What Facebook will do to improve its mobile juice after the IPO
Facebook isn't making money from its mobile apps, and neither are carriers. Something's gotta give.
Yeah, yeah, Facebook is going public today, and it’s making lots of people who aren’t you rich. One thing you might ask is, what are they going to do with all that money? One place it’s going is into the social network’s mobile presence, where Facebook is less sure of its footing.
Facebook is the world’s most popular online service, and it’s available on nearly every device that has access to the web. But it’s not really making money from its mobile apps, or even the mobile version of its website, both of which are ad-free, to my eyes. That’s why they’re working to build an “App Center”, where users can buy web-based apps from developers, pay through charges on their mobile bill, and so everybody gets a cut, with Facebook taking the lion’s share. It’s a big move, and one that’s very necessary. Don’t believe me? Take Facebook’s recent S-1 filing at its word, then:
"If users increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected," the filing said.
Facebook will be starting off on tricky footing with carriers, because at the moment, it’s basically killing SMS with every new member. And the fact that Skype is integrated into Facebook? You’d have to hope that carriers are just a little bit concerned about whether Facebook will make it all to easy for people to “elevate” their back-and-forth chats to voice chats, conducted entirely over data plans. That would squeeze out voice plans, and reduce mobile carriers to their worst nightmare: a “dumb pipe,” competing solely on price and coverage. Even Verizon, largest and probably most reliable of the networks, is only slowly killing off its unlimited data plans. Facebook wants to give its users bigger pictures, mobile video, instant contact, and it’s going to all depend on how pliable they can keep the carriers.
So while Facebook’s $1 billion acquisition of mobile/social photo service Instagram just seemed like a big old joke a few weeks ago, it might start to make more sense when you think about where Facebook stands among the small screens. Even if today’s IPO hype raises Instagram to a $1.2 billion acquisition, you can see how much a company that’s popular and trusted in the mobile space is worth to Facebook.