Social networking has already proven its appeal, if not its worth, on the fixed line internet—and the move to mobile seems a natural evolution. So what happens when these worlds collide? Some very big numbers indeed. The mobile telecoms market is no stranger to big numbers. Global mobile services generate close to $1tn in revenues, putting the market up there with the worldwide automotive, food and weapons industries. Global mobile subscribers are on their way to five billion and the world’s biggest mobile operator, China Mobile, has close to half a billion customers in its domestic market alone.
In the fixed line internet space, social networking—a phenomenon that has taken the PC world by storm—is generating some big numbers of its own. It’s impossible to tell how many subscribers there are to social networks worldwide, or indeed how many social networks exist. But if we look at some of the leading players—Facebook with 350 million active users, China’s QQ with 300 million, MySpace with about half as many and LinkedIn with about half as many again—the traction of the medium is obvious. So what happens when social networks go mobile? Some very big numbers indeed, according to industry analyst Informa Telecoms & Media. The research house is bullish on the subject, believing that the importance of mobile social networking will escalate exponentially over the next five years, creating a much larger industry. Informa says there is sufficient diversity within the social network arena that, in a high growth scenario, nearly 25 per cent of total mobile subscribers worldwide will be attracted to and participating in mobile social networking by 2013.
The forecast is encouraging, with Informa using three scenarios to forecast mobile social networking user base growth as a fraction of the total addressable market. According to the analyst there were approximately 92.5 million mobile social networking users globally at the end of 2008, or around three per cent of the total mobile subscriber base. By the end of 2013, Informa predicts that the global mobile social networking user population could rise to between 641.6 million—the most conservative growth scenario—and 873.1 million, or 22 per cent of the total mobile subscriber base, in the high-growth scenario.
But where will this staggering growth in subscriber numbers come from? The mobilisation of existing PC-centric communities is the most obvious source, providing further confirmation that the mobile model is robust, allowing users to access their communities when all they have with them is a mobile handset. It is natural that people who value immediacy and contextual relevance in their communications would seek to have them when they are not in front of their PC. After all, your social life doesn’t happen while you’re sitting at your desk, so the mobile allows users to report on things that are happening now, without having to wait until they get back to the computer.
Mobile social networking encompasses a diverse portfolio of technologies and services, ranging from simple chat applications to multimedia-rich environments and content generating and sharing communities which persist after the user logs off. It is, more so than anything that has gone before, a reflection of the breadth of both ecosystem participants and users.
But at the same time, the boundaries of this industry are getting more difficult to define systematically and accurately. Social networking is creeping into and changing the nature of many other non-community based services, making precise service category definitions much more difficult to reach. Just as the differences between PC-centric and mobile-centric are eroding, it is also getting more difficult to cleanly distinguish a mobile social networking service with value added content from a service that has social networking features added in order to increase the stickiness to end users.
Different users are motivated by different needs and have vastly different ways and means of experiencing their mobile communities. Early adopters are using more powerful, community-centric handsets and services for finding and communicating with others, quickly adapting their lifestyles to the benefits provided by the services. While in parallel, tens, and soon hundreds of millions of new mobile community members are registering with community services for the first time.
According to Shane Lennon, senior vice president of marketing and product management at mobile social network Gypsii, there’s a sea change happening on three levels—the consumer level, the device level and the distribution level. “Consumers have been looking to do more on mobile, particularly in emerging markets where they don’t have access to the internet via a PC,” Lennon says. “Even two years ago you saw people trying to use WAP to mobilise Facebook and MySpace.
If you think about social networking and the things you do throughout the day, most of the things that are important happen while you’re physically away from the PC, so there’s an inherent business case there.”
While Gypsii’s presence is global, its largest market is China, where the company operates in partnership with China Unicom, targeting the carrier’s 148 million mobile subscribers. “China still has massive white space,” says Lennon, “There’s the potential to sell 300 or 400 million phones to new users. And operators are now pushing data services. There’s China Unicom with the iPhone and China Mobile with the [Androidbased] OPhone platform. Social networking is expected to drive the data business and Chinese operators are learning fast about how much consumers are willing to pay. I think you will soon see data plans in China mirroring those in Japan and Korea.” One of the greatest influences on social networking is cultural conventions, especially where those conventions are in a state of change. Lennon notes that Chinese users are “ferocious” social networkers, clocking up about ten times more activity than Gypsii users in Europe and the US. “Chinese users are coming out of a closed society so there is a lot of curiosity as well as a massive migration from rural to urban areas.
