FACEBOOK LAUNCHES MOBILE APP CENTER, MARKS A MAJOR STEP IN MONETIZING MOBILE, BUT CAN THEY GET IT TO WORK?

Thursday evening Facebook unveiled its mobile App Center, a major step to improve its mobile business.

The new app center, the company's first big announcement since its IPO, went live tonight with more than 600 apps, including Nike+ GPS, Ubisoft Ghost Recon Commander, Stitcher Radio, Draw Something, and Pinterest.

Facebook Mobile App Center homepage (Click Image To Enlarge)

Facebook Mobile App center on a mobile phone (Click Image To Enlarge)

Douglas Purdy, Facebook's director of developer products said.  

"The app center represents a new way for users to discover social applications."

Purdy showed off the App Center at a launch party in San Francisco. Plus, he says, it gives developers a way to reach Facebook's more than 900 million users. Facebook was responsible for 83 million visits to the Apple App Store in May, Facebook said.

Doug Purdy of Facebook (Credit: CNET/Dan Farber)

The App Center is designed to offer an experience personalized for each user, with app recommendations based on the apps they and their friends use. So if you're a person who likes word games -- something Facebook would know from your Facebook behavior -- the App Center will surface those sorts of apps for you. Then, when you select an app you like, you'll be sent to the Apple's App Store or Google's, depending on your device.

Facebook Mobile App center showing list of mobile apps (Click Image To Enlarge)

Facebook App Center apps for your Timeline (Click Image To Enlarge)

Even so, most Facebook users will have to wait before they can check out the App Center. Thursday's rollout -- full of big stats and optimism at an event it held in San Francisco -- will only go live for between 6 percent and 8 percent of Facebook's U.S. users, said Matt Wyndowe, the company's product manager for games and apps. The company it will roll out to all U.S. users in the coming weeks. Eventually, said Wyndowe, there will be different App Centers customized for different parts of the word.

Facebook's Matt Wyndowe. (Credit: Dan Farber/CNET)

Facebook's team has been working to approve apps that it would feature for the rollout. For now, the company is relying on a mix of algorithms and humans to decide what apps it features. He said his team is reviewing apps for technical aspects and functionality. Wyndowe said.  

"We review them all."

Ultimately, Facebook wants the algorithms to do most of the work in figuring out apps to feature. And given Facebook's huge audience, a prominent spot will surely be a boon to developers -- much as getting featured in Apple's App Store can turn an app into a hit.

Asked if Facebook was considering selling digital goods and apps directly to consumers --taking on Google and Apple -- Wyndowe said it's not in the immediate plans.

The App Center is available on mobile via the Facebook apps for iOS and Android, and by accessing Facebook.com on mobile. A huge amount of Facebook's mobile traffic goes through the mobile Web, not via apps.

Today's announcement comes a month after Facebook first said it was launching an App Center, which it billed mainly as a way to help users discover the best social apps and to drum up interest from developers.

Facebook is under enormous pressure to figure out ways to make money from mobile. And in the run up to the IPO, Zuckerberg told investors that mobile was his key priority for 2012.

Today's announcement amps up its mobile efforts, but it doesn't help it turn mobile traffic into dollars. Wyndowe said.  

"Nothing has changed about monetization. For us, it's about how do we delight users."

Of course, it's also about how Facebook gathers data from its users. In that way, the App Center should help a ton as more and more people use apps that are integrated with Facebook.

The company has recently been making others changes to its mobile products as well. Just yesterday it rolled out a "low-friction" mobile payment system to make it easier to make payments for virtual or digital goods via its app. And last month it redesigned its mobile interface to display larger photos.

Facebook had 488 million monthly average unique users of its mobile products in March -- more than half of its 901 million users in all -- and is only just starting to experiment with ways to make money from mobile. One problem is that it simply can't show as many ads on a mobile device since the screens are smaller.

Facebook's mobile challenge -- a challenge shared by most all Web companies -- has contributed to the wave pessimism about Facebook's stock. Shares of Facebook closed today at $26.31, more than 30 percent down from their offering price of $38 a share.

COMMENTARY:   According to Wes Biggs, cofounder and CTO at Adfonic, Facebook's App Center,

"Facebook’s App Center could be the beginning of a hugely disruptive Facebook app network, one that nimbly skips around operating systems and fills Facebook’s coffers with money and data. It just needs the tech in place to do this." 

Facebook wants a piece of the global mobile ad market.   On June 6, 2012, the Interactive Advertising Bureau (IAB), estimated that global ad revenues were $5.3 billion in 2011.   The North American market was 31.6% or $1.677 billion of the total.  Europe was close behind with a 26% share or $1.380 billion.   The Asian-Pacific market is now the largest with a 36.15% share or $1.916 billion.  

2011: Mobile ad spend in $millions

	Display	Search	Messaging	Total
Europe	367	900	114	1,380
North America	572	811	295	1,677
Latin America	31	74	83	188
Asia-Pacific	491	1,384	41	1,916
Middle East & Africa	44	124	4	172
Global	1,504	3,292	536	5,333

According to eMarketer’s most recent mobile ad forecast, the U.S. mobile ad market will grow to $2.6 billion in 2012 from $1.45 billion in 2011.  Google said that it had a $2.5 billion global-mobile ad-revenue run rate in 2011.  In 2012, Google may announce that run rate has increased to $4 billion or more.  Facebook has zero mobile advertising revenues.

