Facebook Is Taking a Big Risk That Won’t Pay Off

Will users trust Facebook Portal after recent data breaches?
  • Facebook Portal raises new privacy concerns.
  • Apple, Amazon and Google are already established in the smart speaker market.
  • Facebook stock has yet to recover from previous privacy debacles.

Facebook unveiled a new smart home device, Facebook Portal, on Oct. 8, 2018, that will let users video chat and control smart home devices. It includes a camera and microphone, and the prospect of having a Facebook recording device in homes is giving consumers and investors pause, for good reason.

Privacy concerns abound, particularly in light of the recent security breach affecting up to 50 million users and the Cambridge Analytica scandal that came to light in March 2018, yet Facebook proceeded with the product launch. There is also the risk that calls over Facebook Portal could be surveilled remotely by government or law enforcement. Facebook seems to be well aware of the security pitfalls, as Portal’s website directly addresses privacy concerns. Instructions for disabling the camera and microphone are prominent in the marketing copy.

Click to read about how Facebook could bounce back from its biggest failure.

Amazon Already Dominates the Home Smart Speaker Market

Market research firm CIRP reports in Forbes that Amazon has a dominant 70 percent market share of the U.S. home smart speaker market, with Google at 24 percent and gaining ground. Apple, having just introduced its HomePod this year, has 6 percent share. The U.S. installed base of smart speakers was reported to be 50 million devices.

See: Instagram, WhatsApp and 13 Other Companies Facebook Has Acquired

Facebook Portal Can’t Compete With Amazon’s Echo

Facebook Portal enables video calling over Messenger, with a camera and microphone. Users can place voice-activated video calls to anyone who has Messenger, whether they have a Portal or not. Up to six people can be on a call. Comparatively, it seems late to the game in the smart device space and not likely to compete well with existing products like Amazon’s Echo. Whether Facebook Messenger users will choose Portal over other options remains to be seen.

Apple HomePod, a speaker that works with Apple Music and Siri, is promoted primarily as a voice-activated music speaker, but it can also make phone calls and manage smart home devices with Siri. It encrypts voice commands and sends them anonymously to Apple’s servers. Apple has announced group FaceTime as well, but that has not yet been released.

Which FAANG Stock Should You Invest In? Facebook vs. Google

Google Home plays music, answers your questions and controls your TV and other devices. It integrates with a security camera to let you see your home’s exterior.

Amazon Echo works with its Alexa personal assistant software to play music, get information, and control your smart home devices. You can also use Alexa Calling to call other Alexa users, or most mobile or landline phones. Amazon doesn’t seem to be very concerned about Facebook Portal poaching its customers — it has licensed the Alexa technology to Facebook for the new product.

Facebook Has to Address the Privacy Risk of Smart Speakers

In July, Facebook shares took a big hit after the company reported that it missed revenue expectations for the second quarter, and expected a decline in user growth, primarily due to privacy concerns. The stock, which seemed to be on a positive trajectory from day one, dropped down more than 20 percent that month. Facebook will have its work cut out for it if it expects to penetrate this market, especially with its current security concerns.

Click to keep reading about how Facebook generated $12 billion in revenue after the #DeleteFacebook movement.

More on Business and Making Money