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Facebook Forays Into Hardware, Introduces AI-Powered Portal

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Facebook FB recently made available its first hardware device, Portal, which was delayed from May this year.

Artificial Intelligence (AI) powered Portal is a voice-controlled device with features like smart camera, speaker, digital assistant and most importantly, video calling.

The hands-free video call feature allows users (up to seven people) to communicate with their Facebook and Messenger friends. The smart camera tracks movement and adjusts camera focus as users move around the place. Additionally, the speaker minimizes the background noise, thereby eliminating the issue of proximity.

Notably, Portal, which comes in two variants, Portal (costs $199) and Portal+ (costs $349), is available for pre-order in the United States. Shipping for both devices is likely to begin in November.

Portal to Boost Facebook’s Competitive Position

Notably, the smart speaker market is expected to grow from 61.1 million users in 2018 to 76.5 million users in 2020, per eMarketer. Amazon AMZN holds the highest share in the global smart speaker market. The company shipped 4.1 million Echo devices in the last quarter, accounting for 24.5% of the total shipment.

However, Portal’s features like Story Time and video viewing is expected to help Facebook differentiate itself from dominant providers like Amazon Echo, Alphabet’s GOOGL Google Home and Apple’s AAPL HomePod.

Through Story Time, users can narrate stories and transform into the characters using Facebook’s augmented reality (AR) feature. Additionally, users can view their favorite shows on Watch and listen to music from partners like Spotify, Pandora and iHeartRadio. Moreover, Food Network and Newsy are available on the device with other apps to be added soon.

Further, Facebook’s Portal is incorporated into Amazon’s virtual assistant, Alexa, giving users the flexibility to control other smart devices and perform additional tasks like ordering groceries.

Facebook, Inc. Revenue (TTM)

Facebook, Inc. Revenue (TTM) | Facebook, Inc. Quote

Will Portal Reinvigorate User Growth?

The video-chatting feature for Facebook and Messenger users along with the growing demand for smart speakers is likely to expand user base. As of Jul 13, Facebook had 240 million users in the United States alone. Moreover, almost 31% of Messenger users (1.3 billion monthly active users (MAUs) as of the last reported quarter) use the platform’s call service worldwide.

Facebook is also working on voice commands to send messages, initiate calls and create reminders on Messenger. We believe that the company’s efforts to bring in differentiated features coupled with its own smart devices improve user engagement in the long haul.

However, users may not be confident about using the device, given security issues on Facebook platform that are scaring away users.

Notably, the recent data breach resulted in information loss of more than 50 million users, which may lead to a fine of $1.63 billion. Despite the investments in technology and workforce, Facebook has not been successful in completely curbing bad practices on its platform, which remains a significant concern.

Facebook currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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