The next phase of smartphones

It’s now 7 years since the iPhone reset the phone business, and indeed the entire computing and internet businesses. But it was pretty clear at the time that the first iPhone was an MVP, and Google’s first Android… homage, the HTC G1, was even more so. It feels rather like the last 7 years have been spent adding all the things that really needed to be there to start with, both in hardware and software. For iOS and Android these have come in different orders, since their opening assumptions were very different, but they’ve ended up at much the same place in terms of the user experience and interaction model. There are small differences in how you interact, and there are always things that are on one platform before the other, but the basic user flows are very similar, and almost all the obvious gaps have been filled. 

Along these lines, my colleague Steven Sinofsky makes the point that for any new ‘thing' in computing, at the beginning everyone is doing roughly the same stuff because the stuff you need to add is pretty obvious and undifferentiated - you might deliver different things in different orders but you’ve got basically the same wish list. It’s once you’ve finished building out that stuff that things start to diverge. 

This, I think, is what we started to see at this year’s WWDC and Google IO - the end of the first 7 years and the start of a new phase, with the fundamental characters of Apple and Google asserting themselves. As Jean-Louis Gassée put it, iOS 8 is really iOS 2.0

Hence, WWDC was all about cloud as an enabler of rich native apps, while the most interesting parts of IO were about eroding the difference between apps and websites. In future versions of Android, Chrome tabs and apps appear together in the task list, search results can link directly to content within apps and Chromebooks can run Android apps - it seems that Google is trying to make ‘app versus web’ an irrelevant discussion - all content will act like part of the web, searchable and linkable by Google. Conversely for Apple, a lot of iOS 8 is about removing reasons to use the web at all, pulling more and more of the cloud into apps, while extensions create a bigger rather than smaller gap between what ‘apps’ and ‘web sites’ are, allowing apps to talk to each other and access each others’ cloud services without ever touching the web. 

Unlike the previous differences in philosophy between the platforms, which were mostly (to generalise massively) about method rather than outcome, these, especially as they evolve further over time, point to basic differences in how you do things on the two platforms, and in what it would even mean to do specific tasks on each.The user flows become different. The interaction models become different. I’ve said before that Apple’s approach is about a dumb cloud enabling rich apps while Google’s is about devices as dumb glass that are endpoints of cloud services. That’s going to lead to rather different experiences, and to ever more complex discussions within companies as to what sort of features they create across the two platforms and where they place their priorities. It also changes somewhat the character of the narrative that the generic shift of computing from local devices to the cloud is a structural problem for Apple, since what we mean, exactly, when we say ‘cloud’ on smartphones needs to be unpicked rather more. That's a subject for my next post. 

Meanwhile, this sort of divergence is why I’m a little skeptical about the other two big reveals in the last couple of months: the Fire Phone and Facebook’s mobile announcements at F8. Facebook is trying to build essential plumbing to connect the web and apps together, in particular with its deep linking project. But this is like building the plumbing for a building that’s still going up, and where you don’t know what it's going to look like. Making tools to connect apps and the web together when Apple and Google are shifting the definitions of those terms is going to be challenging. 

Amazon has a bigger problem. Most obviously, more and more of what it means to be ‘Android’ will come from the closed Google services that aren't part of AOSP and that it doesn’t have access to. If Amazon wants to free-ride on the Android app ecosystem, it will need to spend more and more time replicating the Google Android APIs that the apps it wants are using, or the apps just won’t work - presuming that Amazon even has the sorts of search-led assets to do that. But more fundamentally, AOSP is being pulled along by Google’s aims, and will change in radical and unexpected ways. This isn’t like building on Linux - it could be more like taking a fork of DOS just before Windows 3.1 came out. Are we quite sure (to speculate wildly for rhetorical effect) that we won’t be running Android apps in a sandbox on our ChromeOS phones in 5 years? Where would that leave Amazon’s fork? AOSP is not necessarily a neutral, transparent platform for Amazon to build on. 

Amazon and Android forks

The general reaction to Amazon's Fire Phone has been a puzzled shrug. It's a good but unexceptional device with entirely conventional high-end and high-margin pricing - a move as out of character for Amazon as the purchase of Beats was for Apple (and probably driven in part by the way the US pricing structure makes even $400 phones ’free’). There's an interesting quasi-3D UI feature and a big flashing BUY button, in line with Amazon's role as the Sears Roebuck of the 21st century, but little that really changes anything or couldn’t be done on any other smartphone anyway. And that leaves people wondering why Amazon bothered. The most productive line of thought, I think, is to look at Prime, Amazon's whale service, and the role that the Fire Phone plays in securing that relationship. 

To me, though, the interesting thing is less the phone than the platform and what it it represents - that is to say, the first real attempt to sell phone that forks Android outside China*.  

Android itself is open source, and anyone is free to take the code (AOSP) and build whatever they want. Android is the new Linux, in this sense. But AOSP doesn't give you Google's own smartphone apps and it doesn’t give you all the system services Google has built. So if you make an Android device without reference to Google, and change a bunch of things ('fork Android') your device won’t have the app store and the maps, and it won’t have the Google services APIs that lots of third-party apps need, most obviously push notifications, in-app payments, location and embedded maps. There are lots of other things Google makes as well, but those are both the important and the hard parts. 

Without this Google layer you really only have a featurephone, and to get Google's layer you need to submit to Google's control over what you make, which amongst other things means that you have to use Google's interface and you have to take the whole package - whatever Google wants on the phone goes on the phone. (The core mechanic here is that you have to pass the compatibility test). Hence, Google uses access to its apps and services as a lever to control Android. This is pretty similar to the way that Microsoft used Office and Windows: selling an Android phone without Google's services is like selling a Windows PC that doesn't have Office and can't run it. 

