This Is Facebook's New Plan For Europe
The "Facebook Platform", as it's known, is often regarded as the nuts-and-bolts operation that sits behind the Facebook that everyone knows - the more glamorous viral social media side of the network. But Facebook Platform is a massive part of the social network's business. Currently, Facebook pays out $2.2 billion a year to developers who have made sales and accepted payments through Facebook. Eighty-five percent of the top 100 grossing apps on both iOS and Android are integrated with Facebook Platform. And on the desktop site alone more than 100 companies who make games received at least $1 million in payments in 2013.
Facebook is currently pushing to get more companies on board. CEO Mark Zuckerberg believes Facebook is the best place for companies to build apps, expose them to new users, and drive traffic from Apple's App Store and the Google Play store.
Julien Codorniou is the man in charge of the Facebook Platform in Europe. He sat down with Business Insider at Facebook's London office to explain how the company searches for up-and-coming developers, and the way it helps them get to the top of the App Store.
We started off by asking him about his background:
I joined Facebook three and a half years ago. I was at Microsoft before, in France, and in Redmond.
I joined Facebook to help the platform operations in France and Benelux. Today, I manage the platform partnerships team. We try to build and foster the ecosystem and to make sure the Facebook ecosystem in Europe is doing fine. We work with a variety of partners, but it's basically everybody who's building apps on the Facebook platform. So, of course on Facebook, it's the usual suspects Zynga, King.com, Wooga … the people who really created the European and social gaming economy.
It's mainly mobile app developers right now using the Facebook platform to build, grow and monetize. And so the ambition that we have at Facebook in general is to be the company and the platform fuelling the growth of the next generation of billion dollar companies and big companies pivoting to mobile.
How did you first notice the shift from games to other kinds of applications on Facebook Platform?
When Mark Zuckerberg introduced the Facebook platform, he said that one day there would be companies whose only product will be an app that lives within Facebook. He said that before Zynga even existed. It's always the case in the history of software that the gaming developers always come first on every single platform.
The gaming guys immediately saw the opportunity of using Facebook as a distribution platform - and this is how we've seen Zynga, Playfish, Playdom and that first generation of gaming companies, and then the second generation which happens to be from Europe. But the gaming guys were first and very soon after the launch of the platform, Mark Zuckerberg said that the disruption that had happened in gaming would happen in other verticals.
I would say the second vertical to be disrupted by social and mobile has been music. If you look at the launch of Open Graph, which took place in 2011, the biggest partners we had at that time were Spotify, and a lot of good things happened to Spotify since they integrated with Facebook. It was the same thing with Deezer and Rdio in the US and companies like Beats. What happened to gaming happened to music, and now that's happening to media in general. It's happening to e-commerce and to every mobile company. But the platform has changed a lot.
Three years ago, if I had asked you what the typical Facebook partner was, you'd have probably said Zynga or King.com, but if you asked me that today, I'd probably say something like Moovit, from Israel. The launch of Open Graph transformed the definition of Facebook platform, but the shift to mobile that we did two years ago, and the fact that we went from making zero percent of our revenues on mobile to 63 percent, and the fact we opened our app to mobile developers. And also to Canvas to developers going mobile has extended the payment of the platform. You could be an amazing app on the Facebook platform, without even being a social app by using products like Parse, for example, or the Audience Network to monetize your application.
So any app that's built can have multiple levels of integration? Theoretically, you could built it on Parse, distribute and monetize it on Facebook, and your app would be almost entirely a Facebook product. Presumably you could also build it without Facebook's tools and just use Facebook login?
We're talking about mobile apps. 80% of the companies we work with are mobile-first or mobile-only, so we are talking about a mobile world. You can choose to use it to build, for PR, for growth, or to monetize. You can cherry-pick and use just your login, or just your network. When people think of Facebook on the phone, they think of social experiences. Well that's not true anymore. You don't have to create a social experience to be an amazing application on the Facebook platform.
