Is Facebook Dominating or Stumbling in the Mobile Space? [Analysis]

facebook mobile

So, Facebook’s record-setting $100 billion initial public offering (IPO) was a total dud.

The causes were many: too many shares that were priced too high; the alleged dishing of insider information to wealthy clients of the underwriters regarding earnings expectations that were revised downward, the fudging of early hour market orders by listing exchange NASDAQ.

The lawsuits have already hit the courts. Inevitably, this spectacular mess has led many analysts to start picking the company’s overall strategy and direction apart as competition and astronomical expectations continue to loom.

So what is Facebook’s strategy? There’s no question that Zuck doesn’t lift a single toe out of bed each and every morning without the nagging, ever-present holy-grail-of-a-conundrum regarding how he plans to balance the company’s success with how he will sign up Facebook’s next billion users.

But many will argue he has more pressing issues to address: namely, Facebook’s position in the mobile space. Now, depending on who you talk to, Facebook has done either a remarkable job in mobile or has clumsy stumbled into the market with little consideration for a long-term strategy.

One thing is for sure: members are using Facebook Mobile products.

In February, the company announced in its IPO filings that more than 425 million monthly users access Facebook from a mobile device – more than half of the company’s total registered members. And with an estimated one in five people around the world owning a smartphone these days, we can expect nothing but acceleration in that figure.

What Facebook Has Done Right in Mobile

First and foremost, they are there. The company has published a Facebook app for every smartphone maker, from the iPhone to Nokia to Samsung. And they’ve already been doing it for a few years now, at that.

According to Facebook, the company published their first mobile website in 2006 (a cheeky throw-back to the days before the iPhone, called Mobile Web). It was nothing more than a crude, watered-down version of the website with smaller table widths so the mobile browser could cram pictures, text and the like onto a 4’’ screen.

They’ve also been able to grow and adapt to user’s preferences as new smartphones hit the market, and new capabilities in mobile computing emerged. The first app for the iPhone, for example, offered little more than the ability to read news feed, search your friends list, and trade private messages.

Since then, Facebook has effectively introduced a scale that’s unmatched by any other social network. Users today can access and adjust complex privacy settings, manage multiple pages and subscriptions, chat with messenger, check-in to their favorite spots, share and tag photos, and much more, on virtually every smartphone operating system available on the market.

Where Facebook Has Missed

Despite this incredible effort, many critics hold that Facebook hasn’t offered up a long-term strategy for sustaining this level of growth to ensure the engagement of mobile users.

That doesn’t mean there’s not opportunity. Just consider some of the head-spinning numbers coming out of the economic think-tanks and data miners: mobile ad spend is expected to spike as high as $20.6 billion in 2015, up from just $3.3 billion today. The question is not whether mobile is the emerging opportunity that will propel Facebook’s growth in its second decade; it’s whether or not they can capitalize on it.

For one, there’s some pretty intense competition out there. Companies like Apple (with GameCenter) and Google (with Play) are dead in the middle of a modern-day arms race for smartphone consumer attention and engagement, and they’ve got hoards of cash to do battle (compare Apple’s $90 billion in the coffers compared to a paltry $3 billion for Facebook). Not to mention the independent app makers who have created more than half a million games that have collectively been downloaded more than 10 billion times.

Another issue Facebook must at some point address is their highly concentrated sources of revenue. The company generated about 12% of its $3.7 billion annual revenue from one game marker – Zynga – and the remaining 88% from advertising. That lack of crucial customer diversification creates a grave potential for market-share loss if Zynga fails to produce any significant blockbuster games for the mobile space over the next few years.

And finally, perhaps their biggest issue has nothing to do with the market itself. It has to do with Facebook’s top leadership.

In a move that rocked even Silicon Valley’s most established luminaries, Zuckerberg announced this past April that Facebook has agreed to purchase Instagram, the mobile photo sharing app with about 50 million users and zero revenue, for a whopping $1 billion. If that wasn’t blatant enough, reports quickly emerged that Zuckerberg had decided to make the purchase over the course of a weekend and didn’t bother to consult his board for approval (although technically he doesn’t have to, as he owns 57% of the voting bloc).

So, is Facebook so desperate to establish an early footprint in the mobile space that they are willing to do so at belligerent speed without ample due diligence or long-term strategy, or has the 27 year-old boy genius founder struck gold twice? The truth is that only time will tell, and judging by the growth rates in the mobile user market, we won’t have to wait long to find out.

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New Age AdMan & proud father of 2 incredible kids. Omar is Chief Strategy Officer at Sandstorm Digital; a new age brand communications agency. Omar has over 20 years experience in marketing and advertising, the last 10 being in digital within large media agency environments. During that time, Omar developed and implemented cutting edge digital campaigns for some of the world's best known brands. For the latest in digital marketing and industry news updates, follow Omar's Twitter stream (@OmarKattan) or add him to one of your Google+ Circles: Omar Kattan's Google+ Profile.

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