Is Facebook dumb for wanting a smartphone?

Summary: Most agree that it is not a matter of can Facebook build a phone but should they? Zuckerberg seems to think so.





The New York Times is reporting that Facebook is again trying to build a smartphone (again).

Based on the recent headlines, most are betting against Facebook’s phone success with headlines like “The Most ill-fated idea since the Palm Pre” from and TechCrunch’s Alexia Tsotsis’ writing, “It’ll be a miracle if the Facebook phone doesn’t suck”.

Most agree that it is not a matter of can Facebook build a phone (most agree they can’t) but should they?

Many are asking is there even a need for a Facebook phone? Mark Zuckerberg seems to think so.

Facebook is constantly optimizing, making the product better, while trying to increase their customer base. That may have been a good strategy when you only had the private equity folks to impress, but now that Facebook is publicly traded company they no doubt feel a substantial increase in pressure to grow the pie - rather than simply producing improvements or variants of their core product.

To live up to expectations and hype, Facebook needs not only to innovate, but to do so in a way that is transformational, bypassing adjacent opportunities altogether. Firms who are able to pull this off are very well rewarded (think of iTunes). Those who are not, well, they stand to lose a lot of money.

Much of the criticism leveled at Facebook is that they have no track record of producing anything like a phone. Hardware and software development are completely different endeavors with vastly differing skill sets.

To that end, Facebook has been reportedly hiring up former Apple iPhone and iPad engineers. While that may seem like a good idea, hiring former Apple employees resulted in both a very nice touchscreen smartphone and the death of the Palm Pre. A smartphone that I owned at one time.

Clearly to make money at the smartphone business Facebook will need margins like Apple or Samsung who fragmented the Android market. Both companies have been at the hardware game for years, and Facebook will be starting so far behind the leaders that whatever they produce will need to be a game changer.

All of this, I agree with. Facebook developing software, I can get behind. Facebook producing, selling and supporting hardware, well, they are just so far out of their league that it is improbable.

Regardless, many are suggesting that Facebook partner up with a hardware vendor. They already have the operating system which includes all of the basics, not to mention everything that comes from the recent Instagram purchase. But I don’t see Facebook as the partnering type. They are more apt to make an acquisition.

Like the recently completed the acquisition of Motorola Mobility by Google, I suspect that Facebook will soon announce the intention to acquire some hardware vendor.

Facebook certainly has the funds to purchase any number of small hardware providers, thanks to their recent IPO. The question is, which one? If you know any industry insiders, now is the time to buy them lunch and get the inside scoop!