Should Facebook Buy BlackBerry and Build Its Own Phone?

By Chris Preimesberger  |  Posted 2013-11-03

Should Facebook Buy BlackBerry and Build Its Own Phone?

Facebook's finally a hot financial item. The world's largest social network, which went public in May 2012 only to see a serious drop in capital value for more than a year, proudly posted its first $2 billion quarter earlier.

Revenue was up 60 percent from a year ago, attributable to improvements in the company's core advertising business--specifically in ads and sponsored notifications sent to mobile devices. The stock is up to the $50 level, having doubled its value in only the last three months. Still, the company is probably secretly wishing that it had waited an extra year to get its mobile ad operation up and running before it went public, but what's done is done.

Facebook was the first company of any kind to smash the 1 billion-member barrier and is now aiming at snaring the "next five or six billion," CEO Mark Zuckerberg said. The truth is: Who knows how many people the network can eventually reach?

What New Directions to Take?

With all those folks around the globe pouring their likes, photos, videos and messages into its coffers every second of the day, making Facebook's databases all the more powerful for advertisers, it's up to the company to decide where to invest all that money and influence.

For all its influence and success, Facebook is a one-trick pony. All one needs to do is witness the tens of thousands of servers in its data centers--and I have seen them--that are all designed for one application: the Website. The company needs to branch out.

In what other directions should Facebook look? The Wall Street Journal reported that Facebook may be interested in buying some or all of BlackBerry's intellectual property. BlackBerry apparently sent some of its people from Toronto to Menlo Park, Calif., for a meeting with Facebook hoodies to discuss a potential bid for the long-suffering phone and tablet maker. To no one's surprise, neither company is talking about the meeting.

Few outsiders have any idea how serious Facebook might be about acquiring BlackBerry. Zuckerberg has often said he wants to get Facebook on as many phones as possible, but he's also said a Facebook smartphone doesn't make sense. And it probably doesn't at this time, with Google's Androids and Apple's iPhones showing dominating power in market share and powerful companies such as Microsoft unable to get a decent footprint in there.

What BlackBerry Would Bring to Facebook

However, Zuckerberg hasn't ruled out partnering with one or more phone makers to come up with some value-adds that could set a new phone apart from all the others. Facebook took a first stab at this earlier this year in a now-scuttled deal with HTC that produced the HTC First, which fronted Facebook Home, a custom homepage for Android and iOS that put the social network in front of all other apps on the device.

But that one tail-spun into the ground after only a few months; HTC Android customers showed little or no interest. iPhone users preferred the standard Apple home page.

Not to be deterred after the first stumble, Facebook, to its credit, tried another tack. Don't forget a bit of history: Google's first Android phone, the HTC Nexus One, was a commercial failure in 2010. Now look at the Android franchise.

Facebook and HTC were talking about doing a second project together last summer. Zuckerberg hired a team of former Apple engineers to improve the Facebook application for the iPhone; there apparently was additional surgery done on the Android interface, which evidently needed a lot more help. That project apparently is still in development.

What would BlackBerry bring to the table that Facebook covets? BlackBerry still has around 60 million subscribers around the world, and most of whom use the BlackBerry Messenger (BBM), a highly regarded tool. The company revealed recently that there are now 20 million iPhone and Android users using BBM, and more than 80 million total monthly active users.

Should Facebook Buy BlackBerry and Build Its Own Phone?

Those have to be interesting numbers to Zuckerberg & Co. Facebook's on-board messaging isn't easy to use on a phone and has needed an upgrade for a long while.

BlackBerry doesn't have all that many options, but does this make sense for a company such as Facebook? Buying BlackBerry would enable Facebook to cut out phone-making partners and control both the hardware and software of its own phones, which is part of what makes Apple so successful. However, Facebook would also have the additional disadvantage of having to play from behind in reviving a tarnished brand--even though BlackBerry still has millions of loyal users.

BBM Would Bring Millions of New Users

"We think Facebook is most interested in the BBM messaging service or Blackberry's intellectual property portfolio," Neil Mawston of UK-based Strategy Analytics told eWEEK.

"BBM would give Facebook access to tens of millions of younger mobile users and a sticky, real-time messaging service. Every firm is interested in IPR (intellectual property rights) nowadays, because it can give a competitive edge in a crowded mobile market, and Blackberry's intellectual property is of a reasonable quality to make a purchase worthwhile."

This is interesting, because Facebook CFO David Ebersman said on the Oct. 30 earnings call that the network is seeing a dropoff in the number of younger users. Would an improved free messaging app help Facebook? Possibly.

If Facebook could find enough value-adds to put into its own phone alongside the messaging, then perhaps it could compete successfully with the big boys.

On the other hand, the "window of recovery for BlackBerry is closing fast and it needs to find a white knight savior" sooner rather than later, Mawston said.

BlackBerry Needs a Mentor

"BlackBerry would be best served, in our view, by sitting under the protective wing of a global software or services giant with deep pockets, such as Microsoft or even Amazon," Mawston said. "A company like Microsoft could fund BlackBerry's losses and fund investment in new services or hardware, such as enterprise social networking or tablets."

BlackBerry has said it hopes to have a buyer by this month. Other rumored corporate suitors include Samsung, Google, Microsoft and others. BlackBerry co-founder Mike Lazaridis and former Apple CEO John Sculley are also reported to be considering bids for the company.

This should all play out before the holidays. We'll see then if Facebook opens a package and finds a Canadian company for Christmas.

Rocket Fuel