Despite Unproven Market, Facebook To Launch Custom Android OS Phone With HTC

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Over the past few years, Facebook has partnered with a variety of handset makers to release smartphones and feature phones that deeply integrate the social network into software and hardware. These phones have sold poorly, though. Meanwhile iOS and Android are claiming more and more of the market such that they endanger Facebook’s future, cramping its mobile platform and relegating it to just being an app. Last year we wrote that Facebook was likely building a custom-version of Android, and now AllThingsD says Facebook is, and it that it will run on an HTC-made Facebook phone.

A custom operating system could attract users with even deeper software integrations, and let Facebook monetize in-app payments. The company hopes that despite a lack of proof that users want such a thing, its phone will sell well, and allow it more determination over the future of its mobile apps and platform.

Facebook has partnered to build phones in the past, but these have never been huge sellers, nor have they furthered its goal of reducing Apple and Google’s leverage in mobile. Dumbphones like the INQ Cloud Touch and Vodafone 555 Blue have seen slow sales because they don’t provide access to a top-tier app store. Their operating systems are essentially one-offs controlled by the device manufacturers so they’re less important to the future.

The Facebook smartphones including the HTC Status (formerly ChaCha) and Sala that run the standard Android OS and include dedicated Facebook sharing buttons haven’t faired well either. AT&T rumored to be considering dropping the Status and the price of the devices has been discounted. Since Facebook couldn’t customize the OS, it wasn’t able to integrate its features into the software they way iOS has integrated Twitter.

We broke the story that Facebook was building a phone 14 months ago, and our interview with Mark Zuckerberg indicated that a custom Android OS would be its plan. Now that looks more assured.

By customizing Android, the Facebook phone might not be able to include some Google-developed apps like Gmail, Maps, or possibly even the Android Market. Instead, it could replace the Android Market with its recently launched HTML5 platform, and provide single sign-on where users could instantly access any these Facebook apps without having to reenter their credentials. This could in-turn help it fight off the Apple App Store, turn Android against Google, and make more money through in-app payments powered by Facebook Credits. It could also tap Bing for maps and let a web browser snagged through its acquisition of Parakey provide access to other services.

So though there’s no sure market for the device, still 1 to 2 years away, the potential gains of having a successful mobile operating system appear to have outweighed the risks. There are definitely issues with customizing Android, including native app compatibility, keeping up with OS updates, and getting more device manufacturers on board. If Facebook can work with HTC to produce a high-tech device with innovative social integrations that really sells, more manufacturers could integrate the Facebook OS and the mobile power balance could shift in its favor.

Update: I was reluctant to republished AllThingsD’s assertion that this Facebook mobile project is codenamed Buffy because we all know how Spartan turned out, but it may make for convenient short-hand later. Also, in case it wan’t obvious, the codename is Buffy because it’s designed to slay the vampires Apple & Google who suck Facebook’s blood by preventing its native apps from processing in-app payments to third-parties developers via Credits.

[image credit: Android Central]