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turtle777 · May 28, 2012, 01:30 PM

Rumors are heating up again that Facebook is working on a mobile phone.

Facebook reportedly back to building phones, recruiting former iPhone engineers -- Engadget

To me, this is one more sign that Facebook is completely overvalued, and has no effing clue how to go forward from here.

A physical Facebook mobile phone strikes me as a typical Loss-Loss situation.

Either they are successful with the phone, and provide a superior Facebook experience for its users, but at the cost of pissing off all other phone users with sub-par Facebook app experiences;
Or they pour tons of money into this w/o being successful.

At any rate, it's hard to see how this is going to fix Facebook's main problem: monetizing on mobile Facebook usage.

Opinions ?

-t

besson3c · May 28, 2012, 02:12 PM

If this is true it sounds like Facebook management is having difficulty focusing on its core strengths. I guess it's possible that they have all of these great employees in house that know hardware well, manufacturing facilities, industrial designers, etc. but I really doubt that.

Facebook probably does need more than one product, but to me diversifying their product line by working on a new web service makes more sense than getting into making phones. Google did really well for a long time with just search though, but even they don't make a damn phone, and they probably could come up with the same justification as far as advancing Google Plus goes.

turtle777 · May 28, 2012, 02:44 PM

It sounds like a move out of desperation. If they can't think of *anything* software related to diversify, they truly have peaked.

At any rate, it's going to be a carnage when the markets open tomorrow. FB will drop more, probably below $30.

-t

subego · May 28, 2012, 05:47 PM

Originally Posted by turtle777

Either they are successful with the phone, and provide a superior Facebook experience for its users, but at the cost of pissing off all other phone users with sub-par Facebook app experiences;
Or they pour tons of money into this w/o being successful.

This isn't their plan. Any phone they put out is going to target the feature phone market.

The app experience is going to be secondary to the texting and data plan contracts.

besson3c · May 28, 2012, 05:53 PM

The more I think about this, the more I think that Facebook really isn't interested in the total experience of the phone ranging from the hardware to the OS to the UI, they probably just want to work closer to the individual Android phone makers to ensure that Facebook is an important part of the phone. By bringing abord phone experts they can help develop concept phones and building pieces that can be licensed to the phone makers.

To me this would make far more sense than making phones designed to compete directly with Samsung and the like.

I'd really like to know what it is about Facebook's relationship with Apple that has prevented more Facebook integration with Apple's stuff...

turtle777 · May 28, 2012, 09:27 PM

Originally Posted by subego

This isn't their plan. Any phone they put out is going to target the feature phone market.

Even worse. So Facebook has no more ideas how to expand in the area that made them successful (software - Social Media), so now they go after a complete new market and technology (hardware - mobile phones).

Horrible strategy.

-t

Waragainstsleep · May 28, 2012, 09:35 PM

Originally Posted by besson3c

I'd really like to know what it is about Facebook's relationship with Apple that has prevented more Facebook integration with Apple's stuff...

Doesn't Micro$oft still own a big chunk?

subego · May 29, 2012, 12:19 AM

Originally Posted by turtle777

Even worse. So Facebook has no more ideas how to expand in the area that made them successful (software - Social Media), so now they go after a complete new market and technology (hardware - mobile phones).

Horrible strategy.

-t

There's no reason to expand if you won't be able to keep it down the line.

FaceBook doesn't have any genuine lock-in. What it has is inertia. You can't count on that forever.

Full disclosure: not on the Facebook myself.

turtle777 · May 29, 2012, 12:51 AM

Originally Posted by subego

There's no reason to expand if you won't be able to keep it down the line.

FaceBook doesn't have any genuine lock-in. What it has is inertia. You can't count on that forever.

Well, I agree, but how does making your own handsets help ?

If you lock-in the few on your handset, you'll lose the million others. What's the game plan ?

-t

subego · May 29, 2012, 12:56 AM

Lock-in is not lock-out.

Think Amazon.

jmiddel · May 29, 2012, 02:51 AM

Originally Posted by turtle777

It sounds like a move out of desperation. If they can't think of *anything* software related to diversify, they truly have peaked.

At any rate, it's going to be a carnage when the markets open tomorrow. FB will drop more, probably below $30.

-t

I agree, in the sense that FB simply has no business getting into hardware of any sort, I mean, what's the point. But why should FB be desperate? They have huge growth potential, both in expanding the user base, as well as adding services possible on such a large network. It can't just be the so so IPO, they were thinking of this for a while. Is this a possible Zuck brain fart?

besson3c · May 29, 2012, 04:08 AM

What if all of this is simply about working with the existing phone makers to modify Android as needed to Facebook-ize it, and sell Facebook branded phones as new models of one of these existing phone makers? Didn't Apple do that with Motorola and some sort of iTunes phone?

