Mobile represents one of Facebook’s biggest challenges, but the company that just went public in what is sure to be remembered as one of the most infamous IPOs ever, that challenge is also a huge opportunity.
In an effort to exploit that opportunity, Facebook CEO Mark Zuckerberg was willing to pay $1bn for a revenue-less startup (Instagram) and the company’s own engineers have been working on their own mobile apps (Facebook Camera).
But are mobile apps enough, or does Facebook need something more?
A report by the New York Times’ Nick Bilton this past weekend indicates that Facebook may be looking well beyond software. According to Bilton’s sources, the world’s largest social network is working on a smartphone that it hopes to release next year.
How serious is Facebook? Apparently, serious enough that it has reportedly “already hired more than half a dozen former Apple software and hardware engineers who worked on the iPhone, and one who worked on the iPad, the employees.”
As Bilton notes, rumors about a Facebook phone have come up several times in the past several years. Those efforts didn’t get far, sources say, because the company believed — perhaps naively — that it could figure hardware out on its own. But now free of the illusion that it can build a smartphone without hardware expertise, Facebook is, if you believe the reports, working feverishly to do something very few companies have been able to do: go from software to hardware successfully.
The apparent impetus for this: “Mark [Zuckerberg] 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” according to an anonymous Facebook employee.
Given that fear was rumored to have played a big role in Zuckerberg’s decision to pay $1bn for Instagram, this doesn’t seem entirely implausible. As the Instagram acquisition, which is pending FTC approval, showed, what Mark Zuckerberg wants, Mark Zuckerberg gets.
The big question, of course, is whether building a Facebook phone would be a smart move. It’s one thing to spend a billion dollars on a mobile app. It’s another thing entirely to build a phone. The costs are huge, the competition is fierce and the mobile ecosystem is complicated. Facebook faces a number of unique challenges. A potentially big one: as popular as it is, it’s not exactly a trusted brand. That for, obvious reasons, could be problematic when it comes to selling one of the most personal devices used.
Does any of this mean Facebook is bound to fail? Not necessarily. But the costs of succeeding may far outweigh the possible rewards. The idea that Facebook could achieve Apple-like success is far-fetched, but what about Android-like success? That may seem unlikely to, but even assuming for a minute that Facebook can do something special in the mobile hardware or platform market, it’s worth considering that Google hasn’t made a lot of money from Android.
Google, of course, can afford to invest in Android. Can Facebook? Thanks to its rich IPO, the company has more than $9bn in the bank. If it decides to build a phone, it will go a long way towards answering the question: how is it going to spend all that cash?