Meta Is Unbundling... Again
"There are only two ways to make money in business: One is to bundle; the other is unbundle." While Jim Barksdale's famous quote is often talked about in the context of cable television, or the music industry, or even software, really, there is one company that epitomizes the quote above all: Meta.
Since it started as Facebook two decades ago, the company has unbundled and bundled – and often unbundled again – basically every single product they've ever made. Photos, camera, chat, video, events, forums, notifications – I mean, at one point, Facebook even had a stand-alone Poke app (one of about a half dozen attempts to go directly after Snapchat)! So it should be absolutely no surprise that this week there was news about not one, but two services from the company now known as Meta potentially getting unbundled into their own apps: Reels and AI.
Reels Science
Reels is pretty straightforward. While the service has seemingly been doing well inside of Instagram, if Meta truly wants to take on (and potentially out) TikTok in their moment of vulnerability, they probably need a service just focused on this use case. As Kalley Huang and Kaya Yurieff report for The Information:
Instagram is considering launching a stand-alone app for its short-form–video feature, Reels, Instagram chief Adam Mosseri told staff this week, according to a person who heard the remarks. Such an app would be similar to the TikTok experience of scrolling through videos, and would be Instagram’s most aggressive move so far to take advantage of its Chinese-owned rival’s uncertain position in the U.S.
Instagram’s efforts to take on TikTok are part of an initiative code-named Project Ray, which includes improving recommendations for new users and people in the U.S. as well as distributing more three-minute-long videos, according to the person. The strategies also highlight Meta Platforms’ focus on videos, which has encouraged users to spend more time on the app, a boon to advertisers.
Instagram, as you may recall – I was there, Gandalf. I was there three thousand years ago – started as a way to share single photos with friends. Now it's a complete Frankenstein's monster of a product from a UX perspective. It's photos, it's video, it's chat, it's Stories, it's Reels. But really, it's ads. That's the thing, Instagram is for all intents and purposes the new Facebook. If it's not bringing in more advertising revenue than the "Blue App", it's close (at least in the US).
But like Facebook before it, Instagram is quickly becoming the "old fuddy-duddy" app amongst the core demographic of TikTok. And so launching Reels as a stand-alone app would follow the same rationale as the aforementioned half-dozen attempts to compete with Snapchat. And it's a similar rationale to why Facebook bought Instagram in the first place. They're lifeboats from the old, dying demos – a way to not only ensure survival, but far more important: relevance, to future generations.
At the same time, you can't burn the boats. Again, Instagram may now be the key to the entire empire when it comes to making money. Without it, you can't spend billions on XR let alone AI. This is the same reason why Mark Zuckerberg has been talking about revamping and rejuvenating "OG Facebook". These are the cash cows. They may not seem like they're dying, but they will one day without the blood transfusion.
Of course, Meta has tried before to clone TikTok with a standalone app. During the app's initial rise – which came about, in no small part, thanks to parent company ByteDance spending billions of dollars on advertising on... Facebook! – we got Lasso. It completely and utterly failed to corral an audience. It was shut down in less than two years. But when TikTok was last under fire during the last Trump administration, Reels was born.
My angle in writing about it back in 2020 was that it was well-made and had a shot in the market, but:
TikTok is different. It’s actually not a social network, it just looks like one to some people on TV. It’s a content and entertainment network. It’s Netflix with UGC and true virality. It’s YouTube with better algorithms, tools, and mobile UI. Instagram is not this type of network. That is why IGTV did not work — amazingly, it’s still shoved in here too, which is additionally confounding — and why I think Reels won’t work.
…at least inside of Instagram. I would not be shocked if we see a stand-alone Reels app in a few months, if not sooner.
Well, it will have taken five years, but I may be right in the end. Of course, Meta was undoubtedly right too, to leverage Instagram's massive user-base to be able to not only bootstrap a network, but learn and train algorithms to make such a product work. Now that they're way beyond any "cold start" fears, they can go for it with a stand-alone app.
In a way, I'm again reminded of TikTok itself, siphoning those users off of Facebook. But they could do that because of the work ByteDance had done beforehand with their other massive services (mostly in China), training their algorithms to be ready to meet TikTok's moment. And it worked. Might Meta benefit from their own bit of good timing, timed with TikTok's misfortunes?
It Really Whips the Llama's Ass...
