Virtually the only times Facebook (NASDAQ: FB) makes a splash in the media these days is when we’re hearing about its latest failure of information security or similar lapses. And the most recent of those incidents is still resonating.
So you may be right on board with MarketFoolery host Chris Hill and his guest, Motley Fool Asset Management’s Bill Barker, when they wonder aloud why the company chose this moment to launch the Facebook Portal. The device is meant to compete with Amazon‘s Echo, Google‘s Home Assistant, or the Apple HomePod and features both a microphone and video camera. In this segment, they weigh a simple question: Will anyone buy a device like this from a company that engenders such trust issues?
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A full transcript follows the video.
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This video was recorded on Oct. 8, 2018.
Chris Hill: Let’s start with Facebook. I don’t know if you’ve noticed, but Facebook has been in the headlines in 2018, largely for security reasons, or, I should say, lack of security reasons. I spent part of my weekend dealing with the latest email hack, which is people saying, “Hey, you may have been hacked, you may have gotten an email from me saying I’m looking for a friend request. Don’t accept it, because it’s this whole other thing.”
For some reason, Facebook decided in the wake of this latest hack that today would be a good day to unveil a new device. The device is called Portal. It’s essentially Facebook’s way of competing with the Amazon Echo and the Google Home assistant. It is a Facebook-powered camera and microphone that I’m supposed to put in my home. And I’m sorry, but given all of the security problems that Facebook has had in the last 12 months, there’s no way in the world I’m buying this thing.
Bill Barker: Give me the downside.
Hill: The downside?!
Barker: The only downside I see is it Facebook knows a whole lot more about you all the time.
Barker: Everybody trusts Facebook with all their data. [laughs]
Hill: [laughs] This just seems surprisingly tone deaf for a business that has been built by someone who really seems to have been in touch with the way the world is going, in terms of online social media connections, and also with the acquisitions, with the acquisition of Instagram and WhatsApp, but particularly Instagram. And I don’t know how much money they spent to make this thing. I’m not worried about Facebook’s finances, because they basically print money. But this really seems like a misstep.
Barker: It seems like a misstep. I’ll take the other side for a second, although I’m basically on the same side as you with this. This was a scheduled launch, I assume. Yeah, they’ve got yet another bad headline from last week. There’ll be more in the future, I’m guessing. If they delay this until we can’t quite remember when the last time Facebook was in the headlines for abusing our privacy, then they might have a very long wait. This will blow over, because news cycles are so short now. It’s a bigger problem in the sense that Facebook is, for us anyway, becoming more and more synonymous with failing in what we would hope to be their protection of privacy and data and security.
Hill: Yes. And the difference with this latest hack is, it’s not just the headlines out on news sites and on cable TV news. It’s right there in your Facebook feed. I mean, my Facebook feed this weekend was a whole lot of people — including myself, by the way — posting a message saying, “Hey, if you got this thing for me, I was not actually sending you another friend request.”
Barker: Ah, so you still go to Facebook? You still use it?
Hill: Yes. Every now and then.
Barker: OK, well, when you stop, then you won’t be confronted with this as much.
Hill: [laughs] I guess that’s true.
Barker: That’s probably coming. Or is it? Are you so taken by what you get from Facebook that you’re unlikely to walk away from it?
Hill: You and I have talked before about sports fandom. I’ll just use you as an example, because you’re sitting here.
Barker: No. Use a hypothetical me. Not me, just the guy who’s a little bit like me, perhaps.
Hill: You are very much in New York Yankees fan. Which is odd, considering you’re from Philadelphia, but that’s a whole other thing. I’ll leave that to the people of both New York and Philadelphia to judge you for. I’m not going to judge you for it. I’ll let them do that.
Barker: Philadelphia’s closer to New York than Maine is to Boston.
Hill: [laughs] We’re talking about you. So, you’re a New York Yankee fan. You’ve said before, when the Yankees aren’t doing well, you suffer from that. You’re an invested fan where. As opposed to, there are teams that you root for, that you only get good things from. If they’re doing well, it’s great, but you’re not as emotionally invested as you are with the New York Yankees. True?
Hill: That’s sort of my relationship with Facebook. In the same way that you’re not emotionally invested in a professional hockey team, that’s kind of how I am about Facebook. It’s like, yeah, every once in a while, I’ll get something good from it. If there’s garbage on Facebook, I’m not that invested.
Barker: Do you check it daily?
Hill: No, I don’t think I do.
Hill: I just am now curious to see where this device goes. What comes up on the next conference call or maybe the one after that, in terms of, “Hey, how many of those Portal devices have you sold?” Because it’s hard for me to imagine it’s going to be a lot.
Barker: I think it gets them in the game, right? Not necessarily that getting in the game is enough, because there are any number of times when one company, Facebook, Google, Amazon, Microsoft, is a laggard in one or another part of each other’s markets, and makes an attempt to get in. Microsoft with the phone for instance, or Amazon with the phone. And it’s just too late. So, the devices, and having the devices in the home, Amazon, Google, Apple, Facebook needs to be there in order to not miss out, perhaps, on what will be the next huge market. So, this gets them in there. Obviously, they’re working with some disadvantages, in terms of their reputation for security and privacy. But it gets them in the game. It may be as much of a failure as Facebook getting into search. Time will tell.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. Bill Barker owns shares of Alphabet (C shares) and Apple. Chris Hill owns shares of Amazon. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Facebook. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.