Right after its IPO, Facebook Inc (NASDAQ:FB)‘s founder Mark Zuckerberg, was quick to point out that he views that Facebook is a mobile company. However, at that time, Facebook Inc (NASDAQ:FB) didn’t generate meaningful amounts of revenue from mobile. Fast forward a few quarters, and Facebook is set to earn billions from mobile ads, and is now launching series of apps on Android which will not only drive user engagement, but aid substantially in generating more revenue.
Deep Integration with Android; Fancy Features of ‘Home’ Designed to Keep Users Logged On
Facebook just rolled out a series of apps which the company is terming ‘Facebook Home’ for the Android OS. Facebook Home is a software experience that is not an Operating System but a series of apps that has a lot of cool features. Home is a very new and different experience as this deep integration with Google Inc (NASDAQ:GOOG)‘s Android OS, which will allow users to make Facebook the home page on their phone, by placing it on the center-stage and without using a web browser, or an app.
Facebook Inc (NASDAQ:FB) will be the first point of contact on the mobile-devices, and it will allow users to have full sized views of Facebook, through the visually rich News Feed called the cover feed. The Home has a feature called Chat heads, which enable users to keep on communicating with friends while using other apps.
For example, if a user is using Google Inc (NASDAQ:GOOG) Maps, and their friend is sending them a message or a text, the user can interact with their friend through this chat head without leaving the Google Maps app. This line of apps will be the home of the users phone, which will keep them connected to their network of contacts on Facebook Inc (NASDAQ:FB) constantly. The emphasis is on an enhanced user connectivity system, as opposed to logging onto Facebook through an app.
Initially, Facebook will be available in only a handful of Android powered devices including HTC and the Samsung Galaxy Line. Facebook has an understanding with HTC and AT&T Inc. (NYSE:T), as these two companies will be launching the first phone with Facebook Home pre-installed. The app can also be downloaded from the Google Play Store.
Big Addressable Market
In 2012, more than 700 million smartphones were shipped up from 490 million in 2011. Of which a record 213 million smartphones were from Samsung alone giving the company roughly 30% market share, according to Strategy Analytics. Samsung controlled ~19.9% in 2011, and saw big increases in user adoption for its Android-based devices. Whereas Apple Inc. (NASDAQ:AAPL) also grew its smartphone shipments with a 46% increase and shipped roughly 136 million smartphones, holding ~19% market share last year, according to Strategy Analytics.
Sales of PCs are on a secular decline from most manufacturers including Apple Inc. (NASDAQ:AAPL). As a result, it was clearly a great move by Facebook to take steps towards building more mobile-based products, as opposed to developing desktop products only.
More widespread consumer adoption, especially on Google Inc (NASDAQ:GOOG) powered Android-based devices will likely continue. Facebook will almost certainly introduce its Home product to other Android phones. The Home series of apps by Facebook Inc (NASDAQ:FB) will be at the center of the smartphone experience for the user, and a lot of consumers will adopt this product down the road.
Drive User Engagement Substantially; More Ad Placements
Facebook’s mobile user-base has been growing at a rapid rate, and now stands at 680 million, who spend a lot of time on the social media platform. With the launch of this new Facebook Home feature, Facebook will be at the very center of the users’ mobile experience. Not only will users spend more time on Facebook, but the Chat Head feature on Facebook will create very strong network effects, by encouraging more users to interact with each other.
Facebook did state that the Home product will be monetized by more ads, and as a result, Facebook’s mobile monetization will get a strong ramp up. The company’s mobile revenues run rate of more than $1.2 Billion, should be healthy increases going forward. Advertisers should love this new Facebook Inc (NASDAQ:FB) experience on mobile, as users will be on the platform all the time. As a result, more marketers will start knocking on Facebook’s door.
Research firm, eMarketer expects the social media giant to earn $965 million in mobile ad revenue in 2013. While this is a solid number, it is a very conservative projection for Facebook’s Mobile ad revenue; because it’s current mobile run rate stands at $1.2 Billion. With a deeper integration on Android devices, will further accelerate its mobile ad placements.
Going Forward
Facebook holds the No. 2 slot behind the mighty Google for Mobile Ad dollars in the U.S., and is unlikely to overtake Google in terms of mobile ad placements. However, this deep integration on Android products, will definitely aid Facebook Inc (NASDAQ:FB) substantially in building out its mobile revenue base. Facebook’s transition has surely taken place, and it’s now a mobile company for sure.
Ishfaque Faruk has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook and Google.