This is stimulating a natural embrace of the platform—Chinese users actually want to make friends,” he says.
Social networking makes as interesting an anthropological case study as it does a business one, because of the evolutionary demands it places on social etiquette. Facebook CEO Mark Zuckerberg recently stated: “Privacy is no longer a social norm.” That may be an overstated remark, but it’s indicative of how our concept of privacy has changed.
Because users are the lifeblood of an online society, social networks are almost universally viewed as organic communities that operate in autonomy. But China, with its strict internet constraints raises an interesting question on the subject of control over these communities.
At present there is a three-way struggle going on for ‘ownership’ of the community, which perhaps more importantly translates into a struggle for ownership of the user. In one corner we have the traditional PC-centric networks, Facebook, MySpace, LinkedIn et al, while in the other there are the operator portals and co-branded or white label offerings, like Gypsii or Zyb, designed to keep the carrier where it traditionally expects to be—the gateway to the user experience. But there’s also a contender emerging from the devices space, where the proliferation of mobile applications stores is allowing handset vendors to reconstruct the walled gardens of the last decade.
Nokia’s Ovi is a good example of how social networking creep has added value to another service model. In the same way that Amazon really started out as a social network that just happened to sell books, the Finnish vendor set up Ovi to extend its relationship with hundreds of millions of Nokia device owners around the world beyond the lump of shiny plastic in their hands. Nokia launched the Mosh environment in 2007, a dedicated social network giving users a place to communicate and share their content, as well as to make requests for content not yet available. But the firm closed the service down in 2009 in favour of the Ovi Store after it became increasingly problematic to police Mosh, which had become riddled with pirated content.
Piracy is a problem but, in combination with the app stores, Lennon claims that social networking features will drive viral uptake of mobile applications. He points to the success that Apple and Android have had in this regard, but states that “no other provider has come close.” It’s a telling statement. A few years ago Apple and Android were names that had no place in a conversation about mobile technology; nowadays it’s almost impossible
to avoid mentioning them. Branding seems to be the key here. To describe Apple with the iPhone, and Android, with its connections to Google, as “well known” would be an understatement. And something they’re both very good at is getting their brands in front of eyeballs. “If you have an iPhone and you’re in the US, you barely know you’re on the AT&T network because Apple branding is everywhere,” says Carsten Brinkshulte, CEO of mobile messaging firm Synchronica, “It’s the same thing with Android and Google.”
The suggestion here is that it’s better to partner with the big brands. “Nokia’s Ovi and RIM’s BlackBerry services are also going down same route; they want to be a VAS (value added services) provider to the end user,” says Brinkshulte. But does that mean partnering with the known players in a given space—say Facebook or MySpace in the social networking market? It’s certainly one option. “Handset manufacturers could offer exclusivity for whatever service they’re associated with, just like Apple did with the iPhone,” adds Brinkshulte. “But when the exclusivity period is up the competitive advantage disappears again. If carriers just give up and partner with MySpace in order to offer a mobile MySpace, they only gain a short term advantage, because another operator will partner with the same company a month later. Facebook’s not going to do an exclusive deal with any carrier. So the carrier will be further pushed down into being a dumb pipe,” Brinkshulte concludes.
The term “dumb pipe” was bandied around a lot in 2009. It has clear negative connotations but it’s not a model that everyone dismisses. “Some operators will happily choose to be dumb pipes,” says Anu Shah, head of mobile services provider IMImobile Europe. “Operators do not launch services quickly enough for a consumer centric market. They shouldn’t offer single services, but instead offer building blocks—phonebook, location, billing services—to make differentiated service offerings. At the moment operators are trying to do it all in house, but they should look to partnerships and become a consumer services provider.”
While it may seem like many social networks just appeared overnight, Shah maintains a certain skill set is required to launch a successful social network. “Operators should enhance and enrich a service rather than just compete directly with it,” he says.
One of the direct consequences of the mobilisation of PC-centric social networks is increased choice. There are millions of new users of PC-centric community services visiting the community areas of their operator portals as well as seeing new announcements and invitations to join mobile-centric communities.
So while on the one hand mobile subscribers are now aware of the community service options available to them, they also have less time to spend on each community. Informa found that time spent on community services is increasing, but not as rapidly as the number of different communities with which a single subscriber is registered, resulting in reduced time and page impressions in markets where large PC-centric networks have recently been mobilised.
