The Facebook Phone won’t kill Google’s revenues…yet
Facebook’s devices seem to be complementary to Google’s mobile and search ambitions, but the two companies could butt heads down the road.
Mark Zuckerberg was on hand (virtually, below) at HTC’s Mobile World Congress event this morning to personally introduce what Facebook refuses to call the Facebook Phone. The “mobile social phones” from HTC (Salsa and Cha Cha pictured, right) look like your garden variety mid-range HTC Sense-laden Androids.
But, they have a blue Facebook button pasted on the bottom in what looks to be an aftermarket job akin to adding a nitrousbutton on a Camaro. Instead of weather, the huge Sense Clock widget displays your Facebook status timeline information. At this point, these devices seem innocuous.
But, clearly these phones weren’t designed from the ground up to be Facebook phones. That doesn’t matter, real Facebook phones are coming. Zuckerberg said that 12 such devices were coming this year. Combined with the little Gemalto SIM trick Facebook announced yesterday, these devices should give quite a lift for Facebook’s mobile efforts.
But what’s the net effect of Facebook’s foray into smartphones on Google GOOG?
Initially, these phones won’t mean much to Google and I expect to hear their “Facebook brings people to the web which is good for Google” type of response.
And that is true, at least for these initial phones. But as Facebook digs in deeper to HTC’s Sense and perhaps other Android device overlays, Google may have a problem keeping its products on the devices. For instance, Facebook’s location features may start to interfere with Google Latitude and all of its location-centric services tied to local advertising. That area is earmarked by Google for huge revenue gains in the coming years. Heck, they were willing to spend $6 billion on Groupon if that is any indication of Google’s mindset. Clearly, Facebook wants a bigger piece of that and by being part of the Android platform, they will get some leverage.
Google, on the other hand, will be motivated to keep Facebook from taking its mobile money. I’ve noticed that Google is being much less receptive to overlays and skins from carriers in their Android 3.0 devices (which at the moment are exclusively tablets, but there are rumors of phones).
If Google makes skinning impossible by carriers and manufacturers (hooray!) then Facebook will be cut out. However, since Android is open, Facebook could simply fork the OS and build their own version of it with Facebook’s locations services (and likely Bing’s search — Microsoft MSFT and Facebook are very friendly and Microsoft owns a small portion of Facebook). Chinese carriers have already forked Android for their own purposes with OMS and Tapas. Facebook is already hiring away Android developers who are likely hard at work on this right now.
It seems pretty clear, no matter what either company says publicly, this scenario is what is likely in the cards for the long term. The question will be: Can Facebook sell a forked version of Android on mobile devices? Will the carriers want it (they want their own control over mobile devices)? Will consumers? Clearly Google sees this threat coming so they either have to keep innovating ahead of Facebook to keep more and more compelling devices on the shelves, or they have to figure out some sort of way to block Facebook.
The strength of the Android and Google brands will certainly play a key defensive role. Facebook’s forked Android devices won’t be able to carry the Android or Google brands, for whatever that’s worth.