The Smart Phone Wars: Enter Facebook

Tech analysts have pontificated on the possibility of a Facebook phone for years and it seems that their wildest wet dreams (or nightmares) may finally be coming true.

The New York Times reported that Facebook has been hiring former Apple engineers who worked on the iPhone and iPad to help build a Facebook phone.

However, it remains to be seen if a software company can ultimately succeed in the hardware business. After all, Microsoft and Google have made several efforts with mixed successes into hardware and of course Apple comes from the hardware world.

And sure, Facebook's social network is a triumph of design and function, but would you buy the Facebook phone? And what makes Facebook so hurried to build a hardware platform at all – shouldn't they concentrate on developing their core ad business first?

After reading the NYT article, it immediately made sense to me why Facebook wanted to raise so much money in its IPO. Sure, greed and liquidity were probably higher priorities, but the Zuck has ambitions to compete directly with all of the major tech heavyweights as it increasingly expands its platform.

It seems that Zuckerberg has grown very nervous at the thought that Facebook could just merely go down as an application on other companies' platforms as opposed to being a platform within itself. What's more is that he sees the opportunity closing to get a foothold in the phone market before Apple and Google consolidate it.

Facebook joins the mobile hardware arms race just as Google is completes its acquisition of Motorola and Apple gets ready to roll out its next product line of phones, pads, and TVs. This is all setting up to make mobile the great brand war of our time... or has the victor already been decided before the major battles could be fought?

In the current age of App stores and anal retentive music/movie library organization, consumers who have utilized their phones to their fullest potential have invested a great deal of time and money personalizing and organizing. Given the purposeful incompatibility between phone brands (mostly because Apple insists on imposing authoritative digital rights management on all of their media and software), it is not easy to switch phone brands. Think of the person who went through three generations of the iPhone and bought over 50 paid apps that become useless if they buy the new Android.

On the other hand, the social network which Facebook has created is arguably even stickier than the apps on your phone; the time last I checked you can't buy friends on Facebook. Facebook plans to make its social network ubiquitous to the extent that everything you do on your computer or mobile device (chat, email, web search, shop, consume media) would be done through their platform. They basically want to re-rout 80% of the Internet and sell ads with goofy pictures of your friends on them all along the way.

I am very skeptical that Facebook will become the Internet's one-stop-shop mostly because I believe that product focused sites like Ebay or Netflix will always have a huge competitive advantage in any given space. To me, Facebook's ambition of being the next Internet conglomerate puts it in the same category as Google and Yahoo in that it tries to do too many things at one time and often fails where it loses focus. Facebook may very well have the next great smart phone, emailing service, or commerce platform. But will it have all those things? Definitely not.

Whenever the Facebook phone does come to market, I expect it will be little more than a novel distraction. Unless Facebook takes itself off competing platforms, the phone is unlikely to differentiate itself enough. The phone would most likely have a limited appeal to kids and college students who want to feed their fish and pick their tomatoes in class.

Do you guys like the idea of a Facebook phone? Does that make the stock more attractive to you? Do you think they can execute on their dreams or are they too lofty to be realized?

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