Facebook Shakes Up the Smartphone Wars

Earlier this week, Facebook (NASDAQ: FB  ) unveiled an entirely new way to interact with your phone that the company has dubbed "Home." As CEO Mark Zuckerberg pointed out after taking the stage to release the new platform, Facebook Home is neither a new OS, nor is it simply an app. It's what he referred to as a new way to experience your smartphone. While Zuckerberg openly admitted that Facebook loves Apple  (NASDAQ: AAPL  ) in a separate interview, he extolled the openness of Google's (NASDAQ: GOOGL  ) Android as the reason that Facebook was able to bring the new product to market so seamlessly. The specific financial ramifications are difficult to predict thus far, but this is a big win for Facebook, and should serve as a catalyst for the stock.

What is Facebook Home?
For lack of a better term, let's call Home a meta app that exists within the Android OS, but above the rest of the apps native to the device. Facebook Home takes over a smartphone's home screen and lock screen to stream Facebook updates to you without the need to actually enter an app. Zuckerberg pointed out that most of us look at our lock screen as many as 100 times per day. By filling that real estate with Facebook updates, you'll be able to follow the people in your life in a much more meaningful way, creating what he called a significantly more personal experience.

Thus far, Facebook Home only streams updates to the two screens, but viewing the demonstration makes it immediately apparent that the company has left enough free real estate to allow ads to quickly become a part of the equation. Facebook has struggled with the need to monetize mobile, and Facebook Home looks to be one of the most successful plans to do so that has been brought to market. I believe it is reminiscent of Zuckerberg's genius in how he rolled out Facebook originally; it leaves the ads out for now. Let users get comfortable and reliant on the technology and then slip in the ads later.

Impact on the competition
Facebook may love Apple -- the Facebook app is one of the most popular on iDevices  -- but Facebook Home is hard to imagine as ever being an option on the iPhone. Android's open source structure, and Google's willingness to let Android be altered, are critical reasons why Facebook Home can work. Cupertino surrendering control of the home and lock screens on iDevices is a development that should be viewed as improbable to impossible. An app version may be available, but it will not have the same power as the full experience.

Another consideration for Apple is the fact that preliminary reports suggest that Facebook Home may simplify the Android experience sufficiently to make it more comparable to the iOS ease of use. One of Apple's biggest strengths has been the intuitive nature of iOS, and the ease with which it can be learned. If Facebook Home brings that simplicity to Android, this may pose another threat to Apple.

The impact on Google is much harder to gauge this early in the life cycle of Facebook Home. On the one hand, it may drive an even greater contingent of users to Android. If, however, the advertising dollars are soaked up by Facebook, because it stands in front of the back end OS, Google may find its open generosity a significant detriment in maintaining control of the mobile ad game. Watching these factors is critical for Google shareholders moving forward.

Overall, Facebook Home looks like a big win for Facebook, and should prove a positive catalyst for the stock. Even after the initial pop, I see significant upside from here. As for Apple and Google, this is a developing story from those perspectives, and a critical one.

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