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Facebook Introduces Smartphone Software to Boost Ad Revenue

Thursday, 04 April 2013 02:05 PM

Facebook Inc. unveiled smartphone software that puts social-networking features front and center on a handset, stepping up efforts to boost sales of advertising on small screens.

The new software, which the company calls Home, makes it easier to access Facebook features -- such as friends’ photos, messages and status updates -- on a smartphone’s home screen, Chief Executive Officer Mark Zuckerberg said at an event today in Menlo Park, California. The downloadable application, available on phones that use Google Inc.’s Android operating system, also boasts improved messaging tools, Facebook said.

Now that the majority of users access Facebook via mobile devices, Zuckerberg needs ways to keep them engaged longer while coaxing advertisers to pay to place promotions on small screens. The company is betting that a handset with Facebook-centric software will do a better job wooing users and marketers than the current approach, which emphasizes a downloadable application, Howe said.

“The problem with apps is they’re a click away from wherever you are,” said Carl Howe, an analyst at Yankee Group. “Facebook wants to remove that barrier.”

Home will have monthly updates, can be installed from Google Play, Google’s online app store, and will be available on tablets in the coming months, Facebook said.

Facebook rose about 1.8 percent to $26.72 at 1:33 p.m. in New York. Through yesterday, the stock had declined 1.4 percent year-to-date, while the Nasdaq Composite Index gained 6.6 percent.

No Smartphone

Facebook isn’t building a smartphone or creating an operating system, Zuckerberg said.

Amazon.com Inc. uses a version of Android in the Kindle Fire tablet. In Amazon’s case, that means bypassing Google’s preloaded applications, such as Gmail, Google Maps and YouTube, which generate revenue for Google.

Software crafted by Facebook will more prominently display the social network on handsets and could challenge competitors such as Apple Inc. and Google for the attention of smartphone users, Howe said.

“They’re not as mobile focused as Apple and Google are,” Howe said in an interview. “They need to play catch up.”

While the iPhone operating system is controlled exclusively by Apple, Google provides more flexibility with Android. Companies can take older versions of the software and customize it for their own services and preferences.

‘Integrated’ Socializing

Zuckerberg has said he sees opportunities to push the company’s features deeper into mobile devices -- though he has denied that Facebook will make its own smartphone. Already, Facebook, along with Twitter Inc., has been built deeper into the latest version of Apple’s software, enabling users to post easily to the social-networking service.

“I think people want it to be very integrated into all of the different devices that they have, and that’s what we’re going to focus on,” Zuckerberg said on a call with analysts in January. “So, rather than just building an app that’s a version of the functionality that you have today, I think making it so that we can just do -- go deeper and deeper I think is going to be a big focus for us.”

A new Facebook-enabled handset follows earlier forays into mobile devices for the social-networking service.

HTC Corp. began selling “ChaCha,” an Android-based phone with a dedicated Facebook button to share music, photos and messages, in 2011. INQ Mobile Ltd. and Facebook that year also unveiled a phone with close integration of services, such as wall postings and photos.

Mobile Ads

While those devices have won over some die-hard Facebook fans, widespread adoption has been limited, according to Carolina Milanesi, an analyst at Gartner Inc. A new Facebook handset may struggle to match the success of devices made by Apple or Samsung Electronics Co., which manufactures the Galaxy line of phones, she said.

“I don’t think that Facebook as a brand will necessarily get consumers -- that are your average Facebook users -- to pick out that phone over a Galaxy or an iPhone,” she said.

After a 31 percent decline in Facebook’s shares since an initial public offering in May, through yesterday, investors are looking for signs that the company can extract more ad dollars from promotions on mobile phones. The number of daily Facebook users on desktops and laptops fell in the fourth quarter as the portion of members on mobile devices increased, regulatory filings show.

Share Gains

Facebook’s nascent mobile-ad service, started in March 2012, isn’t helping the company gain market share in the U.S., according to EMarketer Inc. Facebook is projected to grab 12 percent of the market in 2015, down from 13 percent this year, EMarketer said. Over the same period, Google’s stake will climb about two percentage points to 57 percent.

A new handset could help Facebook get more information on users to bolster its mobile ad efforts, according to Melissa Parrish, an analyst at Forrester Research Inc.

“They need to do more,” Parrish said. “The most important thing is putting more focus on how they can deeply understand the people who are using Facebook on a mobile device.”

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Facebook Inc. unveiled smartphone software that puts social-networking features front and center on a handset, stepping up efforts to boost sales of advertising on small screens. The new software, which the company calls Home, makes it easier to access Facebook features --...
Thursday, 04 April 2013 02:05 PM
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