Mobile social consolidation

Facebook Home is a tactical move that points to a broader structural question: regardless of the specific appeal of Home as we see it now, does the current swarm of mobile social services resolve in consolidation into one or two dominant players?

If the answer is yes, then Facebook’s existing scale makes it by far the most likely winner. However, I'm not sure that consolidation is inevitable.

There are three relevant precedents to choose from. On one hand, there were once a range of competitors to Facebook on the desktop, and some argued that there would be regional winners. Instead, Facebook crushed almost all the local alternatives, such as Bebo or Orkut, leaving only specialised niche players like LinkedIn (whose main value is as a CV database, not a social network) or dating sites.

Conversely in instant messaging, there were regional winners: everyone in one country used Yahoo Messenger and everyone in another used AOL Messenger – not because of product differences but purely though network effects. This seems a less likely outcome, though.

However, the most worrying precedent for Facebook is AOL – a hugely dominant aggregator that was unbundled and never replaced.

It seems to me that a driving dynamic for consolidation and integration on the desktop is the network barrier: the hassle of creating your social ‘graph’ (in Mark Zuckerberg’s phrase) on a new network. This argues against the current fragmentation, naturally.

Yet on mobile the social graph comes ready-made in your address book and the accompanying PSTN numbering system. Your phone already knows who your friends are – you don’t have to enter them into each new social network. Both Whatsapp and Viber leverage this: they look at your phone book and tell you who’s already using it.

This is a much simpler global identity system than Facebook Connect: phone numbers (and the address book) are themselves a single global social network that any app can use, bypassing Facebook’s biggest protective ‘moat’ and removing a lot of the problems of fragmentation. Such apps ride on mobile and mobile numbers just as Facebook apps ride on Facebook and websites ride on the web. There are lots of social apps on mobile, just as there are lots of apps on Facebook or lots of sites on the web: this is not necessarily a problem.

In other words, the current ‘fragmentation’ of mobile social may only be the same ‘fragmentation’ that happened to the web as people moved on from AOL. People decided they were ready for best of breed services and content sites, rather than getting everything through AOL. The current rapid bubbling-up and equally rapid disappearance of new social apps may not be a transitional phenomenon.

(This is an excerpt from a detailed report produced for Enders Analysis.)

Facebook Home maths

I'm writing a detailed note on Facebook Home for Enders Analysis, but some of the distribution maths struck me as worth posting here as well.

Facebook Home will be available in the Google Play app store from April 12, but at launch it will only be supported on a limited number of high-end phones (HTC One X, HTC One X+, Samsung Galaxy S III and Samsung Galaxy Note II). 

These devices together have sold perhaps 60-70m units (we know 40m GS3s a month or two ago but the rest is pretty speculative), out of a total of around 680m Androids in the last two years. The GS4 will presumably be supported too, of course. In addition, HTC is launching a new mid-range Android phone (the ‘First’), which will come with Home pre-installed. Sadly, given HTC's current position, I don't expect this to change the trajectory of anything.

(Incidentally, it's a sign of how banal Android fragmentation has become that the fact  Facebook has to give a list of supported devices has passed largely without comment.) 

This is just a first step: I'd expect Home to expand to cover most or all devices running Android 4 or later in the next six months or so, if not sooner. In March Android 4.x made up 54% of the active Android base outside China, according to Google’s developer statistics. This is moving up, and will be maybe 75% by the end of the year. Android 2.3 is possible, but a lot more work and seems unlikely. 

Expanding Home to cover all 4.x devices might take the addressable base to 375m.

Meanwhile Home is not available for the iPhone and almost certainly never will be, since Apple would not permit such a take-over of the interface. 

In December 2012 iPhone users made up 29% of monthly active users (MAUs) of Facebook’s smartphones apps; Android was 38%, and growing faster (it was about 35% last summer). Facebook stopped disclosing this data at the end of the year so I don't have more up-to-date numbers. 

So, all of these numbers are moving, and some are a little fuzzy, but it looks like Facebook Home might be available for something like 20-25% of the current base of  Facebook smartphone apps users today (assuming it really does expand to cover Android 4.x). By the end of the year, Android might be 45-50% of Facebook's base and have 75% Android 4.x penetration, which would take that to maybe 40%. 

How many people actually will install it (and keep it) is another matter entirely, of course. 

As an aside, I always prefer to talk about workings and variables than just state 'it will be x'. Instead of the above, I could just say "130m people can use Home", but that approach always seems less helpful - if not rather arrogant. After all, no-one at all actually knows the real number. 

Facebook Mobile

Oi mate - text me on Kik - it's like Whatsapp - download it

-One drunk shouting to another across a London street last week

It seems pretty clear that Facebook has won 'social' on the desktop. No-one will do to Facebook what Facebook did to Myspace: no-one will beat Facebook on its home ground, just as no-one beat Google or Yahoo on theirs.

It is not clear that the same is true on mobile. It is not clear what the right social network experience is on mobile, and it is not clear that Facebook is dominant in such experiences as there are. Facebook is certainly doing well: its own primary smartphone apps have over half a billion active users, but the secondary apps (Camera, Messenger etc) have had more moderate success (Camera in particular fizzled). Yet there are well over a dozen other mobile social apps each with over 100m users, and probably two dozen with over 10m users and the potential to be much bigger.

The primary threat posed by all of these apps is unbundling. Instagram took photos and Whatsapp and others take messaging: both are just an icon on the home screen next to Facebook, and it seems much more fluid to switch between apps than to go to a whole other website. Meanwhile clever approaches like Whatsapp's use of the phone number as your ID help bypass the hurdle of rebuilding your social network afresh on every app.