In China all of this works differently. Google services are either blocked or weak or both (the Chinese unaccountably didn't let Google send its mapping cars down every road in the country), while the Chinese internet giants Baidu, Alibaba and Tencent ('BAT') and scores of others have built lots of great Android services of their own. So the vast majority of Android phones sold in China (even from Samsung or Motorola) come with no Google apps and integrate these instead. 

Outside China, though, if you want to use Android as a platform but do something different, you need to build or buy those core functions yourself, and that’s what Amazon has tried to do. It has licensed Nokia’s HERE mapping platform, it has built an app store for Android, and it has built its own versions of the key enabling APIS - location, push notifications etc. 

The problem is that the maps and the app store are not commodities. Adding them is not just a matter of spending the money. Google's Maps platform is very good and HERE, at least in western markets, is not as good. As with Apple Maps, it works, mostly, but the gap is clear and there is no roadmap that points to that gap closing. For apps, though an app store itself is perhaps a commodity, Amazon has only persuaded a minority of Android developers to load their apps into its store, partly since this means they have to swap out Google’s APIs (for maps etc) for Amazon’s, and that is not necessarily trivial. Amazon has done just about as good a job as one could expect anyone to do at this stage, and there are very few other companies that could get this far - perhaps only Microsoft. But it hasn’t, remotely, reached parity with Google. 

And so Amazon is testing the proposition that you have to have Play (or iTunes) and Google Maps to sell a smartphone outside China - or, rather, it is testing just how good the app store and maps have to be. How many of the latest cutting-edge apps do you have to have, if you cover the basics? How close do you have to get to Google Maps’ coverage? We know Windows Phone does not have enough apps, but can the Amazon store get there?

These same questions apply to any Android OEM that might be thinking of asserting greater independence from Google (such as Samsung), with a further complication. Google’s agreements with OEMs have been leaked several times, and they include clauses that prevent you from having a foot in both camps: you cannot sell a forked device and carry on selling official Google Android devices. So you can’t experiment on the margins (Samsung can't sell a phone running Amazon's Fire software) - you have to walk away from Google entirely, or not at all. That's really no choice at all at the moment. 

All of this takes us to the elemental question - why, exactly, are you forking Android? What important problem do you solve that’s worth reinventing the wheel, while taking on the risk of building on someone else’s platform, open-source or not? Why are you asking people to buy a phone with second-rate maps and a second-rate app store? Are you offering them something you couldn’t otherwise do in return, or just addressing your own strategic concerns? Are you solving a user problem or your own problem?

Both Xiaomi and Cyanogenmod (an a16z portfolio company) have built their own very custom versions of Android that do none the less pass the compatibility test. And though Xiaomi differentiates on software, Xiaomi phones outside of China ship with Google Apps. Hugo Barra called it 'a compatible fork'. After all, it’s not as though you’re not allowed to change Android at all. Google describes the compatibility test as follows: 

"Enable device manufacturers to differentiate while being compatible. The Android compatibility program focuses on the aspects of Android relevant to running third-party applications, which allows device manufacturers the flexibility to create unique devices that are nonetheless compatible."

Generally, Android OEMs have been no better at differentiating on software than were PC OEMs, even though Google allows you to change more than Microsoft did. But it doesn’t follow that you can’t make Android visibly better without forking it if you bring the right skills and culture - Xiaomi and Cyanogenmod (and a number of other Chinese companies) show that. 

Hence, it seems to me that the forking question really flows not from a specific feature that you want to implement but the fundamental principle of controlling your destiny - you want a platform that’s 'yours'. 

That is, a central strategic problem for both Amazon and Facebook, amongst others, is that their businesses have moved from the essentially neutral platform of the web browser, where there has been no real change in the user interaction model in 20 years, to the much messier, mediated and fast-changing platform of smartphones, where the web is just one icon and platform owners are continually adding new ways for users to discover and engage with content, such as iBeacon or Google Now. They didn’t need to make browsers because browsers had become transparent commodities, but smartphones aren’t. This of course is why Google itself made (or rather bought) Android - to make sure that it would not be shut out in this new environment. Making an entire new OS is not an sensible option for Amazon or Facebook at this stage, but building on top of a free, open-source one is worth at least thinking about. But, again, in doing that you need to solve the users' problems, not just your own. 

Facebook is also poking away at this issue (such as with the abortive Home), but as Mark Zuckerberg pointed out, even a really successful Facebook Phone would only be used by 5% or 10% of Facebook’s users, so would really just be a distraction. Instead, faced with a very different set of competitive dynamics on mobile, Facebook is exploring the unbundling of its product with a 'constellation' of different apps. That is, Facebook is embracing this new and more complex environment. With the Fire Phone Amazon is going the other way - greater bundling rather than less.

I do wonder what might appear if Facebook's strategy was applied to Amazon's product - if there were half-a-dozen different interesting and useful Amazon apps for finding and buying products. But Amazon has never been a user experience company in that sense - it thinks about user experience the way Fedex does, as something to focus on ruthlessly, but not as a playground for new experiences. That means it's going to be very interesting to see how it can enchant and delight people who buy its phone. 

 

*Note: when I wrote this on a Sunday evening the fact that Nokia (and hence now Microsoft) has been selling a forked Android phone for the last 6 months passed completely out of my mind, even though I played with one at MWC and rather liked it. It's done rather well in emerging markets, apparently, and is on sale in parts of  Europe) but isn't even for sale in the USA. The main driver is that Windows Phone doesn't fit well into the hardware required of that price. The points in the blog post all remain, though. 

Unfair but relevant

A while ago I wrote a post talking about how sometimes, the best and most important comparisons are those that are unfair, but relevant. 

This is a pretty good example of an unfair but relevant comparison: Facebook's active users of Android and IOS by region. 

