By Roger Field
Social networking websites have become big business in the past couple of years, and now offer huge potential in the mobile space. But how can operators profit from the trend?
Social networking websites have become big business in the past couple of years, and now offer huge potential in the mobile space. But how can operators profit from the trend?With social networking sites such as Facebook, MySpace and Twitter now an established part of the web landscape, mobile operators and manufacturers are increasingly looking at the potential of the growing trend.
With the number of people accessing the internet via mobile devices growing rapidly, a combination of social networking while on the move appears to have plenty of potential for all the players in the telecoms ecosystem.
Some 56% of subscribers belong to a social network of some kind, and 27% of that group has used their device for social networking, according to research firm Nielsen published at the end of 2008.
Analysts forecast that more than 800 million people worldwide will access social networks through their mobile phones by 2012, up from 82 million in 2007, according to eMarketer.
"Mobile social networking involves more than just shrink-wrapping social networking sites for the mobile device," says John du Pre Gauntt, senior mobile analyst for eMarketer. "It is one of the best opportunities for the mobile ecosystem to drive mobile internet use to levels comparable to online internet use."
French operator Orange entered the social networking arena in August, launching a social networking aggregator called "Social Life". The package, which is billed as a "one-stop-shop for social networking on the mobile" gives users' access to Facebook, MySpace and Bebo social networks. It also provides instant access to the sites from the home screen of handsets and allows users to access and update all of the sites simultaneously through a single login.
Orange, which said it plans to include more social networking sites in the aggregator through the rest of the year, also appears committed to attracting significant traffic to the site, by offering pay-as-you-go customers free access to the social networking sites, while contract customers receive free mobile internet access on certain tariffs.
But operators and application providers are not the only companies hoping to cash in on the growth of social networking, with device manufacturers also paying increasing attention to ensure their handsets work seamlessly with social networking sites.
Inq is just one example. The company, which is owned by Hutchison Whampoa but operates as an independent entity, was established in 2008 to design handsets made specifically for users who want to access social networking sites via mobile.
Jeff Taylor, co-founder and strategy director, said the original idea was to plug a perceived gap in the market.
"We isolated a few years ago a couple of key factors we thought were impeding the growth of mass market data, and key amongst them was usability," he says. From many conversations with vendors, Taylor and his colleagues realised that while there were some strong products in the top 15%-20% of some manufacturers' ranges, most handsets lacked the best features for mobile data use.
Taylor describes Inq's mission as being "to deliver integrated, web enabled communications devices to the mass market to drive paid-for data use amongst subscribers by up to 70% to 90% of bases using our devices."
The company's first handset, the Inq1, which was launched in late 2008 seems to have gone some way to achieving these goals according to data released by the company. In Hong Kong and the UK, the handset, which includes Skype and easy access to websites including Facebook has "seen figures higher than iPhone on Facebook, sitting at around the 70% mark," Taylor says.
"The other good stat is that 85% of people who buy an Inq handset walk out of the door with a data plan attached to that," he adds. "That is a high margin product for a network to sell a data plan."
Taylor attributes the success to three key principles of "simplicity, affordability, and usefulness" which the company incorporates into the design of its handsets.
The devices also had to be relatively cheap - around $150 - for networks to adopt them without "crushing" subsidies.
While Inq recently launched two more devices that both feature Twitter, Facebook, Windows Live Messenger and Skype, among other features, Taylor insists the company views social networking as one of four "communication activities" including email, instant messaging and VoIP that need to be reunited with the mobile phone. He adds that the importance of social networking lies in the fact that it is an efficient way for people to stay in touch with numerous people. "We think that is what is driving the incredible upswing for it on the mobile. It is actually the efficiency, not the fad," he says.
While Taylor admits that the sector is still being held back by some operators that "think they can charge for individual services" he argues that a change of attitude is vital if networks hope to increase data usage.
"Many networks have adopted the position that ‘3' adopted early on, which is to drive uptake of data on mobile you need to follow the same principles that have been successful in broadband, ie unlimited or very large buckets, flat rate open data. Networks that pursue that and marry it with a device that takes advantage of that from a simple and affordable point of view do very well. Networks that don't, won't," he says.
