Digitalsoftw Perhaps it was mere coincidence that two senior Facebook Inc. (NASDAQ:FB) executives resigned in the wake of CEO Mark Zuckerberg’s announcement the company would be placing its future bets on private, encrypted, ephemeral communications. Do the departing executives know something we don’t?
By seeking to establish a private messaging and payment services platform, Facebook clearly wants to emulate the success and popularity of China’s WeChat messaging service. The difficulties the company would face in implementing such a private communication platform are pronounced and may prove to be insuperable.
First, even if the company is successful in diversifying or expanding its platform to partner with financial services firms for a payment system through the Facebook private messaging platform, the revenue generated from this new business operation is going to be a pittance compared to the Niagara Falls-type of cash flow it generates from selling users' private data to advertisers. Nothing Facebook pulls out of its hat is going to surpass or equal this money-making Leviathan. Ever
Second, Tencent’s (HKSE:00700) WeChat app was developed and flourished in an environment where it was sheltered by the Chinese government from any potential competition. WeChat also doesn’t provide the level of privacy many Facebook users would demand from a private messaging service. Additionally, given the social media giant’s continuing practices of abusing personal private data, few exiting users are going to rely on the promise their encrypted communications will remain private.
Third, another American company has already been dabbling in payment services. Has Facebook ever heard of Apple (NASDAQ:AAPL) Pay?
Facebook will encounter other challenges in its bid to diversify. Any new platform geared to expanding the Facebook messaging concept to payment services would have to be home-grown. Regulators are finally waking up to the fact that, for years, while they fiddled, the competitive tech marketplace burned. Facebook and Alphabet's (NASDAQ:GOOG) Google gained prominence by buying out competitors.
According to The Wall Street Journal, in the last decade, the five largest tech companies have made more than 400 global acquisitions, and none have been blocked in any jurisdiction. This isn’t laissez-faire, it's madness.
Although it may be too late to reverse the damage from the perspective of ensuring a more competitive business environment, some governments are rolling out new ideas to tame the tech companies hereto before untrammeled power.
As Greg Ip of The Wall Street Journal noted, in the U.K., the government recently released a proposal intended to circumscribe tech giants' threats to competition, while managing such a provision with a very light hand. The economic proposal does not address privacy issues in any way, but rather is an attempt to acknowledge digital markets do have characteristics that tend towards monopolization. A designated regulator would work with companies to voluntarily develop a code of conduct that would bar them from using their dominant market power over other players to stifle competition.