When Alexander the Great was fighting the Persian Empire in 334 BC, he led a fleet of Greek and Macedonian ships across the Dardanelles and into the Asia Minor. Persia was the strongest and most formidable enemy Alexander faced, and he knew that in order to succeed, he needed absolute loyalty and conviction from all of his troops. So, when he reached the shore, Alexander ordered his men to burn the ships. He told them, “We will either return home in Persian ships or we will die here.”
You might think it’s a bit hyperbolic to say that Mark Zuckerberg did the same thing last week with the rebrand from Facebook to Meta — Facebook doesn’t appear to be in a dire situation — but that’s not what he sees.
Apple’s recent IDFA changes illustrate how much control the iOS and Android platforms have over Facebook. Zuckerberg has been paranoid about these companies exerting their influence on the app stores for a while, and now that they’re doing just that, he sees no other way out than fighting them head on.
At a high level, the Meta rebrand is an attempt to pivot the entire company away from Facebook the application, and towards an entirely new business. Zuckerberg is doing what Satya Nadella did to Windows-dominated Microsoft. Microsoft isn’t focused on Windows anymore, and Meta isn’t focused on Facebook anymore.
The unstated, yet clear underlying intention of the Meta rebrand is that Facebook — now Meta — is going all-in on hardware. So much so that I’d bet money we will see a Meta-phone soon. Wearables aren’t powerful enough to work independently, which means they will be tethered to your phone. This wouldn’t be a problem if every company could plug into the iPhone or an Android phone seamlessly. But Apple has frequently shown that other hardware players don’t get to play on the same playing field. Try using non-Apple Bluetooth headphones, smartwatches, etc. and you’ll quickly see what I mean.
Meta has to create its own phone if it wants consumers to have full capabilities for its eventual smartglasses and smartwatches.
Zuckerberg has already shared the company is making more Oculus VR headsets, smartglasses, and smartwatches. On the Meta Keynote, he emphasized the company is going to commit billions, and a phone is a logical next step towards influencing the trajectory of the Metaverse — because hardware is the primary way we will interact with it.
The Apple of Eden
Apple won mobile because Steve Jobs’ primary focus was creating the most elegant personal computer. That vision didn’t work for the Mac, because PCs were an enterprise business. But people purchase phones, and that meant that the smaller touches mattered. Typography isn’t a consideration for companies, but it might be for everyday consumers.
But crucially — every tech company knows this now. Is that a large enough moat for Apple moving forward? As I like to say, does this Change the Calculus? There’s a difference between knowing something and doing it, but Google used Apple’s playbook for the Pixel 6 by bringing everything in-house (software and hardware). Microsoft has done that too with the Surface line. Meta has experience making hardware, and as it builds an OS for VR and AR, it’s certainly applying these very principles. This raises the possibility that the largest moat Apple has, its integrated design (which in turn fosters its ecosystem lock-in), may become irrelevant. Apple isn’t going anywhere, but it’s interesting to think about.1
I’m curious whether the Meta-phone will be a fork of Android, or if it will be a completely new operating system. The latter would be more challenging because that would require developers to make new apps — but Facebook is also pushing React Native coding language, which allows developers to write applications for iOS and Android simultaneously. Perhaps they could make these apps easily port to MetaOS? They’ve also been building the OS for Oculus, so maybe it becomes a hybrid approach? Or maybe they’ll start with an Android fork. Time will tell.
Facebook’s Mobile Woes
Facebook lost mobile because 1) it was a little too late, and 2) Zuckerberg thought people would be the center of a phone, not apps. Applications were more important for smartphones, but what about in the Metaverse? I’m not sure! Which is why this is interesting.
If VR and AR are more about connecting to people, then having billions of existing users already having profiles seems like sizable advantage.
Additionally, one of the prerequisites for a successful hardware launch (especially phones) is a first party messaging service. Meta just so happens to have the biggest one in the world (Messenger + WhatsApp).
But, the biggest question by far is: will this vision of the future work?
An Anti AWS Moment
Amazon spent years building its retail infrastructure before it found AWS. Once AWS emerged, the trajectory of the company changed. It went from high capex, low margin business model, to one with exceedingly comfortable margins.
Facebook already has a highly profitable business unit with its ads platform, and now it’s pursuing a business model that for the foreseeable future will be loss making. There’s also no guarantee it will be a high margin business in the long run.
That’s what makes last week so interesting to me. Facebook is facing substantial regulatory pressure and public scrutiny, but by financial measures, the company is primed for continued success. Those business units aren’t going away, but Meta is unquestionably the primary focus now.
No Turning Back
It’s hard to not overstate the enormity of this change. Zuck burned the boats, there’s no turning back now. He maintains majority voting power, and he’s putting all the eggs in this basket by committing billions (and many years) to realizing this vision. Whatever your thoughts on the founder or the company, this level of conviction is impressive. Especially considering the unfathomable amount of criticism from all sides (some warranted, some misplaced).
Zuckerberg doesn’t have to do this. Sergey Brin and Larry Page stepped away from Google, and I don’t think many people would have been surprised if Zuck decided to step away from day-to-day operations, especially after the past few years. But he isn’t, and if you actually watch the keynote, while parts of it are a little awkward, you can tell that he’s passionate about this. As we’ve seen with Tesla, it’s unwise to bet against a founder with an audacious vision who also has nearly unlimited access to capital and talent.2
Strategy is about navigating conflict whether it be in business or war. Winning means using every resource you have available to you in the most efficient way possible. Facebook’s resources are now being used to make the metaverse, because Zuckerberg thinks that failing to do so would mean the end of Facebook in the long run.
Silicon Valley is very aware of Disruption Theory and all the ways in which they usurped legacy tech behemoths as young startups. Understandably, their biggest fear is having that happen to themselves. For better or for worse, in order to try and avoid this fate, Zuckerberg is reorienting the entire company around a new mission, in order to make sure that no one is beholden to the old ways of doing things. It’s a true jockey bet, and one that will be studied for years to come.
Last week Zuckerberg burned the boats, and now win or lose, his company is joining him. Tech is getting a whole lot more interesting, and I for one am quite excited to see the beginning of the VR Hardware Wars.
Back in the 2010s, there was concern that lower-priced Android devices would erode Apple’s iPhone’s profits. That didn’t happen, and many analysts like to point to the fact that the iPhone’s operating system was much better, fluid, and easy to use. As an Android enthusiast, I have many qualms with this statement — I think much of the iPhone’s success can be tied to excellent marketing and iMessage. But the key thing to note is that low-cost options are appearing from Google, and soon Meta, that will be built using the same design and integration principles Apple has championed, meaning that low-cost options could be at parity to the iPhone. If that happens, then it’s very possible that the iPhone is impacted (assuming iMessage isn’t an important purchase consideration, maybe it won’t matter in the metaverse).
I have a lot of thoughts about how this plays out, and will try to elaborate further in another piece.
In full transparency, I own Meta shares, though they were purchased back when the company traded under the $FB ticker.