The other unbundling news this week is arguably more important but also less straightforward: a stand-alone Meta AI app. As Jonathan Vanian scoops for CNBC:
Meta AI will soon become one of the social media company’s standalone apps, joining Facebook, Instagram and WhatsApp, CNBC has learned.
The company intends to debut a Meta AI standalone app during the second quarter, according to people familiar with the matter. It marks a major step in Meta CEO Mark Zuckerberg’s plans to make his company the leader in artificial intelligence by the end of the year, ahead of competitors like OpenAI and Alphabet, said the people, who asked not to be named because the project is confidential.
This was hardly a surprise to me, as a couple weeks ago, I wrote the following about Meta's long-term consumer AI prospects:
Speaking of Meta, they're already trying to do this as well. They're touting millions and millions of users of Meta AI – probably in a similar vein to how Google+ touted their millions and millions of users back in the day. What are users – people explicitly trying to use it – actually doing with it? It's not clear, but it's also clearly not the same use case as the more general chatbots like ChatGPT at the moment. To make that happen, Meta probably needs their own stand-alone app. I know, I know, Zuck hates apps because Zuck hates Apple. But Google learned this. xAI learned this. We need a Llama app.
For the record, I doubt they'll use the Llama branding, which is of course their "open-source" (read: open-weight) model name. I think it would be fun, with great app icon potential,1 but I suspect we'll get a bland old "Meta AI" app.
Still, branding aside, this makes sense to me. While Zuckerberg keeps touting the amazing usage Meta AI is seeing within their products, I'm not really buying it and I know I'm not alone there. Per above, it really feels like the way Google used to tout the massive Google+ usage – after they shoved it into every single product via notifications and other annoying surfaces. Meta replaced their own search functionality in apps for billions of users with Meta AI. Of course people are using it! The question is if they're getting any real utility out of it (or even know they're using it).
Further, the arms race is seemingly shifting from purely being about LLM pre-training to winning the hearts and minds of consumers. And, of course, their wallets.2 ChatGPT is far ahead in all of those areas right now. Meta is middling at best – despite having what many consider to be the best "open-source" (read: open-weight) models. Well, at least until DeepSeek entered the fray...
Yes, they have a Meta AI website, but seemingly relatively few people are using it. As much as Zuckerberg may hate it, they need to aim to get an app on the homescreens of smartphones. I can't tell you how many young people I now see using ChatGPT out and about, at museums, at cafes – and it's largely not on their computers, it's on their phones. And yes, while you can use Meta AI within Instagram and WhatsApp and Facebook, per my above point with Instagram, it's not the job to be done there. At best, it's a way to boost usage and get better data from which to train; at worst, it's a way to boost vanity metrics. But again, for real mindshare, you need a stand-alone app.3
But it's also weird because Meta already controls two of the most popular apps in the world for chatting, of course, in WhatsApp and Messenger.4 But again, the use-cases are just different right now. They may look similar – which tricks Meta into doing silly things over and over again – but they're different. You can have AI baked into such apps too for certain uses,5 but general purpose AI needs to be its own app, at least for now, in this age of discovery.
Eventually, perhaps you bundle the Meta AI app back into the core products. And this is Meta, you can be sure they're going to unbundle and bundle again until the cash cows come home. But really, you probably just do both here. This is the same playbook that Google now seems to be running with Gemini. It's baked into their products – including, notably, Search – and exists as a stand-alone app.
This is the wild west right now, you need all the guns you can get your hands on. Having a shotgun is great, and may save you in a shootout, but it's overkill in the initial duel. You need a trusty, nimble pistol too. ChatGPT is Wild Bill Hickok in this scenario. And we're on about pace number six of the ten before we turn...
M.G. Siegler
M.G. Siegler
M.G. Siegler
1 And they have to combat this bad boy now on homescreens!
2 Yes, Meta's true path to monetize AI may be through improving their advertising products and business, but you can bet a lot of money -- all the money -- that Zuck and team absolutely want to own the consumer-facing aspect of AI too. And better competing here with a way to directly monetize users will ease a lot of Wall Street fears about CapEx spend as well...
3 And there are a handful of early use-cases where it feels like people are not going to do within random Meta apps -- including a lot of the agentic stuff.
4 And messages within Instagram is undoubtedly up there as well!
5 How is Meta AI not baked deeply into Threads already?! Xitter integration one of the most interesting early uses of Grok...