You Are Not A Hardware Company

Henry Blodget, on Business Insider, offers some handy tips on why it would be extraordinarily bad for Facebook to get into the hardware business:

Facebook knows absolutely nothing about making, selling, or supporting hardware. Really - nothing. Yes, Facebook could use its billions to buy RIM or Nokia, and then it would know something about hardware. But RIM and Nokia are deeply troubled companies that are already cratering. Can you imagine how difficult it would be to buy, integrate, and FIX RIM or Nokia? (Google's about to give us a case study in how difficult it is with Motorola).

He nails it right here:

Facebook already has an "operating system" for mobile - it's called the social graph.

So instead of building a phone, which seems like a desperate move, Facebook should partner with every operating system and carrier and hardware maker it can to try to embed this social platform within every mobile platform. And it should build great apps to float on top of these systems. (And if Apple keeps giving it the brush-off, it should probably start by cozying up to Samsung, which is the only company giving Apple a run for its money).

Facebook needs to start thinking above and beyond the ad-driven web model and look at what they have: lots of data that connects people. Facebook has allowed apps like Instagram and Klout to flourish because of Facebook Connect. If that pipe wasn't available I think those apps would have struggled to grow as users would have had to manually find their friends or use their address book or email account which feels a little too close to home (even though all of this data is exposed by Facebook once you accept an app's permissions).

Chris Dixon:

The key question when trying to value Facebook's stock is: can they find another business model that generates significantly more revenue per user without hurting the user experience? […] A more likely outcome is that Facebook uses their assets - a vast number of extremely engaged users, it's social graph, Facebook Connect - to monetize through another business model. If they do that, the company is probably worth a lot more than the expected $100B IPO valuation. If they don't, it's probably worth a lot less.

An even more likely outcome is that the stockholders start revolting as the advertisers slowly push Facebook over the edge:

In a now-notorious meeting between General Motors Global CMO Joel Ewanick and other top marketing brass and Facebook sales executives, the automaker's team asked whether it was possible to run bigger, higher-impact ad units than the current offering, according to people familiar with the discussion. Advertising on Facebook has always been subtle. But GM wanted to do something bigger. To GM, Facebook's audience was interesting; its ad formats were not.

$28 mate. (It's actually dipped under $26 for the first time.) If anything else, I'm drawing a line here so I can either say "told you so" or eat this post.