Facebook spent $1 billion to acquire hot social startup Instagram, and it’s said to have been willing to offer an equal amount to purchase popular social platforms like Snapchat and Waze. But could the world’s most popular social network be interested in dropping significantly more money on an indisputably unpopular company?
That’s the rumor in the echo chamber today after the Wall Street Journal reported that BlackBerry executives had met with Facebook last week to explore a potential bid for the ailing smartphone maker. In August, BlackBerry, which lost nearly $1 billion last quarter and plans to shed 40% of its workforce, announced that it was exploring a potential sale of the company, immediately sparking predictions of possible buyers, ranging from Microsoft to Lenovo. The Wall Street Journal‘s report today is the first time that Facebook has been named as a contender–if it’s true, then it could mean Facebook is considering competing directly with Google and Apple in the mobile market.
Of course, an acquisition by Facebook is still a long-shot outcome for BlackBerry. For one, the Wall Street Journal specified that “it remains unclear whether Facebook is interested in placing a bid,” and that the meeting was only “to gauge its interest.” There have been more substantive reports that PC maker Lenovo or even BlackBerry’s cofounder Mike Lazaridis would make a bid for the company.
There are pros, in terms of Blackberry’s mobile market share, its foundational operating system, its established distribution and developer reach. But the cons outweigh them.
The company’s smartphone market share has been dramatically plummeting in recent years, so much so that even Microsoft is said to have surpassed its share with its late-to-market Windows Phone platform. Worse, it has made no compelling headway in the tablet space, and it was forced to take a $960 million write-down due mostly to unsold inventory of its latest flagship phone, the Z10.
BlackBerry is a well-known mobile company with an established customer base. But it’s also a tainted brand hampered by too much legacy. Government markets love BlackBerry’s security features. But those aren’t ideal targets for a social company like Facebook.
There are many reasons why Facebook specifically would be a bad fit for BlackBerry. Roughly 41% of Facebook’s ad revenue came from mobile last quarter, a figure that’s likely to continue to rocket higher. The huge gains are due to the service’s popularity on platforms like Apple’s iOS and Google’s Android systems; Facebook has remained an agnostic social provider and thus a universal one. As the company indicated in its annual 10-K SEC filing, “We are dependent on the interoperability of Facebook with popular mobile operating systems that we do not control, such as Android and iOS, and any changes in such systems that degrade our products’ functionality or give preferential treatment to competitive products could adversely affect Facebook usage on mobile devices.”
Certainly, that could be an argument for Facebook acquiring a company like BlackBerry. But there would be endless potential downsides to pursuing this strategy. Most significantly, by going against Android or iOS in mobile, the company would run the risk of alienating its mobile partners–thus increasing the likelihood that Google or Apple would want to “degrade [Facebook’s] products’ functionality or give preferential treatment to competitive products.”
Earlier this year, Facebook lightly experimented with building its own operating system, or at least its own customized version of a mobile OS. The company partnered with HTC to launch Facebook Home, a sort of toe-in-the-water attempt to give its users a Facebook-centric mobile device. Built on Google’s Android platform, the service was completely overhauled to promote Facebook apps and features such as Instagram and Chatheads.
Reports indicate it was a complete failure. Its flagship HTC First smartphone reportedly sold just 15,000 units before its price was cut to next to nothing. The phone was eventually discontinued by AT&T.
The company’s experience with Home should serve to dissuade the company from taking a deeper dive down this rabbit hole. But Facebook CEO Mark Zuckerberg has suggested that he’s not ready to kill Facebook Home. “Home is slower rolling out than I would have hoped,” Zuckerberg said recently at TechCrunch’s Disrupt conference. “One of the toughest things is determining when something isn’t going to work versus what just hasn’t worked yet.”
Still, if Facebook were to acquire BlackBerry, it would represent an about-face for the social network. Home was designed to be a layer built on top of Android–not an operating system designed to compete with Google.
“[Home] is not an operating system,” Facebook platform director Doug Purdy has told me. “We don’t want to build an operating system. Apple is really good at operating systems, Microsoft is really good at operating systems, and Google is really good at operating systems. This is about thinking what we’re good at and how we add value.”
If the acquisition ever were to happen, and if the company were to build a Facebook-centric version of BlackBerry’s OS, not only would it disrupt that cross-platform ecosystem, it would also potentially alienate social app developers from creating services for its social operating system. After all, why would Twitter or SnapChat want to build services for a Facebook-owned Blackberry OS, if it’s likely to give preferential treatment to its own social services?
It’s a sentiment Purdy has touched on before. “The world is heterogeneous,” Purdy has said. “You’re going to change your phone I don’t know how many times, whether Android or iOS. Facebook creates this common channel that spans across all these different things.”
“Our aspirations could never be fulfilled by having a single operating system,” he continued. “I mean, how would you get a billion people on the same operating system? It would be very hard, very, very hard.”