I would make a Facebook Camera for the explicit purpose of getting acquired by Facebook.
Facebook have announced they're going mobile first. They need to: half Facebook's traffic comes from mobile rather than PC, but mobile traffic
does not currently directly generate any meaningful revenue.
There are lots of rumours about Facebook working on a phone.
They shouldn't make a phone. They should make a camera.
The Facebook Camera should be a better pocket camera, with native Facebook and re-imagined for sharing, plus core communications functionality. It should have wifi and optionally 3G.
The camera is a "second device" which lives alongside the phone and doesn't compete with it. This sidesteps Facebook around the highly competitive (and increasingly locked-in) space of iPhone and Android, and avoids the need to launch with a full app store.
Facebook are interested in camera apps (they have two: their own, and Instagram). They should make the hardware.
A better pocket camera:
The viewfinder screen should be front-facing, on the same face of the camera as the lens.
Social photos aren't like what I'll call "posterity" photos. They're not portraits and landscapes. Social photos include the photographer in the picture -- you hold the camera out, and point it back at you and your friends. Or you point it at the view behind you and include yourself in the frame, to prove you're there. A front-facing viewfinder would be perfect for this, and it would also make the physical product visually distinctive when shown in adverts and magazines ("self-evident" product design is essential for marketing).
Sharing happens in real life too. One usage of digital cameras I saw - before the iPhone came along - was that a few photos would be kept, undeleted, on the memory card, usually of cats, kids and significant others. These photos are for showing off.
There should be a dedicated "photo wallet" Facebook album, and the front-facing screen should be used for a dedicated showing off function.
A "core communications" device:
Although I see the Facebook Camera as a second device, alongside the phone, this networked device should support all core communications:
Given this list, I suspect the Facebook Camera would undermine many of the reasons to carry a full-featured app phone.
Music isn't required. Wearing your headphones is anti-social when you're hanging out with your friends.
If you want the killer feature... Facebook should build on Facebook Chat to support video, and make this camera a video chat device. Hangouts (easy, social video chat) is the stand-out amazing feature in Google+, and Facebook should be looking to compete.
The Facebook Camera should have accessible product design which is cool without being weird (the Nokia Lumia does this well), mass market without being tacky (the Kindle does this well), and distinctive without being bizarre (think of the original iPod). It's got to look like a camera crossed with an iPod Touch with your friends inside.
It makes sense to make hardware, because physical products are high engagement.
Facebook's model (as I understand it) is to record every single action every person takes, with metadata of time, place, and location in the social graph. This substrate, and the tools to manipulate it, has a good chance of being the underlying foundation of whatever it is comes after the Web. The Web started as a document repository, it's all about nouns. Facebook has the potential to be as big, but all about verbs. The "social network" aspect of Facebook is part of its bootstrap: the way Facebook gets into the position that it's natural that all verbs run through it. The next step in the bootstrap, to move down into the foundations, is that Facebook will become a platform for other social networks. Instagram is the first major one.
Any drop in engagement in the social network (for example what happened to Digg or MySpace) risks this entire future.
As a defensive play, a mobile device is essential. Facebook's mobile usage is increasing, but they can't make any money out of ads on mobile. So they're in a desparate double bind: So long as Facebook on mobile is popular but not commercially useful, it's good for mobile operators and OS providers because it boosts service usage, but it's bad for Facebook because it cannabalises desktop usage.
But when their mobile service is popular and becomes commercially viable, the mobile operators and OS providers become conflicted gatekeepers who will either undermine the ad experience or get a piece of it themselves by undermining Facebook as a whole. We're seeing signs of this already. Half of the mobile market is owned by Android, made by Google, who also make Google+, which means Android will threaten Facebook.
The way to escape this trap is for Facebook to make a mobile device.
The phone market is really, really contested, and really, really hard. Phones are the centrepiece of Apple, the most valuable and most inventive company on the planet. Phones are the focus of Google, the Web's most inventive company, and a fierce and increasingly motivated competitor. Both Apple and Google have been working hard on lock-in for one or more OS generations. Phones are the one of the points of both attack and defence from the previous generation's largest technology firm, Microsoft. Phones are where one of the largest technology companies there is - Samsung - can just about keep up. Phones are the rocks on which the biggest of the big technology players have come unstuck: Nokia and RIM.
