Do operators understand what mobile social networks are for, and how they work? If so, how can they generate revenues from them?
Ad-funded social networks will provide the bulk of revenues in the mobile user-generated content (UGC) space by 2013, according to a new report from Juniper Research.
The report says that the total value of the UGC market – comprising social networking, dating and personal content delivery (PCD) services – will rise from nearly $1.1 billion in 2007 to more than $7.3 billion in 2013, with social networking overhauling dating to become the largest revenue generating segment by 2009. The report also notes the increasing importance played by advertising, which will account for nearly one-third of total revenues in the UGC space by the end of the forecast period, and more than half of mobile social networking revenues.
According to report author Dr Windsor Holden, "It's clear that we have seen an industry wide shift regarding the implementation of business models in this area. Whereas initially there was a perception that users would pay a small mobility premium to access social networks on their handsets, it rapidly became clear that to achieve truly mass adoption, it would be necessary to offer free membership and then to augment that with advertising and the sale of premium content."
The Juniper report also observed that, while the iPhone had substantially increased public awareness of mobile content services, there was significant scope for improvement with regards to the marketing of such services within the industry as a whole. It also stressed the need for operators to reduce data costs outside of bundles to encourage casual use of social networking and dating services.
Other findings from the report include:
– The number of active users of mobile social networking sites is expected to rise from 54 million in 2008 to nearly 730 million in 2013
– The Far East & China region will be most popular in terms of mobile user number for mobile social networking and PCD throughout the forecast period, but the Indian Sub Continent will become the largest region for mobile dating services by 2010
– There will be more than 9 billion downloads from PCD sites by 2013, of which 32% will be ad-supported.
Operators say 'me too'
This looks like nothing but good news for operators, as they struggle to do what the main brand social networking sites have so far been unable to, and that is make a profit.
So far, European operators have responded to this trend by offering mobile versions of the main brands. The thinking is that this leverages the brand power of the social networking site, whilst keeping operators in control.
In Russia, the local version of MySpace has announced a partnership to develop and promote solutions for the subscribers of MTS Russia. Under the terms of the partnership, MTS and MySpace will develop an exclusive service for the subscribers of MTS Russia that will become part of MTS' WAP-portal. In addition, the companies are planning to launch an MTS-branded community on MySpace Russia website to drive usage and support the partnership. MTS?thinks it has hit on a good strategy. "We are looking forward to introducing over 60 million customers of MTS in Russia, the largest subscriber base in the country, to the leading social network, MySpace," saysPavel Roytberg, product and service development director of MTS Russia.
"This partnership fits well into our strategy of providing Web 2.0 and social networking capabilities for our subscribers. The new service from MySpace on our WAP-portal will also allow us to explore innovative marketing initiatives, such as viral marketing. The pairing of the leading mobile and social networking brands will bring increased portability and greater access to customers of both MTS and MySpace and enrich the mobile user experience."
"MySpace is known for its networking and creative solutions which revolutionized social networking. It is a place for everyone – whether you are a global celebrity or an aspiring artist," noted Aleksandr Turkot, general director of MySpace Russia. "This partnership with MTS is a key strategic move for MySpace, allowing us to give Russian customers unprecedented access to networking via their mobile phones. Our brands are built on providing high quality communication and networking experience and our partnership will allow us to develop many new exciting services for our customers."
Meanwhile, Orange is bringing the leading social network sites together within Orange World. It has a new service that combines access to the sites' popular functions into a single destination, following the completion of partnership agreements with MySpace, Facebook and Bebo whose members will be able to view their profile updates – emails, comments from friends, recently uploaded pictures – alongside others from Skyrock, Pikeo, Flirtomatic, DailyMotion and Meetic.
The service, which lets users keep in touch with their friends wherever they are, has launched in France and will follow soon in the UK, Switzerland, Spain and Portugal. It works by displaying the most popular functions of multiple social networks side by side these so that they can be accessed far more simply with one click. Consumers will now be able to receive and send messages, upload photos and check status updates without having to browse individual URLs or log into separate sites. Orange plans to evolve the service from Orange World to an embedded application, accessible from the home screen of Orange Signature phones. The ultimate goal is to bring these communities together across all three screens: mobile, PC and TV.
"Our partnership with MySpace shows that mobile is a seamless extension of the online experience, not an alternative to it," said Olaf Swantee, Head of Orange's global mobile operations."This service illustrates how Orange is aggregating digital content to simplify access to social networks from mobile devices. In future, Orange will deliver digital entertainment across mobile, TV and broadband, giving consumers content not just where they want it, but how they want it."
