Will a Facebook phone flop?

Rumours surrounding the development of an official “Facebook phone” have been given new life this week, after reports emerged stating the world's largest social network is collaborating with HTC to build its own handset.

While the formation of a Facebook mobile “special ops” team created a buzz over a year ago, there has yet to be anything concrete to show for their efforts.

Facebook has partnered with numerous manufacturers to bring deep integration to phones such as the HTC Cha-Cha and the Vodafone 555 Blue. These, and similar phones with dedicated Facebook buttons have, however, failed to win over the market.

Now, according to AllThingsD, Facebook has chosen HTC as its hardware partner for the development of an original phone, built around the social network from the ground up on a custom-built Android operating system.

Since choice of hardware partner has only just been made, the actual handset is only expected to appear in the next 12 to 18 months.

AllThingsD claims the handset is code-named “Buffy” (its predecessor that failed to materialise was said to be the “Slayer”).

According to Facebook, it has 350 million active mobile users (and over 750 million active users in total) and already 475 established relationships with mobile operators.

World Wide Worx MD Arthur Goldstuck says there are two motivations behind a potential “Facebook phone”.

“The fact that Facebook is by far the most common application on smartphones worldwide means there is already a broad footprint to capitalise on.

“Facebook has a massive user-base, one of the largest in history, so leveraging that to expand their advertising revenue is a huge opportunity.

“Facebook also has the advantage of knowing exactly who their users are and being able to market directly to them, so from a commercial perspective, a Facebook phone makes absolute sense,” says Goldstuck.

“The question is though: does a user want a Facebook phone? And the answer to that is probably no.

“Just about every phone released currently comes with Facebook functionality, so Facebook alone isn't a strong enough value proposition.”

Reports say the main battleground for Facebook and its mobile venture will lie in the control of the mobile payments space.

TechCrunch argues a Facebook phone could “fight off the Apple App Store, turn Android against Google, and make more money through in-app payments”. This would be a possibility if the customised OS could replace the Android Market with easy access to Facebook apps, and could leverage Facebook Credits.

According to Goldstuck, there is “tremendous potential” for the Facebook phone in the low-cost phone market.

“In the developing world, Facebook is one of the first apps people download. For many, it actually serves as their primary mode of Internet access.”

As a result, Goldstuck says many of the current low-cost phones with deep Facebook integration have attempted to leverage the current excitement surrounding social media by providing easy and low-cost access to popular services.

France telco Orange recently announced a new range of low-cost phones with Facebook integration designed specifically for Africa and Europe.

The Alcatel handsets, including the One Touch 908F Android smartphone, are priced under EUR100 and feature dedicated Facebook buttons.

Orange's SVP of mobile multimedia and devices, Yves Maitre, says: “The rise of the smartphone and the explosion of social networks have completely changed how people keep in touch and share content.”

According to Goldstuck, a dedicated Facebook button itself is not a draw card.

“These handsets are trying to recreate the success of the Huawei Ideos, in Kenya,” says Goldstuck. Since its January release, the handset already commands 75% of the country's smartphone market.

“It's an Android phone with a touch-screen that can act as a WiFi hotspot. Another key thing was that the phone was marketed as the 'Google Phone' and that powerful brand name did a lot for the overall image of the phone.”

Goldstuck adds that equally significant to the success of the handset was its built-in Facebook and Twitter functionality.

“Without it needing to be a 'Facebook Phone' the marketing of the social media functionality alone was enough. A phone that has exclusive Facebook functionality would not see the same success.”

Goldstuck argues that as a result, a Facebook handset would have to offer more than just Facebook.

“In order for a Facebook phone to be competitive, it would have to allow for all of the other social applications and services. Take Twitter for example, there just can't be any attempt to limit such a service from Facebook's side.”

While some have speculated that the quality of Facebook's current mobile application needs work and does not bode well for a pure Facebook phone and is the equivalent of trying to run before learning to walk, Goldstuck says: “I agree that the application is lacking, but that doesn't mean that Facebook should stop developing other mobile capacities.

“It's always been the nature of Facebook to work on multiple products at once. So it's not really a question of running before learning how to walk, but rather not focusing solely on building up the legs and instead using the arms and the legs together.”