Facebook “levelling” the playing field?

(This post is by Bryan Pon – who is leading Caribou Digital’s research into the power structures in global app stores and platforms.)

The recent move by Facebook to open the Internet.org service to “any developers” has stirred a new wave of debate and criticism about the initiative. This new move is largely a response to the growing backlash from net neutrality supporters, especially in India, where some content partners pulled out of participating in Internet.org due to public outcry. Critics complained that not only was zero-rating fundamentally against net neutrality principles, but that Facebook would control which services were offered for free as part of the Internet.org portfolio–a classic walled garden. Given the expected advantages of a service on Internet.org vs. a competitor not on Internet.org, Facebook would essentially be picking the winners and losers for these markets. 

By opening Internet.org to all developers, Facebook is addressing this second criticism, and VP Chris Daniels stated clearly that its intent with Internet.org is not to create another walled garden. If we leave aside the fundamental conflict between zero-rating and net neutrality, the underlying strategic intent and potential implications of this move are important to consider. Because while Facebook is only creating the rules for Internet.org, if the platform becomes a significant part of the mobile internet landscape in emerging markets, the model that it establishes may become the de facto standard–just as Apple’s iTunes and App Store model set the standard for the first wave of the mobile app ecosystem, including the now-universal 30% margin that the platform owners take on apps. 

The Internet.org platform will be open to any developer, but not any app, as there are three eligibility requirements all apps must meet: First, the app/service has to encourage users to “explore the broader internet” by limiting what is available for free through the app; in essence, Facebook is encouraging a freemium model. Second, the service has to be efficient with data, and work well on more basic phones, which means more text and fewer images. Third, the service has to comply with a set of technical requirements, including *not* encrypting traffic via HTTPS, or using JavaScript, Flash, or SSL. The lack of encryption has generated criticism of how Facebook is handling privacy, especially given that all traffic will be served through Facebook’s proxy servers. 

While on the surface Facebook seems to be creating another app store similar to Apple’s and Google’s, there are a few structural differences that are important to call out. First, this would be an app store based not on an operating system, but on a service, signalling the increasingly powerful role that services–especially those like Facebook that capture user data–are taking in the mobile industry. Traditionally it has been Apple, Google, and Microsoft who have been able to establish power through their respective platform ecosystems and app stores, all of which are based on an operating system. Yet this power structure has started to shift: As Android gets appropriated by firms such as Xiaomi, Amazon, and Cyanogen; and abundant processing power helps cross-OS interoperability become standard, the operating system is becoming commoditized while the critical control point, or bottleneck, is instead moving up the stack to services such as Facebook. Or put more simply, most people who are heavy users of Facebook, Gmail, Dropbox and so on would rather switch to a different operating system/device than switch to a competing service; we are locked-in by our personal data, and will follow it . 

Perhaps even more importantly, this new app store structure would re-frame internet and web access for its users. In the industrialized countries, mobile internet usage has been steadily shifting away from the web and mobile browser, and toward apps, mostly because they’re purpose-made for specific tasks or entertainment functions, making them easier and faster to use. Compared to the open web, which is thought of as unrestricted and free-to-use, apps are more directly controlled (via the app store owner, who can determines access to the store) and monetized (via the app developer and the app store owner). 

This gets flipped on its head in the new Internet.org platform, where the open and unrestricted web costs money, and it’s the directly controlled apps that are free-to-use. The question is, when open and restricted costs money, and the directly controlled apps are free and easy to use, how many new users are going to choose the open web? 

Of course, this restructuring of controlled apps vs. open web affects producers as well. New firms seeking to enter the space will have to abide by Facebook’s terms of service and eligibility requirements, limiting the scope of innovation. For one, all apps/services on the Internet.org platform must agree to sharing user data with Facebook, who in turn will share it with mobile operators. More constraining is the “freemium” requirement, as explained by Facebook VP Chris Daniels, which encourages those services that “simplify features of their applications such that in order to access the entirety of their websites or their applications, one has to pay for it.” 

Would a new form of Wikipedia be able to meet this requirement? How about Facebook itself? Facebook enjoyed tremendous user growth as a standalone website on the open web, with no requirement to limit its functionality or force users to pay for key features (it mostly sold ads). And when users signed up, there was no 3rd-party entity above Facebook that was collecting data and sharing it with the user’s internet service provider.

So it’s with some irony that Facebook is now using its dominant market position to push free access to Internet.org, and thereby directly weakening the role of the open web–the same innovative and unrestricted environment that helped it grow into a $200 billion company–in favor of a tightly managed ecosystem that it controls.