Waragainstsleep · May 29, 2012, 05:44 AM

That strategy seems more likely to succeed. Though it didn't for Apple.

turtle777 · May 29, 2012, 09:00 AM

Originally Posted by subego

Lock-in is not lock-out.

Think Amazon.

If you don't give your now handset users something better / more than other app users (which I would call a lock-in & lock-out), then there is NO reason for anyone to buy that phone.

-t

turtle777 · May 29, 2012, 09:02 AM

Originally Posted by besson3c

What if all of this is simply about working with the existing phone makers to modify Android as needed to Facebook-ize it, and sell Facebook branded phones as new models of one of these existing phone makers? Didn't Apple do that with Motorola and some sort of iTunes phone?

Of course, we don't know all the details, but the current rumors don't speak about re-branded phones.

But even if that was the case, how the heck is this going to save Facebook or make a significant impact on their business ?

-t

Eug · 09:57 AM

I agree that FB is overvalued, and also that they probably are having some trouble clarifying their future goals.

Nonetheless, this thread sounds an awful lot like the handwringing about Google when they first started, and when they decided to get into the phone business.

Disclosure:
I don't have any FB stock, and I've never had a FB account either. FB just seems like an equally narcissistic middle-class version of MySpace, without the background pictures of guns.

Originally Posted by Waragainstsleep

That strategy seems more likely to succeed. Though it didn't for Apple.

The product of the partnership didn't, but Apple learned a lot from it. The Motorola/Apple phone showed Apple in a real product just what was wrong with that approach and design, and at the same time got Apple's foot in the door for a future product. iPhone FTW.

turtle777 · May 29, 2012, 10:34 AM

Originally Posted by Eug

I agree that FB is overvalued, and also that they probably are having some trouble clarifying their future goals.

Nonetheless, this thread sounds an awful lot like the handwringing about Google when they first started, and when they decided to get into the phone business.

But Google's valuation (P/E) is (and was) much more realistic.
FB has currently a P/E of 96. No way someone who makes hardware can justify that valuation. It's already too much for a software only company.

Btw, FB down to almost 30. The markets didn't take the phone business idea positively.

-t

Eug · May 29, 2012, 11:09 AM

Developing a phone may be a good idea or it may be a bad idea, but FB's valuation being too high has very little to do with that. Do you really think FB would not be developing a phone if they raised a few $billion less in the IPO?

turtle777 · May 29, 2012, 11:13 AM

Originally Posted by Eug

Developing a phone may be a good idea or it may be a bad idea, but FB's valuation being too high has very little to do with that. Do you really think FB would not be developing a phone if they raised a few $billion less in the IPO?

I'm not sure what you're saying.

Fact is: software companies traditionally had a higher P/E than manufacturing / hardware companies.

At the current high P/E of FB, it's going to be even harder to justify the P/E if they get into the hardware business.

-t

freudling · May 29, 2012, 02:55 PM

Do you know how difficult it is to make a competitive smartphone? I assume they mean smartphone. Most companies are failing at it.

I don't see how Facebook can do it. That sounds like a huge risk. Why would anyone want to buy a phone from Facebook with Apple and Samsung owning the market? This is just dumb. Facebook is all over the place. They're just a Website!

That's it!

Eug · May 29, 2012, 02:58 PM

That's the same argument people used against Google making a smartphone.

And like others have said, for all we know, facebook may just be partnering with others to co-develop the software and UI for certain phones, for facebook and instagram implementation.

freudling · May 30, 2012, 01:16 AM

Originally Posted by Eug

That's the same argument people used against Google making a smartphone.

And like others have said, for all we know, facebook may just be partnering with others to co-develop the software and UI for certain phones, for facebook and instagram implementation.

And how did Google make out in the phone making business?

turtle777 · May 30, 2012, 12:53 PM

We will only know now that the Motorola acquisition is done.

There is no way FB can be successful on their own in the hardware business. It's not only the know how and skills, but also the lack of patents. Hey, FB should buy RIMM

Good luck, FB.

-t

Eug · May 30, 2012, 12:58 PM

Originally Posted by freudling

And how did Google make out in the phone making business?

Pretty good, considering their OS owns half of the US smartphone market, almost twice that of Apple's share.

Big Mac · May 30, 2012, 01:15 PM

And Apple makes most all of the smartphone profits.

Spheric Harlot · May 30, 2012, 01:17 PM

Originally Posted by Eug

Pretty good, considering their OS owns half of the US smartphone market, almost twice that of Apple's share.

Really?

Google are making half the money in the smartphone market? Off their own phones, no less?

In what universe?

Even if you allow for the cries of "Android is winning!", in whichever way you might construe the data to actually support that claim, Android "winning" certainly doesn't mean that Google is.

turtle777 · May 30, 2012, 01:18 PM

Originally Posted by Eug

Pretty good, considering their OS owns half of the US smartphone market, almost twice that of Apple's share.