People who buy $600 phones (Apple's ASP) and people who buy phones for $250 (Android's ASP)  or less tend to be different types of people. 

Of course, whether everyone in Greenwich who will ever get one already has an iPhone, and hence whether there's any more growth to be had, is another equally relevant question. 

iPads and tablet growth

Apple's revenue has pretty much stopped growing. This chart shows the quarterly revenue the company has reported - a series of ever larger spikes upward around new product launches, but with a flattening trajectory. 

If you look at this on a a trailing 12 months basis, to smooth out the spikes and see the underlying trend, you see a very clear 'S' curve. 

And the US revenue is pretty much flat, though China is certainly growing. 

Apple has three main buckets of revenue - iPhone, iPad and  everything else. If you split these out, you can see that the really dramatic slowdown is actually in the iPad business, not iPhone. 

This is something of a change - a year ago the general narrative was around the rather obvious ceiling on iPhone sales and the possibly huge but unknowable potential of the iPad. Now things have turned around. 

Part of this slowdown in revenue is due to a decline in ASP as Apple rolled out cheaper iPad models...

But if you look at unit sales you see pretty much the same trend: flat for the last year. 

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Shifting back to the raw quarterly numbers, you can see the same trend.

When asked about this on the conference call earlier this week, Tim Cook talked a bit about changes in inventory. But actually, that isn't the point - the underlying trend looks the same whether you look at sell-in or sell-through.

(Note, incidentally, that no other mobile device company provides anything like this much this data) 

So iPad sales are slowing. Why? Is it competitive pressure from Android? Not really. 

This chart, and dozens of others from every possible source, makes it very clear that the iPad dominates tablet web traffic in a way that it does not dominate smartphone web traffic. This particular chart shows the USA, but I hear the same story from companies everywhere from the UK to China. The same is seen for app use. People are not substituting iPad use for Android use, not at anything like the scale needed to explain the slowdown. And Android tablets that try to offer the same 'post-PC vision' as the iPad are not selling especially well - the real global volume is in the generic black plastic devices at much lower prices - and they don't even show up in usage stats. 

The classic negative view on iPads was that they couldn't compete with PCs because they lacked multitasking, keyboards, Office (until now) etc, etc. But that' s an incomplete response, because PC sales are suddenly weak too (and only part of that is Windows 8). 

So what IS going on? Perhaps one answer is in this chart. 

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On one hand, as I wrote here and Steven Sinofsky discussed in this podcast, moving to new devices and form factors involves new software experiences, and new software also often both creates and requires new business processes. It's hard to spend a day creating a 20-slide sales report on an iPad, even now that MS Office is available for iPad. But actually, that sales report should be a SAAS dashboard that takes 10 minutes to annotate. It will take time for those business processes to shift to enable more corporate tablet use. 

On the other hand, the smartphone explosion is putting the internet into the hands of far more people than ever before, and it's alway there. If you're watching TV and want to know about an actor or a product, do you go upstairs and turn on your PC, walk across the room to pick up a tablet, or just pull a smartphone out of your pocket? The declining relative utility of the PC is reflected in a slowing replacement cycle (you don't replace the one you have) - the tablet has yet to make the sale in the first place, outside the initial wave of adopters. 

Compounding this, the smartphone explosion is accompanied by an apps explosion. There are thousands of amazing apps on iPad (and very few on Android tablets, which is why the balance of use between the two is so skewed), but the smartphone opportunity is so much bigger that it attracts much more attention: there are more of these devices, some use cases make much more sense on them (such as Instagram) and some only make sense on them (such as Uber, Hailo or Lyft). So the smartphone experience now is very rich. 

(A complicating factor, of course, is that these categories can't be neatly divided - phablets blur the boundary between phones and tablets and 'convertibles' blur the laptop/tablet boundary. But sales of both these are relatively small for now - even phablets)

A good illustration of this shift from the PC to mobile was Facebook's results this week: it now has more mobile-only than desktop-only MAUs and 79% of MAUs are mobile. 

So, looking at tablets and smartphones as mobile devices in a new category that competes with PCs may be the wrong comparison - in fact, it may be better to think of tablets, laptops and desktops as one 'big screen' segment, all of which compete with smartphones, and for which the opportunity is just smaller than that for smartphones. And so tablets will over time eat away at laptop and desktop sales just as laptops ate away at desktop sales, but the truly transformative new category is the smartphone. Maybe. 

Facebook, identity and throwing sheep

Way back in the dark mists of time, when Facebook first launched its platform on the desktop, one of the first hit apps was something called 'Superpoke'. Superpoke did quite a few things but the one that got all the attention was throwing sheep at people. That is, they'd open their Facebook news feed and it would say 'Benedict threw a sheep at you'. 

Of course, a website that did that would never work - you'd never get a critical mass of people to open an account on a new site just for that. But Superpoke could plug into the Facebook platform so you could do this fun little social thing right away with almost no friction. 

A lot of the social apps bubbling up now remind me of this. As I've written several times, by plugging into the smartphone address book, camera, photo library, notifications etc the frictional barriers to doing a new social app fade away: the smartphone is a social platform in the same way that Facebook is. The obvious expression of this is WhatsApp and similar things that directly address the core Facebook use cases. But it seems to me that there's at least as much potential in doing things that use the platform without trying to take over a core use case - things like throwing sheep. That is, the smartphone social platform enables a lot of experimentation with new ideas and behaviors that don't need to be your core comms channel and that would never have worked on the web, and (for a bunch of reasons) might not have been possible on the desktop Facebook platform.

Snapchat is arguably one of the biggest of these, and Secret is another. Firechat is also an interesting example - it leverages the wireless autodiscovery features in iOS7 to do hyperlocal chat. Of course this isn't quite as easy as Superpoke - you still need to install an app from the app store (for now, though that may well change) but the friction is still pretty low. With apps like Line, WeChat and Kik you can see people trying to pull this experimentation back up the stack and put it inside a social app again - that might be the right model for some things, but of course you're trading friction for flexibility. Making your own smartphone app needs that initial install but has much more power. 

