Facebook Home: A Brilliant Move

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ADOTAS – Facebook announced its Home family of apps last week under a bit of less euphoria than we had anticipated. Yet it is a brilliant move that made up for the “a dollar an engagement” announcement a few months back.

While everyone was talking about a “phone” per say, it’s actually an app bundle that pushes Facebook to the front of the phone, which is very smart.

How does the consumer benefit? It could mean a lot of convenience. As more and more people get on Facebook, a “click to call” made over data networks makes the call cheaper, and in extreme cases, potentially at a near-zero cost if subsidized by the ad revenue Facebook can generate: this is similar to Amazon’s ad supported Kindle.

Moreover, current smartphones do not yet provide a functionality to show if someone is available for a chat or a call, something that would be easier to incorporate in the design of Facebook Home. Third, if Facebook is really clever about it, it can use the push notifications to make a consumer’s life easier by organizing text, chat, notifications and even tweets showing up on the phone in a much less intrusive manner.

While not mentioned at the press event, there is a subtle, but far bigger advantage in terms of its growth. As Facebook grows internationally, it has an opportunity to capture the market by presenting these benefits to the cost-conscious consumers of the developing world. Done correctly, Home can turbocharge Facebook’s international user base and revenue growth.

What does Facebook get in return?

With this announcement, Facebook suddenly becomes an 800-pound gorilla in mobile ads. While personalized advertising has been around and growing, Facebook’s depth of data, including personal information, geo, usage and engagement, churned through a powerful algorithm, will make it a darling for mobile advertisers.

Facebook solves another problem that has plagued the Google/Android ecosystem: its apparent “fragmentation” in terms of look and feel. This has been the iHome’s selling feature and now, by riding on top of Android, Facebook Home can fix that issue and drive more users to Android.

These two phenomena — more users choosing an Android/Facebook Home for performance plus convenience, combined with highly relevant, contextual ads incorporated into push notifications on the home screen — has the potential of disrupting the mobile ad marketplace and suddenly making Facebook the number one choice for brand advertisers and publishers.

What could go wrong here? The key to success here is to be less intrusive, as an in-your-face, ad-riddled phone would not be popular among the consumers.

Who are the losers here?

The potential biggest losers from this announcement are the three major ecosystem players/incumbents:

  1. Mobile carriers are apt to lose if people start using the IP-networks for calls; this has already happened for SMS with messaging apps like What’sApp.  Mass use of the Facebook Home could be devastating for carriers in terms of lost revenue.
  2. Third-party mobile advertising networks, unless they specialize in certain niche areas, are apt to lose in a big way. Facebook’s reach, depth and data will be lucrative for advertisers; incumbents should consider them to be put on notice.
  3. The third “loser” is Apple, and it could be big.  Facebook could draw away the user base and ad dollars from Apple toward the Android/Facebook Home ecosystem.  Tim Cook was probably not the happiest follower of Facebook’s announcement.

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