Why Facebook Should Build a Phone

Last week I reported about Facebook assembling a team of experienced engineers with the hopes of building a Facebook smartphone.
Some people seemed excited by the prospect of a phone designed specifically for Facebook. But others, in the comments on the article and on social networks and blogs, questioned why Facebook would want to get into the phone business...



Henry Blodget of Business Insider wrote a post that said: “If Facebook really goes into the mobile hardware business, investors should run away screaming.”
Many of the phone’s detractors simply argued that if Facebook were to make a phone, it could never compete with the Apple iPhone.
Yet that’s not the point of a Facebook-centric phone.
Rather, Facebook needs to get into the phone business because it has the opportunity to reach an audience that can’t afford iPhones, Google Android phones, Windows Phones, or, really any good smartphone. Even when they can afford these devices — some of which are subsidized with hefty contracts — the expensive data and voice plans are often out of the reach of a very large segment of society. The cost of a smartphone isn’t just the $250 for the phone but also the $70 or $90 a month over a two-year contract.
A research report issued late last year by Vision Mobile found that while  half the people in developed countries had smartphones by the end of 2011, the devices had reached only 20 percent of the developing world.
This is where a Facebook phone could attract a large group of customers. It’s important to note that this market in the developing world is the same market Facebook wants to reach to continue its rapid growth. The hitch: the developing world is skipping the PC phase and going directly to smartphone as computer.
The latest report issued by Gartner Research found that Samsung and Apple sell 49 percent of all smartphones. Although hundreds of millions of smartphones are sold each year, many people still can’t afford one. This enormous group could be the key to a Facebook phone.
“With a Facebook phone, you’re not talking about a high-end user. You are talking mass market. Facebook can penetrate other markets where people are trying to budget their costs,”  said Carolina Milanesi, a vice president and analyst for the Gartner Group. “Facebook will have to go beyond the hardware cost and really think about how to make a smartphone for people that will have a much lower data bundle or free voice.”
If it can do this, Ms. Milanesi said, there are hundreds of millions of people who could be drawn to a Facebook phone.
Ms. Milanesi noted that Facebook has grown rapidly because it has focused expansion efforts on other continents, including Asia and Africa. Facebook could put an inexpensive smartphone in the hands of these users, as well as those in developed economies who can’t afford expensive data plans.
Facebook would not be going after Apple or Google in this respect but taking market share from Nokia, which was the leading global phone maker for some time.
If Facebook could make a phone that costs a fraction of the price of current smartphones, then subsidize the data and voice costs through advertising, it would help control a new market of users who still haven’t acquired a smartphone because of initial cost and monthly charges.

Source: bits.blogs.nytimes.com