I also think that (as I suggested here) retailers should be thinking about how they can leverage the social platform aspects of smartphones - shouldn't the Zappos app show you which of your friends have it and let you share shoes directly? Again, doing that well on the desktop would be really hard, but on a smartphone it's just a tap or two away. 

This takes us around to Facebook again. Perhaps the problem is not that people use WhatsApp instead of Facebook Messenger - rather it might be that they use Sephora instead of Facebook Messenger. This is partly about unbundling WhatsApp, just as WhatsApp unbundled Facebook, but it's also that the fads and gimmicks and silly little things (otherwise known as 'fun') don't happen within Facebook. The time sinks don't have to happen within Facebook. And maybe the commerce apps don't need to connect to it. 

The question implicit in all of this, of course, is identity. It's the machine-readable identify that allows all of this low-friction social experimentation. But what is the irreducible common denominator for connecting to your friends? Is it your Facebook identity? How much does it matter to Facebook if it isn't, if it still happens in something Facebook owns? Is it your PSTN phone number (which Facebook will actually let you use to find friends with the smartphone app)? Or do you change that from time to time without caring? The broader phone address book? Your email address? BBM Pin (cough)? Location? Would Apple try something within iOS (with the fingerprint scanner)? Where in the stack does the identify sit - the network, OS platform or something further up? Actually, I suspect there isn't any single common point that any company can own. 

Whatsapp and $19bn

Facebook just bought WhatsApp, paying $16bn in cash and stock ($4bn cash, $12bn stock at current prices) and $3bn in RSUs. WhatsApp has 450m active users, of which 72% are active every day. It has just 32 engineers. And its users share 500m photos a day, which is almost certainly more than Facebook. 

This is interesting in all sorts of ways - it illustrates most of the key trends in consumer tech today in one deal. 

First, it shows the continued determination of Facebook to be the 'next' Facebook. It's striking to compare the aggressive reaction to disruption shown by Google, Facebook and other leading web companies today with how some of their predecessors a decade ago stumbled and lost their way. 

Second, the winner-takes-all dynamics of social on the desktop web do not appear to apply on mobile, and if there are winner-takes-all dynamics for mobile social it's not yet clear what they are. There are four main aspects to this: 

  • Smartphone apps can access your address book, bypassing the need to rebuild your social graph on a new service
  • They can access your photo library, where uploading photos to different websites is a pain
  • They can use push notifications instead of relying on emails and on people bothering to check multiple websites
  • Crucially, they all get an icon on the home screen. 

Any smartphone app is just two taps away - a desktop site can crush a new competitor by adding it as a feature with a new menubar icon but on mobile there isn't room to do that. Mobile tends to favor single-purpose, specialized apps.

This has led to an explosion of mobile social apps - last summer I counted over 50 with more than 1m downloads on Google Play. Some sort of consolidation is clearly inevitable but it's much less clear whether we will revert to one or two. The smartphone itself is the social platform and all sorts of different ideas can leverage that, where on the desktop web they'd have needed to leverage Facebook.

So It's quite possible mobile social will have lots of services indefinitely. This creates opportunities, but also a pretty basic challenge to Facebook. Partly in response, it paid first 1% of its market value for Instagram and now close to 10% for WhatsApp, taking not dominance but at the least two of the commanding heights of mobile social. That's the right way to think about value, I think - not 'OMG $16bn!", but "is this worth 10% of Facebook?' The deal values WhatsApp users at $35 each (very close to what Google paid for YouTube, incidentally), but the current market cap of Facebook values its MAUs at $140 or so.  

Third, the sheer scale of the numbers involved is a good illustration of what the shift to mobile means. I produced a presentation here to try to drive home this point: mobile is the next computing platform and it is several times larger than the desktop internet. There are now roughly the same number of smartphones and PCs on earth - those PCs are mostly shared and immobile or locked-down corporate boxes, while the smartphones are mobile and personal. Meanwhile, the widely-discussed collapse in the cost of creating a startup in the last decade combines with both the much larger scale of mobile and the routes to market and virality offered by mobile platforms to mean that if you're very good (and lucky) you can get to astonishing scale in a short time. This scale is at the heart of the valuations we're starting to see - WhatsApp is probably now sending more messages than the entire global SMS system.  

Finally, mobile social apps are not, really, about free SMS. Mobile discovery and acquisition is a mess - it's in a 'pre-pagerank' phase where we lack the right tools and paths to find and discover content and services efficiently. Social apps may well be a major part of this, as I discussed in detail here. These apps have the opportunity to be a third channel in parallel to Google and Facebook.

Also, note this tweet from the co-founder. 

(Note: my boss at a16z, Marc Andreessen, is on the board of Facebook - the posts linked were all written before I joined)

Who buys the iPhone 5C?

Facebook's ad platform gives a wide range of targeting information, including gender, country and, as it happens, device type. So you can see what Facebook thinks the audience for your ad would be if you aimed it at British women with iPhone 5Cs. And, as it turns out, that's an interesting answer. 

So, this chart shows FB's numbers on this basis for the 5S and 5C for the USA and UK, both markets where both iPhone and Facebook have good sample sizes. 

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There are two obvious things in this chart: the 5S is selling better than the 5C (which we pretty much knew), but the 5C has far from flopped, and women like the 5C much more than men. You can see this more clearly if we switch to percentages and compare with the broader base. 

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Women are a (very) slight majority in Facebook MAUs overall (which is probably within the margin of error). But they're a little more likely than men to buy iPhones, particularly in the USA, and much more likely to buy the iPhone 5C.

