Update: April 6, 2013 4:40 PST.
I had a chance to correspond with a Facebook spokesperson, and Facebook Home turns out to be more disruptive than it appears. You can read more about how VoIP may be integrated into Chat Heads here.
Update: Facebook Home was announced and, unfortunately for Facebook investors, there appears to be very little that is innovative or disruptive about the new product. I predicted that the announcement would be ho-hum, but I expected something more than an upgrade to the existing Facebook App. I've got a call in to Facebook for more clarification. I'm seeking to find out if there is any improvement in sound quality, an embrace of a "names not numbers" approach, integrated VoIP calling, innovations around gaming or push notifications for advertisers. Stay tuned for a follow-up post this weekend.
Facebook is expected to announce today mobile phone software based on the Android operating system and perhaps a Facebook phone as well, made in partnership with HTC. And no one seems to care.
(Photo credit: Ludovic Toinel)
The news of the impending arrival of the "FacePhone" has yet to ignite even a fraction of the interest of other unavailable—yet highly anticipated—products like Google Glass and the iWatch. Popular Science bluntly sums up the vox populi in its article "Nobody Wants A Facebook Phone."
The article covers familiar ground. It compares the as-yet-hypothetical Facebook Phone with the Amazon Kindle. Both Facebook and Amazon seem to share the approach of slapping a skin on top of Android —but the author, Dan Nosowitz, argues that Amazon was successful because it was able to offer a cheaper tablet while Facebook will be stuck offering a me-too smartphone.
It's a good article and worth reading even though the author is wrong. Thanks to the release of the Facebook Phone at this particular moment in time, it has the potential to be highly disruptive to the entire telecommunications ecosystem. But to do so Facebook has to take full advantage of new technologies like WebRTC, while creating a user experience that is both familiar and pleasantly surprising. This is a major caveat. It’s unlikely the benefits of a Facebook Phone will be realized overnight.
The first question people ask about a Facebook Phone is why they would want one? People hate Facebook's Android app, so expectations for additional mobile software from Zuckerberg's engineers are low.
Here's how Zuck’s engineers could prove them wrong:
- The sound quality on a Facebook phone could be dramatically better than any other phone on the U.S. market. Currently both Android and iPhone phones support HD Voice. But you'd never know it because carrier networks haven't been upgraded to deliver it. Facebook could get around this by offering a Voice over IP or VoIP-based service, Anyone who called anyone else with a Facebook Phone would have crystal clear audio.
- A Facebook Phone could finally change the paradigm for how we connect using communications networks by introducing a new era of names instead of numbers. People are tired of remembering phone numbers. For 130+ years, telephone companies have relied on strings of digits, sometimes combined with letters, to connect calls between people. In the age of the Internet, however, the traditional number scheme is increasingly obsolete. The SIP protocol used in VoIP connects calls using SIP addresses that look a lot like email addresses. There's no reason why people using a Facebook Phone couldn’t just “click to call” a Facebook friend, regardless of whether they had his or her phone number or not. The phone number finally becomes irrelevant.
- A Facebook Phone could provide presence information. One of the best things about Internet chat is it lets you know if someone is available to be contacted. This presence information has been difficult to seamlessly incorporate into the design of current smartphones, but it would be more straightforward on a Facebook Phone.
- A Facebook Phone could be much cheaper than a traditional phone. So-called "over the top" services from companies like Viber, WhatsApp, Plingm and Vuilop offer free calls and messaging because they run over the Internet instead of the public switched telephone network. Facebook not only could offer an over the top telephone service, it could subsidize the cost of connecting to the public switched telephone network through advertising. Different pricing could be offered to people depending on the value they offer Facebook—including their propensity to buy from Facebook advertisers or their social clout.
- A Facebook Phone could merge gaming and telephony. A collection of communications protocols known as WebRTC that make it exceedingly easy for one person to exchange any kind of data (voice, video, audio or real-time screen images) with another person could be incorporated into the phone in such a way that launching a rich multi-player game is as easy as making a phone call. Currently, 18 percent of time spent on a mobile phone is taken up by Facebook, while 32 percent is taken up by games. By combining the two experiences, a Facebook phone could potentially offer desirable new experiences as well as new revenue streams. The alliance that Facebook announced last month with Unity Technologies could help make this a reality.
A second question people have is what Facebook would get from offering a Facebook Phone?
The answer is clearly more mobile advertising revenue—but that's not because Facebook will simply slap more ads on a Facebook Phone. An ad-ridden phone is unlikely to be desired by high-spending demographics. Instead, it’s more likely Facebook will use the phone to forge deeper, more personal, less intrusive relationships with its users. More and better mobile advertising would be great news for Facebook investors.
Here's how mobile advertising on the Facebook Phone could work:
- highly relevant, deeply personal ads would be incorporated into push notifications on the home screen. According to Adweek, the push notification—an unobtrusive message that let you know about new activities ranging from missed calls and new SMS messages to Twitter replies—"is a tactic that is beginning to take hold among brands that want to maximize the personal consumer connection afforded by mobile apps."
For advertisers, push notifications are much cheaper than SMS notifications, which are marked up to pennies a minute by carriers and network middlemen. Push notifications can also be sent at rates of a thousand or more per second. In comparison, SMS notifications are sent at rates above one message per second require expensive short codes. The lowest cost for a short code is around $1,000 per month, plus the cost of a message. Even with bulk discounts that bring the cost below half a cent per message, the expense adds up. Push notifications via the Facebook phone would be able to undercut the prices of virtually any SMS notification while providing advertisers access to a highly desirable demographic. And by embedding the push notifications in other Facebook notifications, Facebook would ensure they get read. - advertising on the Facebook Phone could be minutely tuned to each user based on their Facebook activity and real-world context. Personalized advertising has been around awhile, but a Facebook Phone could take this practice to a new level, assuming that the data collected by the phone including location, usage passages and audio context would be accessible to some master advertising algorithm. Like Siri and Google Now, a Facebook Phone will likely aspire to be an omniscient butler whispering in your ear, reminding you to leave catch your plane, to fast before your doctor's appointment or to meet friends who are taking advantage of a happy hour around the corner. None of these services will become the Star Trek computer overnight, but overtime, they will get smarter and smarter until we will not be able to live without them.
There are multiple reasons why a Facebook Phone, done right, would be highly attractive to hundreds of millions of Facebook users. If that happened, it could turn the traditional telecom ecosystem upside down. That’s because the ecosystem is built around the idea of a public switched telephone network. The current transition to IP-based telephony preserves much of those assumptions, because it’s the only world the carriers, who are currently in charge, know.
But Facebook has no incentive to play by traditional rules. Its young engineers have grown up in a world of over-the-top services, and they can easily see the benefits of a carrier-free world, where data networks managed by the big Internet players, transport all the bits that matter.
I’m not yet an investor in Facebook, but I plan to become one soon. Today’s announcement is likely to be ho-hum, there are too many pieces that need to be put in place before a Facebook Phone is “insanely great," but the roadmap is crystal clear. Zuck is on his way to becoming the next Steve Jobs.