Facebook (NASDAQ:FB) recently added support for Internet-connected devices to Parse, the mobile app development platform it acquired nearly two years ago. This move could help the social network tap into the booming Internet of Things (IoT) market, which IDC believes will grow from $1.9 trillion in 2013 to $7.1 trillion by 2020.
Let's take a closer look at Parse, why it is so important to the future of Facebook, and how an expansion into the IoT market would help the social network.
Why Parse matters
Unlike Google, Apple, Microsoft, and Amazon, Facebook does not have its own mobile operating system. This means that Facebook cannot launch a mobile app store and take a 30% cut of the sales.
But Facebook found another way to monetize apps. In 2012, it let developers add Facebook sharing abilities to any app with Open Graph, then offered mobile app install ads on its News Feed. Therefore, instead of claiming a percentage of app store sales, Facebook generates ad revenue from the developers.
Parse is a BasS (backend as a service) solution, a turnkey service that adds user authentication, push notifications, social media integration, location data, and data analytics into any app. Developers subscribe to these services, which can help them reach a wider audience and gain valuable insights on user behavior.
Parse hosts over 500,000 apps on a freemium model. Nonpaying developers get up to 30 API requests per second, 1 million push notifications per month, and 20GB of storage. Premium plans can cost hundreds to thousands of dollars per month.
Facebook wants to connect everything
By acquiring Parse, Facebook combined its turnkey solutions, software development kits (SDKs), Facebook integration, and mobile app install ads in a single subscription package. This makes Parse a solid solution for traditional mobile app and game developers, but an increasing number of apps for wearable devices and IoT devices are now coming into play.
In a recent blog post, Parse founder James Yu stated that synchronizing devices like sleep and insulin trackers to the cloud had "the potential to change the world for the better." But he also noted that "connecting these devices to the cloud can be difficult" due to backend compatibility and "constrained environments."
In response, Parse listened to feedback from IoT customers like Chamberlain, which makes smart garage door openers, Roost, which sells smart batteries for smoke detectors, and fitness tracker maker Milestone Sports. That is how it developed Parse for IoT, a new line of SDKs for connected devices.
Facebook smart homes
One new SDK is Arduino for the Arduino Yun, a microcontroller board with Wi-Fi capabilities which can power IoT devices like smart thermostats. Another SDK is Embedded C, an SDK designed for Linux and real-time operating systems.
Yu stated that with these new SDKs, developers "could make a smart thermostat that can be controlled via a mobile app, a security camera that saves images every minute, or even a music device that can be controlled via a web app."
Once all those devices are connected back to Facebook, the social network could become a major rival to Apple, Google, and Samsung in the upcoming battle over smart homes. For those three companies, the battle has focused on connecting devices to hubs like the Apple TV, Google Nest smart thermostat, and Samsung SmartThings hub which synchronize information with companion apps.
Facebook, however, intends to connect IoT devices without a physical hub. If it gathers information from those devices via Parse, then connects the companion apps through Facebook, it can grow a smart home ecosystem without a major mobile OS like Android or iOS. This could give Facebook a major presence in the smart home market, which Juniper Research estimates will grow from $33 billion in 2013 to $71 billion by 2018.
The bottom line
Facebook should not be considered a direct rival to Apple or Google in the IoT market. Those companies benefit from app sales and ecosystem growth, while Facebook is acting as an information-gathering gatekeeper. That information could help Facebook craft better targeted ads for its News Feed as it generates subscription revenue from Parse subscribers.
Therefore, Parse for IoT is a fascinating way to connect IoT devices to the largest social network in the world and a new area of growth that Facebook investors should not ignore.