Which pieces of the platform compete with Apple and Google?
I would say none because the value proposition we have is unique in the way that the Facebook platform is a cross-platform platform. So by building on the Facebook platform, we can make you big on Facebook.com, on the web, on iOS, on Android, on Windows phone, on any new platform coming up that we support. The main value proposition of Facebook is the fact that it's cross-platform. We like to say that if you look at most of the top grossing apps on iOS and Android right now, most of these guys either started on Facebook.com (e.g. Candy Crush) or have an amazing use of the Facebook platform on mobile.
If you look at the Apple world, they can help you to become really big in the Apple world. It's the same thing for Android. But we are the only company with a vested interest in making our partners successful on every platform because we don't own the operating system. We have a cross-platform platform.
Can you tell us how many apps are being built on Parse?
I think the last public number we had was 270,000 apps. A year before, it was 100,000. As of today, I have four guys from my team in Paris talking to Android developers about the greatness of Parse, Facebook login, app links, app events, all of these things we helped introduce. It's a very important bet for us. Because basically how we created the Facebook platform, we looked at the journey of the mobile entrepreneur - say you want to be the next Instagram. You have three problems: Billing application, cross-platform application (you have to do the same thing on iOS and Android - it's a mess, it's complicated), so Parse can help you to do that. You are going to have to grow your application, because once you're in the App Store you are competing with one million apps on iOS and one million apps on Android. How can we help you be discovered? The last issue is "How do you make money?" How do you monetize if you don't sell actual goods like Candy Crush? We want to help every potential mobile developer on every step of their journey. Of course, some of them use everything, but some of them just use one of the 3 PRs.
Traditionally, app developers have launched first on iOS, and if it's successful, six months later the Android people get a version that's not quite as good even though they're 80% of the audience. Does the Facebook platform help people do it all at once?
Not all at once, as you still have to develop the client. But what we tell developers is "Don't waste your time building a data center, don't waste your time setting up a server farm in your basement to launch on many platforms. Just use Parse for the backend services side, develop the clients on iOS and Android." The mobile developers love to build clients, not data centers.
They still have to build separate clients, though. Are they more likely to continue to build the Apple one first?
As you said, we see more people being Android-first because of the size of the market. Technology is like Unity in all of gaming. You build on Unity, you're almost de facto on iOS and on Android. You see a lot of cross-platform tools, this is why we have an amazing partnership with Unity on top of Parse and on top of Facebook Canvas, because if you build on Unity, you can build on iOS, Android and Facebook at the same time. You see a lot of games like that being developed by Russian developers.
You mentioned that you see more mobile app developers launching first on Android. Could you expand on that, because that's new.
People look at the numbers, they want downloads, installs. They know that monetization is catching up on Android. Of course, iOS is the better platform when it comes to monetization, but it's easier to update your app on Android. There are many people on an Android phone.
The world you described was true a year ago, but I see that things are changing. That said, if you look at all the recent games that came from Facebook to mobile, like Criminal Case, which was a huge app on Facebook - it was game of the year on Facebook last year. They launched iOS first and will launch on Android in a few months from now. The vision we have with Parse and with the platform in general is to accelerate the market. It should not take you six months to develop from iOS to Android. We like to be that cross-platform platform with a vested interest on everybody's platform.
Europe's really big with music startups. You've got SoundCloud in Berlin, you've got Spotify, and Facebook is a huge part of that. What is it about Europe which lends itself to music startups in ways that perhaps the US doesn't?
We'd extend that to non-music startups actually. My big bet is that we've seen in the last two or three years a rise in the super startups from Europe. Think of Minecraft, think of Supercell, think of Candy Crush. I'm talking about very young companies , highly-technical, 90% developers building mobile apps, becoming billion dollar companies in just a few years or becoming insanely profitable companies with a global reach in just a few years. I think it's due to the fact that the cost of building software with solutions like that and the cost of distributing software globally is trending down to zero. So for anybody in a basement in Serbia or Russia, Paris or the UK, the market is global so it's easier to compete. And because it's easier to compete, we see talent from Europe popping up.
