For quite some time now, there have been rumors suggesting that Facebook (NASDAQ:FB) would release a phone of their own. Typically, such rumors suggested that this would be a physical phone, perhaps by teaming with or even acquiring a struggling phone manufacturer, such as Nokia (NYSE:NOK).
Instead, this past Thursday, Facebook released what might be described as a Facebook phone in the form of Facebook Home. As opposed to a new physical device, Facebook Home is, as Wired.com editor Mark McCluskey called it, an "apperating system." Otherwise put, it is really a customization of Google's (NASDAQ:GOOG) Android operating system (OS) which essentially puts Facebook 'front and center' as the home screen that the user experiences when they turn on the phone. Facebook has elected to first roll out this software partnering with HTC on a phone that will be known as HTC First.
In addition to the above-linked article from Wired.com, for another great technical explanation of all of this, please check out this video from TechCrunch.
What I would like to share in this article are my quick thoughts as to how this new development plays into the mobile marketplace with respect both to Google as well as the other big players in the field, Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL). Indirectly, the discussion regarding Microsoft will also touch on Nokia, as they are Microsoft's key partner when it comes to Windows Phone 8.
A key feature of the Android OS is its flexibility. This allows vendors to customize and personalize the OS to work with their hardware and according to their specifications.
Essentially what Facebook has done is to take advantage of this to, in effect, create what sort of looks like a new OS without having to invest the time, effort and risk to actually develop an entire OS. Nokia, for example, did this with Symbian, a home-grown operating system, only to abandon Symbian in favor of Microsoft's Windows Phone platform approximately two years ago. BlackBerry (NASDAQ:BBRY) is really the only mobile player that has done this with some large measure of success, but even they are struggling of late.
For people who love Facebook, this could be a winner. Likely subsidized by Facebook from a cost standpoint, it could open the way for a group of users to obtain a very socially-interactive phone at reasonable cost. Further, it could drive advertising revenue from the ever-expanding mobile space into Facebook's pockets.
A major difference between Android and Apple's iOS operating system is the openness and flexibility. This has already allowed Android to become the #1 platform (52.3% platform market share). Source: comScore January 2013 report)
This latest move by Facebook would appear to be a mixed bag for Google. On the one hand, it certainly should not hurt the Android ecosystem, adding one more major player to Google's list of partners utilizing Android as a platform for development.
On the other hand, it appears that Facebook has identified a key issue with Android (and also with Apple's iOS, as I will explain later) and is trying to 'change the game.' The issue? That the world needs to move away from a vision of static icons which simply lead to some application and more towards a vision whereby people and social interaction become the starting, or focal point. Some have theorized that this approach could actually steal revenue from Google, as users become more engrossed in the Facebook experience, and where it leads, than with the overall Android experience.
These developments seem to say to me that Apple has their work cut out for them. When the iPhone was first introduced, it was nothing short of revolutionary. It took the concept of what you could do with a mobile device so much further than anyone had before.
However, similar to Android, Apple's iOS is also a rather static, icon-filled interface. Further, Apple's environment is much more closed than Android's, likely leading to Facebook's decision to utilize Android instead. If Facebook's vision is anywhere near correct, Apple may have to rethink their iOS to more closely match the concept of becoming people-centric as opposed to app-centric.
This is the linkage that I find most fascinating. The way I see it, this new Facebook interface bears many conceptual similarities to what Microsoft has done in their Windows Phone 8 OS. This OS makes use of what Microsoft calls "Live Tiles." Unlike the more or less static icons found in Android or iOS, these tiles can be positioned and sized such that the personal content most important to a given user, including various forms of social media, can be prominently featured on the user's home screen. In effect, this OS is doing something very similar to what Facebook is proposing. The key difference is that the user is not locked into one app to the same extent.
The linkage, therefore, that I see is that both Microsoft and Facebook appear to envision phones where the user is more closely interacting with personalized content as opposed to a static icon-filled interface.
While Windows Phone 8 trails both Android and iOS by a huge margin in terms of adoption, evidence is starting to appear that they are slowly making inroads.
Author's Note: The above was the original content of the material I submitted to Seeking Alpha. The thoughts I presented regarding similarities between Microsoft's Windows Phone 8 and Facebook Home were what came immediately to my mind. However, shortly following my submission, and while the article was being reviewed by Seeking Alpha's editorial staff, I found that Microsoft themselves have jumped all over this same concept. Check out this story from Business Insider where Microsoft, with tongue firmly in cheek, says to Facebook "Welcome to 2011!"
Summary and Conclusion
Facebook's latest offering provides much food for thought. In my view, it is what might be described as a 'mixed bag' from the standpoint of Android. At the same time, Microsoft's Windows Phone OS appears to be a little ahead of its time conceptually. Lastly, while Apple's iPhone is still wildly popular, I suggest that the company may actually be starting to find itself in a position of playing 'catch up.' As the question of how the mobile phone space plays out involves huge amounts of revenue, investors may wish to ponder this information as they decide where to place their bets.
As I mentioned at the outset, another related company that investors may wish to consider is Nokia. They are by far the leading vendor of Windows 8 phones, so if Microsoft does well, so may Nokia. For more, please see a recent Seeking Alpha article I wrote specifically on Nokia.
Disclosure: I am long NOK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am not a registered investment advisor or broker/dealer. Readers are advised that the material contained herein should be used solely for informational purposes. Investing involves risk, including the loss of principal. Readers are solely responsible for their own investment decisions.