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The Meteoric Rise of Mobile Social Networking
By Deepa Karthikeyan, Current Analysis Analyst, Wireless Data Services
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Issue
It has long been reported that the mobile space will ultimately mirror the Internet with respect to applications and usage. Nothing validates this more than the meteoric rise of mobile social networking sites over the past few years. Social networking can be broadly defined as the act of generating and sharing media content, ranging from a simple write-up to an elaborate video feed, enabling users to keep in touch with friends and establish connections with existing and potential users of a network. This act of bonding in virtual communities via a cell phone is deemed mobile social networking, which has exploded into the wireless scene due to its focus on messaging and media-intensive content distribution, which bodes well with wireless carriers that see it as a new opportunity for data revenue. Mobile social networking sites predominantly assume two forms: a mobilized version of existing Internet sites such as MySpace and the exclusive mobile-only network sites such as AirG and Jumbuck. While usage statistics for mobile social networking sites have risen tremendously, carriers have only recently begun to look at ways to monetize them. Wireless carriers can potentially employ a mixed business model that includes subscriptions, advertising and m-commerce.
Mobile advertisers view social networking sites as a blessing since the flow of information to friends within the network is a powerful recommendation engine, establishing word-of-mouth marketing. Social networking sites provide a discussion board of sorts to members sharing similar interests, a utopia for marketers selling products or services catering to that interest. Until recently, mobile advertising was limited primarily to SMS and banner advertising that did not really take advantage of the device’s capabilities, such as determining the location of a user via GPS or triangulation. In recent months, there has been a surge in the use of location-based and other targeted advertising initiatives that combine the features of mobility with user demographics to reach the right person at the right time and place. An interesting new trend has been the rise in geo-social networking applications such as Loopt, which combine the features of both services, providing consumers with the ultimate in entertainment while helping marketers display relevant, contextual messages. Marketers that advertise on mobile social networking sites are likely to partner with m-commerce services to enable sales via an embedded link that will not only measure the effectiveness of the advertisement, but also emphasize its instant gratification aspect. This also opens up a tentative revenue opportunity for wireless carriers, which can embark on an agreement to share the proceeds on products purchased through these advertisements.
Since the market is still in a nascent state, it is imperative that carriers tread carefully as any misplaced enthusiasm could result in a backlash, scarring the user experience. Strategies involving advertisements and m-commerce need to devote scrupulous attention to device management issues and permission-based models to guarantee success. As the wireless industry looks toward newer resources to further milk this opportunity, there will be an influx of novel advertising models on the small screen, the transformation of mobile social networks into mobile economic networks, and the development of stronger niche sites as well as large-scale consolidation of smaller players.
Current Perspective
An Introduction
The past two years have witnessed a clear rise in the usage of mobile social networking sites, proving that the popularity of this concept is not limited to the Internet. Mobile social networking broadly translates to the act of creating and sharing content among members of a common network via a cell phone, where the member is sometimes the producer and sometimes the consumer of the content. Many popular Internet-based social networking sites such as MySpace, Facebook, YouTube and Bebo have already launched mobile WAP sites in order to cash in on the frenzy and increase the stickiness of their service. These mobile virtual communities allow people to access profiles; make friends; create and participate in chat rooms; and share photos, blogs and videos while they are on the go.
In many respects, the cell phone is an ideal extension of Internet social networking, as it complements the PC with its mobility factor. A wireless device enables social networking aficionados to remain connected to their network, 24/7, updating their profiles and receiving alerts. The proliferation of unlimited data plans and handsets that are conducive to social networking activities include QWERTY keyboards, preloaded social networking sites and large screens have contributed to its growth as well. GPS-capable phones sweeten the deal by enabling customers to locate and converse with fellow network members in the vicinity. An example would be Loopt, which is quickly becoming the face of geo-social networking in the mobile space. Loopt uses a phone’s built-in GPS technology to alert users whenever their friends are within a half-mile to 25 miles. The application allows users to find friends, tag places and pictures and create events based on the location information available. Members who have consented to disclose their location will show up as dots on a map and the user will have the option to text or call the person. JuiceCaster, a mobile-only social networking site, works on a similar premise, allowing consumers to see an up-to-date map of friends' locations, adding the instant gratification element to social networking and providing opportunities for targeted advertising.
