The Facebook phone rumors won’t die (because they’re probably true)

Incessant gossip surrounding iPad/iPhone releases and future features is the only thing more persistent in the tech rumor mill than the mythical Facebook phone. It’s coming, then it dies, then it’s in production, then it was never even considered; the information coming out of Menlo Park (and Palo Alto when they were there) as well as reliable sources do more flip flops about the Facebook phone than most politicians. Most.

Now, it appears that the rumors may have some real weight to them. The project which was reported scrapped last year may have been up and running the whole time. Code-named “Buffy”, it has never been acknowledged by Facebook other than a lack of a complete denial.

“Mark is worried that if he doesn’t create a mobile phone in the near future that Facebook will simply become an app on other mobile platforms,” a Facebook employee told the NY Times.

He should be worried. It’s exactly what is happening already and the potential of monetizing and app at the scale they need is much lower than the hardware arena. It’s one of the reasons that Google got into it by forking over $12.5 billion for Motorola Mobility. It’s the reason that Apple is the only company that builds iPhones, iPad, or any other devices that can run iOS.

As a public company valued at 12-digits (for now), advertising cannot be their only revenue source. Despite the popularity of social media, they aren’t Google. Search engines are able to make money through search because the intent is there. People go to search engines to find “things” and information. They go to social media to interact with friends and family, an activity where advertisements are considered an intrusion.

Smartphones are hard to build. More have failed than succeeded, including well-established hardware companies like Dell and Hewlett-Packard. RIM specialized in them and they’re dying. It is for this and other reasons that the skeptics are coming out all over again.

Henry Blodget at Business Insider says that if Facebook gets into the smartphone arena, investors should run (which many have done already).

“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,” Blodget wrote.

Rumors are rumors, but they often die when they go unconfirmed for long enough. This one keeps creeping up and is likely true. If it is, it could be a move that proves to be the financial doom of the company.

Then again, when a man is able to get the attention of nearly a billion people with a concept he built in his dorm room, are bloggers justified in telling him what he can and can’t do?