Bots Could Give Facebook a Bigger Slice of the App Economy

Google and Apple Haven't Gone Down Bot Path as Far

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Credit: Michael Short/Bloomberg

Mark Zuckerberg has said that Facebook thinks a new product is ready to become a real business only once it has 1 billion users. The company's Messenger app isn't quite there yet -- Mr. Zuckerberg said on Tuesday the app has 900 million people using it each month -- but he's already started laying out his vision for the software's commercial future. And the future, it seems, is bots.

The kinds of bots Mr. Zuckerberg is referring to are software programs that can discern what people type in plain language, then provide an appropriate response. Mr. Zuckerberg said at Facebook's F8 developer conference in San Francisco that the company is rolling out tools that will allow other businesses to build such bots to live within Messenger. In one example he showed from the stage, a CNN bot sent out a daily news update and responded to a user's messages with information about a specific topic. In another, Mr. Zuckerberg requested a bouquet of flowers by sending a message to 1-800-Flowers.

Facebook has already lined up more than 30 partners, including Bank of America, Burger King, and Staples. This list gives perhaps a clearer picture of Facebook's moneymaking goals. If the company can coax people into ordering flowers, hamburgers, and office supplies by sending texts to helpful robotic assistants on Messenger, it becomes an important driver of commerce. And Facebook puts itself in a position to take a cut of those transactions someday.

The social network, however, hasn't yet outlined how it plans to make money from bots. Maybe it's waiting until Messenger actually gets to a billion users. "Today there is no revenue," David Marcus, the head of Facebook Messenger, said in an interview with Bloomberg TV's Cory Johnson on Tuesday. "Gradually, we'll build monetization on the platform."

Facebook's bot strategy goes beyond grabbing a cut of digital transactions. It's also a way to wrest more control of its users' mobile experiences away from companies such as Apple and Google, which make the dominant smartphone platforms. Before the shift to mobile apps, Facebook successfully carved out a slice of the software developer economy with FarmVille and other Web apps that live on the social network. Developers often complained of Facebook's control, and the company failed to convert its success to smartphones.

Facebook has been trying to claw back at this territory for years. The most direct attempt came in 2013 with Facebook Home, a special user interface for Android that replaced the home screen with a more Facebook-centric experience. Then as now, Mr. Zuckerberg criticized the current smartphone experience for being too reliant on apps. The company designed software built to reengineer the phone around people's social contacts, and it reached agreements with AT&T and HTC to sell devices preloaded with Facebook Home. The phones flopped.

It turned out that Apple's and Google's hold on the smartphone market is pretty strong. "Every spring Facebook holds F8 and says, 'This is what interaction on smartphones will look like!' and a few weeks later, Apple and Google say, 'Look, sorry, kid, but …' " wrote Benedict Evans of Andreessen Horowitz in October. "It's not Facebook's platform to change."

Mr. Evans thinks messaging could be different. Downloads of Messenger are growing faster than that of the main Facebook app, and it's added more than 100 million monthly users since January. In 2014, Facebook spent $22 billion on WhatsApp, a competing messaging service that crossed the billion-user mark in February. In the past year the company has begun to push Messenger beyond text messages to create a service that offers an increasing number of features for which people rely on their phones each day.

The more time Facebook can keep people locked into Messenger, the more Facebook becomes essential. This has worked in the past. Google undermined Microsoft by making web-based services that eventually lessened people's reliance on its competitors' services, said Jonathan Libov, an analyst at investment firm Union Square Ventures. "The really interesting question becomes, 'Is there any path by which Facebook becomes the black hole on iOS that Google was for Windows?' " he said.

At last year's F8 conference, Facebook opened Messenger up to developers, allowing them to start offering services within the app. The results haven't been earth-shattering. Many of the Messenger apps are gussied-up versions of emoticons, with names like MemeBlast ("Send awesome memes to friends!") or Effectify ("Grow old, get fat, be a zombie & more!"). Apps from recognizable tech companies either mimic the basic functions of their full apps, like Uber's, or redirect users to the actual apps, like Spotify and Tumblr. There's little advantage to using them within Messenger instead of just opening the app from a home screen.

Mr. Zuckerberg said Facebook wants to reduce the amount of work people have to go through to interact with businesses on their smartphones. "I've never met anyone who likes calling a business, and no one wants to have to install a new app for every service or business that they want to interact with," he said.

Bots could be the missing piece if Facebook can use them to make basic interactions more pleasurable than they are through standard smartphone apps. This is a big "if." It relies on two technologies with massive potential that have plenty of room for development: natural language processing and artificial intelligence. Last year, Facebook said it would start offering its own virtual assistant within Messenger, called M. People could simply type requests, and M would fulfill them. While it may feel like artificial intelligence, it relies on people to help make many of the decisions, which is one reason it remains available only to a limited population on a trial basis.

As a result, any imperial aspirations Facebook has for Messenger are likely to play out slowly. It's still early in a chatbot revolution, if one indeed comes to pass. Apple and Google haven't gone down the bot path with their own messaging systems. This could mean the companies are lagging behind or have simply decided this is a road they don't have to follow, said Mr. Libov. "It may be just Facebook adding to its business, and it's not transformative, and it's not really a threat," he said.

-- Bloomberg News

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