The Facebook Phone: Why it's good news for the industry

I’ve been reading all about The Facebook Phone. I’m sure you have too. I thought I’d pen a viewpoint. If you’re in the mood for a cup of coffee, grab one now. Otherwise a TLDR (“too long didn’t read”) will suffice. 

In about 48 hours the original report of Facebook hiring a few Apple engineers has now snowballed into what feels like an imminent announcement of shipping hardware!

Hiring a few engineers doesn’t build you a phone.

Creating a phone from scratch is a serious, serious affair — and today’s consumer is incredibly unforgiving of anything but ‘almost perfect’. Getting to that stage will require hundreds of millions of dollars. Whether it’s Facebook’s money or somebody else’s (e.g. acquisition or close partnership), it’s not a light decision.

Standing on the shoulders of someone else doesn’t make it easy. Easier, perhaps. But not easy.

Plus, you can’t get it wrong.

Yes you can certainly upgrade hardware — but you can’t get the initial one wrong. Just look at the Apple Antenna screw-up (and the resulting free bumper programme) if you’d like a high profile example.

It’s also a shocking, shocking market in which to compete.

The handset has moved from a device of utility (in the West) to a disposable fashion item, thanks largely to Apple’s iconic approach to the industry. So you’ve got us lot to contend with. We’re a difficult audience, but we’ve got a bit of cash to play around with.

Then you’ve got the bulk of the planet — the so called ‘developing’ markets — with rather different attitudes anchored in the functional nature of telephony. A $100 handset is a serious investment for someone earning $5 a day. However much you enjoy Facebook, you’re not going to be spending that on anything other than a guarantee of functionality from the likes of Nokia, HTC or RIM.

Why would Facebook bother with a phone?

Well if you sit back — and you’ve got a $16 billion to play with — then it’s quite easy to get hyper-paranoid. You have to think strategically. You have to think in years. You have to actually do something. And when you’ve got billions of dollars winking, smiling and dancing in front of you, stressing you out, you need to put them to work. You ideally need a big project to get stuck into.

If you start thinking about the existing mobile platforms as life threatening to Facebook, then yes, I can very well see why you’d want to crash the party. Apple’s integrated Twitter deal could well be weighing heavily. Google’s own tenacious focus on ‘+’ is certain to be baked even more closely into the next iteration of Android. Nokia and Microsoft? Well you could call them friendly, given Microsoft’s long time involvement with Facebook. A huge percentage of users on RIM’s platform are already Facebook users — indeed you might call RIM a very close friend — given it’s one of the only platforms that ships with a phenomenally capable Facebook client pre-installed.

It’s a question of perspective though.

If you killed Facebook on iOS tonight, the iPhone would be significantly less useful to tens or hundreds of millions of users.

This is the crux of the issue.

Consider it closely.

If you were denied Facebook access on your iPhone, would this materially decrease the value derived from your device?

Yes.

I think anyone who’s been a regular user of Facebook on iPhone would answer yes. Some would be sweating at the very thought.

Ok. Next question — stay with me.

So Facebook access is prohibited on iPhone. Would you change platforms to Android, Windows Phone or RIM as a consequence?

Now we’ve got a ball game.

I think most people would answer ‘no’ to the last question.

So there’s a value in having Facebook present on your platform. Indeed Facebook is a must-have. New platforms can’t launch unless there’s a Facebook app. It’s a ‘tick’ app. You have to have it on your platform.

Could Facebook be smothered by Google and Apple?

Could they seriously decrease the social network’s potency on their platforms, for their own commercial interests?

Arguably.

It’s a difficult sell, especially when all your friends are on Facebook. When you’ve uploaded gigabytes of photos to their galleries, when you use the platform as a communications medium. Facebook users can probably live with Apple integrating ‘tweet this’ into the menu structure but they wouldn’t wear much else designed to push them away from Facebook.

My brother is 25. He caught the cusp of the Facebook generation. He doesn’t do email any more. I don’t bother emailing him. Even SMS doesn’t get the same quality and immediate response as a Facebook message. For some, Facebook is the primary mechanism.

