The Facebook Phone

There has been a lot of speculation in the last couple of weeks about Facebook making its own phone. I wanted to write a post on what this could mean to the eco-system in general and Facebook in particular.Facebook has not had a good month by any yard stick. What should have been a crowning glory for the Menlo Park social networking company has instead turned into what is being touted as possibly the worst tech IPO in history. Accusations have flown freely and the naysayers have all come from the woodwork claiming they knew the IPO would tank. No one wants to talk about the feverish craze that enveloped the investment community prior to the IPO. Surely, things have gone awfully wrong and Facebook, Nasdaq and Morgan Stanley would all prefer to put this behind and move forward as quickly and decisively as possible. But given the raft of lawsuits and questions being asked about the true value of Facebook, things will not die anytime soon. It is amidst this environment that news of a Facebook phone is emerging.I do believe Facebook is working on a phone. And there is good reasoning behind why they would do so. This post examines the rationale behind Facebook building a phone and what kind of an ecosystem that would offer to developers and users.The MotivationLets start with why Facebook wouldn't want to make a phone. It is expensive, challenging and incredibly risky business making a smartphone today. There are extremely powerful incumbents (read Apple and Google), one very well funded competitor (Microsoft) and two ex-leaders waiting for their second chance (Nokia, RIM). While some of these companies are working together (Nokia-Microsoft), they are all effectively trying to do whats best for themselves. Under these circumstances, trying to bring a competitive device to the market is challenging to say the least. It requires clout, patience and a real need to build one. Facebook should ideally be platform agnostic, waiting for each mobile ecosystem to offer the best Facebook experience and integration. That would reaffirm their stickiness factor and also ensure they are in as many devices as possible.But there is a small problem. Facebook derives its revenue from two major streams. Ads and Facebook credits. For Facebook credits to continually grow, Facebook needs more and more apps and social games to be successful in the platform. While there are really successful social games, there has been a slow decline in the popularity of such games. Zynga, the biggest of them all is also exploring other networks like Google+ and offering gameplay in its own website. This helps Zynga avoid paying the 30% revenue share to Facebook.Facebook ads are primarily served on the PC/desktop/laptop version of the application and on its website. Mobile versions of Facebook on iOS and Android don't carry ads currently. And there is an increasing percentage of users using Facebook only on their mobile devices. This means that Facebook's ads are reaching fewer percentage of users even though the network itself is growing.  Given the small screen size on mobile devices, it would be incredibly difficult for Facebook to offer a clean interface with ads without turning off its loyal users.A mobile platform of its own, integrated with its own ad network would solve both aforementioned problems. It would ensure that every app running on the device would utilize Facebook credits or pay a revenue share to Facebook like they do for iOS and Android apps. It would also ensure that ads can be integrated into the platform in a way that is consistent with all apps and also be delivered in a less intrusive manner like iAds or AdMob.Design and Core ExperienceArguments can be made about how good or bad Facebook apps on different mobile OS's are. I have had mixed experiences ranging from how simple it is to use to how many bugs I see on a regular basis. But what stands out is the simplicity of Facebook itself. The UI is incredibly simple- so much so that vast swaths of people are sensitive to even simple changes. The tone and starkness of the Facebook motif is a welcome difference to an increasing number of garish and cluttered app interfaces. While Facebook has been adding more and more UI elements to its mobile apps, it still is a very user friendly (albeit buggy) app.Facebook has added a messenger application (standalone as Facebook Messenger), its own camera app (Facebook camera) and a notification system for messages, feed updates and posts. It has also picked up Instagram, an incredibly popular social photo sharing network. It also recently opened up its own Html5 App ecosystem to court apps tailor-made for the Facebook platform. Coupled with a heavily skinned Android UI, it is possible for Facebook to offer a uniquely Facebook experience that fulfills today's smartphone minimum requirements.Third Party Apps on the Facebook PhoneThe Facebook open graph system has been pretty successful in spreading the "Like" system across the internet. It is rare to come across any meaningful website today that doesn't have the Facebook Share or Like buttons. The recently unveiled frictionless sharing mechanism has only coupled these websites closer to Facebook. Having html5 based web apps as portals to these websites and integrating them at a OS level would make for an incredibly tight social experience- assuming it is executed right.Having a simple porting mechanism to allow native Android apps to run on the skinned Facebook platform would offer users native apps in addition to the html5 based web apps created and offered under the Facebook app experience. The native apps would serve as a bridge to a future where all apps are web apps - a scenario very much preferable to Facebook.Facebook's open graph partners like Spotify, Washington Post, Netflix, etc. would be example candidates for tightly coupled integration which would be even more evident on a mobile OS platform.So, what does it mean to me?This is the difficult question. One, Facebook wishes it had an answer to. Facebook tried working with HTC on a Facebook phone- the HTC Salsa and the HTC ChaCha, both of which did relatively badly. Part of the reason for the failure was a half hearted integration of a previous generation Facebook experience. Facebook has learnt from that experience hopefully and with its added partners and capabilities can offer a more integrated experience. But that alone doesn't make it a slam dunk.Facebook's privacy woes are well documented. While the company has been doing different things to get past the privacy stigma haunting it, trust is still an elusive quantity. More so when it involves more than just sharing posts, links and pictures. So will the user trust Facebook with his contacts list, personal messages, pictures, visited websites and pretty much everything given how much we rely on our smartphones these days?. And will app developers be prepared to dedicate resources to building for yet another platform - even if it resembles Android in look, feel and almost everything else?. These are the two biggest challenges for Facebook to solve if it wants to be successful selling its own phone and platform.Until then, lets speculate away on what will definitely be an interesting development in the rapidly changing mobile landscape.