Meanwhile device manufacturers, outside of the high-end vendors such as Apple are also guilty of neglecting data applications. "It has been acceptable in the industry to just slap an application on a phone, expect people to dig through a 120 page manual and expect people to use it, and there has almost been head scratching when people don't want to use it," he says.
Gypsii, a social networking service headquartered in the Netherlands, is also attempting to put the mobile user at the heart of social networking.
The company, which has its own mobile social networking site called Gypsii, has incorporated a location based function into its service, allowing users to locate friends or other people with similar interests using the service.
The company has also developed a platform that integrates Facebook and Twitter, allowing mobile users to update the two sites simultaneously through the Gypsii portal, which also adds a location based element to the social networking experience.
"We are focused on building a mobile lifestyle application which brings together user-generated content, social networking with a mobile-centric view of it," says Shane Lennon, EVP, Gypsii.
He adds that one of the problems with social networking over mobile devices currently is that operators, device manufacturers and even the social networking sites themselves have simply tried to push the existing content onto mobile devices without tailoring it for the new medium.
"To date what I have seen is they are taking a web experience and pushing it to the phone. They are just taking something that is normally done on a reasonable size screen and pushing it down to a smaller one," he says.
He adds that while this approach might have worked on the iPhone, social networking has been limited on other devices owing to the cost of developing the multiple platforms necessary, although this is something that Gypsii, whose application runs on about seven platforms and 300 mobile devices globally, aims to overcome.
For Lennon social networking on mobile tends to be more personality driven than on a PC, and this is something that the telecoms ecosystem should be aware of. "Social networking on a mobile tends to be more about things you are doing on a lifestyle basis, such as soccer, food and restaurants, travel."
In this light, Lennon admits there are "multiple challenges" for operators and handset makers in increasing mobile social networking, including developing platforms, distribution, and collaborating with manufacturers, operators, and application providers.
"It is quite different to what they did building up on the web so they have got to approach it from a process point of view differently and they have got to employ people with different skill sets," he says.
Gypsii's strategy is to work closely with manufacturers such as Samsung, LG, Nokia and others, to co-launch and co-market devices bundled with its application. "We are just in that phase of co-launching with the likes of LG and Samsung, and we also have the ability to download from the stores," Lennon says.
While the company is confident that it will be able to generate revenue from its applications through an advertising based model and other sources such as licensing, Lennon is also convinced that operators will be able to profit from mobile social networking.
Operators are more likely to monetise mobile social networking by working with the application providers to provide additional services, such as billing, and by acting as a distribution hub for the applications, he adds.
"On the advertising chain they need to be able to facilitate working with application providers and just take a chunk of it. Don't just have one solution, have a few options in there," he says. "Operators, if they can become a great distribution channel for content and services and applications, they can do well and take revenue from multiple areas."
Operators could make it easier for application providers to get their applications into their stores. "Stores need to be easy to work and that is simple to download and bill," Lennon adds.
He points to Orange as an example of an operator that appears to be creating a compelling offer by being "great at repackaging stuff" and completing the package with a solid 3G offering.
"They are looking at a cross over of services that targets 18-25 year olds, not just data but also applications," he says.
Mobile social networking could well be a success in developing markets, where many people's first use of the internet and social networking will be with a mobile device rather than a PC.
While it might be some time before 3G becomes widely used in many developing markets, one company is hoping to bring social networking to a wider audience using existing 2G networks.
ForgetMeNot Software, a company that has developed software that allows 2G handsets to send and receive emails and instant messages, is currently testing an application that will also allow basic handsets to post and receive updates on Facebook.
"We are in beta phase of a service that we are providing using our platform that allows users with entry-level phones to be able to receive, update, post messages to their wall or their profile," says Paul Roberts, co-founder of ForgetMeNot Software.
"What we have is not just a communication tool. IM and email is the backbone of it, but it is a platform upon which other services can be built, including the social networking."
Roberts expects the service could be a big success in Africa and other developing markets where low PC penetration has created a pent-up demand for access to internet services such as social networking.
"It will allow end users to not only communicate but allow people who may never have access to the internet or a PC to have access to that information which is normally resident on the internet. It crosses this barrier, this hurdle of having access to information that is on the internet but not having the device capable," he says.