Facebook Home represents the next step in Facebook’s mobile strategy. Cartesian considers the implications both for Facebook and the broader mobile ecosystem.

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Cartesian Perspectives
Facebook Home: So… What?
April 2013

2. 2Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved.
So... What?
Recently, Facebook unveiled Facebook Home, its long-awaited and long-rumored
“Major Mobile Announcement.” Like all things Facebook, this has made quite a splash
“Facebook Home Is Brilliant”
“Facebook's First Mobile
Operating System”
“Facebook Home Phone Pulls
You Back Into Facebook”
“Facebook Home, a visually arresting
place where Facebook and Google split
custody of your attention”
“Facebook invades Android with a new
lockscreen and a new chat experience”
“Facebook Home Review: Slick, Fun
and, for Now, Superficial”
“Facebook Home: A Nice Place to Visit,
but Not Quite Home”
“Facebook Home: People are
more Important than Apps”
So… What does this mean for mobile
ecosystem players more broadly?
1
2
3
4
So… What does this mean for
Facebook’s strategy?
So… What is the HTC First?
So… What is Facebook Home?

3. 3Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved.
So… What is Facebook Home?
Facebook Home expands the current Facebook mobile application set by essentially
taking over the home screen, the app launcher, and the general UI of Android phones
Facebook Home Overview
Facebook Home is an incremental step in Facebook’s mobile strategy
Source: Facebook, Cartesian
• An integrated “family of apps” providing a home screen and lock screen on Android Devices
• Displays newsfeed updates with photos from friends (Cover Feed)
• Brings Facebook Messages and SMS forward with Chat Heads, accessible on top of any app
• Downloadable on select Android phones, preloaded on the HTC First
• Will be updated on a monthly basis via app updates
What Facebook Home Is
A Home Screen
• Brings newsfeed content forward
Messaging Application
• Chat Heads now prominently displays
notifications when a FB message or
SMS is received
• Chat window can be opened and
closed on top of any app
App Launcher
• Accessible with a swipe in the home
screen
What Facebook Home Is Not
Not a Phone
• No hardware investment from
Facebook, contribution to HTC First
investment unlikely
Not an OS
• FB did not create a forked version of
Android
–Uses standard Android tools to
create downloadable app and UI
Not Platform-Agnostic
• Android only - unlikely to be available
on other OS
Facebook Home Screenshots
Launch on April 12, 2013
1

4. 4Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved.
So… What is the HTC First?
To support Facebook Home’s launch, HTC and AT&T have partnered to offer a phone
with Facebook Home preloaded
Source: HTC, Cartesian
• HTC has partnered with Facebook and AT&T to offer
the first phone that has FB Home preloaded
• Ability to show notifications from other phone apps
(including Google Calendar, Outlook email, etc.) is
the primary distinguishing feature from the
downloadable Facebook Home version
• $99.99 price point represents a low-end smartphone
play, perhaps catering to a younger category
• Users are able to disable Cover Feed
• 4.3-inch screen, dial-core processor, 1GB of RAM and
5-megapixel camera
HTC First
$99.99
With contract
While the HTC First represents an important proof of concept, the success
of Facebook Home will depend primarily on the downloadable version
2

5. 5Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved.
Facebook Strategy
So… What does Facebook Home mean for Facebook’s strategy?
Facebook Home addresses several key strategic goals, the most obvious of which is
increasing user time spent on mobile, which increases the number of ads seen
Source: Facebook Annual Report, Cartesian
Facebook Home aims to drive higher engagement and monetization on mobile devices
Grow Users and
Engagement
Improve Ad
Monetization
Enhance
Developer
Offering
• Grow underpenetrated
segments and geographies
• Enter new markets
• Improve user experience
• Improve mobile ad targeting
• Develop mobile ad model
• Grow advertiser base
• Grow and diversify partner
base
• Offer new platform
capabilities
• Regulatory barriers
• User migration to other media
• Loss of user trust
• Non-monetized mobile usage
• Inability to balance
monetization with user
experience
• Competitive/pricing pressure
• Inability to balance user and
developer needs
• Key developers move to OTT
Role of Facebook Home
• Drives FB mobile consumption
and engagement for existing
users but will not necessarily
lead to new FB users
• Helps retain use of FB relative to
other media and networks
• If FB soon releases ads on the
Cover Feed it will be able to
monetize the increasing time
spent on mobile
• This will drive incremental
mobile monetization
Key RisksKey Goals
• Limited impact on developer
offering
3

