All the talk of Facebook's (Nasdaq: FB ) mobile ineptitude must have really gotten to its execs. Less than a month after its big, ugly IPO, the social network has rolled out a mobile App Center. Its goal, of course, is to further integrate itself into users' mobile experiences. Will it work? You'll have to ask Apple (Nasdaq: AAPL ) .
Until the mythical "Facebook phone" comes out, much of Facebook's potential mobile revenue will keep flowing into Cupertino's coffers. Any effort to undermine Apple's App Store control could spark a Silicon Valley battle fit for a Michael Bay film, with Mark Zuckerberg playing the part of Shia LeBouf.
The first salvo
Facebook's PR crew promotes the App Center as a way to "make it easier to find apps you can enjoy with friends." These include (at least on my personalized app page) user favorites like Zynga's (Nasdaq: ZNGA ) Draw Something and Words With Friends, Facebook acquisition target Instagram, and competing social networks Pinterest and Path.
The latter two selections show that Facebook hasn't gone lockdown on its selection yet, but the important thing is that Facebook doesn't control apps anyway. Apple controls apps. Google (Nasdaq: GOOG ) controls the apps on its Play store as well, but you have to go where the money is, and the results are clear: The App Store is much more valuable all around.
Facebook's official App Center launch offered the public some interesting statistical tidbits on the company's relationship with the App Store. Let's run through some of them and pick them apart one by one:
- Seven of the top 10 highest-grossing App Store apps interact with Facebook.
The top 10 highest-grossing apps, by the way, include four fantasy-style games, three gambling games (including Zynga Poker), Major League Baseball, Bejeweled, and Pandora (NYSE: P ) . How do they use Facebook? By spamming the user's friends with status updates, in most cases. There's gold in them posts.
- Facebook sent 83 million visits to the App Store in May.
When you break down the App Store's own numbers, it doesn't seem quite so impressive. There are 488 million mobile monthly active users, or MAUs, on Facebook at last count. About one in six of them visited the App Store last month thanks to something they saw on Facebook.
It's hard to find out how many apps are paid for, but anecdotes from individual developers peg the ratio of paid to free apps downloaded at 1-to-10 to 1-to-20. Let's assume one in 10 clicks wound up purchasing an app. That's 8.3 million apps purchased, from all of 1.7% of Facebook's active mobile user base, assuming each purchase came from a unique user. You can read this one of two ways: Either there's nowhere to go but up, or virtually no one trusts Facebook enough to buy the apps it pushes.
The App Store itself sees more than a billion downloads per month, and a visit does not mean the same thing as a download. Facebook's may have generated about 8% of Apple's App Store revenue last month, if all these numbers line up optimally. Numbers rarely line up optimally, so I'd expect the actual figure to be much lower. Zynga generates at least twice as much a percentage of Facebook's total revenue as Facebook could generate of Apple's App Store revenue, which is only a sliver of Apple's total revenue pie as it is. Who really needs whom?
- Facebook users loaded iOS apps on their phones from Facebook links 134 million times.
What this means: More people who click on Facebook links to external apps are going to apps they already have than are downloading new apps. That could be a sign of saturation. If most people are simply clicking to play their turn on Words With Friends, it's hard to see what value this creates for Facebook, and Apple only gets paid if users are desperate enough to buy something for a win. If users are clicking on Pandora links to see what their friends are listening to, Pandora might lose money -- its mobile content acquisition costs could wind up being higher than mobile revenue this quarter.
Foolish final thoughts
Facebook's path to mobile profit won't be easy. Facebook won't control app payments until it has its own phone, and there's little reason for anyone to buy a Facebook phone when every new phone already runs the Facebook app just fine. Attempting to divert money from Apple would risk destroying a slowly improving relationship, and at least one analyst is already warning Apple's top brass to keep one eye on Zuck at all times. Facebook doesn't really have a position of strength in this maneuvering, and acting as though it does could blow up its mobile chances before they really get off the ground.
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