Facebook Is the Only Company That Can Challenge Google and Apple in Smartphones

By Markets Fool.com

Continue Reading Below

Facebook Home didn't make much of an impact on the mobile ecosystem, but don't count Facebook out. Source: Facebook

The Facebook phone has already had a couple of iterations, neither of which left much of an impact on consumers. The most recent attempt was Facebook Home, which the company built on top of Google's Android operating system. Clearly, Facebook has mobile ambitions beyond dominating the real estate of your smartphone's app launcher.

But creating a dent in the now well-established mobile OS ecosystems of Google and Apple is tremendously difficult. Microsoft has been able to make only a small impact in the four years since launching Windows Phone. Samsung, meanwhile, has been unable to tear itself away from the grip of Google with its own work on Tizen.

But what makes it so hard to succeed in creating a new mobile OS may be where Facebook can excel.

Building an app store
Earlier this year, Huawei -- one of the top five smartphone makers in the world -- stopped producing Windows Phones. Richard Yu, head of the company's Consumer Business Group, said the phones weren't profitable because Huawei couldn't persuade consumers to purchase them.

Continue Reading Below

The biggest thing holding Microsoft back is its app store. The company said its app store had surpassed 300,000 apps back in August, but it's riddled with spammy fake apps and it pales in comparison with Apple's and Google's million-plus apps.

Facebook, meanwhile, already has a strong relationship with app developers. Its purchase of Parse now has it providing a cloud back end for a slew of developers. Last week, Parse announced that it provides cloud services for 10% of the top apps in both the iOS and Android app stores.

On top of that, Facebook has developed relationships with game and app developers through its popular app-install ads. The company could offer a discount to developers on app-install ads if they port their apps to a Facebook OS. Facebook could easily make back the money by taking a cut of app purchases in its app store.

Additionally, an app store from Facebook could survive a more limited app library because Facebook is really good at recommending apps to users. The company already does this with its app ad feed, which would work even better in an app store.

Facebook owns the most popular apps
The only thing people do on their smartphones more than check Facebook is play games. As mentioned, Facebook should be able to attract game developers to its OS, but its real advantage over Microsoft, Samsung, Google, and Apple is that it owns the most popular apps.

The most exciting feature of Facebook Home was the "chat heads" that integrated Facebook Messenger really nicely with the OS. The ability to integrate the most popular messaging apps in the world -- WhatsApp and Facebook Messenger -- with an OS is a huge advantage over the competition. And Facebook has already shown us that it can create a very nice user experience by doing just that.

Instagram's growth over the past year also makes it a prime candidate for integration with a potential Facebook OS. Apple added extensibility to iOS 8, which allows users to send photos from the Photos app to other apps, but Instagram doesn't support it. Making a more streamlined integration with the OS default apps would benefit users as well as Facebook's growing photo-sharing network.

Facebook is also working on developing its Search product, which is another candidate for integration with a mobile OS. Graph Search is currently aimed at helping Facebook users search friends' posts and photos, but it has the potential to become a local search engine that uses recommendations and mentions from friends to find places. Again, integrating it with a potential OS would increase adoption and provide differentiation.

Should Google and Apple worry?
Facebook is a long way away from developing its own OS, but it's very likely the company will make additional efforts to further embed its products into the mobile ecosystem. While Facebook Home was a flop, I still think Facebook has the best chance of making a real impact on the mobile market with its own OS.

If that happens, Google seems more susceptible than Apple. Google's relationships with smartphone makers has grown tense as the company forces more of its apps on OEMs -- which doesn't allow them to differentiate themselves from the competition. It's not clear that Facebook would be much better, but it could differentiate a partner that's willing to take a risk with it.

Facebook needs to learn from its mistakes with Home and capitalize on its successes. But even if it doesn't come out with a full-fledged OS, it still has plenty of growth in mobile left.

The article Facebook Is the Only Company That Can Challenge Google and Apple in Smartphones originally appeared on Fool.com.

Adam Levy owns shares of Apple. The Motley Fool recommends Apple, Facebook, and Google (A and C shares) and owns shares of Apple, Facebook, Google (A and C shares), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.