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Facebook’s mobile plans matter more than share prices

Published: May 31, 2012 | 7:13 am
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Facebook’s share price is mesmerising most observers but the more interesting story is whether the social network is planning a mobile phone, writes Shane Richmond

In the last two weeks roughly 170,000 Britons have joined Facebook, according to marketing firm Socialbakers. That’s equivalent to the population of Swansea signing up for the social network, which floated on Wall Street on May 18th.
The share price has since fallen below $30, leading to the IPO being described as the worst major flotation in a decade. The days since then have been filled with articles obsessing over the position of the stock price and asking what that says about the future of Facebook. Meanwhile, the site continues to grow and its 900 million users keep coming back.
Investor and entrepreneur Paul Kedrosky told The Atlantic magazine this week: “Confusing the trainwreck IPO with the company’s fortunes is classic market myopia, getting caught up in short-term drama and forgetting what was interesting in the first place.”
That’s not to say there aren’t legitimate concerns about Facebook’s future. The countries in which growth is highest are mostly poorer, which means less profit per user for Facebook. And the social network admitted before its IPO that it had struggled to make money from mobile users, which is a problem because users are increasingly likely to use Facebook on their mobile phones.
When the New York Times reported this week that Facebook was planning a mobile phone of its own, nobody was that surprised. This is Facebook’s third attempt at creating a mobile phone, according to an anonymous New York Times source, and the company has been recruiting engineers who have worked on Apple’s iPhone in a bid to make the project a success this time.

Facebook would not necessarily have to build its own phone and operating system from scratch. It could partner with another company to build the hardware, as Google has done with handsets such as the Nexus One, built by HTC, and the Nexus S, built by Samsung.
The company could follow the example set by Amazon with the Kindle Fire and take Google’s Android operating system as its base and then overlay its own interface so completely that it creates, in effect, a Facebook phone.
Whatever approach it takes, Facebook has a difficult task if it really does plan to build its own phone. Previously successful brands, such as Nokia and Blackberry-maker RIM, are struggling and very few manufacturers are selling handsets profitably.
This would, however, be a way for Facebook to get smartphones to those people in poorer countries who are joining the service in such numbers. By drawing data from every aspect of their mobile interactions, Facebook could perhaps make them more profitable.
Facebook has not said anything beyond a statement it issued last year, which said: “We’re working across the entire mobile industry; with operators, hardware manufacturers, OS providers, and application developers.”
The question is whether Facebook needs to go so far as to create its own mobile phone. Last year, when Apple announced the fifth version of iOS, the operating system that runs its iPhone, the company embedded Twitter throughout. Your contacts book adds Twitter names where applicable, the browser, Safari, can post directly to Twitter and other apps can access your Twitter account if you choose to let them.
Apple and Facebook have not had the best relationship in recent years but Apple’s chief executive, Tim Cook, suggested on Tuesday that the two companies might be on better terms.
He said: “Facebook has hundreds of millions of customers. So, anyone that has an iPhone or iPad, we want them to have the best experience with Facebook on those platforms. So stay tuned.”
That could mean Facebook integration is coming to iOS. The next challenge would be to achieve similar integration with Android – something that could prove tricky because both Google and Facebook make their money by selling ads based on what they know about users.
Nevertheless, that’s a route that looks safer and more likely to succeed than diving into the handset market.

telegraph

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