To have a phone now, you need the phone, a sufficiently incredible offer to get customers to break with phones they love (most of those people are in 18-24 month contracts), a whole app and developer ecosystem, hardware manufacturing and distribution, access to the network, access to a media content system, access to a physical media playback system, and to be butressed by a multi-device ecosystem like tablets or music players.
Facebook could enter this market, sure, but why bet the business on winning in such a competitive space?
Here's the thing: You don't need to make a phone to make it in mobile.
Five years ago, the iPhone was released into a world of desktop PCs and bulky laptops. Laptops were never truly mobile devices, and the iPhone (and Android) made a lot of sense in that world, over the previous generation of smartphones from Nokia and RIM. "App phones" were more like mini computers.
The product landscape has changed. The iPad is phenomonally successful, and other tablets look pretty neat too. The trend with laptops is towards ultrabooks, where the MacBook Air is setting the pace -- the Air is almost instant on, super light, and has an incredible battery life. It's way more mobile than any previous laptop. Alongside these product shifts, the cloud has emerged as the home of data. When I lost my laptop recently, configuring a new laptop was as simple as signing into iTunes, Dropbox, and GMail.
In this world of iPads and (hopefully) upcoming tablets, does the bells-and-whistles approach of iPhone and Android make as much sense? I don't think so. I think a new, simple category of pocket devices opens up. It's not going to be another music device, those have vacated the pocket. It might be a gaming device, but the iPhone has grabbed that niche.
But it could be a camera.
A camera that also dealt with core communications (email, chat, maps, Facebook) would meet some of the same needs as a phone without competing with phones directly.
Cameras are both highly personal and highly popular, like music players were when Apple launched the iPod. That's a good place to be. It's full of love.
And cameras fit right in with Facebook's position at the world biggest online photo service (in 2010, Facebook had 2.5 billion photos uploaded every month), just as the iPod fit with Apple's position in the music sector with iTunes.
Last, the camera sector is ripe for re-invention and new features.
The bottom end of the market has been softened up: the iPhone has replaced the compact camera as most people's camera of choice. But it doesn't take great photos, and it's okay but not particularly good at letting you share and socialise around photos. So the iPhone has not protected its position as a compact. And although the former compact sector has been adding features like crazy - smile detection, wifi uploads - none of the device manufactures really get software or social networks.
On the high end, the professional cameras have turned into excellent prosumer models -- which is neat, but they're definitely not social: they're portrait and landscape cameras. You can see a few manufacturers attempting to innovate: Nokia have their 41 megapixel camera, Polaroid have launched a digital camera, Sony have their compact DSCL, there's Lytro and their lightfield camera, and Samsung have actually launched cameras with front-facing screens, etc. But nothing has traction.
Facebook is breaking up their mobile app into lots of different apps for particular functions, which is what I'd expect if they were going to launch their own device: they'd want Facebook features to be top-level features on whatever that new device was, and creating them in HTML (the language of the Web) on iPhones means they can re-use these apps still in HTML on whatever their hypothetical new device is.
They obviously care about cameras: the single app that doesn't parallel a feature on the Web is a dedicated camera app. And then there's Instagram, which is Facebook's second camera app.
If I was Facebook, I'd be getting ready for a hypothetical future device by preparing all my functionality to make the jump. Currently Facebook are breaking up their single iPhone app into lots of little microapps. Makes sense. Then I'd talk to Sony for the manufacturing.
But I'm not Facebook. So I'd either do a start-up with a hardware accelerator (equity is exchanged for contract manufacturing), or I'd prototype and then pitch to joint venture with Facebook itself.
The thing is, the nature of products is changing. It doesn't make sense to think of cameras as straight-up-and-down products -- you have you consider what a camera is as a service, and what it is as media. That is: how does the camera meet the service offering of "taking and sharing photos" as easily and wonderfully as possible? And how does the camera let photos take their place as objects in the communication and entertainment media of social networks? The industrial design is almost secondary.
And traditional product companies - even Apple to an extent - don't think like this. Web companies do, but so far hardware has been out of their reach. Until Web companies figure out how to do hardware, there's going to be an interesting gap to fill.