APIt's not completely obvious why Facebook launched Facebook Home, the phone takeover app that makes your Android smartphone run like a Facebook-dedicated phone.
Most people want their phones to do a bunch of things for them — calls, text messages, maps, search, photos — and Facebook is only a small part of that.
Why would anyone except a total Facebook addict want Facebook to sit on top of their phone's other capabilities, like a social media barrier?
CEO Mark Zuckerberg touched on that in his Q1 2013 conference call yesterday, and revealed the real reason Home is a priority for Facebook.
First, some context, which we gleaned last night over a drink with one of Facebook's biggest media buyers. Facebook only has three "levers" it can pull to generate advertising money, this source reminded us:
- New users - the more users Facebook can add, the more advertisers will feel compelled to spend money reaching them. Advertisers love big audiences.
- Higher prices - all else being equal, if Facebook can keep the price of its inventory going up, it can still raise revenues even if other parts of its business are in decline.
- Greater "supply" - Even if Facebook can't get new users or raise prices to reach them, it can generate a greater "supply" of ad impressions by having people use Facebook more often.
Supply of ad impressions is the same thing as "engagement," something Facebook talks about a lot. The more engagement, the greater supply of ad impressions, the more money Facebook can make.
If supply — engagement — falls, Facebook is screwed.
Here's what Zuckerberg said when he talked about Home yesterday:
We used to open the Facebook app maybe 10 to 15 times per day. But we probably check our phones over a hundred times a day. So with Home, you can see fresh news and content from people and topics you care about every time you turn on your screen. It really brings your phone to life and provides with a completely new experience.
It's not clear whether he's saying "we used to open the Facebook app maybe 10 to 15 times," or "we users open the Facebook app," or some other slip of the tongue. But it doesn't matter: The point is that Zuckerberg is concerned that Facebook engagement is only 15%, maximum, of users' mobile phone use.
Phones are becoming increasingly cluttered with ever-more addictive apps. Vine. Snapchat. Tinder. Facebook is just one of them in a sea of icons. It could easily lose its share of engagement — threatening supply.
Home solves the supply problem completely: It makes it impossible to use a phone without engaging with Facebook. And as we know, because Zuckerberg said it at the launch, ads will eventually come to Home.
Disclosure: The author owns Facebook stock.
More From Business Insider
- GM Pulls 'Racist' Chevy Ad That Calls China 'The Land Of Fu Manchu'
- Here's The Staggering Sum 'American Idol' Gets Each Season From Advertisers
- Mountain Dew-Loving Goat Intimidates Assault Victim Out Of Snitching
- Information Technology
- Arts & Entertainment