This Diagram We Saw Inside Facebook's London Office Ought To Terrify Apple

For years, Apple has dominated the $45 billion app business with its App Store. Android has always been the second-best place for apps.

Facebook, however, has a plan that could change all that. This hastily scrawled diagram on a whiteboard in its London office represents that plan, and it ought to scare the folks at Apple who work to maintain the primacy of iOS among app developers. (We explain the diagram below.)

iPhone and iPad users are generally more lucrative than Android people for apps, in terms of download fees and in-app payments. So the best apps are developed first for Apple's iOS mobile operating system. Only if they are successful do companies produce an Android version, often months or years later. Even then, Android apps tend to be copies of the original iOS app, with all the flaws and compromises that implies.

The dominance of iOS creates a bizarre distortion in the app market: Apple only has a 12% share of mobile users; 80% of users are on Android. Yet the 4-to-1 majority is treated as second class in the app world. It can actually be difficult to hire Android developers because staff only want to work on iOS. And you can be hugely successful as an app creator, even if the vast majority of phone users have no contact with your product.

At Facebook in Europe, however, executives think that Apple's iOS dominance might be about to weaken.

We spoke to Facebook's Europe, Middle East, and Africa platform director Julien Codorniou recently and were surprised when he told us that the trend he was seeing favored Android. Revenue generation on Android is catching up to iOS, and more developers - particularly for game developers - are going Android-first, especially in Europe.

Facebook is hoping to take advantage of this via its Parse app development platform, which Codorniou believes virtually erases the two-step iOS/Android development process, letting companies release new apps on both platforms simultaneously.

Erasing a key selling point for the iPhone.

That would actually be good for Apple in the sense that a robust, growing app market only increases Apple's App Store revenues. But it would be also bad for Apple because if apps are released at the same time on Android it erases one of the key selling points of the iPhone: That users who want the cool new apps must be Apple users in order to get them.

As we discussed the app market, Codorniou drew the above diagram on a whiteboard on the eighth floor of Facebook's cavernous London offices. We have annotated it here so you can see what's going on.

Essentially, app developers would make two separate apps - one for iOS and then, later, one for Android. They needed a lot of operations to support them, like servers. Facebook's Parse platform replaces that: It lets companies build, store, and serve apps directly from the Parse cloud. All developers have to do is create an iOS client, an Android client, and even a Windows Phone client, and publish them as needed.

Once the apps are in the Apple App Store and the Google Play store, then developers can use Facebook's various marketing products - mobile app install ads, engagement ads, and the Facebook Audience Network - to promote them.

The inequality statement at the bottom of the diagram, "CPI < LTV", indicates what developers are aiming for: As long as the Cost Per Install (the marketing investment it took to persuade you to download an app) is less than the Long Term Value of new downloads, users, and in-app payments, then the company should keep spending on more ads on Facebook. If the cost is greater than the value, the companies are advised to halt what they are doing and think again.

More than 270,000 apps are using the system, up from 100,000 the year before. (For scale, both Apple's App store and Google Play have greater than 1 million apps available. So Facebook is partnering with a significant chunk of the market.)

"We see more people being Android-first because of the size of the market."

But does the Parse platform compete with Apple or Google?

"I would say no," Cordoniou says, "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 of proposition of Facebook is the fact that it's cross-platform."

They still have to build separate clients of course, that isn't going away. But are they more likely to continue to build the Apple one first?

"We see more people being Android-first because of the size of the market," Codorniou says. "The Parse technology is like Unity in gaming. [Unity is a game development platform on which you can create games for a multitude of different systems.] 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."

"It's easier to update your app on Android."

Android-first, really?

"People look at the numbers. They want downloads, installs. They know that the 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 [in which Apple is dominant] was true a year ago, but I see that things are changing."

"The vision we have with Parse and with the platform in general is to accelerate the time to market. It should not take you six months to develop from iOS to Android."

"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. [With Apple, you have to get each new version of the app approved before it hits the App Store. There is no version approval for Android.] This is a trend that I see and I think it is going to accelerate."

Codorniou has a team of evangelists, spreading the word, too: "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 introduced at f8. It's a very important bet for us."

Time will tell, of course. The App Store is currently generating perhaps $10 billion in annual revenue for iOS developers, and Google Play is generating $5 billion. It could take a long time to shift that momentum in such a way that developers become incentivized to go Android-first or even Android-equal.

But if it were to happen, Facebook wants developers to know it has just the system to help with that.