If you want to understand the biggest bet Facebook is making right now, you’ve got to check out the App centre.
Heck, you can’t miss it. In an unprecedented move, Facebook is advertising its in-house app directory on its homepage when you’re not logged in.
Why? According to a prominent Facebook critic, an executive said that the social network could make a billion dollars a year by collecting a toll on installations of apps.
The App centre is not an app store. Facebook is not selling apps like Apple and Google do. Instead, Facebook is positioning itself as the ultimate gatekeeper for developers who want their apps to be hits.
Facebook has made the App centre prominent on the social network’s News Feed and mobile apps.
All this promotion seems to be working. At a game-industry conference in Europe, Facebook representatives announced that more than 150 million people had used the App centre in the past month.
The App centre makes it far easier to find Facebook-connected apps and install them, particularly on mobile devices. It’s increased installs by 140 per cent over Facebook’s previous app listings. And they’re also using these apps more. App centre users are 35% more likely to use the app the day after they install it than other users. That’s crucial for developers, who want engaged users.
Here’s another statistic they dropped: In July, Facebook sent people to Apple’s App Store and the Google Play marketplace 170 million times.
That’s both through the App centre and through the links that appear throughout Facebook whenever users post updates to their profile using an app.
Right now, Facebook is putting the focus on how much traffic it drives to app stores and how many downloads it generates. But it is quietly putting the pieces in place to make money off of app installs.
For example, the company is moving ahead with a plan to have mobile-app developers pay for ads designed to get users to install their apps, TechCrunch’s Josh Constine reported recently.
Developers would pay for each installation the ads generate. That’s different from the rest of Facebook’s advertising business, where advertisers pay on the basis of how many people see their ads.
Those app-install ads might take the form of Sponsored Stories, Facebook’s dominant ad format that appears at the top of users’ news feeds. Or they might be featured promotion in the App centre. Facebook’s experimenting with a lot of different approaches.
This is a potentially huge business, and Facebook isn’t the only one gunning for the so-called appvertising market. For example, Twitter has tweaked its mobile ads in specific ways that help drive app installations, like targeting ads based on the smartphone operating system a user has. (An Android user has no interest in an app that only runs on Apple’s iOS.)
We’ve talked to a few different experts in the advertising business who say that developers will typically pay anywhere from $1 to $3 to get a consumer to install an app.
How big can Facebook’s app-install business get?
Well, this is apocryphal. But when riled-up developer Dalton Caldwell accused Facebook executives of muscling his startup, he dropped a really interesting clue (emphasis added):
Strangely, your “platform developer relations” executive made no attempt to defend my position. Rather, he explained that he was recently given ownership of App centre, and that because of new ad units they were building, he was now responsible for over $1B/year in ad revenue.
It’s not clear which executive Caldwell was referring to. Based on the title he gave, it could possibly have been Doug Purdy, an executive who launched App centre back in June. Facebook hasn’t commented on Caldwell’s claims.
But the figure Caldwell mentioned?
Let’s say only half of the visits Facebook sends to Apple and Google’s app stores lead to a download. That’s still 85 million a month.
Multiply 85 million installs a month by 12 months in a year by $1—the figure that advertising experts agree is the minimum going rate for driving an app installation right now.
That takes you to a billion dollars.
The challenge for Facebook now is twofold: It has to keep convincing users to download new apps by tweaking the App centre to make it appealing.
And it has to convince developers that those users’ attention is worth paying for.
If it can manage both of those tricks, that’s a very large opportunity, one that takes Facebook’s strengths on the desktop and translates them to the mobile world.
And it all starts with the App centre.