The more open-minded operators have made some attempts to exploit this phenomenon, as well as to hedge their bets about which social networks to partner with by launching aggregation platforms. These offerings, like Vodafone 360, bring together all contacts and content in one place on the device, allowing customers access to different networking sites including Facebook, Windows Live Messenger and Google Talk. Users can also create different contact groups across social networks, so as to share different information with different groups of people.
This, according to all the companies MCI contacted for this feature, is the smart move for operators because they have access to one thing that the device manufacturers and online service providers don’t have— at least not yet—the user’s contacts book. The address book is the one area where consumers interact with their mobiles on a daily basis, and, according to Shah: “A rich address book is a jumping off point for social networking activities, for email activities, for IM activities. It could allow you to share a music playlist to your contacts right from the address book, and also allows you to create events and send them to contacts either via a client app, on WAP or over the web.”
Shah believes this approach can be extended to keeping a user’s contacts in the cloud, backing up their address book and personal content and at the same time keeping them close to the operator bosom.
“It’s still an astonishing problem that people have when they change their phone—how do they move their contacts and content to the new device? Lots of operators have solutions but the consumers don’t really know how to find them,” Shah says.
To paraphrase entrepreneur Victor Kiam, VAS provider Critical Path liked the idea so much it bought the company. The company in this case was social media platform Shozu which allows users to push and get content from multiple social networks as well as to backup and sync their content and contacts. “The social address book, this is the way an operator can play a big part in the social networking phenomenon,” says Mark Palomba, CEO of Critical Path. “People don’t connect to one social network, they may connect to four or five and the big challenge the consumer faces is how to keep everything in sync and easily navigate the different social networks.”
Palomba refers to Japan and Korea as countries that have had success in this area, “but adds: Those phones are highly configured because they’re controlled by the operator in those markets.” This is a statement that lends further credence to the argument that operators should maintain control of the customer. “The challenge with going through one interface from one social network to another is that you don’t know how other users want to be contacted. In the end the consumer just wants the information, just wants the message, he doesn’t care about the medium,” says Palomba.
It is this level of customer knowledge and insight that is one of the few remaining assets, along with the phonebook, location and billing, that the operator can still leverage. And as location-centric Gypsii has proven, they are assets that can be successfully exploited. Comforting news for Nokia, which in 2008 acquired mapping firm Navteq for $8.1bn—it’s single biggest acquisition to date—and last year bought travel focused social network Dopplr among a raft of other social networking related purchases including cloud-based social media sharing and messaging service Plum, Cellity, Bit-Side, Plazes and Twango.
Nokia can afford it, but $8.1bn is still a lot of money to spend on a medium that has yet to prove itself as a money-maker. The market values of Facebook and Twitter have been artificially over inflated by the same sort of hysteria seen in the dotcom boom days, but acquisitions have not been forthcoming, mainly because these companies are infamous for an absence of revenue model.
Subscription fees are talked about in hushed tones by the social networking community, because it’s well known that users are a fickle bunch at best and even the guys who sell the social network platforms to service providers pitch them as a value added service rather than a premium feature. This might be one route to the money, as Informa notes that models for generating revenue from mobile social networking are also evolving, with new business models built on cross network mash ups, where social networking is pitched as a VAS to another, more easily monetised, feature.
You could also do worse than look to the big disruptors in the space for direction. Both Google and Apple have recently made purchases in the mobile advertising space. In early January Apple acquired mobile advertising firm Quattro Wireless for somewhere between $250m and $275m, perhaps paving the way for Apple to offer an advertising platform to its App Store and iPhone customers. While late last year, Google upped its game in the mobile space with the purchase of AdMob for $750m. Google and AdMob currently specialise in different areas, with Google’s focus on mobile search ads, while AdMob’s focus is mobile display ads and in-application ads.
“Device manufacturers, Apple and Google have a solution in advertising,” says Gypsii’s Lennon. “They currently take a share of revenues from all applications sold and in the future will want to supply advertising. So our ultimate model, our long term goal, is advertising revenues. E-commerce is now mobile commerce and you will also see premium content services. We will see lots of talk around advertising in the social networking space.”
But for this to happen, the media agencies need to mature, says IMImobile’s Shah. “It’s not the product that’s the issue, but at present it’s not easy enough for media agencies to buy mobile inventory,” he says. However, advertising in this sense might not take form as we might expect. Lennon believes that users will actually search for adverts, or have them pushed out by the social network. It’s a different proposition to the kind of research you might do on Google at the PC, “But when looking for vouchers, for a restaurant for example, the natural place to do this is on the mobile,” he says, where the viral element can be exploited.
On this, the proponents agree. Social networking should be used as an enabler—the money is in the mash-ups.
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