On the basis of market share, the U.S. mobile display ad market in 2011 was dominated by Google, Apple, Millennial Media and JumpTap.  Those four represent 62% of the total.   Facebook is nowhere to be found.

Whatever the correct numbers for mobile advertising are,  Facebook wants a piece of that action and it needs mobile to work. Mark Zuckerberg has stated that mobile is of strategic importance.  85% of Facebook’s revenue is generated from ad revenue. And yet, today, it is only just announcing new mobile monetization features such as mobile placement of Sponsored Stories. Even its own mobile app still doesn’t display ‘real’ ads.   Wes Biggs says,

"These are tactics. This is not a strategy. So will Facebook tap into mobile advertising and realise those revenue streams? Or will it become just an app on some people’s phones?"

According to Biggs, Facebook needs to do develop a cohesive mobile advertising strategy. He identifies four pieces of that strategy:  

1. Develop its own smartphone -  A Facebook smartphone with its own operating system would remove one of the IPO exposures.  Rumors have been buzzing that Facebook may be working with Asian mobile phonemaker HTC and ex-Apple engineers on the smartphone, codename ‘Buffy’.   But the mobile phone business is also very risky.  Microsoft (see my blog post dated June 1, 2012)  is having a hard time gaining traction with its own devices, and RIM and Nokia are feeling the heat.  Google and Apple have the upperhand with Motorola Mobility (acquired by Google) and the iPhone respectively.   
2. Developing mobile ad products - Wednesday's announcement of Facebook's placement of Sponsored Stories, via its Ad API and Power Editor tool, on mobile phones opens a potential door to a huge advertiser audience. However, just how acceptable mobile ads will be to users with limited screen real-estate, delivered via mobile apps downloaded from its App Center remains to be seen.
3. Acquisition of a mobile ad network - Google and Apple both recognized the importance of acquiring a mobile ad networks that would cater to their proprietary platforms iAd (Apple) and Android (Google) and funnel mobile ads from the advertisers and ad agencies.  Google acquired AdMob and Apple acquired DoubleClick in 2010.  Facebook must acquire a mobile ad network.  Millennial Media or JumpTap are logical choices. 
4. Add more mobile features -  In April 2012, Facebook acquired Instagram, the two-year-old photo sharing app, App of the Year for 2012, and its 27 million users, for a billion dollars. Facebook will need to find a way to monetize Instagram. Cute little ads appearing within the app might do the trick.  Zynga uses Facebook exclusively for all of its social games, but there are rumors that Zynga might try to unhitch itself from Facebook. It's tired of paying 30% of all virtual goods sales generated by Zynga to Facebook.  Timeline was added to Facebook in 2012 as the centerpiece of its Open Graph.  Brands are reporting better engagement rates with Timeline, but only time will tell. 

On the face of it, the Facebook App Center is just a nice way of directing people to their favorite apps.  While Google Play and the Apple App Store give Android and iOS users a directory of apps, Facebook does this for Facebook-enabled apps – that is, apps that require either a Facebook login, or that interact with the Facebook news feed in some way.

And this could be where Facebook’s real mobile advertising strategy lies.

Right now, it’s just an App Center that is more of a showcase, pointing people to Android and iOS apps that work with Facebook, and not even charging for the privilege. But by promoting Facebook-enabled apps, Facebook could be signalling a strategy to make itself the social layer in an ecosystem of apps.

The App Center could quietly help Facebook establish itself in the world of mobile advertising, with Facebook-enabled apps showing Facebook-powered ads, pumping their data back to Facebook and making it an irresistible ad platform.

Facebook could conceivably become the heart of an extremely disruptive ad network with huge reach and laser targeting – and all regardless of operating system.

Facebook has the network which is massively social and hugely interactive, forming the social layer through which nearly a billion people view the web today.  It has the interface that, via iterations over the years, is becoming a stable, navigable framework.

To become the heart of an app network, all it needs is to meet the advertising world halfway, by providing value to developers who want to be part of the Facebook app network, while also maximising their own ad revenue.

For its part, Facebook still has to convince advertisers that its regular display ads work and can generate a return-on-investment.  General Motors claims they don't, and responded by cancelling $10 million worth of ads the day before Facebook's IPO.   Recent studies haven't helped either:   46% of Facebook users never click ads, and 24% hardly ever click them.  Furthermore, 4 out of 5 Facebook users have never made a purchase through Facebook.   Advertisers are clammoring for better ad metrics and more variety in ad formats including video ads.  

In short, Facebook needs to start treating advertisers like the TV and cable networks cater to Madison Avenue.  If they can't get their act together, what's to say they won't bomb in mobile advertising as well.    

Courtesy of an article dated June 6, 2012 appearing in C|NET and an article dated June 6, 2012 appearing in Forbes, and a press release dated June 6, 2012 by the Interactive Advertising Bureau 

Comments

[hire iphone developer]

Facebook really launches mobile app center, and according to my experience, it really rocks the mobile app development. I am also one of developer and this app store is really looking one of awesome place for consumers and developers.

[Tommy]

Hi Recycle Cell Phones,

thanks for the nice compliment. Keep visiting regularly. Tommy

[Recycle Cell Phones]

your post is so important. Thank you for the information. Great job you have done and keep it up.