So speculation has once again been running rife this past week about Facebook launching a mobile phone. Not the first time it seems that they have worked on the idea, but it's perhaps different this time given the recognition of the need for specialist talent and the hiring of a bunch of ex-Apple iPhone engineers.
Dave Winer (whose views I have a lot of time for) believes that rather than a mobile phone, what Facebook could actually be focusing on is a social camera. He makes a good point about the significance of photo content to Facebook and the potential to create a product with real differentiation that has photo sharing built-in. I suspect however, that the prize Facebook could be going after is somewhat bigger. And here's why.
The smart folk at Addictive Mobile have for a while been using the metaphor of a 'vertical stack' as a way of understanding the unfolding strategy of the big four tech companies (GAFA - Google, Apple, Facebook, Amazon). A while back I had my own crack at what the vertical stack might look like, with an ecosystem comprised of seven key levels on which GAFA are building out a presence, and increasingly coming into direct competition with each other. The bottom layer of the vertical stack is hardware. This is where Apple have originated from, expanding into the operating systems level, through iTunes and iCloud into content and payment levels, through browsers and an app ecosystem into access, through data and closed ecosystems such as iTunes into location, identity, personalisation, and so on.
Facebook originated from this last 'context' level, developing a data-driven capability that is location aware, sharing and social graph aware, identity aware (Facebook Connect) and can power personalisation, recommendation and of-course advertising. They have moved out from this level into payment, access, and content (cloud). The hardware level, one that Amazon moved into with the Kindle and the Kindle Fire, closely followed by Google through their acquisition of Motorola and launch of the Chromebook, is a gap in their capability. It is a hole that there is good reason they might want to fill.
Steve Jobs always focused on developing a seamless ecosytem through the marriage of great hardware with brilliant software. His thinking was in large part driven by a desire to create an exceptional user experience. But there is another benefit behind this strategy - the ability to create an ecosystem unified by data, where one level informs the other levels, and where the user never has to leave.
This, to me, is what the vertical stack is all about. Mobile is a data-rich environment and mobile hardware gives Facebook a platform for a far more comprehensive delivery of just about every other layer in the stack from location, identity and social context, through access, content and payment (through mobile money). The key difference in having this capability is that it that it can bake this into the hardware. It's not only about the ability to augment a huge app store through which they can diversify revenues, it's about making the Facebook phone the easiest possible way to make photos look great, share and access them and other content, stay-in-touch with and message your friends. It's about not having to fire up an app to do all this.
The more this kind of activity happens within a Facebook ecosystem, the better this is for Facebook. In her latest internet trends bonanza, Mary Meeker pointed out the huge potential upside still to be had in smartphones and in mobile ads. Mobile eCPMs and ARPU may currently lag that of desktop based services but with access to the rich data afforded by an ecosystem that seamlessly combines software with hardware and the kind of user engagement and time spent that Facebook has, this will surely change. Combine this with the revenue potential behind that other massive mobile-based opportunity - gaming - and you have a pretty good reason to believe that mobile hardware should form a pretty significant part of your future.
When the BBC asked Facebook for comment on the rumours, they were referred to a written statement which began: "Our mobile strategy is simple: we think every mobile device is better if it is deeply social". Only time will tell whether this cryptic sentence refers to a strategy that delivers this through making proprietary devices. But as part of a long-term future, you might well say that there is very little reason why it shouldn't.