What is the Relationship Status Between Facebook and Apple?

As Facebook grows, and touches more technology with services like Facebook Connect, and as Apple moves deeper into media with the success of iTunes and the iPhone, the two companies are increasingly finding themselves in contact. Most recently, with Apple's purchase of music service Lala, it is now one of the few direct partners selling virtual goods inside of Facebook's gift shop. Here's a closer look at that deal, and a lot more. "Apple buys smaller technology companies from time to time and we generally do not comment on our purpose or plans," is the only comment the company gave about its purchase of the online music company last week. Facebook had previously launched a Lala service that let people buy songs for each other within its gift shop: for one Facebook Credit, you can buy someone to unlimited online plays of a song and for 9 Credits you could let them download the MP3 and get the song forever. Assuming the two companies keep the deal going forward, Facebook is now a full-blown distributor for iTunes and Apple is now a partner in Facebook's still-young Credits virtual currency. Interestingly, we heard rumors about the purchase a couple weeks ago -- but we heard that Google and Facebook were looking, not Apple. However, we never confirmed that Facebook was interested, and we didn't run the story. While Facebook has long been rumored to have been working on some sort of deal with Lala, as well as other online music companies, it has for the past year shied away from offering a music service itself. Meanwhile, an anonymous source told Reuters that "Apple recognizes that the model is going to evolve into a streaming one and this could probably propel iTunes to the next level." It's interesting to think what a more full-blown deal between Apple and Facebook might look like. Apple, after all, has more leverage than any other technology when it comes to cutting deals with record labels over things like song licenses. It could potentially pull off better terms than what, unfortunately, startups like imeem were able to -- then use Facebook as one of the venues for offering a streaming music service. That last line was pure speculation, but we should mention that recent reports suggest that iTunes is moving more seriously into streaming via the Lala deal. Here are some other ways that the two companies are currently connected. Apple's Facebook Pages, and its iTunes Facebook app The company has a strong presence already on Facebook. Its Apple Students page has 1.41 million fans and its iTunes page has 2.34 million fans. Both pages are regularly updated with links to the latest relevant Apple news. And, this week, in conjunction with gift card company Blackhawk and digital card application developer GroupCard, the Page began letting people buy virtual iTunes gift cards for friends. Apple separately has another promotion going on the iTunes page, where you get 20 free songs if you become a fan of the page (the songs are actually samples available through the Starbucks "Pick of the Week" iTunes promotion, not 20 songs of your choice). And, if you want your free songs, you have to not only become a fan of the page but install an app called "Free on iTunes" which is notably made by Apple itself. Aside: So yes, Apple has developed a couple Facebook apps. In order to get your songs, though, you'll need to click through the app to iTunes; also, like any good Facebook app, it asks you to publish this action to your wall and your news feed. "Free on iTunes" currently has 109,000 monthly active users. The takeaway here is that Apple is serious about using pages and applications to try to get more music sales out of Facebook. We should also note, here, that iTunes recently added a way for users to share links to tracks on Facebook. Facebook on the iPhone In March, Facebook introduced Connect for iPhone, which lets iPhone app developers allow Facebook users to log in to their apps and find Facebook friends to do things like play games with. We're not sure how successful the effort has been -- some developers we've spoken with have criticized the Connect implementation as being hard to use. But we have seen companies from social gamer Playfish to iPhone gamer ngmoco implement Connect here, and we expect Facebook to continue pushing the effort. In another sign of what is, if nothing more, respect, Facebook introduced this Connect integration half a year before it rolled out its full Connect for Mobile service (although it has long worked with other device-makers and carriers, so the timeline probably doesn't signify too much). Meanwhile, Facebook's iPhone application continues to be one of the most popular apps on the device, as well as -- to our knowledge -- the single most popular mobile app for Facebook. It currently has 19.2 million monthly actives users, nearly half of whom use it every day, according to AppData. Not Being Google There are only a few places where Facebook and Apple clearly have relations, beyond just being developers on each others platforms. One is engineers -- Facebook has been hiring Apple engineers and other employees for years, although there are thousands of Apple employees, so this fact isn't astounding. Another, more important one, is that Facebook and Apple have a psuedo-rival in common: Google. The search company has tried to rival Facebook Connect with what it describes as a more open web-wide identity service called Google Friend Connect. Most recently, it has integrated Twitter so that people can sign into Friend Connect sites using their Twitter IDs, then share information back to Twitter from the site. And, in what one might call a proxy war, Google has also tried to bolster social networking rivals by leading the development of the OpenSocial application framework. This is fairly standardized set of application programming interfaces that companies like MySpace and Hi5 use to provide developer platforms, and that some developers use to run apps across those platforms. Google has taken a similar approach to dealing with the success of the iPhone, in the form of its Android mobile-focused operating system. Here, Google also makes rhetorical use of the word "open" by leading an industry organization called the Open Handset Alliance. It brings together carriers, device manufacturers and other telecommunications companies to work on more fully implementing Android. Note: While Friend Connect and OpenSocial do not appear to have gotten in the way of Facebook Connect or its developer platform, we are hearing from industry sources that Apple is very concerned about Android. Motorola's Droid phone, for example, appears to have gone over rather well on Verizon's network. Where Will This Relationship Go? Facebook has so far succeeded in being the dominant social network, social app platform, and identity platform. Apple has so far succeeded in creating the best mobile devices and most compelling mobile app platform. But Google, and all of its allies, don't like seeing either. The independent successes of Facebook and Apple perhaps is causing the old proverb to apply: the enemy of my enemy is my friend. There might also be a more philosophical connection between the two companies. They both make great products, and they both strongly believe that they know what's best for users despite regular, massive outcries about both companies ignoring what users "really want." Certainly, they seem to have different views about being open. Apple is by all accounts a very closed platform, to the degree that Facebook's longtime iPhone app developer, Joe Hewitt, stopped working on it out of disgust. Facebook notably came back and phrased things more delicately, afterwards. Here's the comment that Facebook's vice president of communications, public policy and platform marketing, Elliot Schrage, gave TechCrunch: [T]here’s been a fair amount of confusion and speculation about Joe’s comments and whether they reflect the official position of Facebook. They don’t. Facebook’s relationship with Apple and our commitment to the iPhone platform remain strong. In fact, though Joe himself will be moving to new projects, Facebook has a great team of engineers taking over iPhone related development. More generally, our work bringing Facebook Connect to the iPhone and with iTunes, iPhoto and other great products over the past year should illustrate our commitment to expanding our relationship with Apple and finding new ways to offer new services and features to the people who use both our products. We should be clear that this comment was in the context of that situation, not our larger musings here about the relationship between the two companies. Still, quite interesting. Meanwhile, Facebook has been taking steps to make its platform more like Apple's. It continues to take an increasingly "philosophical" approach to Platform policy, and we continue to hear from Facebook app developers that Facebook is talking about implementing some sort of mandatory or at least highly desirable implementation of Facebook Credits. Like Apple, Facebook is taking a 30 percent cut of all transactions that go through Credits, we hear. There's no big strategic alliance between Facebook and Apple at this point, at least that we know of. Mark Zuckerberg does not, for example, sit on Apple's board the way that Google chief executive Eric Schmidt until recently did. We don't expect the relationship to get that close, given Facebook's strategic investor, Microsoft. But, the companies do seem to have an increasing number of things in common. Perhaps we will see more business deals between the two in the coming year.

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What is the Relationship Status Between Facebook and Apple?

Eric Eldon

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Eric Eldon