Facebook Phone Smart or Destined to Fail?

Just like Amazon, Facebook is building a phone. This rumor has been around perhaps for two years but Bloomberg seems to confirm it. The hardware maker is said to be the struggling HTC. Previously HTC released the ChaCha (pictured at right), with a dedicated Facebook button. 

The ChaCha was a failure. Will a dedicated "Facebook phone" equally bomb? The chances are very good that it would see limited demand. 

From Facebook's perspective the logic of its own device is understandable: 

  • Mobile is increasingly important to Facebook's future
  • It doesn't control a mobile platform or OS
  • By controlling the OS (or the presentation layer on top of the core Android OS) Facebook could do a great deal with apps and ads
  • A mobile phone would allow for the integration and extension of its online app store into mobile 
  • Facebook would have more mobile advertising options on its own mobile platform
  • The company could integrate users' networks with the dialer, as well as doing interesting things with chat and mobile video

The problem is that iPhone and Android devices have dedicated Facebook apps. This will be sufficient for all but the most dedicated Facebook users.

The additional integrations and "cool things" that Facebook could do with its own version of Android won't be enough incentive for most people to buy the device. Younger users and first-time buyers making the switch from feature phones to smartphones might be enticed to buy such a device if the price were right. 

The other major issue is privacy and data-mining. I'm making a bunch of assumptions when I say that a Facebook phone would likely collect even more data about individuals and their behavior (calls with contacts, sites visited, apps used, physical movements) than the existing mobile apps or online experience do. Thus concern that "your phone is watching/tracking you" would cause many to stay away and could even lead to regulatory investigations -- depending on how aggressive Facebook wanted to be with tracking/monitoring. 

However I know that Facebook is more cautious about privacy these days and so it might be more restrained. 

Although the rumors have been around for a long time, Facebook probably saw Amazon's success with Kindle and Kindle Fire and decided there was little or nothing to lose in making its own device. I just don't think many people will be very interested. 

Update: On the Facebook Q2 earnings call this afternoon CEO Mark Zuckerberg said that it didn't make a lot of sense for Facebook to create its own phone. But we'll see early next year.