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As Facebook almost died over mobile, banks woke up

The times we live in are confusing.

Just as we think we have clarity of direction, the direction changes.

Take Facebook.  That mighty social network, that links over a billion people in a massively sharing global hive.  Facebook almost died.  Yep, it missed a beat and almost died.

Facebook almost missed mobile and, if they had, you would not be using their service anymore.

Just two years ago, when it was yet to run its first mobile ad, Facebook said it had serious concerns about its ability to make money via advertising on smartphones and tablets.

“We may not be successful in our efforts to grow and further monetise the Facebook platform,” the social media company said in the filing, adding that it could face grave difficulties if it was unable to balance “its efforts to provide a compelling user experience with the decisions we make with respect to the frequency, prominence, and size of ads and other commercial content that we display.”

Since then, Facebook bought Whatsapp, Instagram and more, in a multibillion spending spree, and today it’s raking it in.

Financial results for Q1 2014 showed the company’s focus on mobile is paying off nicely, with overall revenue hitting $2.5 billion, up 72% on the same period 12 months ago.  Profit for the quarter topped $642 million, up from $219 million a year earlier. 

Breaking the numbers down, 59 percent of its $2.27 billion in ad revenue came via mobile ads, up from last year’s 30 percent figure and a sure sign that its mobile strategy is heading in the right direction.

609 million of its 802 million daily users are accessing via mobile, a rise of 43 percent, while a 34 percent increase in mobile monthly active users took the count past the billion mark (1.01bn) for the first time in its 10-year history.

In other words, the disruptive social media network almost gasped and died by missing mobile but, once it got mobile, it’s rocking and rolling.

As Mashable reports

Eighteen months ago, Mark Zuckerberg was not happy with Facebook's mobile strategy. The world's largest social network was offering up a weak product — a hybrid app running on HTML5 instead of native apps for iOS and Android — essentially ignoring the platform (mobile) that it now deems most important. A change needed to be made, and Zuckerberg now openly admits it.

"We took a bad bet," the Facebook CEO said during last week's TechCrunch Disrupt conference in San Francisco. "Our legacy as a company was building this big website and focusing on being able to develop for the web. So naturally we tried to look at things and see if we could build an HTML5 system for across these different platforms and we just realized pretty quickly that we weren't going to get the quality level that we needed.

"So we took a year and it was painful and we retooled that."

Now the company’s strategy is mobile first and, if any firm is to remain relevant today in a digital world, it has to have a focus upon mobility, the internet of things and ubiquitous connectivity.

It's more than that though.

Just as Facebook almost missed mobile, Snapchat, Vine and many other new apps were springing up from nowhere to take over.

That is the nature of the fast cycle change of today.

It has never been more obvious today that things can change fast than just by looking at something we thought was hot and cool a few years ago, and is now dead and gone.

Nokia was blasted out of the water by Blackberry, which was blasted out of the water by the iPhone which was blasted out of the water by Samsung …

Certificate-of-Sam-Sung

 

 

 

Ex-Apple employee Sam Sung makes £47,000 for charity by selling his business card

 

 

 

 

 

 

 

 

 

… and soon something else.

We see a music industry dying on its feet due to Napster, then recovering thanks to iTunes which is soon displaced by Spotify … and then something else.

Just as we get used to using Expedia rather than travel agents, Trip Advisor comes along to change the game … and next something else.

In other words, any industry or marketplace whose products and services can be digitised will see fast cycle change.

Is it happening in banking?

Yes, to an extent.

Banking is just bits and bytes but, until recently, it has depended on a face-to-face engagement for identity management, advice and transactions.

Now, those requirements are dissipating.

That is why we have seen the digital changes in payments.

Just as PayPal succeeds, Square threatens and bitcoin takes over … and then something else.

Ripple(s) are heard.

We are now seeing similar changes in advice and KYC.

Many banks are realising that customers do not want to visit branches to pay in cheques, so create the remote cheque deposit app.

They don't want to visit a branch with their passport and driving licence, so send a courier.

They don't need to talk to someone in a branch for advice, they can get that through a Skype call.

