Fred Wilson posts a thoughtful piece
on 2014. Some of my own reactions, and then what that might mean for this new year:
1/ the social media phase of the Internet ended. this may have happened a
few years ago actually but i felt it strongly this year. entrepreneurs
and developers still build social applications. we still use them. but
there isn’t much innovation here anymore. the big platforms are mature.
their place is secure.
By this, I think Fred mostly means that there will be no new social networks beyond Twitter and Facebook, and such ventures are not going to be funded. He does not include messaging apps in this category as he talks about their growth explicitly in his next paragraph.
I think 2014 was the year Facebook fully evolved into AOL 2.0 and that's where it's going to stay (at least on the web. Who knows if it will launch a true messaging app, or do anything interesting with Whastapp or Instagram or Oculus). But Facebook itself has become essentially those email our grandparents used to send to each other (and us) of jokes, news stories, etc. Young people do not use it to communicate any more.
On the messaging side, the social graph is in the phone's address book, which means switching from provider to provider is very easy. This is where the young people are, and also where families and friends actually communicate. I think the monetization model here is still unclear -- interruptive display ads have usually not done well in a 1:1 communication medium, but I don't see metered pricing or bundled plans working either above and beyond what the carriers already charge (and which, these apps are a reaction against, particularly Whatsapp).
To this point, I think the money Facebook's been making on mobile is driven by display ads for paid downloads, particularly games, as that market is very aggressive at acquiring users because of how Apple's app store works. Being in the top 10 generates a large amount of additional traffic, because customers look at the top 10 list when figuring out what to buy, so it makes sense to spend a lot of money to get your revenues to where they need to be to break into that list, and then spend to stay there. This spend goes directly to whomever can deliver installs, and right now Facebook is the best channel in that market.
If other online destinations start beefing up their paid install market as well, and most importantly, if Apple supports proper discovery (or an ad market) then we'll see what happens to Facebook's mobile revenues as competition and inventory begin to drive down mobile ad rates.