While investors breathlessly await the company’s first earnings report since its IPO, Facebook Inc. (NASDAQ: FB) is believed to be prepping a run at the smartphone market. A report from Bloomberg News cites “people with knowledge of the matter” as saying that the social network giant is teaming up with mobile phone maker HTC Corp. to get a Facebook-branded smartphone on the market by mid-2013.
This appears to be a pretty lousy idea. The iPhone from Apple Inc. (NASDAQ: AAPL) dominates the market in both revenues and profits, while the Android operating system from Google Inc. (NASDAQ: GOOG) dominates the software platform market. Samsung Electronics sells more hardware than anyone, including Apple. Research In Motion Ltd. (NASDAQ: RIMM) and Nokia Corp. (NYSE: NOK) have been kicked to the side of the road and are barely visible, even though Microsoft Corp. (NASDAQ: MSFT) has teamed up with Nokia and looks ready to spend big dollars to promote new phones due out later this year.
And if that field isn’t crowded enough, Amazon.com Inc. (NASDAQ: AMZN) also is reported to be planning a smartphone of its own.
On the surface, a self-branded smartphone from Facebook could help the company grab more revenue from mobile advertising. There is little question that mobile devices are the current battleground for growth, but Facebook’s performance in mobile has been worse than poor. A new piece of hardware will not fix that. If anything, it is a misdirection play, putting public focus on hardware even as Facebook tries to fix its software headaches.
The Bloomberg article notes the number of Apple engineers that Facebook has hired recently. Without exception those named are software engineers. Facebook is in for a surprise if it views the hardware casually, leaving the decisions to HTC.
Without some special reason to buy a Facebook-branded phone, customers won’t. Just because the mobile ad revenue from a Facebook phone would flow more munificently to Facebook is no reason for a consumer to buy a Facebook device.
Remember, though, what Mark Zuckerberg wants, he gets, at least as far as Facebook is concerned. He cannot be outvoted, replaced or in any way interfered with. If Zuckerberg believes that he can take on Apple, Google, Samsung and the others — and win — then there will be a Facebook phone. He may even turn out to be right, but it’s a really long shot.
Paul Ausick
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