6. 6Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved.
40% 42% 44% 47% 51% 54% 57% 60% 64%
83 102 126 157
So…What are Facebook's challenges in mobile?
Facebook Home is intended to address the increasing Facebook mobile user base (64%
of users today) by driving consumption and mobile monetization
• Due largely to smaller mobile device form factors, mobile FB users see fewer ads than desktop users
today, accounting for only 11% of total advertising revenue
Source: Facebook, JP Morgan, Cartesian
“…we anticipate that the rate of growth in mobile usage will exceed the growth in usage through personal computers
for the foreseeable future and that the usage through personal computers may be flat or continue to decline in certain
markets… in part due to our focus on developing mobile products to encourage mobile usage of Facebook.”
– Facebook Annual Report 2012
FB Monthly Active Users (MAU), M
245 288 325 376 432 488 543 604
680
363
393
413
424
413
413
412
403
376
608
681
738
800
845
901
955
1007
1056
M
200M
400M
600M
800M
1000M
1200M
Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12
Mobile MAUs Non Mobile MAUs
Note: Mobile MAUs includes both desktop and mobile usage, with Mobile0only MAUs representing the # of users that only access FB via mobile
$3,154 $3,534
$2,841 $2,425
$275
$847 $1,153
$470
$1,873
$3,339
$3,154
$4,279
$5,562
$6,918
$M
$2,000M
$4,000M
$6,000M
$8,000M
$10,000M
2011A 2012A 2013E 2014E
Desktop Right Rail Revenue
Desktop News Feed Revenue
Mobile News Feed Revenue
FB Desktop and Mobile Advertising Revenue, $M
100% 83% 51% 35%
0% 6% 15% 17%
0% 11% 34% 48%
3
Mobile MAUs
as % of Total
MAUs
Mobile-Only
MAUs
Desktop
News Feed
Desktop
Right Rail
Mobile
News Feed

7. 7Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved.
So… What has Facebook done so far to get here?
Facebook has been pursuing multiple approaches to drive higher usage and
engagement on mobile
Key Facebook Mobile Announcements
Source: Tech Crunch, GigaOM, Company press releases, Cartesian
2010 2011 2012 2013
April 2013
Facebook Home
App/Homescreen
• Replaces Android
home screen
• Chat Heads
• Facebook notifications
FB Mobile
Ecosystem
Expansion
October 2011
iPad App
Application
• FB released its own
iPad app almost
two years after the
iPad first launched
August 2012
New iOS App
Mobile UI
• Rebuilt from the
ground up with native
iOS elements enabling
better functionality
FB Mobile
Apps
August 2012
Poke
iOS App
• App for self-
destructing
messages to
rival Snapchat
September 2012
iOS 6 Integration
Mobile OS
• New release of iOS
featuring deeper FB
integration w/ ability
to use in iOS apps
April 2013
Osmeta
Acquisition
• Small mobile software
startup
• Acqui-hire for mobile
software talent
October 2010
Windows Phone 7
Integration
Mobile OS
• Deeply integrated
into WP7 via People
Hub and Live Tiles
Jan 2013
VoIP Calling
Messenger Update
• Free call button
within Messenger
App testing in US
• Data usage fees apply
February 2012
Payments
Carrier Billing
• Carrier billing
integrated directly
into FB platform for
apps, other content
August 2011
FB Messenger
Application
• FB launched a
standalone
messenger app
• Syncs with FB
June 2012
Sponsored Stories
Mobile Advertising
• Mobile-only
sponsored stories
(ads within
newsfeed) available
August 2012
Instagram
Acquisition
• Acquired for $1B
• Remains standalone
app, with deep FB
integration
3

8. 8Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved.
“First impressions of Facebook Home for
Android are a surprising ‘Like’”
— GigaOM
“I found Facebook Home to be easy to use,
elegantly designed and addictive.”
— Wall Street Journal
“Facebook Home gets SMACKDOWN from
irate users”
— The Register
So... What?
Post release, Facebook Home has a lackluster rating on the Google Play store
• However, for those that have downloaded the app, FB consumption and engagement have increased,
thereby furthering a main goal of Facebook Home
Initial Responses
Drivers of
Adoption
• Heavy Facebook usage would incent a user
to adopt FB Home
• Preferred UI to Android home screen
Barriers to
Adoption
• Potentially intrusive to phone experience
overall
• Potentially intrusive to usage or access of
other apps
• Detrimental impact on battery life
• Usage of customized Android widgets and
launchers preferred
• Facebook “overload” of notifications
• Privacy concerns (e.g. ability to see friends’
information in locked screen)
Drivers and Barriers to Adoption
Google Play Store App Reviews
3
Source: GigaOM, Google Play Store, Wall Street Journal, The Register, Cartesian

