Facebook’s next move in the Middle East

That’s largely down to its massive users numbering 2 billion worldwide – and its ability to harvest unimagined levels of detail from each one of them. Hence the most recent figures, reported at the start of this month, which saw Facebook announce its best-ever quarter of $4.7bn profits – a staggering 79 percent year-on-year increase. The tech giant has become so dominant that it, along with Google, is expected to take half of all internet advertising revenue worldwide, and 63 percent in the US, according to research firm eMarketer.

The company doesn’t break that number down into regional figures. However, its worldwide average revenue per user is $5.07 in the latest quarter, so based on monthly active users of 8.7 million in the UAE, revenues here could be estimated at $44m for the quarter. In Saudi Arabia, where the monthly active user is 17 million, Facebook, by that same metric, would have earned an estimated $86m.

These numbers are even more impressive when you consider that its story in the Middle East only began five years ago, with an office that Jonathan Labin, Facebook’s managing director for the Middle East, North Africa & Pakistan,  describes as feeling a lot like a start-up.

“It was just me and a colleague in a tiny office, probably about the size of this [small] meeting room. It was very different from an operations point of view – I had to buy the printed paper myself,” he recalls, adding that, despite its stellar growth since then, the now 60-strong team, which recently switched from Internet City to a new HQ in Knowledge Village, “tries to maintain that spirit of entrepreneurship.”

Facebook aims to build on its work with local and regional Arab content creators and entrepreneurs

Office moves aside, Facebook has utterly transformed over that five-year span. Back in 2012, Labin was effectively running the Middle East division of ‘Facebook the social media company’. Now, he heads up ‘Facebook the digital sales behemoth’ that provides access to an audience of 2 billion, along with another 800 million Instagram users (with 63 million in the MENA region), and 1.3 billion monthly active users of WhatsApp; making extraordinary amounts of money from selling that audience to advertisers. This, Labin says, is the story of a transforming from “just being a social media company to becoming a technology company.”

Leveraging the audience

It would be just as accurate to say that the real story was the transformation of social media from being an idealistic connector of people and ideas, into a stunningly effective business models, where the core task is to provide solutions for companies who want granular data that will allow them to advertise their products or services to a specific audience.

Labin says the conversations he has with advertisers has completely changed, based on the level of detail that Facebook is now able to offer those partners. The company can narrow its audience down to male or female, age group, spending power, location and much more. In fact, thanks to the addition of that clever thumbs up button, it probably knows more about you than your spouse does (see box, right).

What this means on the ground in this region, is this: “The conversations that I had with advertisers five years ago was about [the number of] Likes on Facebook,” says Labin. “Today they want business results. When we speak with Mercedes, for example, it’s about ‘how many leads are you creating for me’. And it works. Our relationship is great because we are one of the best lead generation platforms in the region.”

Sticking with the example of the German car manufacturer, Labin reveals that Mercedes recently ran a campaign in the region targeting men and women, aged between 25 and 45. “They reached more than five million people in the target demographic and generated thousands of leads,” he says. In this case it was to promote test drives, one of the brand’s key performance indicators (KPIs).

Next steps

Now that it has done such an effective job of monetising Facebook – and, increasingly, Instagram – Mark Zuckerberg’s  global leviathan is turning to its other, perhaps less glamorous but still highly effective, products. Facebook has developed a business product for Messenger, and is looking to roll out a similar solution for WhatsApp.

Founder and CEO Mark Zuckerberg leads the design of Facebook’s service and development of its core technology

Labin says the use of smartphones to actually talk to people is falling all of the time, with users relying on messaging services to communicate. Soon, it will become the de facto communication standard, he says. “You will see more of how businesses can connect with consumers via Messenger and WhatsApp and that’s what we’re working on quite a lot.”

Citing an example of contacting a customer service hotline, Labin believes it will be preferable to do this via a messaging app. “People are already communicating with each other like this, so that makes us sure that businesses will do the same. That’s going to happen in the next one to three years.”

Interestingly, Messenger and WhatsApp were products that were adopted by consumers first, and became part of everyday use before their commercial potential was developed. This, says Labin, is how Facebook manages to develop such effective business products.

