Sunday, 3 June 2012

Facebook phone is a good idea

There is an article on The Age titled Facebook smartphone? Dumb idea that criticizes the idea that Facebook may create its own line of smartphones.

The article states that there is not much money to be made in smartphones. According to the article, there are two ways of making money in the smartphone industry: the Apply way, which involves creating a phone that is worth $150 and then selling it for $800, thereby making huge profits and making Apple one of the biggest publicy owned companies in the world; the Android way, which involves creating a phone at a cost that varies from $100 to $800 and selling it for only a little bit more, thereby making small profits.  The article assumes that Facebook will opt for the Android way and maybe use the free and open Android operating system or create its own operating system and gain market share by heavily subsidizing the phone and lowering its cost considerably. Facebook intends to make money by gaining large market share and then putting ads on the phones.

I don't think this is a bad idea. However, the article states that this is a poor idea because Facebook is already integrated in most Android and iOS phones. This may be true but Facebook does not control the prices of these phones. Rather, Apple, Samsung, HTC, and so forth control the prices. If Facebook makes a phone, it can subsidize heavily and undercut the rest.

I wouldn't mind buying a supercheap phone and have ads on my Facebook. I'd rather see ads on my Facebook than pay more money on a phone. Comparing smartphones with 1GHz processing power only, currently you can buy a iPhone 4S outright for about $800. You can buy an HTC Desire HD smartphone with 1GHz processing power for $380 outright and unlocked. Suppose Facebook offered a smartphone that was only $150 outright and unlocked with Facebook installed with ads. I certainly would buy it. In terms of value for money, it makes sense. Anyone who is smart with money will do the same things. Facebook will steal customers from Apple, Samsung, and HTC phone users and make more money from advertising revenue. Sounds very smart to me.

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