The release of Facebook’s long-awaited iPad app today is being welcomed by many iPad-toting Facebook fans, but behind-the-scenes it also signals the apparent end of a standoff between Apple and Facebook over a potentially sizable chunk of money, and an important financial precedent for the tech industry more broadly.
The upshot: Apple won.
At issue is the mobile payments system that will be used for mobile apps inside the Facebook app — third-party social games, news services and shopping apps that will be offered inside Facebook on the iPad.
As explained by Matt Rosoff of Business Insider, Facebook said today that those in-app apps won’t be able to use the Facebook Credits system as their payment mechanism when running on Facebook’s app for iPhone or iPad. That means they’ll work instead through Apple’s native iOS payments system, where Apple takes a 30% cut.
Here’s the thing: We also know that Facebook takes a 30% cut from Facebook Credits purchases, as detailed by Zynga in its financial documents. So if Facebook implemented Facebook Credits in its iOS apps, it would have been in a position to supersede Apple as the toll collector for purchases related to this new subset of apps.
But that’s not what happened. And financially speaking, it’s not a small issue. On traditional Facebook properties, for example, the 30% cut from Zynga is now sending as much as $100 million per quarter in Facebook’s direction — which is a decent chunk of Facebook’s overall revenue. As usage of Facebook’s iPad app grows, the 30% cut won’t be insignificant.
In short, Apple and Facebook had millions of reasons to fight over the issue. It helps to explain why it took so long for Facebook’s iPad app to come out. But more than that, it was a meaningful precedent as the big tech companies divvy up the spoils of the booming mobile economy.
It remains to be seen if Facebook and Apple negotiated something more complex behind the scenes, such as a secondary revenue-sharing agreement. But on the surface, at least, the exclusion of Facebook Credits from the picture means that Apple is in the position of power.