Where Facebook should direct its phone strategy

TechCrunch first broke the news (or speculated) about the Facebook Phone last week and other news publications quickly followed suit. A few other blogs and tech pundits have suggested the phone to have features like dynamic address book and integration with Facebook Credits and Facebook Places. Facebook has since denied this speculation, but Bloomberg then followed up and reported some details about the phone and how it may be launched in Europe first.

While the Bloomberg report is quite possible, I’d like to suggest a different direction that Facebook can take. Instead of providing the Facebook phone for markets in Europe and US, how about introducing it to third-world countries? CEO Mark Zuckerberg has been quoted to say that Facebook’s mobile strategy is about breadth, not depth. After more than 500 million users, how much broader can Facebook be? Much broader, considering that penetration in Asian and African countries is still much lower compared to that of developed countries.

Of course the reason behind the low Facebook users in developing countries is the low internet penetration. This is where Facebook can help. It is widely known that most people in developing countries use mobile devices to connect to the internet. Cost of mobile devices and cost of broadband are still high in those countries. However Facebook can force these costs down with its influence.

Remember the “Google Phone” that later became the Nexus One? Supposedly, Google’s original goal was to make the phone $99 cheap — but the US telco operators managed to foil this plan. If Google could be thwarted by telco operators, what other companies could succeed? Facebook, that’s who. Facebook already has a number of partnerships with telco operators with its Facebook Zero product — a free access to the stripped-down version of Facebook Mobile, offered mostly in developing countries. A free or cheap Facebook Phone is just an extension of Facebook Zero.

Why would telco operators support a free/cheap Facebook Phone and not a cheap Google Phone? Because unlike the Google Phone which relies on advertising to subsidize cost, Facebook with its 500 million users will actually provide additional revenue for telco operators. The Facebook platform is where users already transact in the hundred millions of dollars. Additionally, Facebook Credits will make transactions easier to conduct, to the point where some is already predicting it to be the first world wide currency. A cut of this huge transaction can be very attractive to telco operators.

Image by Sean Percival.