Facebook Zero: a business model revolution that could dramatically change the mobile industry

This week Facebook has launched Facebook Zero, a version of Facebook’s website that is optimized for mobile phones. There are already custom applications available for accesing Facebook from your iPhone, BlackBerry or Android device but those are limited to smartphones only. Users that don’t have a smartphone can now use the Facebook Zero light-weight website that can be viewed on nearly every mobile phone by simply opening the site 0.facebook.com.

The feature of Facebook Zero that will revolutionize the mobile industry: users in many countries don’t have to pay for any data traffic on their mobile phone when they use Facebook Zero.

No mobile data charges when using Facebook Zero

Facebook Zero brings access to Facebook for millions of people in the world for free. (The exception is for viewing photos). And while there are some developed countries on the list as well, most of the countries are in emerging markets which opens up a huge base of potential users for Facebook. Here is the list of countries and carriers that will offer Facebook Zero for free.

So who is going to pay the bills?

Instead of having customers pay for the service, Facebook will be paying carriers for the data traffic. Yes, the content provider will pay the service provider so user can access it for free. This has never happened in the mobile and telecommunications industry before.

This is a revolution because the mobile and telecommunication industry wants such a business model already for a long time. The increasing web-usage and web-traffic through websites like YouTube poses a problem for carriers: They have to increase bandwidth but cannot charge users more. So they would prefer to charge Google/YouTube and other content provider instead while at the same time ensuring that users will have the best viewing experience with YouTube and not with other sites (who don’t pay the service provider).

This is against the principles of net neutrality that states that service provider cannot impose restrictions on content, sites or platforms or degrade traffic. The topic of net neutrality is exactly the reason why content and service providers have not been able to implement such a strategy and the Facebook Zero experiment will be an interesting case study in this industry.

A brilliant strategy, a risky experiment or the end of net neutrality?

I don’t want to argue for or against net neutrality here, one question remains: Is Facebook Zero a brilliant strategic move or a risky experiment that will put more pressure on Facebook and its policies?

My opinion is that Facebook Zero, despite just being announced this week, deserves to be a prime case study for business model innovation and reframing existing industry assumptions. Either it will be a success and others will follow or it will fail and there are many lessons to be learned.

Two objectives have already been achieved with Facebook Zero:

• Facebook Zero will give access to Facebook to millions of users in emerging markets thus contributing to Facebook’s goals of user acquisition.
• The selection of emerging markets, besides the untapped user base, offers an opportunity to experiment with a radically new business model while being “off the radar” of net neutrality advocates and observers in developed markets.

How this experiment will work out – from a business perspective as well as from a net neutrality perspective – remains to be seen, but it is certainly an interesting experiment to watch.