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Android: Facebook's new weapon against Google

The last time Google and Facebook had a chance to make friends was October 2007, when the two companies discussed an advertising alliance. Ultimately, Facebook snubbed Google in favor of archrival Microsoft.

It's all been downhill since then. As Facebook (FB) grew to become an Internet superpower, it liberally poached engineers, salespeople and executives from Google (GOOG). Time and again two companies fought over advertisers and squared off on privacy, with Facebook even orchestrating a secret smear campaign against Google. Google fought back, paying astronomical sums to retain its talent, and most notably, spending billions to develop Google+, a Facebook rival. More recently, Facebook has sought to encroach into Google's multi-billion search franchise.

Now, Facebook is taking aim at another of Google's crown jewels, the open-source Android operating system for mobile devices. With a new app called Home, Facebook is putting itself front and center on popular mobile phones, pushing Google's prized services--like search, maps and Gmail--into the background. As my colleague Jessi Hempel put it to Mark Zuckerberg, Facebook's CEO, "I have to imagine that when Google developed Android as an open platform, they didn't mean for Facebook to do this."

Zuckerberg said he was "not sure how they're going to react." Then, he equivocated, suggesting that Home could help Android devices to differentiate themselves from Apple's (AAPL) iPhone, especially among consumers who want high-end phones. In other words, this could be good for Google. (Google declined to comment.)


In the short-term, Zuck is right. Any boost for Android is good for Google, which makes most of its revenue on mobile devices from ads in search results, Web pages and apps.

But over time, if the "Facebook phone" succeeds, Google could suffer. Like it's rivals, Apple and Amazon (AMZN), Google wants you to live in a Google world. The more Google services you use--search and Gmail, Maps and Drive, Play and Plus--the more likely you are to stay loyal to Google, to choose Android next time you purchase a phone or a tablet. You might even buy a Chromebook, since all Google's services work like magic on it. The deeper you dive into Google's ecosystem, the higher the switching costs to Apple and its iCloud service or to the world of Amazon Prime, Amazon music and video.

If Facebook usurps the lead role on Android phones, taking over social interactions, messaging and photo sharing, then the value of a new Android device to Google will be lower. Its grip on the Android customer will weaken. Further, if Facebook figures out how to use its central position on Android devices to expand its advertising platform on mobile phones--perhaps even to the point that it can use ad revenue to help subsidize phone purchases--its gains would be undoubtedly at Google's expense.

"In the near term, the impact on Google will be small," says Charles Golvin, an analyst with Forrester Research (FORR). "But it does portend a richer form of competition in the future. If Facebook is successful in changing the paradigm and changing the way people search, discover, buy and encounter advertising, that would have a negative impact on Google."

Facebook is not the first Google rival to use Android for its own gain. Amazon, with the Kindle Fire, also markets an Android device on which Google is very much in the background. There are scores of Android app stores in the U.S. and overseas that rival Google Play. And even Google ally Samsung, has not only made tweaks to the user interface of its Android phones but also offered cloud storage services to rival Google's. It's all part of the risk and reward of running open ecosystem in a hyper-competitive mobile world.

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