9. 9Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved.
1056M
680M
470M
176M
107M
M
200M
400M
600M
800M
1000M
1200M
Total FB MAUs Mobile FB
MAUs
Smartphone
MAUs
Android App
MAUs
Daily Android
App MAUs
So… Will this move the needle for Facebook?
While Facebook Home has a small addressable market (100M users or about 10% of
total FB users), this is likely significantly larger than the addressable market for a
Facebook-owned phone
• For reference, the top-selling Samsung Galaxy S3 sold 40M units in seven months
• Mobile usage of Facebook overall
is increasing
• Of mobile users, smartphone
users will increase as smartphone
adoption increases
• Android is projected to maintain
its majority share of smartphone
platforms
• FB Home is not likely to be
available on iOS, Windows
Phone, or Blackberry (though
Facebook is already highly
integrated into iOS and Windows
Phone
Facebook Home Global Addressable Market, 2013
FB Home
Adopters
Drivers of Increased
Facebook Home
Addressability
100% 64% 45% 16% 10% ?
?
Source: Enders Analysis, Facebook Annual Report, IDC, Cartesian
Mobile MAUs (FB Annual Report)
Remove feature phone and
mobile web users (Enders)
Limit to Android
Platform (Enders)
Limit to FB App daily users (IDC)
Adoption drivers
3
% Total
FB Users

10. 10Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved.
So… Is this a ROKR?
Facebook Home can be best viewed as another experiment with mobile devices, similar
to early activities by Apple, Google, and Amazon
Source: Company press releases, GigaOM, Cartesian
Platform Providers Entering the Mobile Device Ecosystem
• Launch: September 2005
• ROKR was the first ever phone to have iTunes integration
• Users could transfer only 100 songs to phone
• Launch: June 2011
• First phone to have a dedicated Facebook button as
part of a QWERTY keyboard
• Facebook button takes users straight to FB App
HTC Status
Motorola ROKR Apple released
the iPhone ~16
months later
• Launch: January 2010
• Presented as Google’s first flagship smartphone with
“pure” version of Android OS
• Manufactured by HTC via partnership
Google Nexus One
Discontinued after a
few months due to
low demand
Google continues to
offer Nexus phones
and tablets via OEM
partnerships
• Launch: September 2011
• Amazon-owned tablet running a forked version of Android
OS designed to showcase Amazon ecosystem
• Comes with Amazon store and media apps preloaded
Amazon Kindle Fire Successful entry
into tablet
market
• Launch: April 2013
• First phone to have FB Home preloaded on Android device
• A low-risk strategy for Facebook to see if a Facebook-
branded phone would sell well
HTC First
?
3

11. 11Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved.
So… What does this mean?
Facebook Home presents the greatest potential challenges to content providers and OS
providers
Source: Cartesian
Facebook Home Implications by Player Type
MNOs
Device Makers
Content
Providers
OS Providers
Minimal
Significant
Minimal
Moderate
• Limited risk from home screen capture since MNOs already lack control of UI compared
with OS providers and OEMs
• Chat Heads is a compelling OTT messaging offer, though most MNOs have existing
strategies to mitigate the threat from OTT (e.g. shared data plans)
• Usage of Facebook Home may drive incremental data usage
• For FB Home users, other smartphone apps could recede in importance
• Content providers may attempt to create their own versions of “Homes” for example a
Twitter home screen, Evernote home screen, etc.
• Other content providers may integrate more deeply with Facebook to try to gain
mindshare by being part of the News Feed and Cover Feed
• If the HTC First gains traction it may make sense for other OEMs to also partner with
with FB to offer a preloaded FB Home device
• Not relevant for Apple, Microsoft, and Blackberry ecosystems (assuming these platforms
do not allow a fully functioning Facebook Home app)
• Will be available on tablets soon, thus impacting tablet makers as well
• Facebook already has deep levels of integration within major OS platforms, especially
Apple and Windows Phone
• Apple probably will not allow Facebook Home on iOS given their closed ecosystem and
high level of control over user experience
• Android OS will be most threatened to provide a compelling home screen that can
compete with the Facebook Home experience
Minimal
Moderate
Moderate
Minimal
Threat OpportunityType Potential Implications if Facebook Home is Successful
4

12. 12Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved.
So… What will happen next?
Fundamentally, Facebook Home should be viewed as another incremental step by
Facebook to increase its mobile presence and engagement, as part of a “try-
everything” mobile strategy
Facebook Home could potentially address 10% of total Facebook users
For the small subset that do adopt Facebook Home, consumption and
engagement will increase
The HTC First is a low-cost Android smartphone which showcases Facebook Home
and if successful, may indicate Facebook’s willingness to dive deeper
Partnership opportunities for MNOs exist in providing FB-home centric devices
like the HTC First, though market demand has yet to be proven
Facebook is still trying to figure out how best to engage and monetize mobile
users, and Facebook Home is a low-risk way of testing the mobile waters

13. 13Confidential and Proprietary — Copyright © 2014 The Management Network Group, Inc. d/b/a Cartesian. All rights reserved.
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