Facebook Tries Video Reboot With New Portal Chat Devices

Facebook (NASDAQ: FB) appears to be taking the adage of "if at first you don't succeed, try, try again" to heart. A year after launching a stand-alone video chat device that failed to take off with the masses, the social media giant is at it again. This fall, it will roll out three new Portal video chat devices it hopes will resonate with some of its more than 2 billion monthly users.

On Oct. 15, Facebook will start selling the 10-inch Portal and 8-inch Portal Mini video chat devices. The picture frame-styled Portal and new Portal Mini will sell for $179 and $129, respectively -- a discount from the first-generation Portal's original price of $199.

Portal TV, which launches in November for $149, will let users have video chats and stream content from their Portal-connected TV. The device's AI-powered Smart Camera pans and zooms, while its Smart Sound technology minimizes background noise. With the new devices, Facebook users can now make calls via WhatsApp in addition to Messenger calling. All of the WhatsApp calls on Portal have end-to-end encryption.

Facebook Portal.


Facebook gets a second chance

Facebook's redo in the smart home-device market comes at an uncertain time for the social media giant. After a couple of years of working to recover from a series of privacy scandals related to the 2016 U.S. presidential election, and with the 2020 election coming up, Facebook is going to great lengths to try and improve its reputation and show it can protect the privacy and data of its users.

Back in 2016, the social media giant was blamed for not stopping the spread of fake and hateful content on its platform during the election. Related to that was the Cambridge Analytica scandal, in which the now-defunct political consulting firm accessed data on more than 87 million users without their permission in the run-up to the election. Add the fact that reports have emerged that smart speakers from other manufacturers have spied on their users in the past, and consumers may not be keen to have a Facebook video device in their homes.

To address some of that concern, Facebook said in its press release that the Portal devices have simple settings to disable the camera and/or microphone with a single tap or sliding switch. Customers can also use the camera cover that comes with the device to physically block the camera lens. The company says the Smart Camera and Smart Sound technologies run locally on the Portal device, not on a Facebook server.

Smart-speaker market booming

Facebook is trying to capitalize on a market that has been a boon to some of its tech rivals. Amazon (NASDAQ: AMZN) has emerged as the leader in the space thanks to its voice-activated digital assistant Alexa and its line of Echo speakers. Alphabet's Google is in second place, enjoying its own successes with its Google Home smart-speaker device. Microsoft's Cortana and Apple's (NASDAQ: AAPL) Siri have failed to find a huge customer base in the smart-speaker market, although they are still formidable competitors.

With Portal TV, which is a combination of a smart speaker and a content streaming device, Facebook can compete better against its large tech rivals that are launching streaming services. Apple, for its part, is rolling out a streaming content service that will cost users $4.99 a month. Facebook has partnered with Amazon for its Portal device, enabling users to stream Amazon Prime content and even watch it with other Facebook users. 

The first time around was a dud

The original Portal came out of Facebook's Building 8 unit, which was a group shrouded in secrecy and tasked with creating hardware devices for the social media giant. In December, reports emerged that Facebook closed the unit after Portal was launched. It's not clear how many units of the first iteration of the smart speaker were sold, with estimates ranging from 54,000 to less than 300,000. This time, Facebook is hoping the lower price and greater social media functionality will make it a hit heading into the holiday selling season.

The good news: The market for smart speakers in the U.S. is only poised to grow, with Strategy Analytics predicting 50% of U.S. households will own at least one smart speaker by the end of 2020. The bad news: Facebook's Portal isn't even considered a contender -- at least not yet. With sales from Portal and its Oculus virtual reality headsets accounting for less than 2% of Facebook's revenue in the first quarter, the Portal isn't expected to have much of an impact on its bottom line. But as its social media offerings get saturated, it could open up a new revenue stream and new use cases for its existing platforms. 

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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, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Donna Fuscaldo has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, and Microsoft. The Motley Fool has the following options: short January 2020 $155 calls on Apple, long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, long January 2020 $150 calls on Apple, and long January 2021 $85 calls on Microsoft. The Motley Fool has a disclosure policy.

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