A Comparison of the iPhone App Platform Vs. Facebook App Platform

What are the business prospects for iPhone applications compared to Facebook apps? There are some interesting comparisons to be made between the two on the types of apps, the revenue models, and virality.

“Useful” vs. Fun Apps

Web services seem to be polarizing between utilities and entertainment, as Alex Iskold notes. Both Facebook and iPhone are popular for games, but the iPhone has many more business/productivity apps. While Facebook has a few “useful” apps, comparing it to the iPhone platform clarifies for me why it will be hard to make it a place for useful apps. Unlike the iPhone platform, it was never designed for serious activity, it was built for communication, flirting and staying in touch. (Here are 10 useful Facebook apps.) The iPhone, like any smart phone or computer, is designed for productivity, in addition to entertainment. This is no judgement on fun vs. useful apps. But because of this, the iPhone will have more options for a range of applications than Facebook.

Who’s Willing to Pay?

While the prices of iPhone apps are still in flux and the prices did seem high early on, it appears that free apps are decreasing in proportion and paid apps are increasing, according to Pinch Media. The common price point may end up forming around the 99 cent and $9.99.

People are clearly more willing to pay for apps on the iPhone than they are on Facebook. If you pay $200 to $600 for a phone, whats $5 or $10 more? The willingness to pay is a function of the platform. It’s a higher end, higher price point market, which means in theory it will attract more developers. Social games for Facebook generate say $0.50 or $1 CPM compared to an app for the iPhone that could cost $10 to purchase, though granted the $10 game would require much more work to build. If Facebook’s payment system or some undetermined new ad system proves a success, that could change things.

Advertising: Social-ness vs. Location-ness

Right now, advertising on social networks like Facebook is still a crapshoot for the most part. The best prospects are for social-related ads, which take advantage of the social graph on the site. Mobile ads are also still in the early stages of development. But they do offer one thing that ads on Facebook do not: location. Serving specific contextual or behavioral ads based on where someone is located would provide interesting options that PC-based social networks do not.

Virality: Friends, Friends, Friends

Facebook wins on virality, even with changes to its platform that have made gaining users not quite as easy. The downside for iPhone apps at least right now is there is not the kind of viral growth magic that you get on Facebook. This could change if and when developers come up with social networking apps that take advantage of the iPhone’s specific benefits, such as location and touch screen.

Fred Wilson (who inspired this post) raises a related question: does being first on the iPhone matter as much as it did on Facebook? In other words will there be so much virality that those that get in first like Loopt, Yelp and Twitterific take leading positions that others will have a hard time challenging? I think because iPhone’s virality is not as powerful as Facebook’s later apps will still have a good opportunity on the iPhone.

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