But music is a good example. Deezer and Spotify are two very important partners, but I could talk about gaming. Minecraft is a good example. Nordeus from Serbia; you would not expect one of the top ten grossing apps to come from Serbia. And there's Playtika in Israel. I call them the super startups because some of them didn't get any VC money. There are no VCs in Serbia, and almost no VCs in Ukraine. But we still see amazing companies like that popping up. For me, it is down to the fact that we have amazing technical talents, and ten years ago it was a mess and a nightmare to try and become a successful software company in the US with headquarters in Russia.
I actually think you have a competitive advantage if you're in Europe. The cost of tenancy is much cheaper in Europe. If you look at gaming, I was looking at the iOS Top Grossing list, I think that 10 out of 20 of the top apps on iOS were from Europe. There's all these new hotspots: Israel, the Nordics, Sweden, Helsinki of course, Berlin, London, Paris. All of these new hotspots are now producing super startup companies with the potential to be billion dollar companies, or companies like King , who went public for $7 billion, Supercell sold 51% of its equity, or Minecraft, which went for $2.5 million, I think. For me, it's just the beginning, so I'm very bullish in Europe.
Is there a plan to integrate Instagram or Whatsapp to let app developers get at them through the platform?
Instagram isn't part of the Facebook platform and Whatsapp is not a company we've acquired yet. So nothing for the moment.
If I was a gaming app, I'd like Whatsapp integration so I could tell my friends to join me inside the app.
Some people do that already. A lot of the newspaper apps, I think the Daily Mail does this, send via Whatsapp. Secret does that too. You can send a Secret via Whatsapp to your friends. It makes total sense. But this is not something anybody here is working on at the moment.
Would it be better if it was a unified approach?
From a developer's perspective, I guess yes. But just to come back on your point, our ambition with startups, especially in Europe, is to be fuelling the growth of these guys. I think we did a good job with the existing big guys. Supercell is a company we spoke to for the first time maybe four years ago now. I had a meeting with the CEO of Supercell telling him to give up, because he was trying to put games on Facebook and it didn't work, and then he decided to pivot and become the number one company for tablet gaming. He launched the game around June 2012. By the end of August, he was doing half a million dollars a day. We've seen that happening many, many many times. We like to be the guys in the platform fuelling the growth. So for us, managing the big guys is important, but identifying and engaging with the next generation as early as possible is even more critical.
How do you identify what the next generation is?
First we show up. I've got four guys in Paris today. We're going to every possible conference across Europe in all of these hotspots and we work with VCs, angels and entrepreneurs who are sending people to us. We have a team to manage people like that which helps young companies become very successful.
It's obvious how Facebook is going to get paid to do this on the advertising side (mobile app and installment ads), but the payments part of Facebook has not really taken off in the way advertising has, partly because I think Zynga declined.
Zynga declined, but King.com became King.com.
Can you talk about payments?
Payments is gaming, not Facebook. It's 99% of the payment revenues. It's a flat business. As you know, Zynga had some troubles, but there is a new generation of gaming companies like Playtika in Israel, King.com in the UK and Wooga in Berlin. They've become very significant on Facebook in the last two years. That said, we've seen a shift to mobile ourselves with gamers from Facebook Canvas going to mobile. But still, it's a flat business that's a $3 billion a year business for us. It's very significant and most of the companies of that economy are based in Europe. Half of the people you see here are managing gaming companies in Europe.
Is it flat because they accelerate and then the trend goes away and they decline very quickly? They can't get the continuous growth? Why is it flat?
It's flat because there's less players and therefore less payers. These guys are going to mobile which has also been good for us, because, at the same time, when they were pivoting to mobile, we launched mobile ads.
In the long run, what happens to payments?
