Billion Dollar Dart Throwing

Facebook’s $2 billion bet on Oculus or $19 billion spend on Whatsapp or Google paying $3.2 billion for Nest — everyone is looking to find the next platform, argues Fred Wilson. Everyone is betting billions of dollars on trying to find what comes after mobile. Fred’s comments made me wonder: so are smartest minds of our time are as clueless about the future as rest of us?  (Also, Dave Winer has outline nine reasons why Zuck bought Oculus.)

Chuckles aside, is it that both Google and Facebook realize that there is only so much they can do with web-based advertising and ensuing revenue stream? If you ask me, that is the real story here — realization that there is a glass ceiling to advertising especially as we shift gears and move away from the old desktop advertising ecosystem to a smaller, pocketable ecosystem that is less prone to cheap optimization tricks and is also limited by available attention, that is getting increasingly fractionalized by dozens of services that keep popping up like mushrooms after monsoons. 

A friend explained that Oculus acquisition makes it easy for Facebook to tell a story about “cool” things the company is doing. In comparison to Google which is working on cool shit like driver less cars, robotics and Project Loon, Facebook looks decidedly uncool and one dimensional (advertising focused.) Oculus changes the perception of the company with potential employees. More importantly the company has perception of being focused on the future cool things. Wall Street values promise of the future and accords premium based on that. And that alone is worth a couple of billion dollars.

Responses

  1. Om Malik says:

    March 27th, 2014 at 3:32 pm Reply

    Greening, It would be great if more people actually rebelled against being “advertised” too and went for paid models. I for one, have no problems for paying for a service that makes my life easier.

  2. Jason Randell says:

    March 26th, 2014 at 8:35 pm Reply

    Is the purchase an “OppX” and therefore a factored and predetermined loss (R&D) on FB taxes? An educated gamble thus puts investors at ease while still remaining relevant?

    Conversely; more or less the same tactics taken by a16z that propelled them into 1st place in founder relevancy , while many other VC’s lead the market in total return to their GP’s?

    OM: What do you think?

    1. Om Malik says:

      March 27th, 2014 at 7:12 am Reply

      I don’t think those two are the same things, but I feel that future relevancy is important to everyone who depends on influx of fresh talent to keep growing their business.

      1. Jason Randell says:

        March 27th, 2014 at 7:44 am Reply

        True. The next question is how long can Zuck keep the OR team engaged. Will he fully assimilate their team/ tech or will he allow them to operate as a sub entity with its own budget, R&D, board and the like? It will be interesting to see what the future brings.

        1. Om Malik says:

          March 27th, 2014 at 9:12 am

          Given the history of Facebook, I am pretty sure they are going to be left alone and this free from any impact. My two cents

  3. Fred Wilson (@fredwilson) says:

    March 26th, 2014 at 4:53 pm Reply

    your friend is onto something with that thinking Om

    1. Om Malik says:

      March 27th, 2014 at 9:14 am Reply

      Thanks Fred. The interesting part of looking for the next platform is that when Apple went looking for a new platform, it looked at an old one and made it better. What is that we think these companies will make better. Historically Facebook and Google have been unable to create new markets and new behaviors, only took pre-existing behaviors and made them way better

  4. Peter Karceski (@PeterKarceski) says:

    March 26th, 2014 at 11:42 am Reply

    FB has the data, you can only reinvent the banner ad so many times to draw a few extra click throughs. Ad free is where things are headed. The disruption that will be the spark is a payment platform that processes small payments (i.e. $1) without the current 20-30% per transaction fee imposed by the incumbents.

    1. Om Malik says:

      March 27th, 2014 at 9:16 am Reply

      Peter

      payment innovation is something I believe will be done by Apple and Amazon as they have the mass market momentum to influence change in behavior.

  5. Palo Alto Data (@paloaltodata) says:

    March 26th, 2014 at 11:30 am Reply

    I agree with both you and Fred that it’s odd that there appears to be this sudden lurch by some influential big players to move beyond mobile, social and ads. Cloud and big data software infrastructure have both been “incubating” for the past 7+ years and are now finally emerging in a form that can serve as the foundation of a New Industrial Revolution that is going to reshape not only the physical world and its industries, but possibly also capitalism itself (see Jeremy Rifkin’s new book “The Zero Marginal Cost Society” coming out in a few days). Yesterday’s Google Cloud Platform announcements reinforce the view that many of us have had, that now is the time for this “new new thing”. In the next 12 months we’re going to see amazing new extreme-scale cloud data services emerging that are an innovative killer combination of internet of things, search, machine learning, and augmented reality technologies. I expect that we’re going to see a whole bunch of big new platforms as this New Industrial Revolution gets underway. Bill McColl.

    1. Om Malik says:

      March 27th, 2014 at 3:31 pm Reply

      Well said Palo Alto Data. I think we are going through immense change and generational transformation. I am not surprised that everyone is open to trying new things and new approaches in this time of change.

  6. Justin Adams (@justinfadams) says:

    March 26th, 2014 at 11:26 am Reply

    The question Google and Facebook have been answering over the last 10 years is how bad they can make the user experience of finding stuff, socializing, sharing photos, etc., before people will revolt. How much noise can they add to the system before it breaks?

    What many companies (Apple, Andrew Sullivan, Nest) have realized is that people will pay not to be harassed, and that it can be profitable. The problem, of course, is that Facebook and Google have trained people not to trust them, because their business model is typically at odds with what’s best for users.

    So, how can they foist a new platform on top of a rotten ad model?

  7. Greening (@rmsgi) says:

    March 26th, 2014 at 10:58 am Reply

    Also as advertising, branding, marketing and sales as we know it now is disintegrating. Cluelessness aside, selling as we know it now is going to change totally, I do not believe we are going to add a few billion easily influencable buyers anymore.

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