Facebook Invents Caller ID, Reveals Problems At Company

Facebook has released a smartphone app called Hello that matches the numbers of incoming calls to friends and businesses on the social network, in a 21st century version of caller ID.

The tech press is going bonkers about it exclaiming “if you’re a retailer and you target millennials, it’s time to take note. This new Facebook feature could be a game changer,” exclaimed the Huffington Post.

Hello runs on Android and also allows people and businesses to call each other directly from their Facebook pages. This perhaps handy if you don’t have their number on hand.

“When you get a call, Hello will show you info about who’s calling you, even if you don’t have that number saved in your phone,” wrote Facebook product manager Andrea Vaccari. “You will only see info that people have already shared with you on Facebook.”

The more interesting element of the story is that the announcement came along with Facebook’s profit numbers, which were down 20 per cent year-on-year. While revenue was up it shows that Facebook’s business is in a tough spot.

As it stays around for longer it must continually invest in research and development to maintain relevance. By trying all these new things (not because they want to but because they are forced to), the company’s true business performance is revealed: not great.

Snapchat CEO Evan Spiegel, in emails leaked from the Sony debacle, summed it up best:

“Facebook has continued to perform in the market despite declining user engagement and pullback of brand advertising dollars — largely due to mobile advertising performance – especially App Install advertisements. This is a huge red flag because it indicates that sustainable brand dollars have not yet moved to Facebook mobile platform and mobile revenue growth has been driven by technology companies (many of which are VC funded). VC dollars are being spent on user acquisition despite unknown LTV of users – a recipe for disaster. This props up Facebook share price and continues to justify VC investment in technology products based on abnormally large mkt cap companies (i.e. “If this company attracts just 5% of users that FB has, it will be HUGE” – fuels spend on user acquisition as user growth is tied to values).”

What we’re witnessing, in the release of Hello and Facebook’s acquisition of Oculus, is that the company must resort to increasingly more expensive ways to drive user engagement. This shows clearly the underlying sickness in Facebook’s core business.

It will be interesting to see, as the tech sector cools and VC dollars dry up, how the situation plays out for Facebook and its investors.

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