And so it goes.

What is interesting is that everyone then shouts that banks will be disrupted and disappear, as the dinosaurs that they appear to be.

Ten years ago, they were going to be disintermediated.

Twenty years ago, they were disturbed.

Twenty years ago, Professor David Llewellyn of Loughborough University said : “we have seen more change in the last five years in banking, than in the last fifty” and that “banks, as we know them, will soon cease to exist”.

Now we hear the same thing again, with Brett King saying “we will see more changes in the banking industry in the next ten years than we have in the preceding 100 years”.

I agree, but change is a constant.

So banks just need to embrace the change and adapt, as they always have.

I know that I have often written that banks are slow and sleepy, and need to wake up and shake up to be able to adapt faster.

Well, I'm glad to report that many have.

In my dealings with large and small banks around the world, I find more and more of them saying they need to rethink their strategies, to embrace digital and to stop investing in and opening more branches.

They are investing in new start-ups and buying new systems.

They know their core systems are an issue, and are working on upgrades and replacements.

They totally get that customers are moving to new structures and new media, and are trying to work out how to keep up with those needs.

Equally, they are fully aware of the fact that their business has some protection – a banking licence and regulatory barriers to entry – but they are not as complacent as they used to be about that protection.

So let's not be flippant and keep saying that banks are stupid, fat, lazy, arrogant, slow and complacent.

Some are, and they will disappear, whilst most are focused upon investing and fighting to maintain relevance.

Just as Facebook almost tripped over mobile, banks recognised that they faced the same issues and challenges and yes, they are stepping up to the mark.

That’s what makes this such an interesting space to be in and is the reason why so many fintech start-ups are being seen out there.

Nothing like change, is there?

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Professor David Llewellyn of Loughborough University sounds like a very smart guy. I never heard that someone had made a similar prediction on disruption.
    Agree that change is a constant, just that the rate of change may speed up or slow down based on emerging tech and behaviors. I agree that there’s more action in mobile than ever before. The potential impact of mobile on revenue generation for retail is what has me most excited, because that will be the true disruption of the banking distribution model. That is a change that truly will be unlike anything we’ve seen in the last 100 years.

  • Nihat Erdem

    Dear Chris,
    I really like the way you approach the subjects. Many people may not agree with your opinions, but the important thing here is not an agreement. Your articles are always interlinking issues, which are indeed relevant but not in our eyes.

  • Great post Chris and spot on! I do think banks still haven’t hit the bottom, but there will come a tipping point in which someone will thrive with a disruptive concept that will be massively adopted. Bitcoin was only the first try, the Napster of the banking industry. I do agree with the shorter cycles, but there is still time for banks not to become the next Music or Travelling of the business world.

  • neil burton

    Facebook weren’t alone in making that mistake. Clay Christensen, Prof Innovation Harvard and author of Innovators Dilemma,considered the iPhone to be a sustaining but not a disruptive innovation.
    ‘The iPhone is a sustaining technology relative to Nokia. In other words, Apple is leaping ahead on the sustaining curve [by building a better phone]. But the prediction of the theory would be that Apple won’t succeed with the iPhone.’
    http://stratechery.com/2013/clayton-christensen-got-wrong/
    Oops.
    But it goes to show, disruptive innovation disrupts on an unfamiliar vector. It’s invisible if searched for through today’s norms and models; though starkly visible through hindsight.

  • neil burton

    Facebook weren’t alone in making that mistake. Clay Christensen, Prof Innovation Harvard and author of Innovators Dilemma,considered the iPhone to be a sustaining but not a disruptive innovation.
    ‘The iPhone is a sustaining technology relative to Nokia. In other words, Apple is leaping ahead on the sustaining curve [by building a better phone]. But the prediction of the theory would be that Apple won’t succeed with the iPhone.’
    http://stratechery.com/2013/clayton-christensen-got-wrong/
    Oops.
    But it goes to show, disruptive innovation disrupts on an unfamiliar vector. It’s invisible if searched for through today’s norms and models; though starkly visible through hindsight.