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A Facebook phone could be in the works, serving as the company’s latest bold attempt to increase revenue and make money from its one billion users.
The social media giant sent out invites last week to a press event, “Come See Our Home on Android.” Facebook Inc. (Nasdaq: FB) will host the event at its Menlo Park, CA headquarters Thursday.
Rumors state the mobile device will use customized software that’s a version of Google Inc.’s (Nasdaq: GOOG) Android 4.2 OS. The software will dominate a user’s home screen. Updates and information from a user’s Facebook account will be posted constantly.
Industry insiders believe the company is working on the smartphone in collaboration with Taiwan’s HTC. This is the second time the companies have collaborated on a Facebook-focused phone – with the first attempt only lasting a few months.
Could it be that second time’s the charm?
Why a Facebook Phone?
Facebook is the most downloaded app on smartphones, so a Facebook-focused phone seems a likely move from the social networker. Some 680 million of Facebook’s more than one billion users access their accounts via mobile.
“It could drive more frequent access of Facebook and ultimately, more time spent on Facebook and more advertising revenue,” Robert W. Baird & Co. analyst Colin Sebastian told The Wall Street Journal.
The social network giant has actively added new features aimed at keeping members coming back to the site more often and staying there longer in attempts to boost advertising revenue. Q4 mobile ads accounted for 23% of Facebook’s ad revenue.
The phone will reportedly look similar to the black iPhone, with a slightly larger 4.3-inch screen. The rumored features include a modest 5 mega-pixel back camera, 1.6 mega-pixel front camera for video calling, and 15 gigabytes of storage. Despite all the rumors, a price hasn’t been leaked.
But the main question is, will consumers really buy a Facebook phone if they can just access the app on the phone they already own?
Will Members – or Anyone – Want a Facebook Phone?
Persuading smartphone users to switch to a Facebook phone as their primary device seems like a tough sell. Users would have to constantly switch between messaging, calling and email modes to contact a person who does not have a Facebook account.
Plus, constant updates and posts could lead to Facebook overload. A Facebook-focused phone could also turn off users if it becomes difficult to find or use other apps.
CEO Mark Zuckerberg had previously dismissed the idea of a new Facebook phone – a sign this might be a last-ditch effort to make money.
“We’re not going to build a phone,” said Zuckerberg last year. A phone would be “the wrong strategy” and would probably “only attract a small number of new customers,” the leader added.
Zuckerberg was speaking from experience.
In June 2011, Facebook launched the HTC ChaCha and Salsa phones. Both featured a dedicated Facebook button that lit up whenever the user shared content or status updates.
The phones were a flop. Sales were discontinued after a few short months.
Yet, Facebook remains determined to morph into a company that’s mastered mobile.
At a TechCrunch conference last September, Zuckerberg said for “every person who’s using Facebook on mobile, there’s more engagement and they’re spending more time. We think we’ll make a lot more money (on mobile) than on the desktop.”
Facebook Stock Needs…. Something
We’re not convinced a Facebook phone is the right answer, but something needs to dazzle investors.
Facebook stock is currently trading 30% below the $38 IPO price.
The IPO was trouble from the start. After the first five days of trading, Bloomberg crowned Facebook as the worst-performing IPO of the decade.
Shares went on to lose more than half of their value, hitting a low of $17.55 in August 2012.
Many Facebook stock investors have bailed this year. Shares are down 4% this year while markets have hit record highs.
Even as rumors swirled of a Facebook phone, shares fell nearly 1% since last week, suggesting investors aren’t impressed or buying the hype.
We’ll find out Thursday, April 4 if a Facebook phone is indeed in store.
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