As fellow Mediapost columnist and social/mobile guru David Berkowitz pointed out the other day in one of my MoBlogs, it is pretty much astonishing that Facebook has allowed such scale to accrue on mobile without a clear monetization path here. In fact, from a consumer’s perspective, Facebook was among the first smartphone apps to make the case that mobile could be a superior platform to the desktop for some core interactive media habits. Not only was the Facebook interface cleaner and more usable in an app, but the smartphone seamlessly converged all of the multimedia input tools that could bring the sharing of life moments alive.
Think of all the add-ons PC users have had to suffer in order to turn what was once a business machine into a personable peer-to-peer communication device: webcams, camera-to-PC USB links, headsets and microphones. Smartphones really are the multimedia P2P communications device that a rich social network has been waiting for. In the past year I cringed at the prospect of having to go to my desktop Facebook page. My smartphone pings me with a message from the social network when I need to attend to it, and I just use my phone to interact, even when I am at my desk or laptop.
Of course part of the clean, well-lit place that is Facebook on devices is the absence of that right rail of ads. At some point we all expected the company to get into some ad model. Amazingly, it waited until the active user base for mobile access reached 425 million and a looming IPO forced the issue. And we still don’t know what the company is planning. The IPO filing hinted at sponsored stories being inserted into the news feeds. Execution would be key here. Twitter seems to have deployed its promoted tweets in a way that feels inoffensive and reminds people of the sponsored search result they have already become accustomed to in Google.
But I would argue Facebook’s News Feed is not really a news feed in the same sense Twitter’s is. I think Facebook is more personal. Twitter is a broadcast medium that for many of us works like an RSS reader. And unlike promoted tweets that tend to appear as one follows a specific hashtag (again a search-like pull maneuver), the risk seems greater if ads are being inserted into a personal stream of exchanges among declared friends.
But in a quiet announcement overseas last night (which didn’t stay quiet for very long), mobile payments and analytics company Bango said it has struck a deal with Facebook. Echoing a similarly cloaked deal the company made with Amazon last year, the release was curt and deliberately non-specific. “Bango today announces that it has signed an agreement to provide payment services to Facebook,” the company told its own investors in a press release. “The terms of this agreement are not being discussed. The Board believes it is too early in the relationship to accurately forecast the level of business which it may generate.” There has already been some speculation that the deal is really tapping Bango’s considerable mobile analytics platform. But the statement does specify “payment services,” so we have to take them at their word.
The Bango deal naturally hints what Facebook may be considering as one mobile revenue stream: apps and virtual currency. Bango already powers payments for RIM, Electronic Arts, and others. In many cases, it enables carrier billing, which removes much of the friction for m-payments. While the overwhelming majority of Facebook revenue comes from advertising, revenue from virtual currency is a natural model for its mobile app. The app-within-an-app model that HTML5 allows for Facebook essentially makes it a player in the mobile app market. Creating a more seamless way for people to pay for credits or directly for apps could be enormous. As social games migrate into the Facebook app itself, one can imagine the app becoming a rival to the mobile operating systems on which it sits. For messaging, gaming and photo-storing, Facebook is already my daughter’s de facto operating system. Those habits can easily migrate to mobile, and some already have.
Any in-app payment scheme is going to run up against Apple’s iOS App Store rules, which require Apple to get its cut of any in-app payments. Conceivably, the Bango deal could help Facebook do an FT-like end run around Apple. Carrier billing could make it easier for Facebook to sell virtual goods and credits via its mobile Web environment.
It seems silly for Apple to let something like this happen, however. The iOS platform is a powerful driver of mobile usage for any partner. The integration of Twitter with iOS 5 helped that microblog increase monthly sign-ups 25%. The otherwise niche Wolfram Alpha search engine now gets a quarter of its overall traffic from the Siri voice assistant after Apple made the search service one of its default providers. It seems more likely Apple and Facebook will cut some kind of deal, especially as the social network starts taking on the contours of a rival mobile OS. To update Michael Corleone, keep your friends close and your frenemies closer. When Facebook brings a robust app ecosystem onto mobile, the game may very well change.