Uhm, you're a little ahead of yourself. So far, Google hasn't "made" any phones.
They only made a free OS.

I'll be blunt: Zuckerberg is not smart enough to beat Google at the mobile phone OS game.

-t

Big Mac · May 30, 2012, 01:28 PM

To be fair to Eug, while his phraseology was sensational, he wrote that Google's OS owns half of the US smartphone market. Android is on a ton of smartphones in the US and abroad, although I'd argue that a large portion of them are used more like glorified feature phones. And Eug mentioned nothing about revenues or profits going to Google from the Android business. He referenced only OS market share.

Spheric Harlot · May 30, 2012, 01:47 PM

Which is a complete non-sequitur to the point freudling was making.

Big Mac · May 30, 2012, 01:55 PM

Not complete. Google has down well in the phone business if its objective was to control a mass market smartphone OS platform that is hugely fragmented. Google hasn't done so well if revenue, profits and long term platform health are the prime considerations.

subego · May 30, 2012, 02:31 PM

Originally Posted by turtle777

Uhm, you're a little ahead of yourself. So far, Google hasn't "made" any phones.
They only made a free OS.

Who makes the Nexus phones?

Big Mac · May 30, 2012, 02:33 PM

Samsung, arguably.

nonhuman · May 30, 2012, 02:44 PM

Originally Posted by subego

Who makes the Nexus phones?

Different Nexus phones have been made by different manufacturers. The Nexus One was manufactured by HTC. The Nexus S by Samsung. I believe Motorola has done one as well.

Big Mac · May 30, 2012, 02:51 PM

Is Facebook going to try to pull a RIMM job? They have cash while RIMM is circling the toilet, and they want in to the smartphone space. They're both being linked together as flailing in the market right now.

nonhuman · May 30, 2012, 02:55 PM

Originally Posted by Big Mac

Is Facebook going to try to pull a RIMM job? They have cash while RIMM is circling the toilet, and they want in to the smartphone space.

That would definitely be an interesting move. Though Facebook would really only be interested in their handset/tablet and software divisions; wouldn't do them much good to have to take on the aging, buggy, enterprise email infrastructure.

Another interesting possibility is WebOS. Though it's hard to say how that's going to shake out with HP open sourcing it.

Eug · 03:36 PM

Originally Posted by Big Mac

To be fair to Eug, while his phraseology was sensational, he wrote that Google's OS owns half of the US smartphone market. Android is on a ton of smartphones in the US and abroad, although I'd argue that a large portion of them are used more like glorified feature phones. And Eug mentioned nothing about revenues or profits going to Google from the Android business. He referenced only OS market share.

Originally Posted by Spheric Harlot

Which is a complete non-sequitur to the point freudling was making.

It seems that freudling and a few of the others have missed the point as usual. Google doesn't need to make the phone. It needs to ensure that the OS is prepared to be able to leverage itself in such a way to monetize the installed base. The same is true for facebook. Zuckerberg is right to be afraid that facebook's only mobile presence would remain only as a simple app for iOS or Android, an afterthought.

Yeah, Apple makes more money because they also reap the profits on the hardware and media too, but facebook doesn't have to use Apple's business model to profit from working on phones.

turtle777 · May 30, 2012, 03:37 PM

Originally Posted by Eug

It seems that freudling and a few of the others have missed the point as usual. Google

I'm afraid you might be in the same camp.

Originally Posted by Eug

Google doesn't need to make the phone. It needs to ensure that the OS is prepared to be able to leverage the OS in such a way to monetize the installed base. The same is true for facebook. Zuckerberg is right to be afraid that facebook's only mobile presence would remain only as a simple app for iOS or Android, an afterthought.

Google doesn't need to make a profit with Android. At least not right now. They can "buy" market share in mobile OS space by offering the mobile OS for free for a long time.

FB can't possibly go teh same route. Their profit is already too low to justify the high valuation. Whatever they do with all that cash, it better be making money. Handing out a free mobile OS will not only cost tons, it won't do ANYTHING for their revenue stream.

-t

Eug · May 30, 2012, 04:10 PM

Originally Posted by turtle777

Google doesn't need to make a profit with Android. At least not right now.

According to Google itself, Android is profitable. Right now. In fact, they said this a couple of years ago.

Current estimates of indirect revenue from Android are in the few billion range, with profit in the billion range. These estimates may arguably be a bit rich, but nonetheless they demonstrate just how important Android is to them. In fact, two years ago, they projected that Android would be responsible for about $10 billion worth of revenue per year.

Big Mac · May 30, 2012, 04:12 PM

That's why Apple needs to kill them all. Thieves.

That's Apple's money damn it!

