Facebook’s computer hardware company infiltrates Apple’s backyard


Facebook (NASDAQ: FB) could develop a smartwatch with two cameras, according to The Verge. The front camera will likely be used for video calls, while the rear camera can be detached to capture photos and videos for the Facebook family of apps.

Facebook is also said to be in talks with companies to develop accessories for attaching the camera to backpacks and other items. Previous rumors about the watch suggested that it will sport health tracking features, run on a stand-alone cellular connection, and use a customized version of the Android operating system. Could this long-rumored device help Facebook challenge Apple (NASDAQ: AAPL) in the connected watch market?

Image source: Getty Images.

Why is Facebook developing a smartwatch?

Facebook generated 97% of its revenue from ads in the last quarter. The remaining 3% came from its “other” businesses, which include its Oculus virtual reality (VR) headsets and Portal smart displays. It may initially seem odd that Facebook would add a smartwatch to this lineup, but it would actually complement its previous hardware strategies.

Facebook’s most powerful hardware business is its line of Oculus VR headsets. It could ship at least three million Oculus Quest 2 headsets this year, according to SuperData. This would make the standalone VR headset, which does not require a PC or phone, the undisputed leader in its niche market.

Beyond VR devices, Facebook is developing augmented reality (AR) glasses that will use controls similar to those of its Oculus headsets. It also acquired CTRL-Labs, which is developing a bracelet capable of using brain signals to control computers, in late 2019. In theory, CTRL-Labs’ technology could potentially allow users to control VR and AR devices with “mind-reading” bracelets. instead of controllers in the future.

A young woman wearing the Facebook Oculus Quest 2 headset.

Image source: Facebook.

Meanwhile, Facebook’s portal devices haven’t gained much momentum against Amazon (NASDAQ: AMZN) or Alphabet‘s (NASDAQ: GOOGL) (NASDAQ: GOOG) Google in the smart display market. This failure likely dashed Facebook’s hopes of expanding its social media platforms beyond PCs and phones and into connected homes.

When you put all of these parts together, you will realize that Facebook’s smartwatch could be used to improve the control of its VR and AR devices, or to extend its social media to the Internet of Things (IoT) and maybe be successful there. where the portal failed. Facebook could also possibly upgrade its watches with technologies from CTRL-Labs and allow users to control other IoT devices with their minds.

But let’s not anticipate on ourselves … for the moment

Facebook has reportedly spent around $ 1 billion on the development of its smartwatch over the past few years, but it initially only plans to ship in six-figure volumes.

This would make Facebook a small manufacturer of smartwatches compared to Apple (NASDAQ: AAPL), which increased its Apple Watch shipments by 19% to 33.9 million in 2020, according to Counterpoint Research. Apple ended the year with a whopping 40% share of the global smartwatch market.

Facebook is likely realizing that its smartwatch will face the same three issues plaguing the portal: a deep distrust of the Facebook brand, privacy concerns, and its late arrival in a saturated market. Google has also faced similar criticism after its recent takeover of Fitbit.

Facebook is reportedly planning to launch its smartwatch next summer for around $ 400. But a lot could happen over the next year or so, and new smartwatches – including a new version of the Apple Watch – could easily steal the thunder from Facebook. A smartwatch with two cameras could also be seen as complicated and redundant, especially when smartphones and action cameras have the same purposes.

The main points to remember

The global smartwatch market could grow from $ 59 billion this year to nearly $ 100 billion in 2025, according to Research and Markets. This is great news for Apple, but it also suggests that the market may still be big enough for newcomers like Facebook to gain a foothold.

But investors should take all of these rumors with caution until Facebook makes an official announcement. Even though Facebook’s smartwatch does better than the portal, it is unlikely to generate a significant percentage of its revenue or reduce its overall ad reliance.

Instead, it should be seen as a potential expansion of its ecosystem beyond PCs and phones, which could simply complement its current push into virtual and augmented reality markets.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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