Instagram is also instructive because of the way it grew to tens of millions of users with half-a-dozen employees and a tiny amount of funding. App stores and cloud computing mean that if you get the formula right - and get very very lucky - you can grow to astonishing scale in six months with very little money. And a billion people now have smartphones with app stores.

However, it seems to me that the deeper problem comes not from the comms apps that directly attack Facebook's offer, but from the third-party content. Consider a few things you might do on Facebook on the desktop:

  1. See updates from your favourite band
  2. Look at a local restaurant
  3. See a new story in a magazine
  4. See a post from a friend about a show on at a museum
  5. Find out that a shop is having a sale

Some or all of those are sources of revenue for Facebook. Yet on a smartphone, how many of them would happen first in the Facebook app? How many would come in dedicated apps - either from the brand itself (a magazine app) or a vertical app (Yelp, Songkick etc). Of course, there's no guarantee you'll install those third party apps, but the keener and hence more valuable a person is the more they're likely to.

This is, of course, exactly the same problem that everyone points out for Google: apps erode web search. Google is trying to address that by moving beyond web search with things like Google Now, which is just one manifestation of a deeper reorientation of how it looks at search (indeed, some of those pieces of content might well appear in Google Now). But apps may actually be just as big a problem for Facebook, both because they enable competitors, and because they might erode the actual use cases that make Facebook money.

Facebook's 470m mobile app users

Until late last year, Facebook disclosed monthly active users (MAUs, hereafter 'users' for simplicity) for its smartphone apps, on a rolling daily basis. I was always slightly nervous of publishing it, since you had to know how to get it and I suspected it might disappear if anyone pointed it out. Now, like fairy gold, the data has disappeared, so I can share it. 

First, the eye-catching numbers:

  • In September 2012, Facebook reported 470m users of its smartphone apps for iPhone, Android, RIM, Nokia, Windows Phone and J2ME ('Featurephone) 
  • It had a further (presumably overlapping) 45m users of its iPad app, out of around 100m active devices
  • Out of 1.07bn total users, Facebook reported 604m 'mobile users', implying that 134m were not using these apps and hence were using the mobile web
  • Obviously, these numbers are not exclusive: many, if not all, of the people using mobile apps are also using the desktop site

The chart below shows Q3 2012 data, clearly showing how important mobile has become for Facebook, but also the relative importance of the different mobile platforms. 140m people were using the iPhone app, and 176m using the Android app: between them these are a quarter of Facebook's base, and almost certainly a higher proportion of use. 

One of the interesting aspects of this data is that (if you were collecting it) you can compare platforms over time. The next chart compares Facebook's mobile numbers for September 2012 versus September 2011.

It's pretty easy to see where the growth is coming from: Android, up from 66m to 175m, followed by iPhone, up from 91m to 140m. There is also very interesting strength for the J2ME client for feature phones, which is probably a function of growth in emerging markets: this app more than doubled to 75m users. Meanwhile the RIM app is growing much more slowly (and had flattened completely by the time the data stopped being reported) and Windows and Nokia are nowhere. 

How does this compare with the broader install base? 

  • The iPhone install base in September 2012 was perhaps 200m, giving Facebook 70% penetration
  • The Android base was MAYBE 550m. However at least 100m (a very rough estimate) was in China with no access to Facebook, giving Facebook an effective penetration of 40% of the 450m phones outside China

In other words, Facebook has much higher penetration in iPhones than Android phones: 70% versus 40%. This might be a geographic issue, with Android having higher share in emerging markets with lower Facebook use, but it probably also reflects the widely observed lower engagement on Android. There may also be app quality issues. 

Aggregating this data makes another trend very clear: use of smartphone apps is surging as a share of Facebook, up from 240m in September 2011 (30% of the total) to 470m (44%) in September 2012. Mobile web, meanwhile, is flat, at least on these numbers. 

Finally, we also used to get data for Facebook's other apps; Messenger and Camera. 

Facebook Messenger had an entirely respectable 53m users, again with the iPhone having slightly lower absolutes but higher penetration. RIM, perhaps unsurprisingly, was less successful. However, compared to the dozen or so stand-alone mobile messaging services, such as WhatsApp, Line etc, this is pretty small. Camera, meanwhile, bumps along at 1m or so users. Instagram is an obvious explanation here.

100m is the new 1m 

Facebook is becoming an mobile app-based service first and foremost. Almost half the base is using smartphone apps and we can be sure it's more than half the use, especially in developed markets, where 75% of users are on mobile in some form. That poses a two sets of challenges: 

  • Revenue: FB has a solid desktop revenue model, but the mobile model is much less well worked out
  • More importantly, I think, UX: Facebook has nailed a certain vision of desktop Social Networking. It is much less clear to me that it has nailed the One True Mobile social experience. Hence Instagram, Poke, Camera, Messenger - FB is back into customer discovery mode, trying to work out the right UX. Meanwhile Whatsapp seems to have a couple of hundred million users and there are at least a dozen mobile messaging apps with over 100m users. Worse, since they're mostly founder-controlled they may not be willing to be bought out

FB is going though a massive, existential transition to mobile, changing the UX and the revenue model massively. Nothing is settled yet. 

Note

This data is not entirely compatible with public statements from Facebook that the mobile site has more users than its Android and iPhone apps combined. There's no obvious way to reconcile them: Facebook has disclosed MAUS for the Android and iPhone apps that add up to well over 340m, and 'mobile users' of a ittle over 600m. 

Platform Wars

This is a summary presentation based on a longer and much more detailed report I’ve produced for clients of Enders Analysis. I’ve presented these slides at a few conferences, so I’m making it public here as well. As should be obvious, it is the basis for a talk rather than a stand-alone document, but most of the charts should be self-explanatory. 

Mobile platform wars: Apple, Android, Samsung and Facebook