A Facebook-Branded Phone, or Something Similar, Appears More Likely

The idea of a Facebook-branded phone — an operating system, designed and produced together with a hardware partner — has been floating around tech circles for years, as Google, Microsoft and other companies have pushed out their branded devices. But there has been little confirmed information about it.

In the firmest report yet that Facebook actually has been acting on the idea, TechCrunch hears that it is actively working with a hardware company, and has assigned top engineers to the project.

We heard a similar report in June, as others have since, and like TechCrunch, one possible partner name floated to us was INQ, the maker of popular lower-end devices. Facebook has hedged when we’ve asked, since. Without denying or confirming a branded phone project, sources at the company have previously said that observers have long speculated that it would go into designing a mobile device. And that’s what the company’s official statement on the latest report basically says, too.

Facebook’s Motivations

Facebook has had trouble accessing some parts of the mobile ecosystem, even though it says it has signed up more than 200 mobile operator partners in 60 countries. Apple has yet to introduce any major Facebook integration, despite many hints in that direction — the Facebook iPhone application is now a main attraction in the iTunes App Store, but Apple is instead launching its own social products, like the Game Center and social music feature Ping. Google and its partners developing devices for its Android OS have not released significant Facebook integration, either, yet the Facebook Android app has quietly racked up millions of users.

While Apple tightly controls its ecosystem, Android is open — to the point that many operators are making their own devices, pre-installing their preferred apps, and app stores (in fact, one report points to Facebook using Android as the base for its own version).

Apple, Google and other companies also have their own ad networks and payment systems. Everyone in the mobile ecosystem is now trying to create a platform that it can control, and Facebook has so far been stuck in the developer role. With the largest social platform on the web, Facebook’s business model is designed around being the best platform for developers, and bringing in advertising and payments revenue.

A branded operating system would give it a clearer path to monetizing mobile devices than it currently has, that would directly plug into the company’s strengths. You can imagine the phone operating system providing APIs as an extension of its existing platform, making it easier for social games and the wide range of other apps in the world to build tightly integrated mobile versions. You can imagine Credits being the main way to pay for virtual currency in apps, or whatever else Facebook and third parties might try to sell as part of the mobile experience (location-based deals, perhaps?). And you can imagine Facebook’s own ads appearing in all parts of the system if not in apps.

And if you take the audience Facebook has to market the device to — it claims more than 500 million monthly active users, and 150 million current mobile users — you can see how the whole thing could get quality traction.

Facebook’s Focus

The motivations are clear. The engineers reportedly working on the project seem to show its intent.  Joe Hewitt and Matthew Papakipos, along with new hire Erick Tseng, have key relevant product experience.

Hewitt helped build an early version of Firefox, started working on a web-based operating system called Parakey, got acquired by Facebook in 2007, then developed the first versions of its iPhone application. He has more recently been working with Facebook’s various Android integrations. Papakipos left a productive stint at Google in June, after developing the Chrome OS and associated HTML5 APIs; the browser technology is designed to work well on mobile devices. Tseng, meanwhile, became Facebook’s head of mobile products in May, having been a key product manager for Android who won a lot of respect internally at the company during the last few years.

The project, by all accounts, could still be canceled, or could turn out to be less of an operating system and more an advanced version of the existing mobile platform options — ways for carriers and developers to integrate Facebook data and communication channels, that still rely on other companies to provide the core operating system.

Among other risks, Facebook could have trouble finding carriers for a branded device, as they have been trying hard to maintain control of payments revenue, if not ads and the developer platform. To get anyone to carry the phone, Facebook could be forced into tough revenue-sharing agreements. In addition, if Tseng and Papakipos are involved with the project and are to learn from Google’s mistakes in designing the Nexus One phone, Facebook and its partners will need to make significant commitments to market the device through conventional retail channels. One problem with the Nexus One, which Tseng shepherded through development in roughly nine months, was that Google decided to market the device solely online and wasn’t able to gain cooperation from mobile operators to sell the device in brick and mortar stores.

We could see the device not being available in all markets, and perhaps more intended for developing countries, where carriers are often already in complete control, and hungrier to sign up new users. Facebook Zero, a service that lets carriers provide some Facebook services for free in exchange for upselling the users to data plans, has already helped forge special mobile relationships for the company already. In several developing markets, mobile phone users often carry more than a single device, since communicating between different networks is quite expensive. A Facebook-integrated phone could bypass many traditional financial and logistical hurdles for communicating in these markets.

In all, Facebook is strategically forced to go deeper into mobile. On the positive side, it can directly expand its products, platform, and revenues — and if it doesn’t, Google, Apple will do it instead, and get between Facebook and users.

Kim-Mai Cutler contributed to this article.

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