What's going on here? There are a couple of dynamics: 

  • All iPhones are more expensive relative to the competition in the UK than they are in the USA, where the pricing structure tends to mask the price of phones. 
  • The iPhone 5S is sold a little more on technology than the 5C and is also more expensive  (again, especially in the UK)
  • The 5C is offered in a wide range of colours

So, is this gender disparity because women are more practical and buy a cheaper phone? Or because the colours of the 5C are more appealing than they are to men? Or something else?

(All this is presuming, of course, that the Facebook data is reliable, but these gaps should be large enough to rise above sample error). 

Mobile interaction models

The interaction model for the desktop internet was pretty much settled 15 years ago. It turned out that the answer was a web browser. Stand-alone apps such as Pointcast were a mostly blind alley, and while apps persisted for email and IM, and for very specific things like music, the words ‘web’ and ‘internet’ became effectively synonymous to anyone non-technical. Over time we added Ajax and better search and better social, but everything really happened inside the browser.

In mobile this is quite different: nothing is settled. We have the web and apps and of course app stores, and then we have many complications - voice, in-app payments, web apps, hybrid apps, widgets, push notifications, social messaging apps, Google Now and Siri. Then there’s the hardware layer - images, barcodes, NFC, bluetooth, location, motion sensors etc. Innovative and disruptive new interaction models can very often find a route to market, far more easily than they could on the desktop internet. Sometimes, they scale to a hundred million users in a year to two. And we have more and more waves of innovation coming, with things like local wireless from Apple and deep linking to within apps from Android, and a very fast-evolving social messaging space, and more things in 2014 and beyond.

So, we can actually have a pretty limited idea of what the dominant interaction models will be in 5 years. 

(There is a dream, of course, that all these nasty choices and options will go away and we can go back to the nice, simple, limited web, but that doesn’t seem very likely just yet.) 

One of the big changes here is the removal of monopolies. If the web is not the only interaction model then web search loses power as a discovery and acquisition channel. And in parallel Facebook’s desktop monopoly on social has not transferred to mobile and it seemly unlikely that it ever will (I wrote about the reasons for this here). So both of the key channels on the desktop are smaller and less crucial, and also work significantly differently, and are pretty poor at driving some key types of engagement, now that you’re not just looking for a click on a link. This changes lots of things, and creates lots of new opportunities.  

The puzzle for Google is how it brings its vast, decade-old machine learning project to bear on this new complexity of data and behaviour. The obvious problem is that data and behaviour within apps are effectively dark matter that it can’t track (hence the deep-linking initiative in Android). But this is balanced by much richer data collection. Your Android phone feeds it with data all the time - where you are, what you look at, where you go after you search and what you did the day before. The challenge is finding the right ways to collate and present that data - Google Now is one example but probably not the only one. The search box and the page of results is just one possible interface to that machine-learning project - what does Google look like after the search box?

Social faces a different set of challenges. It seems to me that on mobile Facebook will never have the near monopoly that it briefly enjoyed on the desktop - smartphones remove most of the frictional barriers that keep you on one social network. But mobile social more broadly is a vast opportunity. With web search no longer the dominant channel, social, on a far more social device than the PC, has an open door to push at. Tencent announced that the first 5 games that it launched with Wechat integration, starting in August, have had 576m registered users. Mobile social is an engagement, interaction and distribution channel, and it appears to be much richer, and probably much bigger, than social was on the desktop. 

If this is the end to near-monopolies in acquisition and discovery, it’s also interesting to think about it as the end to monocultures. If the interaction model shifts away from web search, that change makes different models and different types of behaviour possible. In turn, one might ask - what models and companies and behaviours were precluded by Google on the web? What good ideas didn’t work because of the way Google did search and the way Facebook did social? How did that monoculture shape things, and how does that change now? 

Instagram and Youtube

Instagram is looking like a great acquisition. It had 30m users when Facebook bought it in April 2012, and has now passed 150m, just 18m later. 

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 (The change in colour signifies the acquisition.) 

This reminds everyone, naturally, of YouTube - again, a product that has become far more popular since acquisition in late 2006 (this chart shows the only consistent data that seems to have been released).

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There's a difference here, though. Youtube is the dominant online video sharing platform but Instagram is not, remotely, the dominant photo sharing platform on mobile.  

Facebook's latest disclosure is that 55m photos are shared a day on Instagram, and another 350m on Facebook itself.  But 350m a day are also shared on Snapchat, and 400m on Whatsapp. And we don't know the numbers for Line, or WeChat, or the next half-dozen services to be launched that we haven't seen yet. Meanwhile Instagram has 150m monthly active users but Whatsapp has 350m and there are close to a dozen others with more than Instagram. 

So as it turns out, Facebook did not solve the unbundling problem by buying Instagram - even in photos. It bought just one of many mobile social products, and not even the biggest

All of these new services are driven by the fact that smartphones have characteristics that remove most of the defensive barriers that Facebook has on the desktop:

  • The smartphone address book is a ready-made social graph that all apps can tap into
  • The photo library is open to all apps
  • Push notifications remove the need to check multiple sites
  • Home screen icons are easier to switch between than different websites

The fluidity with which you can move between these apps seems to be breeding very fluid use cases. The original analysis was that these were unbundling Facebook in a semi-coherent way - most obviously, Instagram was taking photos, a core Facebook use case, and moving them to a different, specialised app. But it doesn't seem to be as clearly defined as that.

People aren’t using Instagram for photos, WhatsApp for text, Line for stickers... they’re using everything for everything. Instagram to tell people you're running late, WhatsApp to share holiday photos, Snapchat to make plans for the evening and so on. WhatsApp and Instagram are not in different categories - they're direct competitors for time and attention. Instagram, Snapchat, Line and all of the others are all poking away at different social behaviours and different options in the same communication space. 

