Nick Bilton reported in today’s New York Times that Facebook is seriously contemplating developing its own smartphone. Henry Blodget has suggested, with a modicum of hyperbole, that if Facebook enters the smartphone/hardware business, investors should run away, screaming.
And that makes perfect sense. Well, maybe not perfect sense. But it is an understandable position to take. After all, what sort of experience does Facebook have designing and building hardware? And how many companies are actually succeeding in this space at the moment? Apple is, of course. Perhaps Samsung. And Amazon. Yet the vast majority of recent mobile hardware efforts, even from among those with significant mobile hardware experience, have been abysmal failures. Does Facebook have any hardware DNA? Not that I’ve seen.
Unfortunately, that may not matter. Facebook may have to enter the space. The key players – those that Facebook will have to deal with in its particular market space – include Apple, Google, Amazon and Ebay/Paypal. Apple is the dominant player here. It has had hardware manufacturing in its DNA for decades, really from the very beginning.
Google may not yet have a successful track record with hardware, but it’s clear they are keen to be players in this space. They have to be if they are to play head-to-head with Apple.
Amazon knew nothing of hardware prior to developing and delivering the Kindle, arguably one of the more successful mobile device entries into the market during the past five years. Bezos, like Zuckerberg, felt compelled to move in this direction. Like Zuckerberg, he knew that without a device that he could put into consumers’ hands, he would forever be at the mercy of the business model dictated by the device manufacturer / platform owner.
And what about Ebay/PayPal? So far the only device has been a Square knock off, and that device is designed with small merchants as the target market, not consumers. Does Ebay need to get into the hardware/mobile business as well?
I’ve argued before that Apple and Google want to put a cash register – their cash register – into the pocket of every consumer. Facebook and Ebay/PayPal were content, for a moment in time, to eschew the cash register approach because each of these companies was certain it could become the dominant currency that consumers would use to purchase goods and services. It is not clear if this approach has been working for Facebook, but Zuckerberg’s recent moves suggest that at the very least he feels the need to hedge Facebook’s bets. If Facebook credits don’t take hold and do not become the currency of choice, then Facebook may well need to have a mobile device in consumer’s pockets. To fail to explore this territory places Facebook at the mercy of Apple, Google and any of the other major players that are delivering e-commerce services to consumers via a mobile phone or tablet.
And let’s not leave Amazon out of this. Don’t forget that the two most trusted consumer brands – from a commerce perspective – are Apple and Amazon. If Bezos succeeds in using this trust to drive his ecommerce success into the local and mobile space, Facebook could be in serious trouble.
So while Blodget is right to point out that Facebook has no business building a mobile phone, it may also be true that if Facebook does not build a mobile phone, it may have no real business. And that’s how these things work: you’re damned if you do, and damed if you don’t.