Facebook has said on multiple occasions that it sees itself as a “mobile company.” However, until recently the company’s mobile strategy has been lacking something major — a revenue model.
In its current setup, Facebook’s main revenue stream comes from targeted display ads on the desktop version of its website. However, Facebook has opted not to run ads in its iOS and Android mobile apps. When you consider that smartphone and tablet market growth are dramatically outpacing that of traditional computing, this could spell trouble for the company. A mobile phone, or phone operating system, could give Facebook the foothold it needs to continue its dominance in the social media arena. It could also introduce a vital, additional revenue stream for Facebook.
The company has recently launched App Center and integrated mobile apps with features like Facebook Camera and Facebook Pages. This suggests Facebook is attempting to gain control over the user experience in the mobile space. This could easily be a way of garnering influence on other platforms to make the idea of transitioning to a Facebook phone that much easier.
How It Could Change Mobile Marketing
For brands, a Facebook phone could offer great opportunity for increased exposure and engagement. A quick look at any magazine, movie poster, or billboard will tell you that Facebook Pages have become a staple for advertisers. A Facebook OS would allow brands to promote directly to mobile device users in new and inventive ways. It could also offer much more data on what an individual does with his or her device. This could open up the company to explore markets such as daily deals, mobile payments, and more — all centralized around brands’ Facebook Pages and members’ individual Likes.
For Facebook members, the benefit would be obvious. A Facebook smartphone would likely provide a rich, simple user interface highlighting marketing messages that users find relevant. In addition, it would offer a simple way for members to connect with their friends and families through a single platform and a single device. In many ways, a Facebook phone would be able to accomplish the things Google has attempted with Android (but so far has not delivered).
Ownership of a mobile OS could allow Facebook to move away entirely from display ads and into interactive marketing entirely, a proposition that surely consumers will appreciate and enjoy.
Why It’s Not a Sure Thing: The Risks
Although controlling the mobile experience may offer a number of benefits to Facebook, the proposition is not without risks. For one, it could make enemies of partners like Apple and Microsoft. As we’ve seen recently, Google’s Android OS has faced a litany of copyright and patent lawsuits to the point where, despite marketshare success, it seems to be offering the company diminishing returns.
The hardware game is even more risky — and crowded. It gets scarier yet when you consider that last quarter Apple and Samsung took 99 percent of the industry’s profit, leaving everyone else to break even or lose money.
One way or another, Facebook needs to find a way to generate revenue in the mobile space. Whether the company thinks launching a phone is worth the risks is anyone’s guess.
Do you think Facebook is developing its own smartphone? If so, is it a good or bad idea? Share your thoughts in the comments.