This shouldn't really be a surprise: we already have three social apps on our phones - voice, SMS and email, and we don't stick to a rigid set of use cases for each one. These new apps just add more options into the spectrum. That, of course, points strongly against consolidation into a single winner.

So buying Instagram certainly looks like a good trade - it would be worth a lot more if it was selling today. But as a strategic move, it's looking increasingly irrelevant. Is FB going to buy Whatsapp, Snapchat, Line, Kakao and the next ten that emerge as well? Sure, some of those will disappear, but it doesn't look like FB will crush the competitors the way it did on the desktop. On mobile, FB will be just one of many. 

Just maybe, Facebook might have been better off rethinking the core product instead of buying what turned out to be just one of a swarm of alternative services. 

This, of course, prompts comparison with another (in)famous acquisition - Flickr's purchase by Yahoo. There was a period when AOL and Yahoo went around buying up lots of cool new web services as their portal model came under threat. They then generally mismanaged them, but that wasn't really the point. No matter how well they ran these acquisitions, they couldn't buy every great website that there was. Neither can Facebook. 

 (Update - I got the exact photo sharing numbers transposed when I wrote this - updated with links)

Mobile is eating the world, autumn 2013 edition

I've been giving versions of this deck in London and San Francisco, and I though it worth sharing here. It's the basis of a (roughly) hour-long client presentation, with Q&A.  

A version I gave in the summer got about 350k views - after 3 weeks this one has had 200k views - curious to see where it tops out. 

Dead social networks and the value of history

This Google Trends chart provides a neat shorthand illustration of the rise and fall of five different social networks. All of these had strong lock-in effects. All of them thought that there were barriers to switching away. All thought that people would not want to abandon their history of photos, interactions, tags. But when it came to it, people just walked away from all of that accumulated history and adopted a new platform. 

 I've been wondering how broadly applicable this message is. How much value do ordinary people place on their email history, for example? At least half of the subscribers to my newsletter are using Gmail, and in the tech world we tend to think of such things as extremely sticky. But real people walk away from services that they're supposedly locked into with disconcerting ease. And when a corporate person (as opposed to a VC or entrepreneur) leaves a job they leave their email behind too. When I left NBC Universal at the end of 2008, I left behind my Exchange mailboxes, including, say, my 'Launching Hulu in Europe' folder. I can't really say that I need it now. It has a certain historical interest but no professional value. 

Meanwhile a lot of my professional interactions are on Twitter, which are ephemeral and unsearchable even after a day or two. (There's a start-up idea in here, somewhere.) 

I wrote a post on the unbundling of services recently in which I suggested that a key issue for Facebook is that the smartphone phone book and photo library are resources that any app can tap into, where a competing desktop social site had to recreate them from scratch. This, obviously, makes it easier for smartphone apps to unbundle segments of the Facebook experience - text messaging, photo sharing, games etc. It also enables new experiences, such as Snapchat. All these apps sit on top of these smartphone resources in the same way that Facebook apps sat on top of Facebook. And most people use more than one and many use three or four in parallel, both with different people and the same person. 

So the underlying relationship has far more value than any record of the messages exchanged. People switch between apps and dump them and their archives on a whim, or even in a deliberate detox (it seems to me this is part of the point of Path - it's Facebook, but with only your real friends). The value is in the contact list on the smartphone - the social services and the conversations and things shared themselves are ephemeral.  

LinkedIn has a similar issue. Once you've accumulated a few hundred LinkedIn connections, every time you look at the news feed you see people you have no recollection of ever meeting. They're people you met, once or twice, a few years ago, and it seemed worth connecting to them, but now they're just names. That is, many LinkedIn connections are like the business cards you find in a drawer and struggle to place. You file them away safely for another year or two, and then, the next time you find them, you shrug and throw them away, not because the information is out of date but because the relationship that's referenced is long gone. How many LinkedIn 'connections' are equally worthless? Rather like the tags and shared photos on Facebook, you care about them at a moment in time, and then, when you really think about it, you're happy to abandon them. Maybe, like Path and Facebook, there should be a LinkedIn clone that's just for the people you actually know. 

Snapchat is the purest expression of this view. Any interaction, whether professional or purely social, is a conversation that fades over time if it isn't continued. After a certain point the archive of that interaction has no value (except perhaps to your company's lawyers). And the division is between the relationship itself versus the many different media though which you might contact a conversation - phone calls, SMS, coffee, Instagram, beer, twitter, Snapchat, WhatsApp, Facebook. And both the relationship and the messages have half-lives. An app that reminds you that you met this person has strictly limited value - if you can't remember them, are they really in your network?

Lots of companies have big user bases and big accumulations of user data. And they think that this gives them a lock-in. But maybe the only stickiness comes from the mere presence of users - more like a nightclub than a bank. If your friends move, you'll move in a second, and the dynamics of smartphones mean there are no barriers at all to moving. Owning the address book, and perhaps the photos, are the only real levers of control, and it's very hard to dislodge the underlying platform owners from that. 

That of course begs the question - what is the irreducible, underlying, unchanging point of identity? Is there one? An email address? A PSTN number? A Facebook/twitter account? Or is it ultimately a personal, real-world connection?

Unbundling: AOL, Facebook and LinkedIn

One of the recurring themes of the consumer internet is the cycle from aggregation to disaggregation - bundling to unbundling. There is a lot of value in services that pull everything together in one place, but over time that value starts to recede, the lock-ins keeping people there weaken and the appeal of having separate, specialised products grows. And then, after a while, the appeal of aggregation starts to grow again. We saw this in the past with AOL, and now with Facebook on mobile.

