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A Facebook smartphone? Why? | Android News | Cyandroid.com

A Facebook smartphone? Why?

At the end of last week's Monday Note, I briefly wondered about the rumoured Amazon smartphone. Would it follow the Kindle Fire strategy: Pick Android's lock and sell the device at or below cost in order to lubricate the wheels of Amazon's e-commerce of tangible and intangible things?

This week, we have the rebirth of another story: the Facebook phone. All Things D, the Wall Street Journal's site dedicated to… All Things Digital, aired a series of posts focused on Facebook's hypothetical jump into the smartphone fray. Given the site's reputation for reliable sources and real writing, this must be more than idle speculation floated for pageviews.

But what's going on? Why would Facebook – or Amazon – create its own smartphone?

(For the time being, I'll set aside the four-year parade of "Google phones": T-Mobile's G1 and G2; the ill-fated Nexus One built by HTC and sold by Google; Samsung's Nexus S and now the Galaxy Nexus. Sign up here; Steve Wozniak got his a few days ago, my turn will surely come soon.

What HTC thinks of its erstwhile beautiful friendship with Google isn't known, neither is Samsung's view of being last year's model now that Google owns Motorola. Nor is Moto's serenity, or lack of it, when competing with the muscular Korean for the sultan's favours. This brings back memories of the sorry parade of companies touting their shiny new partnerships with Microsoft, only to be discarded for the next pony in the carousel. We need a little time to figure out who's playing whom.)

Looking at the PC market, we wonder: There's no Amazon PC, or Facebook notebook, so why would these companies launch their own Really Personal Computer? What changed?

Google.

When Microsoft unified the PC industry under its tender care, the web – and thus web advertising – didn't exist. For Microsoft, the game was the two-way Windows/Office leverage; the rest of the industry picked up the crumbs that fell from the Wintel table.

When the web changed the game in the mid-90s, Netscape emerged as the dominant player, at least until Microsoft added Internet Explorer to the Windows/Office engine. Then Google entered the market with what initially looked like a search engine but turned out to be a huge, highly efficient advertising money pump.

This left Microsoft (and others) reeling. The Redmond company's online business keeps losing large amounts of money: $8.5bn in the past nine years!

Although Google confused things by attacking the Office franchise with its Google Docs service, the company's true modus operandi is nonetheless very clear. Advertising generates 95% of Google's revenue and, probably, 105% of its profits. Google will say and do everything needed to ensure we're exposed to its advertising radiation pressure at all times, in all venues, and on all devices. Everything is either a means to that end, or an obstacle that must be leveled, disintermediated.

Enter the smartphone.

Google saw it coming. Whether it did or didn't get the idea because Eric Schmidt, Google's CEO at the time, sat on Apple's board of directors doesn't matter for today's purpose. In August 2005, Google bought Android, a company started by Andy Rubin and others after they sold Danger (no pun) to Microsoft. Google's first smartphone, the aforementioned G1, looked a lot like Danger's Sidekick device. After the iPhone came out in 2007, Google's products took a distinctly Apple bent. Unsurprisingly, Google disagrees with Steve Jobs' strongly expressed opinion of their "sincere flattery."

Regardless, Google was right, the smartphone wars are on: This is the new PC, only bigger because it's smaller, more ubiquitous, more connected, more personal.

Google doesn't want anyone (but themselves) to control the smartphone market the way Microsoft dominated the PC; they don't want anyone to stand between the viewer and the ads they serve up. With Android, they engineered a Trojan Horse: the ''free and open" smartphone OS came with mandatory Google applications that guarantee the vital revenue-generating exposure to advertising.

As Bill Gurley explains in his memorable "The Freight Train That Is Android" post, Google wants its smartphone OS to flatten everything in its path – and it's succeeding: Android now has more 50% of the smartphone market. That dominant position was taken from Nokia, the former king; from Palm, now deceased; from RIM, sinking fast; and from Microsoft, struggling to get in third place with its truly modern but late to the game Windows Phone 7, this after losing the market because of its creaky Windows Mobile.

(Apple plays a different game. In the quarter ending in September 2011, it had a mere 14% smartphone share, but managed to get more than 52% of smartphone profits.)

Back to Facebook. Both Google and Zuckerberg's company vie for the same advertising dollars. This makes Google Facebook's biggest, most direct competitor. The Trojan Horse applications on Android-powered smartphones are a direct threat to Facebook's advertising business.

Just like Google, Facebook wants to maximize our exposure to ads that are finely-tuned using the personal data we provide as a payment for the service. For this, the company needs a well-controlled smartphone.

Apparently, Facebook's first home grown project was ditched and a manufacturing partner such as HTC is now being considered. For the software, let's assume that Facebook will following Amazon's lead and develop an Android "fork": open source code without the Android license and obligations.

The Amazon parallel is useful when considering the technical solution, but it breaks down when we think about revenue generation. Amazon's forked-Android device, the Kindle Fire, is a way to sell more content by lubricating the purchase and consumption processes. They sell more physical goods as well, all integrated into their very successful Prime deal.

We see no such processes and revenues for Facebook. The only justification for a Facebook smartphone would be a better user experience and a more effective vehicle for its advertising business.

It boils down to a comparison. On the one hand, an Android-powered smartphone – a Samsung Galaxy device, perhaps – with one good Facebook application and all the Google applications, the "evil" Google+ insinuating itself everywhere. On the other, a Facebook smartphone, with the Facebook experience on top of everything, its own app store, a Facebook browser, and Facebook Cloud Services.

I can't help but think that there's more to this hypothetical Facebook phone than a play against today's Google+ in defense of today's Facebook money pump. There must be something else in Facebook's future, a new revenue stream that it will eventually need to promote/protect. But what?

JLG@mondaynote.com

PS: If we needed confirmation of the impact of smartphones on e-commerce, we just got early reports on Thanksgiving shopping behaviour. According to Forbes and IBM Mobile Sales Hit It Out of the Park on Black Friday.

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