Waragainstsleep · May 30, 2012, 04:15 PM

Facebook is built on ad revenue, just like Google. I see no reason they couldn't give away a free phone OS other than Google already did it so why switch one buggy, fragmented OS for another. If M$ can't manage it, it seems unlikely Facebook will. They'd be better off trying to do something like Amazon did with the Kindle network coverage deal. Maybe a Facebook watch that you can use FB messaging on from anywhere with a cell signal. Which also shows ads.

Spheric Harlot · May 30, 2012, 04:34 PM

Originally Posted by Big Mac

Not complete. Google has down well in the phone business if its objective was to control a mass market smartphone OS platform that is hugely fragmented.

Even then they haven't done well, at all—they have no control.

Spheric Harlot · May 30, 2012, 04:36 PM

Originally Posted by Eug

It seems that freudling and a few of the others have missed the point as usual. Google doesn't need to make the phone. It needs to ensure that the OS is prepared to be able to leverage itself in such a way to monetize the installed base.

Google makes more profit off iOS (despite lower market share) than off Android.

(One of?) The biggest-selling Android-based tablet (the Kindle Fire) provides Google with no revenue whatsoever.

Whatever Google intended, I'm pretty sure it didn't come out as planned.

Eug · May 30, 2012, 04:38 PM

Originally Posted by Big Mac

That's why Apple needs to kill them all. Thieves.

That's Apple's money damn it!

To make matters worse, Android was developed by an ex-Apple employee.

turtle777 · May 30, 2012, 04:47 PM

Originally Posted by Eug

According to Google itself, Android is profitable. Right now. In fact, they said this a couple of years ago.

Current estimates of indirect revenue from Android are in the few billion range, with profit in the billion range. These estimates may arguably be a bit rich, but nonetheless they demonstrate just how important Android is to them. In fact, two years ago, they projected that Android would be responsible for about $10 billion worth of revenue per year.

Android ITSELF can not be profitable, becaue it's given away for free.
It's cross-subsidized by ad revenue. But that doesn't make Android itself profitable.

Nonethelss, yes ad revenue is what Google is all about.

Sure, FB would like to be Google and more. But they haven't even figured out how to monetize on Facebook apps. Trying to get into the mobile OS market so they could magically generate ad revenue is quite a stretch.

Like I said, given the current valuation, they need to be more than successful to justify an ongoing P/E of over 90.

-t

Spheric Harlot · May 30, 2012, 04:50 PM

Originally Posted by Eug

To make matters worse, Android was developed by an ex-Apple employee.

Well, Andy Rubin was an Apple employee from 1989-1992.

Not sure that counts for anything.

turtle777 · May 30, 2012, 04:59 PM

LOL, maybe FB will gobble up some Apple executives from the Gil Amelio era

-t

freudling · Jun 1, 2012, 05:32 PM

Originally Posted by Eug

Pretty good, considering their OS owns half of the US smartphone market, almost twice that of Apple's share.

You have missed the point as usual and have failed to read what others have said. We weren't referring to Android, we were referring to the making of physical phones.

freudling · Jun 1, 2012, 05:37 PM

Originally Posted by Eug

It seems that freudling and a few of the others have missed the point as usual. Google doesn't need to make the phone. It needs to ensure that the OS is prepared to be able to leverage itself in such a way to monetize the installed base. The same is true for facebook. Zuckerberg is right to be afraid that facebook's only mobile presence would remain only as a simple app for iOS or Android, an afterthought.

Yeah, Apple makes more money because they also reap the profits on the hardware and media too, but facebook doesn't have to use Apple's business model to profit from working on phones.

No no no. Unless I'm missing something, the articles have stated that FaceBook is thinking of making an actual physical phone. That's what we're referring to. I think it's foolish for them to make their own phone because it's so competitive with Samsung and Apple there, and other phone companies who've been at this for years throwing piles of money at this and not sticking.

Now, if they were thinking of making a mobile OS... which as far as I know it's not that... it's a physical phone and maybe some software... if they just go the software route, I'd bet everything they'd fail at it. Nobody needs it. Nobody needs another rip off iOS or multi-touch OS. And if they tried to do it... good luck. That's a money sucking operation with no end in sight.

So where does that leave FaceBook? Exactly where they seem not to want to be: just an App on someone else's ecosystem.

All FaceBook is is a Website. That's it.

Eug · Jun 1, 2012, 06:27 PM

You're thinking too concretely. I have no doubt facebook is looking into this, but just because some rumour monger believes that facebook is actively trying to fill in the void made by the slowly disappearing RIM, it doesn't mean they're actually correct.

I think it makes much more sense that facebook wants to somehow insert itself into the mobile picture, and is exploring different ways of doing it, with hardware design just being one method.

turtle777 · Jun 1, 2012, 06:58 PM

Yeah, but under the premise that they really wanted to make a physical phone, wouldn't you agree it would be an almost guaranteed failure ? That's the whole point of discussion in this thread.

-t