We are trying our best to bring gross, and to bring back more users, more players. Every day, across the web and mobile, we send 375 million clicks to games on Facebook and a lot of people come on Facebook because they love to play games on Facebook. It's a very important vertical, so we try every possible trick to bring more gross to that economy. But new games would also help, new IP, new content - this is why we spend a lot of time in Russia. In Russia, Facebook is a new gaming platform. The first time we went to Russia with Mark Zuckerberg, we had one Russian company on Facebook. We said: "Guys, there is a place where you could reach a global market." In the 12 months that followed that trip to Russia, we've seen a tsunami of Russian companies coming onto Facebook.
How does Facebook tackle Russia? It's got a dominant social network already, how do you approach them?
From a platform perspective, we go and tell Russian developers that Facebook is the place where they can go global. You can be the king of Russia with VK, but it won't help you to get payers from the US. Facebook can help you get those kinds of payers and players. When they look at the success stories of developers that went from VK and then to Facebook then to mobile.
But if I'm a gaming developer, and I know that the majority of people who want to play games do so on mobile phones, I'm going to develop mobile first. I'm going to start with a Facebook game and then produce a mobile app.
If you look at all the top-grossing gaming apps on mobile, e.g. Candy Crush, Pet Rescue Saga, Diamond Digger Saga, DoubleU Casino, all of these games are here because they started on Facebook. We have a line here which is: "Big on Facebook, big on mobile." The best way to become successful on mobile as quickly as possible is to launch on Facebook first. It's a cheap place to acquire users, there are millions of users; we have hundreds of millions of people playing games on Facebook and you can update your game all the time.
So what we see right now is what King.com is doing: They put games on Facebook, they make it perfect, and when it is ready for primetime, they'll launch on iOS and Android. By using our channels and platform, they can easily take a user from Facebook to iOS and Android. When we heard that story and we saw gaming developers going mobile-first, we wondered whether mobile was going to kill payments and Canvas. Will people just play on mobile? But what we realised is that the more people play on mobile, than the more people play on Facebook.
People want to play in a fully synchronized way all the time on many devices. A typical scenario can be taking the bus and playing Candy Crush on it. You arrive in the office, you play Candy Crush on a huge screen on Facebook, and when you go back home on your sofa, you play on an amazing Android device. That's fully synchronized, cross-platform, all the time. And this is why the Facebook Canvas platform has never been a relevant as it is today. We have an example in the US called SGN. It was created by Chris DeWolfe, the former CEO of Myspace. He had a game on mobile called Cookie Jam and he was doing $100,000 a day on iOS and Android. We said to him that he had an amazing game, why don't you put that game on Facebook? And he did. The next thing you know, the revenues went up 50% in three weeks by doing that. Because the people who played on mobile were frustrated back in the office or back home that they couldn't play on the big screen. So they were extremely happy to discover that the game was available and they could play and pay using the game, so that was one of the lessons we've seen.
It was a surprise for us. But if you look at the top grossing games for iOS and Android, most of them, except Clash of Clans and the Supercell games, started on Facebook. And there is a pattern here. It is almost every gaming company, especially in Europe going from the web to mobile .
One thing app developers want is to get noticed. If Facebook finds a really great app, then how does Facebook help the app get discovered?
There are two ways. The first one is to make best possible use of the Facebook platform, because there's a lot of virality to get from Facebook . Using Facebook login, using native share buttons, the mobile like button, and the tools we have to help users to recruit their friends inside an application and to create a social experience. Of course, we also have mobile app ads, and most of the companies we work with are getting budgets on mobile which is going exclusively to Facebook. Think of a company like BlaBlaCar , it's a French company which has just raised $100 million. This was a company I spoke to for the first time three years ago to talk about the Like button on its website. And then they launched on mobile, and they realised that mobile was good for them, as it offered more engagement and monetization prospects. The company's marketing budget shifted from the web, mobile and went almost exclusively to Facebook. That's a very predictable way to get traffic. Most of the guys we work with usually get funded or they make enough money to invest in advertising and growth.
