After Only A Month The Facebook Phone Is Down To 99 Cents

This could be a symptom that no one’s really very interested in the Facebook Phone: the price on contract has just gone down to 99 cents. On the other hand, given the rather hinky way that phone pricing can work, it might be a symptom of it being a runaway success. Although, to be honest, that’s unlikely:

This is not a good sign. Barely a month into the first “Facebook Phone’s” life, the Facebook Home-sporting HTC First price has been slashed from $99.99 with a two year contract to just 99 cents with the same AT&T two-year agreement.

AT&T’s own web site makes the situation look, if possible, worse, by displaying the original HTC First price, $350.99 and subtracting $350. That’s a 99.72% discount.

While this is great news for anyone who wants an attractive, workman-like 4G phone with Facebook Home built in at a cut-rate price, it does not bode well for this first HTC/Facebook collaboration and future Facebook Phones.

The first and obvious way of thinking about this is that very few people indeed are actually interested in having Facebook entirely take over their phone. Despite the fact that it’s a perfectly decent phone on its own, sales have been very slow indeed and thus the price cut to get them shipping out the door.

However, as I say, phone handset pricing can be pretty odd at times. To the airtime provider there are two revenue streams not one. And it’s the cumulative value of those revenue streams that they’re interested in, not just the sales value of the phone. The other revenue stream is of course the value of that contract that you’re tied into. Which, importantly, has upgrades in cost if you start consuming a lot of data. It’s for this reason that many airtime providers are willing to swallow the high handset subsidies that Apple insists upon: they know that iPhone users are heavy data users and that they’ll get the money back in overages.

If those potential higher charges over the life of the contract are high enough then it’s at least theoretically possible that you’d happily give the phone away in order to get those extra charges for the next two years. There are, after all, plenty of cheaper contract phones that are free or near free upon signing said contract. This is exactly the same calculation.

So, we could posit, construct an example, where the users of this new Facebook Phone are spending so much time on Facebook on their new phones that their data charges are enormous. So much so that it makes sense for AT&T to give them away so as to be able to charge all of that lovely extra money in the future.

Given the two possible explanations (and I’m sure inventive minds could think up more) we now have to decide which is more likely. And I’d assume that you will agree with me that the second is most unlikely to be true. After all, AT&T only has one month’s revenue numbers to be working on at present and that’s just not enough to know that high data usage would be consistent into the future. Especially as they’ll only just now be finding out how peoples’ behaviour changes after getting the bill for that presumed overage.

Another clue would be, I think, that if the Facebook Phone was indeed proving very popular then I’m sure that Mr. Zuckerberg would be letting us know about that.

No, I think the explanation for the price drop is simply that not very many people seem to be interested in the Facebook Phone, at least as yet. If I were in the market for a phone right now I would be very interested myself at this price: but I would have to find some way of getting the Facebook software off it.

Via: Forbs