Paul-Francois Fournier, Senior Vice President for Portal Strategy and Online Advertising at Orange says: "At Orange, we are committed to giving over 170 million customers the best and most user-friendly multimedia experience possible, whether on the mobile, the Web or IPTV. This new service will give our mobile customers easy and optimised access to the most popular Internet online communities on their mobile, so they can take it with them wherever they go." Francois concludes, "It also supports our cross platform advertising strategy with a compelling offer for advertisers to reach all those different communities in one single place on Orange World portals".
Yet this approach, while clearly of utility for those established users of ISP sites, keeps mobile at one remove from "core" online sites. How can users get a mobile experience? Experts are agreed that mobile operators need to build services around their strengths.
A mobile experience
One company that is trying to build its presence in this area is GeoSentric, through its GsyPSii brand. GyPSii is the geo-location and mobile social networking provider, and as an example of its "get integrated" approach, has entered into a multi-year worldwide agreement with Garmin, the specialist in satellite navigation.
Under the terms of the agreement, GyPSii will provide technology, products, worldwide data center infrastructure, development licenses, and GyPSii branding rights to Garmin, on a worldwide non-exclusive basis for a range of Garmin products. Garmin anticipates that future products will include friend finding applications that support the GyPSii-powered location-based social networking services platform.
The agreement provides development licenses to Garmin, to leverage the GyPSii location-based geo-social networking services infrastructure for internal development and integration with its products. The agreement also has provisions for revenue sharing between GyPSii and Garmin.
GyPSii incorporates a wide range of location-specific functions and mobile lifestyle services – including mobile search, user generated content-sharing and social networking – in a single platform.
Thor Johnson, SVP Media Markets at GyPSii, says that in his view, a partnership like this will enable brands to offer better ads to users.
"In the main, the types of ads in the mobile space are still 1990s-style advertising. With something more cutting edge, as with PNDs, we may see a BP?logo on the map as you drive through a town, showing you where the nearest filling station is, for instance. We believe we are starting to see evidence that advertisers are starting to embrace this sort of advert. It allows them to target much more accurately than desktop internet ads, because they know where people are and what they are looking for.
But dedicated deals between technology providers, handset manufacturers and operators is not the only route being mooted. The mobile agency RingRing Media, has launched 'I'AM'.
I'AM is said to integrate with a broad range of local and global mobile ad networks (including Admob, Millenial Media, Adshandy, Mkhoj and BuzzCity), automatically routing traffic to the most relevant ad network which is achieving the highest revenue for that particular user, handset and demographic.
Typically mobile publishers appoint an ad network to serve ads into their mobile site. In contrast, I'AM is said to dynamically segment and route traffic to the highest yielding ad network to provide publishers with 100 per cent fill rates.
Harry Dewhirst, Co-Founder of RingRing Media, says, "Our vision of mobile advertising 2.0 is dynamically selecting from a pool of ads the most targeted and highest revenue generating ad for a specific user.
"With the launch of I'AM I believe we have fulfilled this vision, creating a platform which creates a win-win situation for ad network, advertiser, publisher and user alike."
Christophe Hocquet, CEO of mobile social networking site Moblr says, "Having previously worked with Google's Mobile AdSense, our new partnership with RingRing Media's I'AM platform has transformed mobile advertising from a hobby to a viable business prospect for Moblr, helping us to turn our mobile inventory into money at a much faster pace than with any other individual ad provider."
Missing the point?
Yet it's possible that operators everywhere are missing the point about social networks. Norman Lewis, of Wireless Grids, points out that operators have traditionally misunderstood the motivations of their customers.
"Why do people make phone calls? When I worked at Orange, I asked this question, and nobody knew. Operators need to start looking to the social meaning of communication interaction, and not their function. The business models for telephony need to extend from what happens during a call, to what happens before and after call."
Lewis' point is that by thinking of social networks as some markedly different or "other" type of communication, operators risk misunderstanding their customers, and hence risk missing the chance to profit from the services their users are using.
For Lewis, users of social networks are really just defining themselves in the same way that youth, especially, have always done. They are forming groups of like-minded users, expressing and forming their identities in ways they have always done. It's just that the platform for doing so has changed.
"When I presented this to the Orange board, the question was, "Should we launch a teen portal?" And I just lost the will to live."
Lewis says that operators need to make their users not the recipients of advertising, but the originators, and recommenders, of it.
Grinding down the road of trying to make money from a model that is already proven to lose money is not the way, he says.