Rumors circulate that the next big exclusive OS will be on Facebook. How viable is that?
This move seems extremely risky. Barriers to entry in the smart phone business seem pretty high. Nokia, still number 1 handset provider in 2008, is seeing its market share shrinking with 9% less revenue this year in its device and services business.
As of today, Google is not making money on its open source Android. It’s handset business with MiM ( Motorola) operated with 3% loss - MMI revenue came in at $1.25B (3.1% of total revenue) for the stub period. Google‘s primary revenue driver (97%) is it’s search engine as opposed to its low margin Handset products.
Apple’s competitive advantage lies within its App store, which it dominates with 650000 apps available. Apple App Store revenues for 2010 hit $1.78 Billion. Iphone represents 46.4% of Apple’s revenue and is the highest Apple revenue generating product. Despite its small OS market share( Apple iOS accounts only for 20.5% of global market share in 2012 as opposed to 61% Android), Apple captures 70% of mobile device profits and assumes a huge profit margin through its mobile advertising benefits ( both mobile ad display and apps ad).
Samsung improved its position from 4% in 2009 to about 30% in the first half of 2012 mainly because of the success of its flagship "Galaxy series" (combined with Google’s Android OS).
Does this leave any place for Facebook to enter that Market?
The smart phone market is already saturated. Unless Facebook can create an OS that is technologically innovative enough to gain market share over Android’s 60% Market share and 20.5 % Apple iOS’s market share worldwide, it seems very difficult for Facebook to succeed. Blackberry , Motorola and Nokia’s handset failures as well as Microsoft’s OS falling behind, are good examples of how difficult it is to compete in this market. If Facebook was to create its own handset, it will also suffer from the same type of issues as Google is today with its low margin hand set business.
Can Facebook survive without a share in the smart phone business?
Future belongs to tech companies that can combine the worlds of mobile, cloud and software applications, that can bridge the gap of Social Network and Social OS. Tech companies that will develop the capability of collecting and correlating user data across these platforms will be better positioned to create the “next big thing” that can more efficiently drive monetization and attract marketers.
It seems that without a hand on the smart phone business, Facebook’s future will be in danger. If Facebook was to enter the smart phone business, it will not be without pain.
To my opinion, in long run, given the current competitive landscape and high barriers to entry, unless Facebook makes a significant innovation, chances are slim for Facebook to survive- with or without the smart phone business.
1 comment:
Nice post. We are already seeing FaceBook making inroads to the mobile segment by making few acquisitions.
The acquisitions hopefully gives FB the required software expertise to aggressively pursue the mobile space since more than half of their users access the website through mobiles.
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