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Facebook and Google: The Race for the Next-Gen Communications Platform

Part 2: The battle lines are being drawn between the over-the-top (OTT) players and telecommunications companies

In Part 1, I looked at what could be behind Facebook's acquisition of WhatsApp and subsequent purchase of Oculus Rift. How are these seemingly different acquisitions related? There is no question that both Facebook and Google are in a race to build the next-generation computing/communications platform (after mobile) and the battle lines are being drawn between the over-the-top (OTT) players and telecommunications companies. After all, both Facebook and Google count on telcos to deliver services to their customer base. How will the WhatsApp and Oculus Rift acquisitions shape Facebook and impact the rest of the market including Google and mobile?

Facebook did not pay $19 billion for WhatsApp simply because it's an SMS replacement, a Skype and Twitter competitor, because it could grow its international subscriber base, or could attract customers among the coveted millennial demographic - although these reasons are icing on the cake. Facebook's WhatsApp acquisition was a shot across the bow to telcos: we will be masters of our own destiny and not be reliant on you to reach our customers. With the addition of voice calling to WhatsApp, this puts even more pressure on mobile providers who are already feeling the heat from WhatsApp, which has cost them billions in lost SMS revenue. Now, they have to worry about an even bigger impact on their bread and butter voice business if that follows a similar pricing pressure trajectory. With an already 450 million strong WhatsApp subscriber base added to Facebook's own customer base, Facebook has the ideal launch pad for the next-generation communications platform provided by Oculous Rift. While Facebook and Google have similar business (new subscribers and advertising revenue) and personal (secure a place in the history books) motivation that is driving both companies overall strategy, their approach is quite different.

Google Glass addresses the ubiquitous nature of communications, which started with the mobile phone. Google wants you to be able to communicate without taking your phone out and checking for messages, texting and more. In contrast, Facebook imagines a world where a computer has essentially removed you from the real world and placed you in a virtual world. While Glass enables users to text, receive messages, take pictures, record videos and chat, Oculus Rift provides users (remember that important Whatsapp subscriber base) with the opportunity to interact in a virtual online city. Think digital billboards, among other advertising opportunities. In a nutshell, the key distinction comes in the way these technologies are meant to be used: Google Glass wants to augment the real world by making technology and devices fade into the background, while Facebook wants to improve reality by eliminating it altogether. Google Glass thinks the real world is fine if you can speed it up and make it better with faster search and navigation - Oculus will put you in a room by yourself where you can communicate with people thousands of miles away, putting the real world out of your mind.

This difference in end goal is immediately apparent just in each product's design. Google Glass is slick and almost Apple-like in its appearance, and is convenient for everyday use, whereas Oculus Rift is bulky and is not likely to be worn outside. Google Glass may still look a little ridiculous for the time being if it's being worn in public, but nowhere near as ridiculous as Oculus - that is a virtual reality device only meant to be worn behind closed doors. Zuckerberg's comments on the acquisition provide additional support to the long-term Oculus play. "Strategically we want to start building the next major computing platform that will come after mobile. There are not many things that are candidates to be the next major computing platform. [This acquisition is a] long-term bet on the future of computing." He also views the technology as more than a device for video games, noting "Immersive virtual and augmented reality will become a part of people's everyday life."

So what can we conclude for Facebook's future? While gaming is a good place to start, there are many other future uses for virtual reality that can be imagined. With a growing developer community and partners, there is a myriad of applications that can be developed and monetized. With a user base of more than one billion and a growing and a shiny new virtual reality platform, Facebook might be ready for what's next. Imagine experiencing the FIFA World Cup, sharing adventures with friends or learning in a virtual world simply by putting your goggles on. This is Facebook, next generation. If it had to use its very deep pockets to acquire its way into this new world, so be it, but the social interaction with your online friends has the potential to become an addictive (and arguably scary) pastime.

Facebook and Google see the next generation computing/communications platform in a fundamentally different way. Glass makes your everyday life easier; the Rift enables you to escape it all together. Which approach will win remains to be seen, but what is a certainty is that we will see more ads along the way than anyone can possibly consume - just the way both companies planned it. They will see a new wave of revenue, but their motivations are now bigger. The money from ads ultimately fulfills much bigger ambitions. Whether that's simply a place in the history books or changing the world in a fundamental way, time will tell.

More Stories By Esmeralda Swartz

Esmeralda Swartz is CMO of MetraTech. She has spent 15 years as a marketing, product management, and business development technology executive bringing disruptive technologies and companies to market. Esmeralda is responsible for go-to-market strategy and execution, product marketing, product management, business development and partner programs. Prior to MetraTech, Esmeralda was co-founder, Vice President of Marketing and Business Development at Lightwolf Technologies, a big data management startup. Esmeralda was previously co-founder and Senior Vice President of Marketing and Business Development of Soapstone Networks, a developer of OSS software, now part of Extreme Networks (Nasdaq:EXTR). At Avici Systems (Nasdaq:AVCI), Esmeralda was Vice President of Marketing for the networking pioneer from startup through its successful IPO. Early in her career, she was a Director at IDC, where she led the network consulting practice and worked with startup and leading software and hardware companies, and Wall Street clients on product and market strategies. Esmeralda holds a Bachelor of Science with a concentration in Marketing and International Business from Northeastern University.

You can view her other blogs at www.metratech.com/blog.

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