He’s not alone. I recently met a lady who works for a big Exhibition firm as an event marketing manager. It’s a serious position. She’s 26. She’s based in Sydney. She’s super-connected. But she doesn’t use email. She’s got an iPhone. Her work email stays on the laptop. She doesn’t use email personally. Instead she ‘Facebooks’. I found it astonishing. I even demanded to see her device email settings. They were blank. Her life is on Facebook. And she accesses it predominantly on her iPhone.

I quote these anecdotes to underpin the value that millions derive from Facebook. It’s sometimes difficult to get a handle on this when you’re working closely to the market (or if you can remember what Betamax was — i.e. you’re old).

Is Facebook feeling threatened?

You might comment that they’re in the perfect position at the moment. They could sit back and watch the continuing handset fight from the sidelines. They’re already the biggest mobile ‘platform’ around (something we discussed in detail on this week’s 361 Degrees podcast by the way). The big players can’t do without them, however much they might hint or tease.

Fast forward a few years and remember that you’ve already blown $1 billion on Instagram and you can easily see why Facebook might think it needs to do more to assure continued connectivity to its mobile users.

They’ve 500 million mobile users today but it won’t be long before that doubles to a billion. It won’t be long before a huge percentage are mobile-only, that is, they don’t ever bother with a desktop (and increasingly won’t own one).

Why should Facebook care about the ‘terminal’ (as the mobile operators famously refer to handsets). Why does that matter?

Facebook aren’t buying Dell.

That would be laughable.

They aren’t starting their own PC manufacturing plant either. That would silly, right?

Well it’s actually a similar proposition.

So why mobile?

Well, it’s a complete unknown. We don’t know where it’s going to be in 10 years. And that’s a real problem if you’ve got the weight of $16 billion and millions of investors demanding you make the right call — now.

If I was advising Facebook, I’d be telling them to start gazing into the future right now. I’d be highlighting that Apple’s dominance of the smartphone ecosystem is a brilliant, brilliant opportunity. It’s actually holding the whole marketplace back. We’re committed to this single-silo app ecosystem for at least 5 years. Everyone else is scrambling to try and replicate Apple’s creations. In most cases, everyone is aiming for parity. There’s little focus on anything beyond. Google’s done everyone a lot of favours by allowing Symbian-esque fragmentation that’s made life a flipping nightmare for developers — and their Wild West marketplace has helped dissuade consumers from jumping into the full connected experience that Android could offer.

There’s a lull in the industry right now. It’s perhaps best illustrated by the likes of the “retina display”. Simple, easy stuff that Apple can knock out. That’s not to diminish the company’s phenomenal capabilities. It’s just that single ‘halo’ features like this mask the relatively slow progress with the mobile experience. FaceTime, Retina, a slightly better camera, they’re all nice to have. They all help push the upgrades and keep the cash flowing into Apple without significantly changing things. If anything, Apple has an interest in maintaining the status quo. So does everyone else. The legions of developers all have an interest in a bit of stability — on the basis that the App Store is at least a known quantity and, yes, some folk can actually make some money on mobile.

What about the next paradigm shift though?

What about a unified personal experience on a device that completely moves the needle — that offers a single API to easily surface information at the point of need? What will it take for me to be able to walk out the office and have my device automatically recognise this, together with the time (e.g. 5pm), historical data and my empty diary and assume, therefore, that I’m probably heading to the train. Why not carefully surface the current train times, highlighting to me if there’s a 5 minute delay so that I can pick up my dry cleaning or get a coffee?

If you think about it, there’s a whole host of applications and services that need to talk to each other — at millisecond processing speeds — in order for this to work. It’s impossible on an iPhone with it’s (current) simple single-silo app architecture.

When you move this vision of future connectivity into the social world, you can begin to see the challenges and opportunities for Facebook.

The next-next-next mobile paradigm will be driven by our social networks. But not in the rather Fisher Price manner of today.

Speak to anyone at any handset manufacturer and they’ll tell you their future research demonstrates everything is all about social. It’s only social. That’s the fundamental. Even back when Nokia was hawking N97s, their top chaps were speaking of the need to begin focusing their device experience on a social framework, connected or based upon a map with a whole series of different visual and experiential planes (family & friends, friends from college, friends in home town, work colleagues from 10 years ago, the people I’ve just met — all skewed and visualised across 500 metres, 500km, or according to the nearest Starbucks).

