Et tu, Facebook?
I wrote last week about the potential trouble that Facebook’s (NASDAQ:FB) new Home app could represent for Apple (NASDAQ:AAPL). Thanks to its Android-only implementation, Facebook Home could be the must-have feature that makes some of those hyper-dedicated iPhone users (who also tend to be big Facebook fans) make the leap to an Android smartphone.
You’d think this would be good news for Google (NASDAQ:GOOG), the company that owns Android, but chances are CEO Larry Page and his team are watching this development with more than a little trepidation.
Why? If Facebook Home makes Android smartphones even more popular (the platform already controls 70% of the world market), shouldn’t that be good news for Google? After all, despite its increasing forays into consumer electronics and high-profile projects like self-driving cars and Glass, Google still lives and dies by search ad revenue.
As users increasingly go mobile and the importance of mobile advertising rises (continuing to gain ground against traditional PC-based search ads), Google’s Android strategy is simple: Relentlessly improve the operating system, give it away for free, keep it open and rely on mass adoption to put Android — along with Google’s apps like the Chrome web browser, Google Maps and YouTube — in front of as many mobile eyeballs as possible.
That strategy puts Google apps front and center and makes Google Play the default online store for buying digital media. Google sees a free, open and widely dispersed Android as being key to continue its dominance in search ad revenue.
But with Home, Facebook took that strategy and twisted Google’s intent to turn Android into something completely different.
On the surface, a Facebook-themed smartphone could boost Android adoption and be a good thing for Google … except Facebook’s Home isn’t just a polished Facebook app. It doesn’t just sit beside YouTube and Google Maps on a smartphone’s app launcher; instead, it leverages Android’s openness to hijack the entire experience.
Facebook Home essentially becomes the smartphone’s user interface. Facebook takes over, relegating Google’s own apps to second tier. The user doesn’t even see them unless they navigate out of Facebook Home to access their Android app launcher (or manually add them to their Facebook app launcher). Android users who adopt Facebook Home are contributing to solving Facebook’s mobile problem, while taking advantage of the all hard work Google put into its mobile OS.
And guess who has partnered with Facebook to power its search capability? Microsoft’s (NASDAQ:MSFT) Bing, Google’s primary competitor for search ad revenue.
Thus, someone who buys a Facebook Home smartphone or downloads Facebook Home onto their existing Android smartphone has the potential to shut Google out of any mobile ad revenue, while contributing to the coffers of Facebook and Microsoft.
What’s even more worrisome is that if Facebook home proves popular with smartphone owners, other services could do the same thing and release a themed layer that sits on top of Android — burying Google’s apps and dominating the user experience with their own.
Google could get tougher with Android and lock it down to prevent future hijacking of its platform, but it would alienate the large percentage of its users that chose Android because of its openness and customizability. It’s a catch-22.
The only other apparent option would be fighting fire with fire: releasing a Google-themed smartphone, one that goes beyond its standard app placement to build Home-like functionality around its Google+ social network.
It will take some time before we have real numbers around Facebook Home: how many times it’s downloaded and installed, how many users end up moving Google apps onto their Home app launcher, how much time they spend in the Home UI exclusively and how many end up ultimately ditching Home to return to the standard Android experience. Those numbers will largely determine whether Android users will also end up with Twitter, LinkedIn (NYSE:LNKD) or Pinterest phones.
Until then, you can count on Google watching this unexpected development very closely.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.