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Carriers, Google should fear Facebook: analyst

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Facebook is positioning itself to become a giant in the mobile space, and brands are taking notice

ORLANDO, FL – An Ovum analyst at CTIA Wireless 2011 said that Facebook’s unrivalled level of user engagement will help it become a major player in mobile advertising sooner rather than later and even encroach on carriers’ turf.

While carriers acknowledge that Google is a feared adversary with the potential to seriously disrupt their business model, they often think of Facebook as benign, they want to partner with it, for good reason—there are benefits, as Facebook drives data usage on carrier networks. However, Facebook is increasing expanding its reach into the realm of the carriers, and of Google as well.

“Facebook is a growing force in mobile—by some figures, it has something close to 600 million users, and more than half of these users are interactive with the service via mobile devices,” said Eden Zoller, principal consumer analyst at Ovum, London. “This compares with about 70 million users a year ago, which shows how quickly Facebook’s mobile reach is ramping up.

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“It is a broad-based platform for the consumption of content and services across devices, not just online,” she said. “It does want to integrate with everything and suck the Web into itself—think about how well it is doing with Facebook Connect.

“In addition, official Facebook applications already dominate app stores across all smartphone operating systems.”

Mobile is social and vice versa
Facebook’s mobile strategy is starting to come into focus, and its potential for disruption is huge.

INQ and HTC both released smartphones that are optimized to support Facebook.

In February, HTC unveiled new Facebook phones with the Android-powered ChaCha and Salsa, as well as deep integration with Facebook via a dedicated hardware component.

Is an actual Facebook phone in the works? Rumors continue to percolate to that effect.

Facebook Check-in

Facebook Places provides company with location-based user data

Facebook applications and widgets are often preinstalled on smartphones, but even when they are not, Facebook tends to be the first app many smartphone users download.

However, the social networking giant has its sights set on the entire spectrum of mobile phones.

“We associate Facebook more with smartphones, but that is again underestimating Facebook,” Ms. Zoller said. “It’s not just focusing on the high-end phones—Facebook is making a concerted effort to ensure that its services are supported on less highly specified feature phones.

“It is important to support feature phones for the mass market in general and emerging market in particular,” she said.

Facebook Zero, available at http://0.facebook.com, is a mobile version of the site designed with emerging markets in mind. The text-only service has stripped out components that would require fast networks and high-end devices.

In January 2011, an updated Facebook for Feature Phones application was introduced with Java app developer Snaptu.

There are also areas that Facebook is expanding into that carriers should examine with a wary eye.

Facebook signed an integration deal with Skype for voice communications, and in November 2010 took the wraps off a revamped new messaging platform that has an added an email-like service to the SMS, IM and chat mix.

“Facebook as a rich communications and content platform, not just a social network,” Ms. Zoller said. “It is building up a strong apps and content portfolio, initially in the shape of virtual gifts, but now across the spectrum, with particular strength in games where it has several big names on board, including Zynga.”

Facebook claims to have more than 2.5 million developers and partner applications currently on its Facebook Platform, while every month 70 percent of Facebook users engage with Platform apps.

Is a Facebook app store next? Only time will tell, but it does seem likely, per Ovum.

Facebook Credits is a virtual currency supporting premium payments, which has become the de facto payment mechanism for Zynga.

“I expect Credits to ramp up over the next 12 months to the point where it becomes a major payment mechanism on Facebook,” Ms. Zoller said. “Imagine if Facebook Connect partners start supporting Facebook Credits—that would be pretty powerful.”

Like Google, Facebook is increasingly turning its attention to location-based services with its Places platform, as well as the Facebook Deals check-in service.

And Facebook’s advertising business, while growing online, has the potential to be disruptive in the mobile space, even if it does not have a mobile ad network acquisition in its sites.

Facebook is also active in search, and Google has taken note.

“Facebook offers advertisers the most engaged users online and increasingly via mobile,” Ms. Zoller said. “Facebook is also proving a major force in driving online search traffic to other sites, begging the question of when it might move to directly harness search advertising revenues.

“It is pushing into mobile advertising—that’s what Facebook Deals is pushing towards, and I expect to see more this year,” she said.

Ms. Zoller expects to see Facebook make a bigger play on video services. Mobile video is an area especially ripe for expansion.

A large portion of YouTube videos are already viewed on Facebook, and companies such as Warner Brothers have added Facebook to their online distribution networks.

Ovum is also predicting a privacy backlash against Facebook.

“Facebook is always pushing the boundaries of user privacy,” Ms. Zoller said.

In February 2011, Facebook was forced to backtrack on an initiative designed to share the home addresses and phone numbers of its users with its third-party developer community following pressure from users.

“Consumers have got to the point that they realize there is a certain trade off—if they share information they get something back,” Ms. Zoller said. “However, they are concerned with what happens to that data once they share it.”

Ms. Zoller also predicts an impending showdown between Facebook and Google, with user data as the initial battle ground.

“Google feels Facebook is starting to lock up user data,” Ms. Zoller said. “In LBS, Google does have the lead on Facebook—it has closed a lot of carrier propositions in that space, and it has a lot more fairly established assets in that area.

“In mobile advertising, Google is more articulated and further down the line—it got a great company in the AdMob acquisition—but I do believe that Facebook will become a major player in mobile advertising,” she said.

“It has the most engaged user base of any online entity, in a way that Google doesn’t in many of its mobile properties, so I don’t see it’s a leap for Facebook to replicate that kind of traction in the mobile space.”

Final Take
Ms. Zoller on other potential disruptors

 
Related content: Social networks, Facebook, Ovum, Eden Zoller, Facebook Credits, Facebook Places, Facebook Deals, Facebook Connect, mobile social networking, Google, mobile advertising, mobile marketing, mobile

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