“We typically try to create business solutions that amplify consumer behaviour that’s already happening organically,” he says. “Once we have a technology that we think we can create a product around, then we expose it to consumers. The next step of the evolution is: ‘Let’s try to get an ecosystem of tech companies to build on top of it. And that’s where then the business side comes in.”

To explain the point further, he brings the conversation back to Facebook Pages, where most businesses will have their first interaction with the tech company.

“If you think about the way we thought about Facebook advertising, the way it started was that businesses had a page and they could connect with consumers. It was organic. And then eventually we gave them the opportunity to make sure that they could reach even more people.”

He says that same principle is guiding their thinking about where to take Messenger and WhatsApp. “We’re going to create tools to make it easier and eventually provide other business solutions for them to make that process even better.”

Facebook’s new 20,000 sq ft regional headquarters is located in the heart of Dubai’s knowledge, technology and creative hub

Facebook is currently testing its WhatsApp for Business product, which will be geared for both SMEs and larger businesses.

“It’s still early days in testing. We’re going to be very conscious of how consumers react, and to make sure that this is providing value for both sides,” Labin says. “I don’t know where it’s going to go but if I don’t have to call customer service hotlines anymore and I can use WhatsApp in the future, I’d be very happy.”

Taking on TV

Labin singles out mobile and video as the two fastest growing trends in the Facebook family right now.

“We forget that back five or six years ago Facebook was still pretty much a desktop company.

It’s very difficult to believe that now,” he says of the transformation. “Today most of our users are mobile, and most of our revenues come from mobile because that’s where the majority of people have moved in their habits.”

The other big shift is the kind of content that’s being shared. Whereas it was once about text, and then moved on to images, the most talked about medium is now video. The creation of this content will incorporate user and advertiser-generated material, but it goes much further than that.

In August, Facebook launched its biggest play against YouTube (owned by Google parent company Alphabet), and potentially video streaming providers like Netflix, with its Watch video service. This, of course, is a natural progression in terms of providing users with a service they want. But thanks to advertisers shifting more and more of their money online, and with Facebook and Google having already hoovered up most of the available ad spend, it could also be seen as a canny move to take the lion’s share of ad revenue away from TV as well, by tapping into the growing audience of people watching their favourite TV shows and sports on smartphones and tablets.

Mobile is the biggest opportunity for 99 percent of businesses, Labin believes

Initially launched in the US, there are plans to roll it out globally, though not just yet. “We’re very excited about it,” says Labin, before detailing how that experience might develop. “We believe that every experience today can be reinvented around communities, as opposed to it being a passive experience where you are on your own.”

Sports coverage is a big attraction for Facebook, starting with College Football in the US. There are reports that it’s also looking to obtain streaming rights to show UEFA Champions League matches in emerging markets where the games aren’t shown on TV, in places like Africa, India and Cambodia. It also launched a reported $600m bid to win streaming rights to the Indian Premier League, before losing out to Rupert Murdoch-owned Star India, which paid $2.6bn for the rights.

But Labin insists the move isn’t so much about competing with other TV companies, social media firms or other digital players. In fact, it’s bigger than that.

“At the end of the day, we compete for people’s attention. I want your attention.

I want you to use our products,” he says. “Where you consume that, and how you consume that, I think that’s where the innovation takes place. Today we can see that consumption that used to be text and images on a mobile phone is now more about video, so that means we’re in the video space and competing with TV. But for me it’s just competing with wherever consumer attention happens to be, and then building business solutions around that focus.”

Future trends

While these developments, ambitious as they are, represent the current trends and habits of users, Facebook is readying itself for what will come further down the line – namely, the expected explosion into virtual reality (VR) and artificial intelligence (AI). It acquired Oculus VR – a tech firm that specialises in virtual reality hardware and software products – for $2.3bn in 2014. It partnered with Samsung to develop the Samsung Gear VR headset, before launching its own Oculus Go headset in October this year, which will be available for retail in 2018 and will come with its own platform, Facebook Spaces.

While Labin admits it’s a longer-term project, he says Facebook is ready to embrace the rush when it happens.

