Missed opportunity: Why Facebook should have built its own phone

Facebook should have announced its own phone today; there, I said it. In my opinion, Facebook is ignoring a big opportunity at the very broad inexpensive base of the handset market. If it were to create a cheap feature phone optimized for its own services, it would not only become more dominant in mobile, but also would further solidify its role as the world’s social network of record.

First, let me say I’m not one of those people who thinks that every brand or tech darling needs its own hardware. I think the idea of an Amazon smartphone is silly and a Twitter phone even sillier. I believe there’s limited appeal for specialty Xbox or Nintendo gaming handset. And I feel the short unhappy lives of virtual carriers ESPN Mobile and Disney Mobile show that the market has little use for devices built around a specific company’s content.

All of these companies are better served by offering up their content and services through an open application environment. In his very astute analysis post on Wednesday, my colleague Kevin Tofel claims the same logic applies to Facebook: It can much more easily and much more efficiently extend its reach through software, rather hardware. I agree with Kevin, but only up to a point.

I think Kevin is right that Facebook has no business creating its own smartphone. People buy smartphones for flexibility, and they’re paying for the privilege of not being tied down to a specific set of services or apps. A feature phone, however, is a much different animal. A feature phone is a much more rigid device, built over proprietary software and designed to do a few things — and only those few things.

There are still billions of people around the world buying feature phones, and they’re not approaching those devices with any smartphone expectations. They essentially want a communication device, and Facebook is perfectly positioned to deliver that communication capability in spades.

Facebook is already a communications company

Unlike say an Amazon or a Disney, Facebook’s whole business model is built around the idea of social communication. With Facebook’s suite of apps services, you can IM; email; share photos, videos, links and updates; coordinate activities and even make phone calls. While most social networks or over-the-top communications apps are limited by the size of their networks, Facebook doesn’t have that limitation.

Apart from the telephone grid and email, with 1.06 billion active daily users Facebook is probably the largest communications network in the world. And for many people Facebook has become their de facto communications network. I haven’t gotten an email form my younger sister in years. If she wants to contact me she pings me on Facebook. The point I’m trying to make is that many people have chosen to make Facebook the organ by which they communicate with the world. I’m not saying that’s a good thing, but it’s certainly something Facebook could capitalize on.

Who would buy a Facebook phone?

I would argue there’s already a substantial crossover between likely feature phone buyers and Facebook junkies — teenagers, for instance — but Facebook could further broaden that mutual appeal.

There are still plenty of people in the U.S. who are uncomfortable with the idea of the mobile internet, but are perfectly comfortable using Facebook online. They would embrace a Facebook-centric phone as a way to ease into mobile data (think of it as a “gateway phone”). Parents giving their younger children their first internet-capable handset might be much more comfortable with a device that hosted a single social network, over which they could easily keep tabs on their activities.

Facebook is growing like wildfire in developing markets where few people can afford a smartphone or have regular access to a PC. A cheap Facebook phone would be ideal for their needs. Many more people would simply be attracted to such a device’s cheapness. A free or sub-$ 50 device that comes with a cheap data plan and a core social networking service you’re already well familiar with — that’s tough to ignore.

Facebook has already started pursuing a cautious form of this strategy. It’s working with mobile chipmaker Spreadtrum to pre-optimize its software for the cheapest Android handsets. If Facebook made its own inexpensive phone, though, it would exert considerable influence in the market. Carriers would be anxious to carry any Facebook-branded device, so Zuckerberg and team could negotiate specialty data plans for their members. Orange and Facebook are already experimenting with this concept in some European countries, exempting social network traffic from the usual data caps.

The company could also optimize any Facebook device for its own advertising, kicking of its still-nascent mobile monetization strategy. If it made enough money through advertising it could even take a page from Amazon’s book, subsidizing the cost of the phone or the cost of the mobile service, thus making its phone even more accessible.

Ultimately the Facebook phone and the Facebook network would begin reinforcing one another. After year or two of viewing the mobile internet through the Facebook lens, a user might graduate to a full-fledged smartphone, but they would more than likely bring their dependence on Facebook’s applications to the new device. Billions of people around the world will get their first exposure to the internet through a mobile phone. If it can produce a cheap, attractive device, Facebook can ensure that exposure is through its portal.

Getting into the hardware business isn’t an easy thing to do, especially if you’re expertise is in software, but in Facebook’s case it might be worth it. The more vested Facebook is in mobile, the stronger its social network becomes.

You can argue all you like about how worthless a Facebook phone would be to you are your friends, and I would agree with you. I wouldn’t buy a Facebook phone. As a GigaOM reader, I doubt you would either.

But I guarantee there would be millions of people who would.