’s more of a real-time experience.
Oculus and other products
Facebook’s shopping spree earlier this year also
included Oculus, maker of virtual reality headset Oculus Rift (and current Samsung partner on Gear VR). Zuckerberg has said for months that Oculus is a long-term bet on the future of computing and that he doesn’t expect the headsets to be profitable for years. But Facebook is investing in Oculus to make sure it refines its product, starts shipping to consumers, and attracts developers who want to make great products for the headset.
“The strategy for Oculus is to help accelerate their growth,” Zuckerberg said. “They have two products, Rift on PC and Gear VR, and I’m really excited about both of them. It needs to reach a very large scale before it’ll be a meaningful thing as a computing platform. It’s hard to predict exactly, but I don’t think it’ll reach 50 to 100 million units in the next few years. When you get to that scale, that’s when it starts to become interesting as a business.”
Zuckerberg had a list of Facebook’s top priorities, and it’s…extensive. Everything from new ad technology and auto-playing videos to Instagram’s commercial opportunities and e-commerce partnerships are on the table, which is why Facebook Chief Financial David Wehner said 2015 will be a “significant investment year” for the social network. He cautioned that next year could see an increase in expenses up to 75 percent. Wall Street cringed at that number, but Zuckerberg could care less. He controls the company. Facebook is public, but the future belongs to Zuck—and it sure sounds interesting.