Today’s app framework won’t exist. Instead they’ll be replaced with services. I don’t need a flipping app to tell me where the nearest Subway restaurant is, and to keep track of my Subway points. I expect all that to happen automatically in the background, surfaced to me on an interface that dynamically adjusts to the specific needs of the moment.

When you start thinking in these terms — when you start ‘blue-sky-ing’, it’s easy to appreciate the dilemma that one part of the Future Innovation team at Facebook is facing. You can see why it’s up at the top of the agenda. They’ve got to balance the needs of ‘now’ (i.e. buying Instagram) with the changing mobile landscape 1 year, 5 years and 10 years out.

So I’d be playing with it. I’d be getting my engineers to start coding these wild and exciting examples. Not as real world apps — but as proof-of-concepts (“POCs”). I need POCs so I can start playing with them, so I can begin to appreciate what I need to be getting my dotcom and mobile teams to be building now. I also need to be selling a vision to my partners — the HTCs, the Nokias, the Apples of this world. I need to make sure they ‘get’ my vision, ideally with a Facebook brand on it. So when BlackBerry 10 arrives, I want to be sure they’ve baked in the goods I’ll need in 3 years time.

This is one reason I’d want a load of Apple engineers hanging around.

It wouldn’t take much to persuade me that Facebook needs a phone, though, if only to do a ‘Nexus’ — to point the way to the industry. Yes it’s a load of work but if I could set a team of absolute geniuses free with a billion dollars to play with, what paradigm shifting technology could they deliver? You wouldn’t need to sell many to force a shift in the market. And, even that might be difficult given the fact Facebook itself has no experience selling hardware.

However it’s no secret that Facebook has been working very closely with many handset manufacturers for a long time. Most large manufacturers have a team (or, at least a senior single-point-of-contact) dedicated to the social network. There’s already a relationship there. So it wouldn’t be too much of a leap to envisage a “Built for Facebook” phone issued by one or a a few platforms — I’m thinking of an HTC Chat on steroids. I don’t mean just sticking a Facebook button on the phone.

But, to the subject of this diatribe: Why talk of the Facebook Phone is good news for the mobile industry

In no particular order:

• It’s another ‘thing’ that will continue to scare the mobile operator executives who’re already busy panicking about everything else — perhaps this might actually get them off the fence and encourage them to start innovating themselves (or simply admit defeat and become dumb yet profitable data pipes)
• It should hopefully get the device manufacturers opening their minds a little bit more too
• It’s a brilliant question to ask any senior executive, especially in the handset and operator world: “What’s your Facebook Phone strategy?” This single issue is keeping a lot of PR folk up at nights already. 
• It’s helping expand the view of the industry beyond the rather boring Apple/Google fixation
• It will focus attention from external third parties who might not have previously considered the value or importance of ‘social’ in the next decade’s mobile development — think investors, big conglomerates — phrases like, “And of course, we haven’t even touched on the possibility of the Facebook Phone” will shortly be finishing many future-gazing board meeting segments.
• The investor issue is rather important: Facebook is certainly known for being acquisitive and now they’ve (apparently) signalled a greater focus on mobile. Which means there’s another 800lb Gorilla to buy your investments. So investing in some crazy sounding social-related mobile stuff won’t feel as risky. 
• The very hint of Facebook actually testing hardware for deployment will have folk in and around this industry positively orgasming with excitement. 
• There’s potential for some rather cool headlines and market moves. I love big moves — when the world changes with just one story from the Wall Street Journal. Consider how you might react to: “Facebook buys RIM and Nokia; injects billions of dollars; signals intent to become #2 in mobile in 3 years; ‘We are now a mobile company,’ says Zuckberg” — well, we can but dream. That kind of competition would seriously sort the men from the boys.
• We do need a bit of competition in the industry — I’d like to see a world where Apple, Google, Nokia, RIM and Samsung were fully funded, fully capitalised and competing with each other on a fairly level playing field. Dream-worthy I know, but right now everything is so Apple-focused it’s difficult for anyone to have an independent thought outside that framework.

So, Mr Zuckerberg, whatever you’ve got planned, let’s hear about it soon.