On Sunday night, Warner Bros. announced that it would become the first Hollywood studio to rent digital movies through Facebook. This move suggests Facebook is working on a broader strategy to further penetrate the media distribution space. Such a move would be a natural extension for Facebook, given it already stores and shares “more than 30 billion pieces of content (web links, news stories, blog posts, photo albums, etc.)…each month.” This static content is in addition to the thousands of apps that are available via the Facebook Platform.
Meanwhile, just over the weekend, there were reports that Facebook is resuming previous talks with Skype to offer online video calls. This would further extend Facebook into the communication space, with a steady progression from wall posts and the news feed, to online chat, to the recently announced “messages” feature, which combines texts, chat and email. Facebook’s communication network is quickly expanding beyond the confines of the company, through the “Like” button, which allows users to post media directly from many third-party websites.
As Facebook is expanding its service in the directions of media distribution and communication, it’s also expanding further into commerce, with the (beta) introduction of Facebook Credits in 2010. Although Facebook Credits are currently used primarily to purchase items in Facebook apps, it’s likely that the Credits system will soon evolve into a full-blown payment platform to conduct transactions for a range of digital products. Facebook Credits can already be purchased via gift cards at a variety of retailers, from Target to Tesco.
To summarize, it appears that Facebook is advancing in three core directions: media distribution, communication, and commerce. As Facebook moves forward on these three fronts, it will create new competition for the likes of Amazon and Netflix. It will also intensify Facebook’s rivalry with Apple and Google, since these two companies are also aggressively pushing forward in similar areas of technology. Because each of these emerging competitors, from Amazon to Facebook, have roots in very different areas of technology, from online commerce to social networking, we should expect a very dynamic competitive environment over the next 3-5 years. This is good news for online consumers, and bad news for legacy firms and industries.