Quick Thoughts: Facebook F8 – Bots Offer Path to M-Commerce

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CEO Mark Zuckerberg hit the stage for the keynote at FB’s annual F8 developers conference. The biggest reveal was a program to enable businesses to use AI-based “bots” to execute customer service communications across FB’s messaging platforms, a first step toward asking businesses to pay for outbound communications to those customers. Zuckerberg also pushed FB’s new Live ad hoc video, releasing an API to allow 3rd party developers to plug into the Live platform, thus encouraging new use cases that could differentiate the service from similar efforts from TWTR and Snapchat. While not mentioned at F8, we also believe the FB is working on a token-based payments utility that could enable a strong move to add real m-commerce capabilities. In all, F8 showed it investing to enrich the usefulness of its messaging and social media products, while cautiously introducing mechanisms to increase commercial activities that could be monetized without generating a backlash from users.

  • Chat with a bot – Taking a cue from messaging competitors like Kik and Line, which have launched bot platforms to allow users to interact with businesses, FB is allowing companies to deliver automated customer support and interactive experiences via AI-based “chatbots”. These programs are trained to respond to common requests directly, without human intervention. Essentially, a bot receives a request from a user via message, interprets the request, and responds with a structured message that could include images, links and action buttons, in addition to text. A new search bar at the top of Messenger will help users find appropriate bots and businesses may include their bot addresses in ads and other consumer communications. In a market where businesses struggle to drive app downloads, these bots could be excellent vehicles to reach customers and lever FB’s substantial user profiles. Eventually, FB intends to monetize bots by allowing businesses that have already established relationships with customers via Messenger to send unprompted outbound messages for a fee. This could be lucrative, but also carries risk of alienating messaging users if not carefully managed.
  • Live goes wide. FB has been vigorously promoting its Live video platform, that enables users and media accounts to build ad hoc video sessions. The use cases are broad, from peer to peer video conferences amongst groups of friends to celebrity fan broadcasts, competing with services like MSFT’s Skype and TWTR’s Periscope. At F8, FB released a Live API that will allow 3rd party developers to incorporate ad hoc video distribution into their products and to create programs that could enhance the Live experience. FB announced initial partnerships with Livestream, BuzzFeed, Vidpresso and drone-maker DJI, which will enable live broadcasts from cameras attached to its drones. FB has not moved to monetize Live yet, but advertisements are likely forthcoming.
  • Not yet for payments. We believe FB is working on adding a tokenized m-payments utility, which would significantly enhance the potential monetization of the messaging bot initiative and enable a more muscular move into broader e-commerce. Given FB’s dominance of time spent on mobile platforms and its nearly ubiquitous reach, enabling purchases from within its app could make it a natural partner to merchants who struggle with identifying and reaching their best customers online. We expect an announcement on this capability this year.

In Summary: As we have noted in our just published note on FB (http://www.ssrllc.com/publication/fb-all-you-need-is-like/), we believe that forecasters are significantly underestimating the upcoming growth in mobile advertising, and that FB will add substantially to its already strong share. As such, we believe FB will top consensus expectations for 2016 sales and earnings, with significant upside to the current share price. Today’s announcements do not fundamentally change our perspective other than to give us additional confidence that FB is working on additional avenues to monetize its platforms via m-commerce that we have not fully included in our valuation.

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