Or, how Facebook makes money and advances its own interest by helping Apple sell apps on its own store. It’s a surprisingly clever move.
by Rafe Needleman
The app store model is winning the evolutionary battle for software businesses. It’s how operating system manufacturers are making ongoing money, especially on mobile devices. But now Facebook, which has a social networking platform and not an operating system of its own, has figured a way to take advantage of the model.
The challenge, for a platform like Facebook, is that it has to build a store on top of these other existing stores. It is especially tricky to build on top of the Apple App store, which remains the only legitimate channel for users to get apps onto iOS devices. Facebook, instead of opening a store per se, has announced that it’s opening a hybrid marketplace: Part store, part showcase.
Facebook will be selling (I use the term loosely) three things:
. Pointers to mobile apps on other stores. The App Center will list mobile apps for iOS and Android, but it won’t sell them. Rather, it will point users to complete their purchases on those stores. Facebook won’t make money from the sale of apps on other stores.
Facebook still wins big, though. It gets to promote social apps that use Facebook login (a requirement to be listed on the App Center), and the more users Facebook has using its network, even if only the login feature of it, the more data Facebook has on its users and the more targeted its advertising can be. More importantly, every time a user logs into an app using Facebook, it’s a time a user isn’t logging in using another system, like, say, Google’s login feature, or Twitter (which Apple favors on iOS). Facebook’s App Center is a clever way to keep other networks from growing.
. Pointers to free Web apps that use Connect. Facebook will also be encouraging the growth of Facebook-connected services on the Web that use its login platform, like Pinterest and Spotify. Again, Facebook wins when users login in via Facebook. And these third-party Web site companies can get a big boost from being promoted on the Facebook network — if they use Facebook for login.
. Actual paid Web apps. So what can Facebook actually sell to users on the site? Non-platform-specific apps, or HTML5 apps. Facebook will take the customary 30% fee for app sales (Microsoft charges less, by the way) and may well make some money from this, but the real win for Facebook isn’t retail sales of apps, it’s getting developers to build apps for the platform-agnostic standard of HTML5 instead of for proprietary operating systems.
The control of the platform is a long game, and it’s a big one, especially with regards to Apple. The mobile platform that an application runs on is the one that collects the data about users and also the advertising dollars. iOS apps feed into Apple’s system. But HTML5 apps, if sold through Facebook, can bypass the Apple-only advertising and monetization requirements, and shunt user activity data to Facebook instead.
It’s not about selling apps
Facebook’s App Center initiative is great for social app builders: It will be easier to get social apps to be popular in the Facebook store than on other stores, as they won’t be competing with non-networked apps. But Facebook benefits even more than developers. The App Center is a play for control of the social Web, and more specifically for the mobile social experience.
Apple may even embrace the App Center, as it is another channel for promoting good apps, and the Apple model is to make money from app sales.
Facebook doesn’t need to make money selling apps. It knows how to make money from users and their activity within the apps. The App Center is a smart, well-timed initiative.