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Facebook Vies With Google and Apple for Mobile-App Makers

April 28, 2014

Facebook Vies With Google

Getting more developers to use its tools is key to Facebook’s mobile ambitions. Mobile ads now generate 59 percent of the company’s advertising revenue, up from almost nothing at the time of its 2012 initial public offering. Photographer: Chris Ratcliffe/Bloomberg

Facebook Inc. (FB:US) wants more Monster Shooter makers.

The social network recently reached out to Helsinki-based Huuuge Inc., the maker of the game, to convince the team to build mobile applications with its tools. The startup didn’t bite, said Anton Gauffin, Huuuge’s founder and executive chairman.

“I don’t think developers really see Facebook as a tool or provider of help for developers,” said Gauffin, who added that his team makes games using Apple Inc.’s software.

Facebook is pushing to change that perception this week at the F8 developer conference in San Francisco, the company’s first major event for app makers since 2011. While Facebook once was a key site where software makers like Zynga Inc. introduced their games, many programmers have since turned their attention to building apps for smartphones instead.

At F8, Chief Executive Officer Mark Zuckerberg is set to rally developers with a new message: Facebook has software that makes it easier to build apps for mobile phones, as well as tools that help programmers sell those wares to the social network’s 1.28 billion users. The more developers use the technologies, the more prominence the social network gains in a mobile world dominated by Apple and Google Inc.

At the center of Facebook’s developer strategy is Parse, which the company acquired a year ago. Parse offers technology to more quickly build an app and keep consumers engaged. Over the past 12 months, the number of apps built using Parse’s tools more than tripled to 260,000, the company said. Parse will be featured during Zuckerberg’s F8 keynote on April 30, and the CEO will be joined on stage by Parse chief Ilya Sukhar.

Problem Solvers

“Now we’re absolutely focused on solving people’s problems -- build, grow, monetize,” said Sukhar, who is also head of developer products at Facebook.

All of this contrasts with Facebook’s last F8 conference. At that event, the Menlo Park, California-based company promised developers they could popularize their apps on the social network by sending messages and prompts through users’ friends. Yet that created more spam on Facebook and annoyed consumers, leading the company to limit developers’ freedom on the site.

“We’ve definitely moved away from the world of ‘send a cow to 100 of your closest friends in one click,’” said Sukhar, referring to Zynga’s method of distributing its FarmVille game on Facebook years ago.

Mobile Ambitions

Getting more developers to use its tools is key to Facebook’s mobile ambitions. Mobile ads now generate 59 percent of the company’s advertising revenue, up from almost nothing at the time of its 2012 initial public offering. The mobile business has powered the company’s stock, which has more than doubled in the last year. While shares dropped late last week, Facebook is up 5.6 percent for the year, compared with a 2.4 percent decline in the Nasdaq Composite Index.

To boost mobile revenue, Facebook has leaned on a type of ad it offers developers to drive downloads of their apps, called app-install ads. Those promotions are one of Facebook’s best-performing products, responsible for more than 350 million app downloads since they became available in January 2013, Chief Operating Officer Sheryl Sandberg said in an earnings call with investors last week.

Explaining Parse

Programmers can use Parse’s tools to handle the complex interactions that happen behind the scenes in an app, as well as to integrate user identity data from the social network and track how people are using the app. Parse’s basic tools are free, with premium features starting at $199 a month.

The product is geared to developers who aren’t technical. Parse walks a person through the steps of building an app, storing all the data on Facebook servers. Once the app is up and running, Parse shows the developer a page prompting them to advertise on Facebook to boost downloads.

“It’s so much easier if you’re built on Parse to integrate these other services,” Sukhar said. His team has doubled to about 50 people since Parse was acquired and the executive said he has regular meetings with Zuckerberg, who has vetted products and recruited developers to the tool. Customers include EBay Inc. and Samsung Electronics Co., he added.

Essential Facebook

The more that developers incorporate Facebook data, the more essential the social network becomes in mobile advertising, said Bob Buch, CEO of San Francisco-based SocialWire Inc., which helps build Facebook ads. That’s because consumers use their Facebook identity for activities across all their devices, making the social network one of the few connectors in mobile, he said.

Facebook has said it is testing a mobile-ad network, which could eventually also help developers profit from their apps, Buch added.

“They’re reviving F8 after all this time and a main thing they’re going to be offering is a way to actually make money,” Buch said.

Some software makers won’t be won over easily, said Slaven Radic, CEO of Vancouver-based Tapstream Network Inc., which works with mobile developers. He said he’s seen some developers, including makers of the anonymous-sharing app Secret, choose to build social ties into their products using consumers’ contacts list from their smartphones instead of a list of Facebook friends.

Apple, Google

In the mobile world, developers are also still more focused on appealing to Apple and Google, which are the prime distributors of apps through their online stores, Huuuge’s Gauffin said.

“With all the competition now, I don’t know if they can get back to the glory days,” he said.

Yet using Facebook and its tools is paying off for Itai Tsiddon, co-founder of app maker Lightricks Ltd. The company started building with Parse last year after trying Facebook’s ads. Tsiddon’s team, initially made up of himself and four PhDs with $500 in marketing dollars between them, relied on the ads to boost downloads of Facetune, a selfie-editing app.

Facetune, which costs $2.99 in the U.S., has been the top paid app on Apple’s store in 94 countries, bringing in millions of dollars in revenue last year, he said.

Now Facetune uses Parse to send video tutorials to users on their mobile phones, showing how to edit their selfies so they will come back for more.

“Every time we send a notification like that, we definitely see really big double-digit spikes” in usage, Tsiddon said.

To contact the reporter on this story: Sarah Frier in San Francisco at sfrier1@bloomberg.net

To contact the editors responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net Ari Levy


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