For future growth, Facebook focuses on mobile business

Telecom Lead India: Social networking major Facebook
made waves few months back when it became the first American company to enter
the stock market with a value of more than $100 billion. It is also looking at
entering the smartphone business.


Facebook, however, reported net loss of $205 million in
the second quarter, against $235 million in the same period last year.


At the end of the second quarter FY12, Facebook’s monthly
active users grew to 955 million, up from 901 million at the end of March.
Facebook’s active mobile users grew rapidly this year to 543 million with a
growth of 67 percent year-on-year.


With such huge quantity of mobile subscribers adding to
the active base of Facebook, the company sees great business opportunity for
its newly-introduced advertising services.


With dipping profit sequentially, the company would be
looking for a full-fledged approach to flourish its mobile business. The
company has also started offering limited forms of mobile advertising.


Facebook’s popularity has been declining post-IPO, as the
U.S advertisers are shifting away from Facebook to place their advertisements
over the internet, according to a survey conducted by 33Across. (Read this: Facebook’s popularity among U.S. advertisers plunges post-IPO)


Mark Zuckerberg, the 28-year-old chief executive who also
founded Facebook, recently said that revenue from the company’s news feed ad
product also known as Sponsored Stories has a run-rate of about $1 million per


He added that half of the revenue for news feed ad
product comes from mobile. Facebook’s COO Sheryl Sandberg said the mobile
ads are generating $500,000 in revenue per day at $183 million annual run


Facebook claims that it has so far been very careful about rolling-out
Sponsored Stories on mobiles. If fully developed, Facebook’s mobile business
will bring huge revenue potential to the company and revenue number will only


In order to strengthen its mobile business, as mobile
business strategy, Facebook also plans to bring out its very own smartphone as
soon as mid-2013.


Reportedly, Facebook is working with Taiwanese smartphone
major HTC to build its own smartphone along with a modified operating system,
purely for the device. (Read this: Facebook set to enter into smartphone market)


While unveiling its recent quarter results, Facebook in
an official statement said that its mobile strategy is simple and it reckons
that every mobile device is better if it is deeply social.


The company added that it is working across the entire
mobile industry with operators, hardware manufacturers, OS providers, and
application developers to bring powerful social experiences.


The statement of the company suggests that it is
aggressive in developing its mobile business. In order to develop a complete
ecosystem around its mobile business, Facebook has started acquiring various
apps and services. Apart from the acquisition of Instagram, the company
recently bought mobile gift-card application Karma to strengthen m-commerce
component of its mobile business.


In June, Facebook also acquired Israel-based start-up, a provider of face recognition technology to bolster deep integration
of social networks.


Earlier, the company acquired rewards
startup Tagtile, social discovery app Glancee, photo sharing app
Lightbox and mobile-oriented social bookmarking service called Spool.


On July 20 this year, Facebook reportedly
acquired Acrylic Software, the developer of personalized newspaper app
Pulp and secure database app Wallet.

While speaking on Facebook’s foray into
the smartphone domain, Appo Markkanen, industry analyst for Consumer
Mobility at ABI Research said, Facebook already is in the smartphone domain,
in the form of its apps. The question here is more about whether it will go deeper
than that, and whether it will succeed. I don’t think they can risk not trying
the OS card, but that definitely doesn’t mean that it will be successful.”


Markkanen added,” I believe Facebook will try to
develop its own mobile operating system, along the lines of what Amazon has
done with Android. If they do that I don’t see it as a short-term bet – 2013 is
the earliest timeframe for Facebook to release anything.”


On Facebook’s future growth strategy, Markkanen
said,   I’d say the biggest priority now should be to track and
evaluate how sponsored stories are being received in practice, and to develop a
better understanding of what work and what doesn’t in that field. Another
relatively short-term revenue source could be to develop a scheme under which
it could charge firm for operating Pages: probably something usage-based, which
would bring in money from large brands while keeping the small-scale,
grassroots activities free.”



Danish Khan
[email protected]