There's a reputation that certain games on Facebook are over-sharing and are trying to recruit your friends. Does Facebook disincentivize that kind of over-sharing, that kind of cluing in other people, or is that something you are keen to continue seeing on the platform?
We do that. We look at notifications, for example. You cannot use app interviews or notifications if your CTR is below 17%. We look at many signals we get from users, when it's bad, we tell our developers, and they have to take action. But we also leave it to the developers - they are smart guys, they don't want to spam anybody, they can track in real time how "spammy" an application is. And some developers just don't use it.
If you look at Facebook five years ago, it was mainly FarmVille, and then it was the rise of the social casino guys, then the casual guys like King.com, but right now I'd say it was the hardcore guys. Each one of these games developers in their industries is making a very different use of the Facebook gaming platform.
Do you have any percentage of dysfunctional mobile gaming companies who are simply burning money and not gaining users?
That's the magic recipe. As long as you can make more money from your users than is spent from acquiring these users, you're making a profitable investment. Companies who don't respect that might be in trouble one day.
What percentage of platform users use mobile app install ads and are not there next year?
I don't think it's a big number because most of the guys we work with are profitable. It's an amazing business and they would not spend any money if it wasn't for a profitable investment. If Facebook cannot provide them with a profitable investment, then they will go to somebody else. As you said, it's direct performance. The real question is how many of your partners are profitable? And then I don't really know. I do know that we are competing to be a very profitable investment for these companies.
If there was a percentage of your partners who were not profitable, you would see churn in your partner base.
I'd have to look at the numbers, but all of the companies mentioned today are making money, growing and making profitable marketing investments in general. I don't think you can have a European mobile company burning cash on mobile app ads in a non-profitable way. I cannot think of one right now.
A lot of apps are moving into a space where you are not sharing public profiles. I know that Facebook has facilitated users' access to anonymous apps. How is Facebook moving forwards with that trend in app development?
From a platform perspective, we are agnostic. You don't have to use Facebook login to be an amazing platform partner. It's entirely up to the developers. If you want to use an anonymous login, which is something we introduced a couple of months ago, feel free to do it. We believe there is a value in using your real identity, as we've seen ourselves on Facebook.com. You can make amazing use of the Facebook platform without using Facebook login. Secret uses Facebook login and that gives a good experience inside the application. There's a clear premium to being Facebook connected on Secret as opposed to not being Facebook connected. Apps like Secret don't use your identity; they use your friends list.
So Facebook as a company can't see how many MAUs Secret has?
No, because a lot of MAUs are not Facebook-connected.
One of the things we are always interested in is the market share between Android and iOS, where the users are and when they come from, and how they generate revenue. Is there anything you can tell us about trends on what is happening now?
I was actually thinking of who launched on Android first, and there is a pattern coming from Eastern Europe. The Russian developers develop on Android first because of a big audience, and it maybe being easier to develop. They liked the fact that they could submit a new version of the app every day. This is a trend that I see and I think it is going to accelerate. The quality coming from Eastern Europe is very good too. When I say Russia, I'm also including the Ukraine. Look at Wargaming, the most profitable gaming company of all time, it's based in Minsk. You would not expect that. If you have one trip to make, go to Eastern Europe and Israel. This is where the next billion dollar companies will come from, I can tell you.
Free to play apps are all well and good, but there's a lot of people quite unhappy with them. The gaming community has been very vocal in its backlash against it and they are certainly moving towards console games in a big way at the moment. Does Facebook risk getting left behind if I buy a Playstation 4 and buy my games there?
Let's talk about Playstation. You can use Facebook login inside the Playstation, you can discover and buy Playstation games on Facebook and have the social experience you can share on Facebook from the Playstation. That's something we love to do, and it's obviously a big market too in terms of advertising. When it comes to free to play apps against paid apps, we are absolutely agnostic.