Facebook is working on a smartphone with HTC

OK, so Facebook is reportedly working on a smartphone with HTC. My initial reaction: who cares?

The latest rumor that such a smartphone may be on the drawing boards comes from All Things Digital. The process is in the early stages, and it's unclear whether the phone would ever advance past that stage. If Facebook is smart, it'll put this project down as quickly as possible.

A Facebook phone may sound like a great idea, but consumers are accustomed to devices that can handle multiple tasks, access any service, and tap into all social networks--which may not fall in line with the company's agenda. The core dilemma for such a phone is that few people actually use Facebook enough to justify buying a device solely focused on one social network.

I'll admit that I'm an avid Facebook user. I spend a nice chunk of the day on Facebook in the office (maybe too much, if you ask my boss). I don't even spend a lot of time on social games, which I know suck up a massive amount of time.

But when I'm on the go, I barely look at Facebook. I'll occasionally pop open the app, if there's an interesting update from a friend, update my own status, or upload a funny photo. I assume that there are a lot of people like me: Facebook campers at work or at home, but casual users when it comes to their mobile devices. Those aren't the kind of people who would buy a Facebook-centric device.

Remember, there's a quasi-Facebook phone already on the market. It's called the HTC Status. The phone was a complete bust, despite AT&T's efforts to push the first phone with an integrated Facebook key. While the advertising campaign could have been better--it highlighted objects in a disturbing glowing-blue color to emulate the glowing Facebook button at the bottom of the device--AT&T did, at least, promote the phone. After launching in July, the phone is now given away with a two-year contract.

Granted, the Status was a budget-friendly phone, at $49.99, geared toward a younger social-networking generation, and it represented only modest contributions from Facebook. By contrast, Facebook is expected to weigh in heavily on the new phone--which may not necessarily be a good thing.

If the reports from AllThingsD are correct, Facebook may follow Amazon.com's path in creating its own highly customized version of Android to power the phone. The problem with such a strategy is, you lose access to the kind of core services Google powers, including Android Market and Gmail. That may be moot to Facebook, which would want to run its own messaging and e-mail services on the device, anyway. Otherwise, why go through the trouble?

Again, I'm not sure many people would want the whole Facebook--and only Facebook--experience on their phone. For instance, I rely on Gmail for my e-mail, and AIM and Yahoo Messenger for instant messages.

I doubt that many people used Facebook's failed attempt to create an e-mail service. And while the idea of integrating my Facebook social network into my address book sounds great, it doesn't work in practice. I've used tools provided by the likes of HTC or Samsung Electronics to do so in my Android smartphones, and the result is a labyrinthine list of people with whom I maintain little to no contact.

The smartphone business, despite its growth potential, is incredibly hard to break into. A company looking to jump in needs to work with the carriers, if it wants any sales support or subsidies. It also needs to strike deals with retail outlets, and it needs to be prepared to spend a hefty amount itself on marketing and promotion. Google attempted to circumvent the system and sell its Nexus One directly to consumers, and it was overwhelmed by customer service issues, despite poor sales of the device.

The only real exception has been Apple, which already had a strong brand, and an expertise in hardware and software in consumer electronics devices. It seemingly came out of nowhere with the iPhone, and it revolutionized the smartphone market.

Facebook certainly has the brand, but it's unclear whether it has the chops to handle the other parts of the phone business. HTC, with its long history of solid smartphones and relationships with carriers, retailers, and other wireless players, will be able to help greatly.

One way would be on pricing. Facebook doesn't charge its users for access to the site. If it does, in fact, offer a phone optimized for its site, it should stick with that strategy and offer the smartphones free with a two-year contract. The device itself also shouldn't feel like a budget phone like the Status; it would need to be packed with high-quality parts.

As with Amazon's Kindle strategy, the real money would be made after the customer buys the phone. While Amazon wants to sell more products (such as e-books), Facebook could lean on its roots and make up any loss on the phone with targeted mobile advertising.

But even then, it would come out of the gate with a severe disadvantage. If the development process is just getting under way, a product won't show up for another 12 to 18 months, giving ample time for Google, Apple, and Microsoft to leap ahead with the next round of innovation on mobile devices. Can Facebook compete in that sea of smartphones? I don't think so.

Now excuse me while I post another status update...on my laptop.