Labin says social virtual reality (VR) will become the next big thing and has the potential to revolutionise human interactions

“AI, along with augmented and virtual reality and connectivity, will play a key role. We have great products, but there is still a lot to be done, technology-wise, on the product experience. That’s why it’s part of our long-term vision, because there’s still so much room from a technology point of view to do even more. But over the next five to ten years I’m very excited, personally as well, about virtual reality.”

Augmented reality (AR) is the other game changer. Facebook announced at the company’s F8 developer conference in April that it would transform its smartphone cameras to allow third-party developers to build digital effects that will be layered atop what you see through your camera. In plain terms, they will be the filters that you presently see on Instagram and Snapchat.

Though the possibilities for AR are endless, and have yet to touch our lives as profoundly as they surely will, large organisations have already started to embrace the new tech, if only for the novelty factor. World football governing body FIFA, for example, used an AR face-painting feature for fans during the Confederations Cup. Nissan used the same feature for college football fans.

“A lot of us thought for a long time, and I was one of them, what’s going to be the platform for AR? And I thought about glasses, as that’s what we had seen in movies and what we expected. But we now see that the first platform for mass adoption of AR is the phone. You have an amazing way to overlay the reality that you see through its camera.”

Challenges ahead?

One area of concern for Facebook, and indeed other social media platforms like Google and Twitter that rely on users for data, is what’s referred to as ‘context collapse’. This is a technical term to describe users sharing less and less personal information and updates as the novelty wears off. It’s a phenomenon that has been around for a couple of years, but one that appears to be supported by research carried out by a Middle East branch of Illinois-based Northwestern University, which found that Facebook use among internet users has declined in the UAE by 10 percent since 2015, and 20 percent since 2013.

Labin, however, insists it’s merely a change in how users engage with the platform – supported in the same report by the 400 percent growth in Facebook Messenger, and 40 percent growth in Instagram use.

A major focus for Facebook is to transform Messenger into a business tool

“People still share, they share a lot, but whereas in the past they always shared to everyone – and some people still do that – others now share in smaller groups, to certain friends. People share a lot in WhatsApp and they share a lot in Messenger. They share stories on Instagram that are going to disappear after 24 hours.

So the way that it is always evolving, and we as a company try to work with that.”

As a social media company – and as a tech company – operating in the region, Labin says he has always found Dubai and the wider MENA region to be very open to trying new things. The challenges, he says, are therefore about Facebook’s ambitious targets. “We always want to grow faster. We want to connect more people,” he says.

Labin says that connectivity in the region, while excellent in the GCC, isn’t on a par everywhere in the MENA. “If you want to connect everyone then obviously there’s some work to be done, and we’re trying to do our part in those regions,” he says.

Business conditions, in terms of the economic environment, are also challenging. “The overall advertising market is probably not growing; it’s also a pretty low advertising spend per capita in this region, and that is one of the biggest challenges for anyone here. What we need to do, as an industry, is to grow the market, because a lot of challenges would go away if the ad spend per capita was higher.”

In the meantime, Labin says Facebook will continue to work on providing business results that “make sure that there’s value and efficiency”. “When businesses see our ROI, they will spend more and grow faster. And when that happens I think then all businesses will flourish,” he says optimistically.

The biggest challenge of all has been the spiralling rise of fake news on the platform. Just recently, senior global executives faced a serious grilling in the US Congress over fake news operations on their platforms, like the ones Russia conducted to meddle in last year’s US presidential elections.

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“This is actually one of the core pillars of how we think about our news feed,” says Labin. “We have community standards. We also have news feed values, and one of those values is that it should be informative. It allows you to see things from friends, to see things from families; it’s entertaining and it’s informative. Which means, by definition, that hoaxes or misinformation are not part of that feed. So we have done a lot to ensure that globally. We try to make sure that we make it easier for people to report when there’s misinformation.”

Labin says the company has taken steps to curb fake news, but it’s an ongoing process. “We are working on this and we always want to do better in that space. Why? Because, for us one of our core values for our platforms and for Facebook is that it’s informative and therefore misinformation shouldn’t have a place.”