Why Facebook could be about to topple Apple

Facebook has had a problem with mobile for a long time now, with running outdated apps to access Facebook and not effectively transferring its integrated ownership of the web, onto mobile. All that could be about to change, as rumour has it that Facebook is working with select developers to allow virtual goods to be purchased in apps via mobile. While this may sound like a small enough change, it represents a huge shift in focus for Facebook, and comes at a time when everyone is turning their attention to mobile commerce and how mobile activity can be monetised. Through developing a mobile credits system, Facebook are also positioning themselves to take on Apple and make a play for the mobile apps market.

A complete mobile strategy

Facebook has needed to focus on mobile for a long time now, as it remains the one area that they haven’t quite gotten right, yet they can’t afford to ignore. As smartphone usage rises, the experience of Facebook via mobile is still quite clunky. It’s difficult to access Facebook Pages for example, as on Android you can’t view separate tabs off a company page, restricting the reach that an organisation can have via Facebook on mobile. By focusing on virtual credits in the mobile browser, they’re not only turning their attention to the mobile experience, but also how to monetise it. This brings up new opportunities through mobile ad targeting for example and the ability to target by real-time location, that Facebook doesn’t currently offer. Right now Facebook is one of the most popular mobile apps, but this is almost by default – a carry over from their presence online – as opposed to actively targeting the mobile market. Now that it looks like Facebook are moving aggressively into this area, it could radically shake up the smartphone and app market.

Playing Apple at their own game

Of course, by focusing on the mobile app experience and virtual currency, Facebook are effectively playing Apple at their own game. Apple came out and changed the mobile market by focusing on apps, with an effective revenue model for themselves, and now Facebook are looking to do the same. The way that Facebook credits work, which is now the form of currency Facebook developers are forced to use, is that they take a 30% cut of revenue generated through the app. Much like Apple’s model for app commerce, where they also take a 30% cut. Of course what Facebook is attempting to do, is keep that app experience within Facebook itself, without the need to access apps via the App Store, Ovi store, Android etc..

This might sound like an impossible task, but Facebook is well positioned to do it. If accessing Facebook is already one of the most popular activities on mobile, it isn’t much of a stretch to change that into an app experience. And by focusing on mobile credits, Facebook can stake an early claim in the area of mobile that hasn’t quite come into fruition yet : mobile commerce. While many, including Google, are experimenting with mobile payment systems, Facebook has an excellent opportunity here to turn the market on its head and develop a mobile commerce system that functions through apps.

$14 per virtual goods transaction

Looking at the virtual goods market alone, which is what Facebook are initially focusing on, with their expected foray into mobile currency, Facebook is in an excellent position here to grab an even larger share of the in-game revenue stream. A recent study by the analytics firm Flurry found that while a significant portion of people don’t buy goods from freemium games, for iPhone and Android, the average transaction is $14. That’s $14 average for every paid transaction within mobile, to purchase virtual goods within a free app :

Looking at this figure in the context of Facebook’s virtual games market, and the revenue potential for Facebook is clear. Throw in 35 million users of Farmville, 80 million users for Cityville and the threat that Facebook plays to established mobile players is clear.

Where Facebook goes, brands will follow

What’s important to consider here, is that many more companies are active in Facebook, than will have developed a mobile app. Facebook’s offering for business remains a lot more accessible than mobile apps, and wherever Facebook goes, brands (and their money) will likely follow. If Facebook develop mobile currency in the right way, to offer a seamless transition from the way Facebook Pages currently work, then companies will likely invest in any offering, to get in front of their consumers and develop their mobile offering in an easier way than developing a bespoke mobile application. That’s not to suggest that Apple are struggling to attract brands to their platform, but Facebook has a more established relationship with brands that could seamlessly cross over into mobile.

200 million

The most important factor at play here, is the fact that Facebook has over 200 million users that are currently accessing Facebook via mobile. This huge reach means that anything Facebook introduces on the mobile platform is pretty much guranteed to instantly overhaul the incumbent player. They have instant reach to 200 million people, to offer an alternative app experience that can be instantly monetised. The fact that Facebook has built up a mobile userbase of 200 million without actively focusing on it, shows the potential of anything new they introduce to actively build out the mobile experience and following. This number is the most important factor in any mobile strategy that they develop. The official word from Facebook? In a statement released to Bloomberg : “We’re always testing new ways to improve app discovery on Facebook, however we have no further details to share at this time,”. Expect news soon…