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Facebook’s phone folly

Would you buy a Facebook Phone?

The social media giant hopes you will, and has ramped up its efforts to build a handset by reportedly hiring a number of ex-Apple iPhone and iPad engineers. If these moves, first reported by the New York Times, play out, they'd represent the company's third such attempt.

TechCrunch reports Facebook first tried to build a device in 2010, only to abandon the project soon after due to the complexities involved. According to AllThingsD, Facebook last year partnered with HTC on a project, codenamed "Buffy", that for now, at least, remains alive.

It's easy to understand why Facebook wants its own smartphone: the company needs to go mobile, and fast. While Facebook apps are available for most major mobile platforms, including iOS, Android, BlackBerry and Windows Phone, they're little more than feature-starved cousins to the full desktop Web interface and, worse, don't currently generate advertising revenue. Part of it is a classic real estate challenge: A desktop or laptop screen has ample room to serve up ads, while a mobile screen does not. The other piece of the mobile puzzle is control — or Facebook's lack thereof.

Ownership is everything

Without its own phone, Mark Zuckerberg worries that Facebook on a mobile device will be little more than just another app. Owning the full stack could give Facebook more leverage to attract developers and help build the kind of end user- and advertising-friendly capabilities of the desktop interface into the mobile one. For a services company like Facebook, vertical integration could allow it to seize that control back from hardware vendors, carriers and advertising networks that are all understandably focused on their own — not Zuck's — bottom line.

That's a great theory. It's the reality that could prove Facebook's undoing. Engineering, marketing and supporting your own smartphone is a far more complex process than deploying Web-based online services, primarily because the number of stakeholders, including carriers, regulatory agencies, network operators, and retailers, is so much more diverse. These shark-infested waters are so far beyond Facebook's core competencies that it's a wonder anyone believes the company is independently capable of making its own phone fly.

Google, arguably Facebook's most serious online-services competitor, learned that lesson in spades when its initial attempts to introduce Google-branded handsets were met with tepid market response. The devices, marketed under the Nexus banner, were little more than upgraded hardware built by HTC with Google's logo slapped on the top. Google's decision to initially sell them only unlocked — an expensive up-front proposition for North American buyers used to getting subsidized phones on contract — confined them to niche status, and the devices remain sideline players.

The company has since gone the buy-not-build route with its just-completed $12.5 billion Motorola Mobility buyout. Even if it uses its new acquisition to launch a fleet of Google-branded devices — hardly a guarantee given its desire to avoid upsetting other Android vendors like Samsung and HTC — the search giant would be just as much out of its league as Facebook.

Lessons from … a tablet?

Perhaps Amazon holds the best hope for a future Facebook phone. Ironically, Amazon doesn't even offer a smartphone. But its Kindle Fire tablet, itself an extension of the Kindle ebook reader legacy, exemplifies a number of best practices that Facebook might want to follow if it chooses to bring its own branded smartphone to market:

Be unique. The smartphone market doesn't need another me-too device. Cynical end-users might be forgiven for thinking a Facebook Phone might be little more than a rebadged smartphone with a slightly upgraded — if at all — Facebook app. The Kindle Fire is unique among tablets thanks to its close ties to the Amazon online retail environment and its strong built-in content management tools. Facebook would need similar differentiation.

Give it away. Sitting next to a raft of free-with-contract Android devices — not to mention previous-generation iPhones — on retail shelves, Facebook Phones need to be price competitive from the start. The brand's roots as a freely available social media service further dilute Facebook's ability to charge a premium for the hardware: Consumers simply have no reason to pay more.

Fix the privacy thing. Consumers still don't trust Facebook with their confidential data. That hasn't stopped them from spending inordinate amounts of time poking their friends, of course, but a phone is a very different and far more personal experience than an online social media service. Facebook needs to go above and beyond before phone buyers feel comfortable abandoning traditional — and privacy-neutral — handset brands and embracing a social media player with a checkered past.

Amazon may yet use its Kindle Fire experience to move into the smartphone market, but it's moving deliberately slowly. Facebook may want to follow suit, because a head-on shot across Apple's and Google's bow may be too much, too soon for a company with no previous experience operating in a space that's already claimed its fair share of once-dominant victims.

Carmi Levy is a London, Ont.-based independent technology analyst and journalist. The opinions expressed are his own.