A big part of the dynamic of Facebook unbundling is the different mechanics of apps versus the desktop web. Any smartphone app can use the phone book and PSTN numbering system to access a ready-made social graph, removing a lot of the friction Facebook benefits from on the web. A core Facebook use case is photo sharing, and a smartphone's built-in photo library offers much more fluid ways to share photos across multiple services. In effect, the phone book and photo library are reservoirs that any app can tap into, where on the desktop, creating that resource is a major pain and a major moat for Facebook. Meanwhile, push notifications to apps mean you don't have to check different web sites for updates.  And it seems that pressing 'Home' and jumping to another app to share something else in another way with someone else is much easier than loading a different web page. 

We can also see this unbundling happening to Craigslist, or at least that’s what many people hope. Once a charming reminder of the web’s uncommercial roots, Craigslist is now, to many, a fat complacent monopolist with a nasty litigious streak, whose founder claims no responsibility for the company he owns. It appears to have taken over the newspapers’ business while taking on all of their attitudes. There are a swarm of services, often mobile first or mobile only, trying to peel off parts of the Craigslist offer, or do things Craigslist should have been doing. AirBnB is only the most obvious. Chris Dixon has a good note about this here, and Andrew Parker produced this great graphic back in 2010. 

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LinkedIn is another interesting example of a product waiting to be unbundled, and it looks especially vulnerable because of the consistently poor execution of so many core features.  

To give just one example of this, a few weeks ago an old colleague of mine took an important new job at Microsoft. I found out because he posted a photo of his badge to Facebook and I saw it, by chance, on my fortnightly visit. But when I went to LinkedIn I saw this, filling the top half of my news feed.

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I spent 10 minutes searching without seeing his new job listed anywhere other than his profile itself, and indeed I couldn't actually find a way for LinkedIn to tell me about it - there is no view of 'job changes in my network', though that would seem like something that would have been implemented at launch. However, it's eager to tell me Deepak Chopra’s ten tips for how successful people wipe their arses. 

To re-iterate the point - LinkedIn has my entire career history. It knows I've spent 14 years in mobile, tech and finance. And this is the news it recommends me. 

Of course, the amount of effort going into a mediocre Huffpo clone wouldn’t matter if the core functionality of the site worked, but it doesn’t. There’s no way to see which of your contacts have changed jobs. No way to post a message to your network that your boss won’t see. The entire user experience is a mess of overlapping technologies, black UX aimed at upselling paid services and outright poor work. Pretty much any basic task to do with managing or engaging with your network is harder and more painful than it should be. It's even hard for LinkedIn, it seems: it knows I don't have an MBA (I TOLD THEM!) but recommends I join an MBA alumni group because I did my BA at the same university. 

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But how does LinkedIn get unbundled? What's the mechanic? The dynamics of smartphones discussed above make it easier to unbundle Facebook. Craigslist's main strength is volume of traffic, and if you can gain an edge in a particular segment you can overcome that. But neither of those dynamics quite apply to LinkedIn. 

The core of LinkedIn is that it's the universal CV database. You need to have your CV there for people to find it, to look you up - in some circles not  being on LinkedIn is almost a professional failing. For specific verticals (programming, design) this isn't the case, but for white collar professionals it is. For some people an online presence per se (your blog, twitter etc) is a de facto CV and is how you build your reputation (and Klout is poking away at this), but most careers are not built in public, and most people cannot blog about their job, even if they had the time and inclination. 

So it seems to me that the low-hanging fruit is the stuff that LinkedIn just isn't doing while it pursues the Huffpo dream. Connection and meeting management (Evernote Hello). Introductions (Emissary.io). Pre-meeting stalking (Refresh). Bit by bit a graphic just like the one for Craigslist gets built up. 

The puzzle is at what point that matters to LinkedIn. The core business is about selling CVs to recruiters. So long as it remains the CV registrar, does it matter if the users only visit the site once a month, or once every six months? Indeed, if all of these apps use LinkedIn as a data source, arguably they actually reinforce its position. 

Perhaps the answer is that tech history is full of dead companies that had mediocre product but great lock-ins. Eventually, the lock-in always goes away - we have Blackberry this week to remind us of that. LinkedIn has a great lock-in and product that's mediocre for the users who enter their CVs, but pretty good for the recruiters who pay the bills. How will that play out?

Atomisation

The two strongest trends in Internet content are atomisation/unbundling on one hand and sealed silos within smartphone and tablets apps on the other. This is contradictory. 

As we all know, many sites see the majority of their traffic going to individual pages rather than the home page, Tumblr and Pinterest disaggregate, reaggregate and remix individual pieces to content far away from where they started, and of course social sharing on Facebook or Twitter remixes and redistributes everything. Twitter cards and the trend for social messaging services to embed content within messages take this another step. In a sense, there is no home page for any site. 

Every piece of content becomes a packet that can be routed anywhere across any service layer - but the service layer is Twitter, Kik, Line or AirDrop, not TCP/IP or HTTP. 

But at the same time, after the end of the HTML5 head fake (as Bill Gurley put it), it seems clear that apps will also be a major component of content consumption. To hope that this will not be the case is to wish to turn the clock back to 2007, and of course to ignore a pretty clear demonstration of what customers want. The last 6 years were not a temporary aberration. 

So apps are a new, permanent part of the content landscape, just like social or search before, and apps are silos. Yes, you can deep link, up to a point (including with things like AirDrop), and share back to the unsiloed web version of many content properties from within an app, but the app experience itself is essentially exclusive. You go in, you engage, and then, often after much longer than you'd spend on a website, you leave and do something else. This is quite different from the promiscuous flitting from site to site and tab to tab that's the general model for the web. And, of course, it's the complete opposite of the atomisation that's happening in parallel. 

