Facebook (aka “Meta”) CEO Mark Zuckerberg today took several thinly veiled shots at Apple and the overall app ecosystem when detailing his plans for the metaverse during today’s keynote speech at the company’s Facebook Connect 2021 event. Specifically, he called out app platforms and their associated fees for “stifling innovation,” while simultaneously justifying Facebook’s plans to keep some of its own fees higher as it further invests in its burgeoning VR ecosystem and its Oculus Quest Store.
His statements follow Apple’s recent app privacy changes that have taken a toll on Facebook’s ads business. With the release of App Tracking Transparency, Apple now allows consumers to stop apps from tracking them across other apps and websites. But this change has dragged down Facebook’s revenue, the company has admitted.
Now, Facebook sees the potential in building out its own app platform with Oculus to create a new stream of revenue — one where it becomes the platform that profits, instead of the developer having to pay the commissions. And one where its business can’t be destroyed at the whims of another company’s shift in strategy.
Zuckerberg acknowledged that it’s time to make this change, saying that he’s learned in recent years that “building products isn’t enough.”
“We also need to help build ecosystems so that millions of people can have a stake in the future and can be rewarded for their work and benefit as the tide rises — not just as consumers, but as creators and developers,” he said. “This period has also been humbling, because as big of a company as we are, we’ve also learned what it is like to build for other platforms. And living under their rules has profoundly shaped my views on the tech industry,” Zuckerberg continued.
“Most of all, I’ve come to believe that the lack of choice and high fees are stifling innovation, stopping people from building new things and holding back the entire internet economy,” he added.
These comments seem directly pointed at Apple and Google, on whose platforms Facebook’s core products largely reside. Facebook has to pay fees on in-app purchases to the app stores — including when users subscribe to creators, buy badges or tip streamers directly, for example. While both Apple and Google have been bringing their commissions down for smaller businesses, media providers and subscription apps, the standard split is still 70/30 (developer/platform).
App Store rules have also prevented Facebook from building out other products where it could have increased revenues — as with its newer gaming service.
The company slammed Apple’s policies last year as it launched Facebook Gaming on iOS without games, for example. Apple doesn’t allow apps that contain other apps or games, as that would cut into its own ability to generate revenues from third-party developers. So instead of being able to play mini-games as on Android, Facebook Gaming iOS users could only watch streams.
However, the real concern for Facebook’s future is one where its ad revenues are threatened by platform policy changes out of its control.
Those revenues over the years have allowed Facebook to invest in other sectors, in addition to keeping its apps free, Zuckerberg noted.
“We offer our creator and commerce tools either at cost or with modest fees to enable as much creation and commerce as possible. And it’s worked. Billions of people love our products,” he touted. “We have hundreds of millions of businesses on our platform.”
The company now plans to take the same approach to build its metaverse ecosystem — by either subsidizing devices or selling them at cost, to make them more broadly available to consumers, Zuckerberg said. And unlike with Apple’s App Store, Facebook says it plans to support sideloading and linking to PCs to provide consumers and developers with choice, instead of locking them into its platform. (Of course, many developers will choose to launch on the Quest Store for discovery’s sake, which is why Facebook knows it can make this promise.)
He also said that Facebook would keep developer and creator service fees low, when possible. However, Zuckerberg — sketching out the company’s next business model — warned that won’t always be the case. Given the size of its investment in this new ecosystem, some fees would remain higher, he said.
“To keep investing in this future, we’ll need to keep some fees higher for some period to make sure that we don’t lose too much money on this program overall,” Zuckerberg explained. “After all, while a growing number of developers are already profitable, we expect to invest many billions of dollars for years to come before the metaverse reaches scale. Our hope, though, is that if we all work at it that within the next decade, the metaverse will reach a billion people, host hundreds of billions of dollars of digital commerce, and support jobs for millions of creators and developers.”
In other words, Facebook’s plan is to become more like Apple by tapping into developer revenues at scale and making its own rules.