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Facebook Introduces Smartphone Software to Boost Ad Sales

April 04, 2013

Facebook Introduces Smartphone Software to Boost Mobile-Ad Sales

Mark Zuckerberg, chief executive officer of Facebook Inc., unveiled smartphone software called Home that puts social-networking features front and center on a handset, stepping up efforts to boost sales of advertising on small screens. Photographer: David Paul Morris/Bloomberg

Facebook Inc. (FB) (FB), with newly released software that embeds social-networking features more deeply into smartphones, is ratcheting up efforts to keep users engaged and lure marketers to advertise on small screens.

The software, which the company calls Home, makes it easier to access Facebook features -- such as friends’ photos, messages and status updates -- on a mobile device’s home screen, Chief Executive Officer Mark Zuckerberg said at an event yesterday in Menlo Park, California. The application is available starting April 12 on Samsung Electronics Co. (005930) and HTC Corp. (2498) phones that run Google Inc. (GOOG)’s Android operating system.

Now that the majority of users access Facebook via mobile devices, Zuckerberg needs ways to keep them engaged longer while coaxing advertisers to pay to place promotions. While the new software may appeal to some dedicated users, it may do little to help Facebook get a broad set of consumers to change the way they interact with smartphones, according to Charles Golvin, an analyst at Forrester Research Inc. (FORR:US)

“It’s clear that Facebook wants to be at the center of their customers’ mobile experience,” Golvin said. “It’s not clear that their customers want that.”

At the event, HTC executives announced the HTC First, a device that will prominently feature Facebook’s Home application and become available next week. Ralph De La Vega, head of AT&T Inc. (T)’s mobile business, said HTC First will run on his company’s most advanced wireless network and sell for $99.99.

Apple, Google

Home will have monthly updates, can be installed from Google Play, Google’s online app store, and will be available on tablets in the coming months, Facebook said.

While the program will not initially have advertising, Zuckerberg said promotions will be included in future updates.

“There are no ads on this yet,” Zuckerberg said. “I’m sure at some point there will be.”

A messaging feature called Chat Heads will let users interact with friends while any app is on their screen. It combines SMS text messages with Facebook’s own messaging service.

Facebook advanced 3.1 percent to $27.07 at yesterday’s close in New York, leaving the stock up 1.7 percent so far this year, compared with a 6.8 percent gain in the Nasdaq Composite Index.

Hardware Solution

Facebook isn’t building a smartphone or creating an operating system, Zuckerberg said.

Amazon.com Inc. (AMZN) uses a version of Android in the Kindle Fire tablet. In Amazon’s case, that means bypassing Google’s preloaded applications, such as Gmail, Google Maps and YouTube, which generate revenue for Google.

While the iPhone operating system is controlled exclusively by Apple, Google provides more flexibility with Android. Companies can take older versions of the software and customize it for their own services and preferences.

“This latest collaboration demonstrates the openness and flexibility that has made Android so popular,” Christopher Katsaros, a spokesman for Mountain View, California-based Google, said in an e-mailed statement. “It’s a win for users who want a customized Facebook experience from Google Play -- the heart of the Android ecosystem.”

Some apps already available in the Google Play store, such as GO Launcher EX and Apex Launcher, let users customize the content that appears on their phones when the screen is locked.

Google Challenge

Widespread adoption of Home could challenge Google in the long run even if it boosts Android adoption early on. Facebook’s bigger emphasis on its own features means users won’t be as inclined to go to Google’s services on mobile phones, said Brian Wieser, an analyst at Pivotal Research Group LLC.

“If you’re Google, you feel a little threatened,” Wieser said. “They’ve gone from a monogamous relationship with the user to a bit more of an open one.”

Eventually, Facebook’s new service could prompt Google to roll out new mobile tools of its own that take on some of Home’s features, he said.

Zuckerberg has said he sees opportunities to push the company’s features deeper into mobile devices. Facebook and Twitter Inc. features have already been incorporated into the latest version of Apple’s software, enabling users to post easily to the social services.

“One of the most important things that we do as people is stay connected with what’s going on in the world around us,” Zuckerberg said at the event. “Home is designed specifically to help you do this.”

Smartphone Integration

A new Facebook-enabled handset follows earlier forays into mobile devices for the social-networking service.

HTC began selling “ChaCha,” an Android-based phone with a dedicated Facebook button to share music, photos and messages, in 2011. INQ Mobile Ltd. and Facebook that year also unveiled a phone with close integration of services, such as wall postings and photos.

While those devices have won over some die-hard Facebook fans, widespread adoption has been limited, according to Carolina Milanesi, an analyst at Gartner Inc.

“I don’t think that Facebook as a brand will necessarily get consumers -- that are your average Facebook users -- to pick out that phone over a Galaxy or an iPhone,” she said.

After a 29 percent decline in Facebook’s shares since an initial public offering in May, investors are looking for signs that the company can extract more ad dollars from promotions on mobile phones. The number of daily Facebook users on desktops and laptops fell in the fourth quarter as the portion of members on mobile devices increased, regulatory filings show.

Facebook’s nascent mobile-ad service, started in March 2012, isn’t helping the company gain market share in the U.S., according to EMarketer Inc. Facebook is projected to grab 12 percent of the market in 2015, down from 13 percent this year, EMarketer said. Over the same period, Google’s stake will climb about two percentage points to 57 percent.

To contact the reporters on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net; Douglas MacMillan in San Francisco at dmacmillan3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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