Facebook vs. Google in 2015

As I look forward to the next few years through the lens of the “mobile first world”, I find a number of interesting things about Facebook and Google to tease out. The next phase of mobile will bring an additional two billion people on the internet for the first time via a smart phone. While this is a huge number of people, they will also be low value customers. So the question is, who is best positioned from a platform standpoint to serve this next two billion?

As I point out in this report, Google faces a very tricky problem. they have likely peaked and earnings numbers this year will highlight it. Google’s revenue numbers have been very closely tied to new internet users. However, in the past, new internet users were worth more to Google than new internet users connecting today and over the next few years. Inevitably, Google is acquiring lower value customers at a more rapid rate. Which means the ASP of an ad unit will go down as Google cannot make as much money from this booming lower-end audience. I am extremely skeptical of Google’s position in this next phase of mobile.

Facebook has a similar issue attempting to monetize the lower-end audience in this next phase. However, Facebook (and assets like WhatsApp and Instagram) are better positioned than Google because it is a demand driver of smart phones at this tier. Consumers in rural China, India, Africa, etc., are not lining up to get Google Maps or a Gmail account. They are, however, being driven to connect to get on Facebook, WhatsApp, Instagram, etc.

As we dive into what consumers in this next phase of mobile care about, it becomes clear Facebook’s services are better positioned than Google’s. Whether or not this will always be the case, it will be at least for the near future. Those who are getting online for the first time don’t care about an app store with a million apps. They aren’t browsing the web yet and they aren’t purchasing much of anything online. Their needs are very simple. Education apps, for example, do exceptionally well in this market. A rural farmer in India gets online for the first time and starts selling his sheep on Instagram. For those in this next phase of mobile, a smart phone means a chance at a better life and to up their standing economically, learn, and connect to others. At the core, this is not all that dissimilar to developed markets except that, for them, it is their first time on the internet.

There is another angle that makes me think Facebook is better positioned than Google for this next two billion. Facebook can be a “one platform to serve all” where I feel Google can not. Google is going to have an extremely difficult time keeping Android interesting to their first billion users AND their second billion users. The primary reason for this is because the next billion Android customers will want and need completely different things than their first billion. A “one size fits all” Android solution is not going to work to satisfy the needs of their most demanding and most profitable customers versus those who are getting online for the first time with their first computer. Completely different set of customers.

Facebook, on the other hand, can serve the full spectrum with their solutions. They have proven they can and are executing admirably. This does not mean there are no major hills for Facebook to climb but it does mean their foundation is stronger than Google’s.

As a growing number of consumers get online with their first smart phones costing less than $50, it is difficult to see clearly who makes money on this audience. It will, without doubt, be companies who are services companies and not hardware companies. Which is why I look at areas where services are in demand and valued, and that is where I see Facebook being better positioned than Google.

Lastly, it is also unclear whether or not Android is going to be the dominant platform for the next two billion. There is a very good chance it is something else. Firefox OS for example, enables very low cost hardware closely tied to web services. What Microsoft is doing with Series 40 on the Nokia 215 is also interesting. Maybe Samsung gets smart and takes Tizen down to this level in an attempt to get first time smart phone buyers. It sounds crazy to even mention this, but perhaps Android over-serves the needs of the next two billion.

With this first phase of mobile complete, a lot of my time thinking about mobile is dedicated to the next two billion. The obvious point I keep returning to is how dramatically different the market for the next two billion internet users looks from the first. Massive challenges, but also great opportunity for those who get the recipe right.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

2 thoughts on “Facebook vs. Google in 2015”

  1. “Who is best positioned from a platform standpoint to serve this next two billion?”

    That is one fine question. A lot of great articles can spring from that question.

    “You can tell whether a man is clever by his answers. You can tell whether a man is wise by his questions.” ~ Naguib

  2. It’s a very interesting question, and my tentative conclusion is similar to yours (not surprising since I’m a frequent reader of this site).

    My question is, what will monetization of services look like for the next billion?

    I’ve seen data that shows that half of the worldwide advertising is in the US, and most of the rest comes from developed countries. It seems unlikely that advertising is going to be the main monetization scheme for the next billion. Already in Asia, we have seen some very successful alternative monetization schemes; first LINE with stickers, network games, etc. We are also seeing messaging services like WeChat and LINE (also Asian) evolving into e-commerce platforms. We also suspect that e-commerce may be even bigger in developing countries than it is in developed ones.

    It would seem that monetization of services in emerging countries might be less about advertising, and more about e-commerce. If that is the case, then the services that can evolve to encompass e-commerce might be the winners. Social networking has already proved that it can.

    Then the question is, can Google’s services evolve to encompass e-commerce? Will they try?

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