Facebook Home represents the next step in Facebook’s mobile strategy. Cartesian considers the implications both for Facebook and the broader mobile ecosystem.
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Recently, Facebook unveiled Facebook Home, its long-awaited and long-rumored “Major Mobile Announcement.” Like all things Facebook, this has made quite a splash
“Facebook Home Is Brilliant”
“Facebook's First MobileOperating System”
“Facebook Home Phone PullsYou Back Into Facebook”
“Facebook Home, a visually arrestingplace where Facebook and Google split
custody of your attention”
“Facebook invades Android with a new lockscreen and a new chat experience”
“Facebook Home Review: Slick, Fun and, for Now, Superficial”
“Facebook Home: A Nice Place to Visit, but Not Quite Home”
“Facebook Home: People aremore Important than Apps”
So… What does this mean for mobile ecosystem players more broadly?
Facebook Home expands the current Facebook mobile application set by essentially taking over the home screen, the app launcher, and the general UI of Android phones
Facebook Home Overview
Facebook Home is an incremental step in Facebook’s mobile strategy
Source: Facebook, Cartesian
• An integrated “family of apps” providing a home screen and lock screen on Android Devices
• Displays newsfeed updates with photos from friends (Cover Feed)
• Brings Facebook Messages and SMS forward with Chat Heads, accessible on top of any app
• Downloadable on select Android phones, preloaded on the HTC First
• Will be updated on a monthly basis via app updates
What Facebook Home Is
A Home Screen
• Brings newsfeed content forward
Messaging Application
• Chat Heads now prominently displays notifications when a FB message or SMS is received
• Chat window can be opened and closed on top of any app
App Launcher
• Accessible with a swipe in the home screen
What Facebook Home Is Not
Not a Phone
• No hardware investment from Facebook, contribution to HTC First investment unlikely
Not an OS
• FB did not create a forked version of Android
–Uses standard Android tools to create downloadable app and UI
Not Platform-Agnostic
• Android only - unlikely to be available on other OS
To support Facebook Home’s launch, HTC and AT&T have partnered to offer a phone with Facebook Home preloaded
Source: HTC, Cartesian
• HTC has partnered with Facebook and AT&T to offer the first phone that has FB Home preloaded
• Ability to show notifications from other phone apps (including Google Calendar, Outlook email, etc.) is the primary distinguishing feature from the downloadable Facebook Home version
• $99.99 price point represents a low-end smartphone play, perhaps catering to a younger category
• Users are able to disable Cover Feed
• 4.3-inch screen, dial-core processor, 1GB of RAM and 5-megapixel camera
HTC First
$99.99With contract
While the HTC First represents an important proof of concept, the success of Facebook Home will depend primarily on the downloadable version
So… What does Facebook Home mean for Facebook’s strategy?
Facebook Home addresses several key strategic goals, the most obvious of which is increasing user time spent on mobile, which increases the number of ads seen
Source: Facebook Annual Report, Cartesian
Facebook Home aims to drive higher engagement and monetization on mobile devices
Grow Users and Engagement
Improve Ad Monetization
Enhance Developer Offering
• Grow underpenetrated segments and geographies
• Enter new markets
• Improve user experience
• Improve mobile ad targeting
• Develop mobile ad model
• Grow advertiser base
• Grow and diversify partner base
• Offer new platform capabilities
• Regulatory barriers
• User migration to other media
• Loss of user trust
• Non-monetized mobile usage
• Inability to balance monetization with user experience
• Competitive/pricing pressure
• Inability to balance user and developer needs
• Key developers move to OTT
Role of Facebook Home
• Drives FB mobile consumption and engagement for existing users but will not necessarily lead to new FB users
• Helps retain use of FB relative to other media and networks
• If FB soon releases ads on the Cover Feed it will be able to monetize the increasing time spent on mobile
Facebook Home is intended to address the increasing Facebook mobile user base (64% of users today) by driving consumption and mobile monetization
• Due largely to smaller mobile device form factors, mobile FB users see fewer ads than desktop users today, accounting for only 11% of total advertising revenue
Source: Facebook, JP Morgan, Cartesian
“…we anticipate that the rate of growth in mobile usage will exceed the growth in usage through personal computers for the foreseeable future and that the usage through personal computers may be flat or continue to decline in certain markets… in part due to our focus on developing mobile products to encourage mobile usage of Facebook.”
– Facebook Annual Report 2012
FB Monthly Active Users (MAU), M
245 288 325 376 432 488 543 604680
363393
413424
413413
412403
376
608681
738800
845901
9551007
1056
M
200M
400M
600M
800M
1000M
1200M
Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12
Mobile MAUs Non Mobile MAUs
Note: Mobile MAUs includes both desktop and mobile usage, with Mobile0only MAUs representing the # of users that only access FB via mobile
While Facebook Home has a small addressable market (100M users or about 10% of total FB users), this is likely significantly larger than the addressable market for a Facebook-owned phone
• For reference, the top-selling Samsung Galaxy S3 sold 40M units in seven months
• Mobile usage of Facebook overall is increasing
• Of mobile users, smartphone users will increase as smartphone adoption increases
• Android is projected to maintain its majority share of smartphone platforms
• FB Home is not likely to be available on iOS, Windows Phone, or Blackberry (though Facebook is already highly integrated into iOS and Windows Phone
Facebook Home presents the greatest potential challenges to content providers and OS providers
Source: Cartesian
Facebook Home Implications by Player Type
MNOs
Device Makers
Content Providers
OS Providers
Minimal
Significant
Minimal
Moderate
• Limited risk from home screen capture since MNOs already lack control of UI compared with OS providers and OEMs
• Chat Heads is a compelling OTT messaging offer, though most MNOs have existing strategies to mitigate the threat from OTT (e.g. shared data plans)
• Usage of Facebook Home may drive incremental data usage
• For FB Home users, other smartphone apps could recede in importance • Content providers may attempt to create their own versions of “Homes” for example a
Twitter home screen, Evernote home screen, etc. • Other content providers may integrate more deeply with Facebook to try to gain
mindshare by being part of the News Feed and Cover Feed
• If the HTC First gains traction it may make sense for other OEMs to also partner with with FB to offer a preloaded FB Home device
• Not relevant for Apple, Microsoft, and Blackberry ecosystems (assuming these platforms do not allow a fully functioning Facebook Home app)
• Will be available on tablets soon, thus impacting tablet makers as well
• Facebook already has deep levels of integration within major OS platforms, especially Apple and Windows Phone
• Apple probably will not allow Facebook Home on iOS given their closed ecosystem and high level of control over user experience
• Android OS will be most threatened to provide a compelling home screen that can compete with the Facebook Home experience
Minimal
Moderate
Moderate
Minimal
Threat OpportunityType Potential Implications if Facebook Home is Successful
Fundamentally, Facebook Home should be viewed as another incremental step by Facebook to increase its mobile presence and engagement, as part of a “try-everything” mobile strategy
Facebook Home could potentially address 10% of total Facebook users
For the small subset that do adopt Facebook Home, consumption and engagement will increase
The HTC First is a low-cost Android smartphone which showcases Facebook Home and if successful, may indicate Facebook’s willingness to dive deeper
Partnership opportunities for MNOs exist in providing FB-home centric devices like the HTC First, though market demand has yet to be proven
Facebook is still trying to figure out how best to engage and monetize mobile users, and Facebook Home is a low-risk way of testing the mobile waters