Thank Goodness There Will Never Be Another Facebook Phone

By Evan Niu,

Over the years, Facebook has tried taking over the phone in more ways than one. This has most often manifested in collaborations to varying degrees with hardware OEMs, such as the HTC ChaCha and the HTC First. But the latter represented a broader initiative for Facebook Home, an attempt to customize the Android experience by putting Facebook products and services front and center.

The HTC First was just the first device to get the software suite, which ended up falling flat. To be clear, I thought Facebook Home had some potential, but most importantly it was a very low-risk shot whose failure was rather inexpensive. Facebook Home's risk profile was completely asymmetrical; it could have proven to be a massive success. Those are precisely the types of risks that I like to see companies making.

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Fortunately for Facebook investors (myself included), the social network has now realized how misguided these attempts have been. There will likely never be another "Facebook phone," and that's a good thing.

Never say neverWell, technically speaking, at the Code Mobile tech conference Facebook messaging exec David Marcus said that Facebook will "probably not" ever make another phone foray. There's really no reason for Facebook to mess with the hardware side at all, even in limited collaborations with OEMs.

What's the point in exerting energy there when Facebook can accomplish all of its goals on its own through its mobile apps and software updates? Particularly to the extent that thinking about hardware partnerships distracts from the ongoing unbundling strategy where Facebook operates a digital conglomerate of apps, services, and brands, it's really not worth the trouble. Marcus says that a whopping 25% of the average user's time on a mobile device is now spent using a Facebook app, be it Messenger, WhatsApp, or Instagram.

This is precisely where Facebook is rightly focusing its efforts.

Speaking of MessengerMessenger has taken off lately both in terms of its feature set as well as overall usage. Consider these estimates from Business Insider and its BI Intelligence service.

Source: Business Insider.

Outside of SMS, Facebook now operates the two dominant messaging platforms on Earth, and messaging is an utterly integral aspect of the mobile experience. The company has seen the soaring success of Asian counterparts like WeChat, KakaoTalk, and Line. Strategically, these Asian services have done an impeccable job of building platforms on top of messaging services.

That's where Messenger's monetization potential lies, and by extension the same can be said about WhatsApp. This is precisely the type of thing that Facebook should be thinking about -- not phones.

Facebook already has its hands fullThe social network already has plenty on its plate, and phone hardware collaborations have very little upside. Facebook still has to implement a Messenger/WhatsApp monetization strategy, tastefully ramp up its advertising efforts in Instagram, and facilitate pictures of people's lunches.

The phone business is decidedly not for everyone, and the sooner that some companies learn that lesson the better. Besides, Facebook already has an upcoming hardware product that has some long-term disruptive potential. It's called Oculus Rift.

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Evan Niu, CFA owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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