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Google Inc (GOOG), Apple Inc. (AAPL) and the Facebook Inc (FB) Phone

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Facebook Inc (NASDAQ:FB) CEO Mark Zuckerberg announced last week that the social media giant is committing to the development of an HTC-built phone that will use the Android operating system to provide a fully integrated Facebook mobile device. It’s the latest step in Facebook Inc (NASDAQ:FB)’s ongoing efforts to replace the World Wide Web.

Facebook Inc. (FB)

All Your Posts Belong to Mark

The service would be very happy if no one ever accessed any online content except through Facebook Inc (NASDAQ:FB). That would allow the company to corner the market on the ads its users see, and perhaps start making some real money off those customers.

That’s not a bad plan, but it’s founded on the belief that 1) Advertisers consider Facebook Inc (NASDAQ:FB) ads effective and 2) users aren’t fickle, and won’t stray from Facebook Inc (NASDAQ:FB)’s confines.

I doubt Facebook has an answer for those two serious questions. Yes, the Android community is large and prone to loving ways to do things on their own. That’s good for Facebook Inc (NASDAQ:FB). However, it’s just one step in a huge chain of mobile users.

To maximize user attention and advertising impressions, the Facebook-integrated phone needs to seize a dominant share of the market. I just don’t see that happening. There are too many other ways for people to see the online world, and too many competitors with market caps justified by performance, not hype.

Facebook’s Major Mobile Enemies

Apple Inc. (NASDAQ:AAPL) Facebook already has a platform on Apple Inc. (NASDAQ:AAPL)’s iPhone. No one can say that it hasn’t gotten significant penetration there. But Zuckerberg made it clear that Facebook still wants a more controlled mobile experience. Apple Inc. (NASDAQ:AAPL) doesn’t allow other developers to control the iPhone experience as much as Facebook will with the new HTC handset. That creates friction, even if the two firms don’t compete for advertising dollars.

I still find Apple Inc. (NASDAQ:AAPL)’s stock a strong buy. I blame its drop over the last several months more on media hype than performance. I believe that a firm with a strong history of profitability and earnings per share of $44.10 can’t stay at a P/E of 10 forever. The time to buy Apple Inc. (NASDAQ:AAPL) is now, before it gets back to $500 or $600 per share.

Google Inc (NASDAQ:GOOG) Facebook is partnering with a phone maker that uses Google Inc (NASDAQ:GOOG)’s open-source Android operating system. More Android installs certainly helps Google Inc (NASDAQ:GOOG) and its Droid store. However, the new phone will allow Facebook to serve ads on the phone as much as technologically possible. That’s bad for Google Inc (NASDAQ:GOOG), since the company makes money on its own quick and easy ads.

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