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The Latest on the Facebook Phone

Here’s what you need to know.
June 1, 2012

Though I recently diagnosed rumors of a Facebook phone as “overblown,” it appears I was mistaken. Nick Bilton of the New York Times this week reported on Facebook’s interest in entering the hardware business–and the rest of the tech press has piled on saying what a terrible idea it is.

Bilton says that Facebook employees “as well as people briefed on Facebook’s plans” say a smart phone from Facebook could be released “by next year.” Reportedly, Facebook has already hired six or so ex-Apple folk who worked on the iPhone, both on the hardware and software side, as well as one person who worked on the iPad. Facebook has been reported to try its hand at the smart phone business time and again. Back in 2010, Facebook gave it a shot, only to find it was too difficult. Last year, reports emerged that it was giving it a second go with a phone code-named “Buffy.” Buffy is still under development, reportedly, though that team has been expanded to explore “other smartphone options.”

Facebook is being coy about the Bilton report, only pointing to a former statement they’d given the blog AllThingsD: “We’re working across the entire mobile industry; with operators, hardware manufacturers, OS providers, and application developers.”

Why would Facebook want a phone to begin with? As I mentioned in my earlier post this week about Facebook’s reputed interest in Opera, the mobile-optimized web browser, Facebook is unsure of its monetization prospects on mobile devices. To justify its high IPO share price, Facebook is under pressure to make money in all realms, especially the high-growth realm of mobile.

But would owning and making its own phone necessarily be the best way for Facebook to go about this? I, and others, am skeptical. Hardware’s a tough game; Apple nailed it, but there’s no reason to think that Facebook, a software company through and through, could do so, too. What’s more, as I pointed out in my post “The Facebook Phone is in Your Pocket,” Facebook already has a fairly strong presence on mobile phones, when you think about it. Many people are already addicted to their Facebook apps on their mobile devices. “Mark is worried that if he doesn’t create a mobile phone in the near future that Facebook will simply become an app on other mobile platforms,” one Facebook employee reportedly told Bilton. But why is that such a terrible thing–so long as Facebook remains one of the most-frequented apps on those platforms? Google makes more money serving ads on Apple phones than it on Android phones, after all. When you’re a pillar of the internet, you are a platform, whether you’re software or not.

A litany of people think that a Facebook phone is a bad idea, for Facebook and for consumers. Says PC World, for instance: “You’re kidding, right?” Or Business Insider: “Facebook investors should be very afraid.” Or Slate: “Who wants a terrible Facebook phone?” Or GigaOm: “Ambitious leap or fatal mistake?” The many reasons trotted out for why Facebook should not venture into these waters are pretty much the ones you’d expect: that Apple and Google have already won this race; that Facebook simply lacks the requisite hardware experience; that the whole project would be an expensive boondoggle; that hardware is a low-margin business, unless you’ve got Steve Jobs’s magic touch; and so on.

Facebook is a major technology company, often mentioned in the same breath with Apple and Google. But just because it’s a major tech company doesn’t mean it necessarily needs to have all the trappings of those other companies–a browser, a hardware division, Terminator smart glasses, the works. Facebook should focus on what makes Facebook Facebook: the fact that everyone you know is on it already.

Mark Zuckerberg is a bright man, and the Bilton report describes him peppering interviewees with tough questions about hardware, down to the inner workings of chips. It’s probably good for Zuckerberg to think of his business flexibly, and to indulge, to an extent, in this vision of a Facebook beyond software. But at the end of the day, all he needs is to listen to the advice of one analyst GigaOm spoke to, who said: “Mobile phone production is a business Facebook has zero experience in. It’s also a business with considerable cost and risk attached [and] no amount of homework done by Mark Zuckerberg is likely to help bridge the operational knowledge and gap needed to compete against the market leaders.” The truly smart CEO knows where his company’s strengths lie. For Facebook, that’s not hardware.

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