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Facebook Is Reportedly Moving Forward With Its Video-Chatting Device

By Evan Niu, CFA - Jan 9, 2018 at 5:04PM

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Limited feature set, privacy concerns, and massively overpriced. What could go wrong?

Despite my objections, it appears that Facebook (FB 1.83%) is going ahead with its plans to introduce video-chatting hardware. Over the past year, rumors emerged that Facebook was working on some type of device that some thought would be a smart speaker but started to look more like a video-chatting device. Given some inevitable overlap in features, there was some confusion in the speculation.

The device will reportedly be called Portal and cost $499, according to Cheddar.

Echo Show on a kitchen counter

Facebook's rumored Portal would compete with Amazon's Echo Show. Image source: Amazon.

Facebook might unveil Portal in just a few months 

Not including its Oculus subsidiary, Portal would be the most meaningful consumer hardware product the company has made to date. The device is expected to feature a wide-angle camera lens and a display, positioning the device primarily as a way to video chat. Portal would be a clear shot at Amazon's (AMZN 3.66%) hugely successful Echo family, but most directly compete with the Echo Show instead of speakers like the Echo or Echo Plus.

Facebook is supposedly planning to officially introduce the Portal at its annual F8 developer conference in May with a target ship date in the latter half of the year, according to the report. Just as Facebook is killing off its M virtual assistant that lacks voice control, Portal will reportedly include voice control. The front-facing camera will be able to recognize users' faces and connect to their Facebook accounts, leveraging the same facial recognition technology that Facebook uses on its core platform to suggest photo tags. Portal may also support third-party music- and video-streaming services such as Spotify and Netflix for additional content.

The price is wrong

At a rumored cost of $499, Portal could be doomed. Facebook could potentially launch Portal at a more affordable price point, but it should be clear that $499 is simply not competitive for a first-generation device from a company with almost no experience shipping consumer hardware. The Echo Show costs $230, making it the most expensive Echo product in Amazon's lineup, while the Echo Spot (with many similar functions and a smaller display) is just $130.

The feature set also sounds fairly limited; Portal won't do anything that a smartphone or tablet can't already do at half the price. Amazon only recently started focusing on communication-based functions last year with its Echo products, including with its "Drop In" feature that allows approved friends and family to connect to approved devices at any time without warning. There are growing privacy concerns surrounding Amazon's latest efforts to put connected cameras all over users' homes.

In terms of user trust, Facebook is already walking on thin ice after its controversial role in Russian election meddling, so asking consumers to pay a massive premium for a new product that raises privacy concerns might be a bit too much.

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