As HTC and Facebook pursue building a phone together, they both risk alienating far more important partners – a lesson they should have picked up from Microsoft’s Zune fiasco.In the list of bad ideas, the rumored “Facebook phone” (which will apparently be built by HTC and may fork the Android code base) is arguably one of the worst ideas since… well, the Zune. Let’s explore that today by looking at some of Microsoft’s own missteps with the ill-fated PMP, and where Facebook and HTC seem to be repeating them.
Zune
To recap the history of the Zune, Microsoft made three massively strategic mistakes over the last three decades. The first mistake Microsoft made was to build the Zune MP3 player. The company started off in media players by helping create the “Plays for Sure” platform with hardware partners like SanDisk and Samsung. One of the things partners are often afraid of in this situation is the platform creator becoming too powerful and effectively replacing them altogether, which is effectively what Microsoft did by creating the Zune MP3 player. In effect, (though I doubt it thought this through at the time), Microsoft could have helped lay the groundwork for Android. The other two similar mistakes were the original Xbox and the Kin phone, in my opinion.
You never want to put yourself at odds with your key revenue source and sow seeds of distrust, but the Zune did that with partners. It was also a colossal failure at the same time, which upset retailers and made them lose their trust in Microsoft.
How did Microsoft arrive at the decision to make the Zune? By looking out at the “Plays for Sure” partners and concluding they were all idiots because not a single one had come up with anything as popular as the Apple iPod. Yet the Zune failed massively, suggesting a good chunk of the reason for that was not (as Microsoft assumed) the partners’ fault, but Microsoft’s own lack of resources to the effort.
Arguably, the Zune is one of the most expensive failures that Microsoft has ever had, all because it betrayed its partners and then under-resourced the effort. What a waste.
Facebook Phone
Facebook isn’t in Microsoft’s business, so its mistake isn’t identical, but it’s also massively counter-strategic (in this case more for HTC than for Facebook). You see, HTC is on the other side of the Zune problem. Just as Microsoft lost trust from its hardware partners, an OEM like HTC stepping out against their software partner should have the same kind of collateral damage.
In this case, HTC has strong relationships with both Google for Android and Microsoft for Windows Phone 7. One of the key standout features for Windows Phone 7 is social networking and in particular, Facebook integration (Facebook and Microsoft are partnered). Google, on the other hand, is at war with Facebook with Google+, and monetizes Android after-the-fact with services like Google+. On paper, Android’s connection to Google services is what makes it works. (I could argue that economically this actually doesn’t work, because by competing with Apple and Microsoft, Google lost more than they gained… but we’ll save that for another time.)
So, HTC taking Android and possibly forking it (effectively denying Google at least some of the revenue and breaking the hard connection to Google+) would really upset Google. Meanwhile, taking Android to build a Facebook phone rather than a Windows Phone 7 would really upset Microsoft. In effect, both Microsoft and Google could put HTC in the doghouse at once, making the other phone makers really happy. Samsung, the company that has never met an OS it didn’t like, is thinking of doing one of these as well, which should alone, be a red flag for everyone else.
Then we look at Facebook. Is it really going to be able to promote a piece of hardware? Does it really want to go to war with Apple and every other device manufacturer? Right now Apple, Microsoft and others spend lots of time on Facebook, but they aren’t likely to continue if they view Facebook as a potential competitor.
Facebook should be focused on building the best Facebook app for every major platform. Going into competition with these platforms and phone providers could alone turn them into the next Netscape. This may partially explain why Microsoft is thinking of building its own social network all of a sudden.
Opportunity cost and collateral damage
What the hell goes through executives’ minds when they make mistakes like the Zune, Kin, and this foolish Facebook phone?
They’re dreaming of the upside of being the next Apple, without considering the collateral damage and opportunity cost that is more likely to make them the next Netscape. The reason for this is that they apparently are hardwired to fail. This post suggests that decisions like this come out of a need to assure status at all costs. Sounds whacked, until you read the post. But for me, I think a Facebook phone is just plain stupid.