This is a real challenge for content owners. How do you think about editorial on the premise that it will both be shared everywhere and read in the course of a half hour session with your brand's app? Do you have to pick one model or the other? If you're in the long-form business already (the New Yorker, say) this is an easy conversation, but if you run a typical magazine with a mix of content of all different types and lengths, what does your 'digital' proposition look like? How many different types of engagement do you need to think about? What's your social messaging app sharing strategy? And, of course, how do you address this across 30 titles in three cities, most of which are only run by half-a-dozen to a dozen people who're only just keeping up with updating a Facebook page? 

 

Facebook Mobile - still here

Last week Pando published a very widely circulated (and very good) article providing a post mortem of the 'Facebook platform', explaining how something that might have been a big part of the future of the web ran into the sand.

The timing was interesting, though, because it co-incided with the spectacular acceleration of growth in Facebook's mobile revenue, which was effectively zero a year ago and is now 40% of Facebook's ad revenue and all of the growth. 

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This isn't a function of an increase in mobile users, since the trend there has been much more moderate. There may be some usage increase, though, since Facebook has significantly improved the smartphone apps, dumping a failed HTML5 wrapper approach. There may also be conversion from feature phone to smart - the feature phone app has 100m users but had 82m in November last year - not much growth on that side. 

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 Clearly, Facebook is finding the right ways to turn on the advertising tap without (it hopes) damaging the user experience too much. Assuming this revenue is sustained, it's an impressive piece of execution by Facebook, especially for a company that was pretty late to understand mobile. Part of the benefit of having so (relatively) few employees is that it's easer to change direction. 

The puzzle that remains, though, is all the other social stuff that's happening on mobile. Competing mobile social services are huge and growing very fast. 

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Whatsapp claims over 250m active users and Line, Viber and to some extend WeChat (though mainly Chinese) all have global scale. There are dozens of others with over 10m users each, and a while ago I poked around Google Play long enough to find 50 social messaging apps that have had more than 1m downloads. Obviously these are downloads rather than users, but Line claims 80% of its 200m registered users are active monthly and Whatsapp, of course, says 250m. Outside of China and Japan, almost all of these users have a Facebook account too. Yet they're using these other services instead. 

It's pretty clear that these aren't just going to be subsumed into Facebook - rather they unbundle key parts of the Facebook mobile experience. The interesting question is whether that actually matters, given Facebook's revenue trajectory. Is the mobile opportunity big enough that it just doesn't matter that Facebook doesn't have the dominance that it has on the desktop?

Glass, Home and solipsism

One of the things you're supposed to work out some time in your adolescence is that though you're the star of your own life, you're not the star of anyone else's.  Some companies never work this out.

A few years ago I worked on a project to make a video-on-demand service for a big UK supermarket chain. All of the supermarket execs kept saying things like 'our customer' or 'the Sainsco customer'. After a while, I worked out what bothered me about this. I do indeed go to one of their shops - or at least I think I do. I'm actually not 100% sure if it's a Tesco or a Sainsbury. I buy food there every week, but I don't consider myself their customer - at least not in the sense they meant it. Rather, it's one of 10 shops I go to in a week, and one of 20 errands I might run. 

In other words, your customers' relationships with you are the only relationships you have as a business and you think a lot about them. But you're one of a thousand things your customer thinks about in a week, and one of dozens of businesses. And they probably have their own ideas about how they want to engage with you (though they wouldn't put it in those words) - assuming they think about you at all

This applies even to Google or Facebook (which brings me to the title of this post). There's lots of data showing the high proportion of online time that people spend using Facebook, and the high volume of web searches that they do using Google. Facebook and Google are important. But that doesn't mean they're everything. 

When I was watching the launch event for Facebook Home, a loud alarm bell started ringing for me when Mark Zuckerberg said words to the effect that "phones should be about more than apps - they should be about people" - by which of course he meant "about Facebook". The problem with this is that actually, we've spent the last 6 years making phones about more than just people. People use Facebook on their phones a LOT, yes, but they do a lot of other things as well. If all I wanted was a phone about people I'd be using a $20 Nokia with a battery that lasts a month. 

The same point, I think, applies to Google Glass. If you spend all day in the Googleplex, thinking googly thoughts about data ingestion and Now and the interest graph, then having 'Google' hovering in front of your eyes instead of rubbing on a phone seems like a really obvious progression. If everyone you know owns a Tesla and is deeply engrossed in new technology, then the idea that there might be social problems with Glass doesn't come up - everyone's too busy saying 'AWESOME!'. In much the same way, no-one on the Facebook Home team seems to have realised that most people's news feed isn't full of perfectly composed photos of attractive friends on the beach. 

Jack Dorsey wrote a blog post a while ago saying that 'users' is the wrong word to describe people who, well, use your service.  He was perfectly right in the sense that the word elides the obligation you should feel to a customer. However, an equal problem is the use of the possessive itself. You can think of people as users or customers - but they're not yours. They don't belong to you, and they may barely even care that you exist. The old Google rejoiced in sending people away from the site as fast as possible, because the result mattered, not the search. Glass points to a risk of forgetting that. 

Facebook and alternatives on mobile

At the moment I spend most of my time working for Enders Analysis, a boutique TMT research and consulting shop. Every year Enders does a big UK mobile user survey, and this year I stuck in some questions about use of Facebook and of mobile messaging apps (Whatsapp et al). On Friday I put out a note to Enders clients with the conclusions, but this chart is worth publishing as a teaser. 

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The universe is UK adult mobile users. Of these, about 66% now have a smartphone, and 39% are using Facebook on mobile. But, a majority of those users are also using one or other of the various mobile messaging apps - Whatsapp, Kik, Viber and so on - and overall a quarter of the UK adult mobile base is using them.  

If you look just at 16-24s, the data gets even more interesting: 70% report they're using Facebook and 57% are using other messaging apps. Again, there's massive overlap: people have Facebook but chose to use other things instead. 

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.