Facebook (NASDAQ:FB) plans to let Messenger, WhatsApp, and Instagram users message each other without separate sign-ups on each platform according to The New York Times. The three apps would remain separate, but an underlying unified messaging system would allow users on one app to contact users on another without leaving the app.
The move probably won't happen until late 2019 or early 2020, but it's already sparking privacy and security concerns. At the State of the Net conference, U.S. antitrust chief Makan Delrahim stated that the Justice Department would watch the convergence "with interest," but didn't say that it would block the move. The Irish Data Protection Commission also recently asked Facebook for an "urgent briefing" on the proposal, indicating that the integration could be scrutinized in the EU.
This decision seems to be a reversal of Facebook CEO Mark Zuckerberg's earlier pledge to keep Facebook, WhatsApp, and Instagram's ecosystems separate -- and could alienate users on those secondary platforms. So is Facebook making a fatal mistake by integrating these apps? Or is it a smart long-term play that ensures that the company dominates the social messaging market for the foreseeable future?
Revisiting Facebook's silo strategy
Facebook's decision to keep Instagram and WhatsApp in separate silos after their acquisitions enabled each platform to preserve a separate identity and serve specific groups of users. Instagram captured younger users and pulled users away from Snap's (NYSE:SNAP) Snapchat by cloning its features, and WhatsApp appealed to users who wanted a no-frills, lightweight messaging app.
On their own, Messenger, Instagram, and WhatsApp thrived. Messenger, which appealed to Facebook's core users, grew its monthly active users (MAUs) from 200 million in April 2014 to 1.3 billion by the end of 2017. Instagram's MAUs surged from 90 million in Jan. 2013 to over a billion MAUs last June. WhatsApp's MAUs rose from 200 million in 2013 to 1.5 billion in early 2018.
Facebook was also making progress with the monetization of each platform: It was expanding Messenger into a stand-alone platform with in-app games and services, and WhatsApp was gradually being monetized with new messaging tools, payment features, and Facebook-linked ads.
Instagram, meanwhile, was attracting brands, generating higher ad revenues, and creeping into the social shopping market with shoppable posts. Last year, KeyBanc Capital analyst Andy Hargreaves estimated that Instagram could generate 30% of Facebook's total ad revenue over the next two years, and account for nearly 70% of its new revenue growth by 2020.
Ignorance is bliss, until it's not
Last year, Spread Privacy reported that 57% of Americans didn't know that Facebook owned Instagram, and 50% weren't aware that it owned WhatsApp. That blissful ignorance likely insulated both apps from the fallout of the Cambridge Analytica scandal.
However, the addition of an "Open Facebook" button on Instagram and the introduction of Facebook ads linked to WhatsApp promoted the notion that all three apps are part of the same ecosystem. Therefore, the decision to let users on all three platforms message each other seemed like the next logical step -- especially since it could ensure that the apps' privacy and encryption standards were on the same page.
With a shared pool of user data, Facebook could also craft better targeted ads. This would be similar to Alphabet's (NASDAQ:GOOGL) (NASDAQ:GOOGL) Google's acquisitions of YouTube and Android, which are now tightly integrated into its advertising ecosystem with a single sign-on system.
Those ideas made sense to Facebook, which is struggling with sluggish user growth (especially in the US and Canada) after its privacy debacles over the past year. But it could also alienate a lot of WhatsApp and Instagram users.
Most WhatsApp users, who generally like the app's streamlined simplicity, probably don't want their contact lists populated by Facebook contacts. Younger Instagram users, who initially fled Facebook to avoid their parents, also probably don't need that integration. Simply put, Zuckerberg seems to ignore the fact that each of these messaging silos serves its own distinct purpose.
Dear Facebook, don't kill your golden geese
Facebook is inexplicably following Google's "me before you" mistakes in social media, in which it killed a long list of social media platforms (like Google+) by prioritizing data mining over user-friendly experiences.
Facebook risks repeating those mistakes by pulling WhatsApp and Instagram closer to its core network and alienating those users. It would be wise to monetize those platforms separately and give users an illusion of choice, but Facebook could kill these golden geese by removing the barriers between the apps and adding features no one asked for.
Check out the latest Facebook earnings call transcript.