Behind Facebook's Bet on Bots

Why are publishers and brands racing to build messaging bots? Facebook recently announced that over 10,000 developers are racing to build so-called chatbots for its Messenger platform. Kik claims that 6,000 are live on its messaging app and Google introduced tools to help developers build more bots. Those developments are only the beginning of what promises to be one of the biggest emerging trends in tech this year.

The Decline of Mobile Apps

The reality is that app adoption has begun to slow significantly. Smartphone users are comfortable with a small core of daily apps (about a dozen) that support key functionalities – social media, music streaming, messaging. They may not be willing, for reasons that include storage and data caps, to download an app that serves solely niche purposes.

Facebook and others clearly understand the need for more lightweight solutions to simple tasks like ride hailing or delivery orders, but there's something else at play that gets to the heart for the fight for control over the mobile ecosystem. Right now, two companies control the vast majority of mobile devices: Apple with the iPhone and iOS, and Google with its Android operating system.

Hardware vs. Operating System Race

Apple bet, correctly, that owning the hardware and operating system would create a massive stream of revenue and customer loyalty. Google's innovation was creating a cheaper and endlessly customizable operating system, while relying on other companies to build the hardware itself, in order to rapidly gain market share.

Now, Facebook is taking this battle a step further. They've identified an opportunity to become the go-to operating system within any smart device regardless of operating system or producer. Facebook is betting that if it can get consumers to spend enough time within its app – Instant Articles is another way it's doing this – that they won't have to play catchup against Google and Apple by building out an actual mobile operating system or some hardware.

We've seen how eager Facebook is to get into hardware as an early adopter as shown by its recent investments in virtual reality, as well as past initiatives like the failed Facebook phone. They understand that platform control means the lion's share of revenue, but will this bet on bots pay off in the form of a new mobile ecosystem?

Probably not, at least not as much as the company would like. It's undeniable that bots are a more efficient way to do simple tasks and interactions. Ordering an Uber or dinner shouldn't have to take place within a dedicated app. Facebook has identified a great niche where it can draw consumers away from its biggest competitors, but two major issues remain.

Putting Money on Facebook...Or Not

First, Facebook's messaging ecosystem faces direct competition from virtual assistants designed by the likes of Apple, Google and Microsoft, of which Siri is perhaps the most well-known. Why would a consumer go through the "effort" of opening Facebook Messenger to hail a ride, when that consumer has the option to simply speak directly into the device?

Chatbots may ultimately be a great customer service tool, but they likely won't be the most efficient way to accomplish basic tasks for very long. Instead, look for bots to succeed when they make much more complicated processes simpler. For example, booking a vacation or planning a birthday party.

Second, many app publishers will be reluctant to miss out on monetization opportunities by providing services via Messenger. Most apps are either free or offer a freemium version, and a great deal of those rely on ad revenue to maintain their operations. Facebook's Instant Articles has shown that the company is willing to help publishers monetize to some extent. But it often comes at a fraction of what publishers might otherwise earn on their own domains.

In sum, Facebook's bet on bots is a bold move aimed at its biggest competitors, but is likely coming too late to have a truly major impact. Virtual assistants will soon replace a great deal of app functionality, making the likelihood of an extensive chat-based ecosystem along the lines of Asia's WeChat fairly slim.