The social networking mania has resulted in several partnerships between wireless carriers and social networking sites, and more recently between handset vendors and social networking sites. Facebook seems to be the mobile social networking of choice, especially among handset vendors. The site is predominantly aimed at collegiate members with a mobile user base of 25 million as of February 2009. In 2007, Microsoft acquired a 1.6% share of the company for $240 million, giving it control over the placement of banner ads on Facebook outside the U.S. through 2011. In October 2007, Facebook unveiled a mobile platform to encourage its 80,000 developers to extend applications to phones. This led to 7,000 free add-ons, allowing network members to perform functions such as monitoring stock portfolios and mapping places on their cell phones, besides the usual function of updating their profile. Facebook has also spread its appeal to smartphones, establishing its presence on Apple’s iPhone and RIM’s BlackBerry line, and is reportedly in talks with Nokia to install features such as the capability to embed a member’s contact list and profile pictures into a wide array of Nokia phones and smartphones.
MySpace, another popular online social networking site, which was purchased by News Corp. in 2006 for $580 million boasts of a mobile user base of 20 million. Later that year, News Corp. and Google entered into a multi-year agreement (ending in 2010), where the latter paid $900 million in exchange for being the exclusive search and keyword-targeted advertising sales provider for Fox Interactive Media's Web properties, including MySpace.com. Mobile MySpace currently appears on the decks of AT&T and T-Mobile (Sidekick), allowing users to edit their profiles from the convenience of their phones and also offers an ad-supported WAP site free to its users in exchange for viewing advertisements.
Other players of note with roots in the online space include: Twitter, which thanks to its open-ended design and a thriving user community is fast outgrowing its roots as an easy-to-use messaging service into a full fledged mobile networking site with the capability to create apps for sharing music and videos; YouTube, which is available on Verizon Wireless’ deck (available as a WAP site for other carriers); and AOL’s Bebo, which recently struck a deal with Intercasting to allow the site’s 40 million users to produce and share content on their mobiles through the Anthem platform. Intercasting’s Anthem platform offers access to eight focused networking sites: AsianAve (social network site for Asian Americans 18+), BlackPlanet (African-American), GLEE (gay, lesbian and everyone else), MiGente (Hispanic community), LiveJournal, Rabble, Vox and Xanga. The platform is available on the decks of Virgin Mobile Boost Mobile, AT&T, Sprint and Verizon Wireless. Intercasting recently upgraded its Anthem social application platform to support additional communication services such as email and instant messaging, providing a one shop stop to its customers while increasing its relevance.
Monetization
Wireless carriers are quickly realizing that they are in an advantageous position due to their access to valuable consumer demographic data and address databases that can help advertisers deliver highly targeted marketing messages. Mobile advertisers know that they can leverage the power of mobile social networks by capitalizing on the social aspects of the service. That, coupled with the mobility of a cell phone, can effectively promote their products. Social networking sites are prime avenues for advertisers, as these trusted networks enable peer-to-peer marketing, a very influential promotional tactic for the youth consumer base. The advertising factor can be made viral by offering customers incentives for forwarding advertisements to interested members in their network. Marketers can assess consumers’ interests, likes and dislikes based on their demographic information, available from carriers and social networking sites, and promote the right product at the right time. The personal information that users share via their user profiles could shape the advertisements that appear on their mobile social networking sites, enabling them to be brand re-communicators. Mobile MySpace, the mobile version of the social networking giant, led the way for other sites by officially launching an ad-supported version in late 2007. The site features a proprietary hypertargeting system, a platform that enables marketers to mine profile data by scanning profile pages for keywords and selling ads against them. The hypertargeting system began with ten broad interest categories and it has now expanded into thousands of sub-categories. MySpace is also constructing an “influencer" option that helps advertisers find users with large, active friend networks and interests in specific categories and advertise to them accordingly.
Although research reports in the U.S. and the UK have established that ad-funded models for mobile social networking sites will be well received, carriers and marketers have to proceed with caution, as a misstep could prove disastrous. Carriers will have to assure advertisers and marketers that they can mine their customers effectively by demonstrating a high target relevancy. In the case of prepaid markets where the carrier’s user database will not be much help, services from companies such as AdMob, which work with mobile carriers to gain information on end users, can be utilized. As mobile advertising gains momentum, carriers and marketers will have to work together to address the issues of efficient demographic targeting, building a safe platform for mobile commerce and blocking unfiltered user-generated content that can taint the advertised brand. Carriers and social networking sites should also make sure that customers understand how their personal data will be used and provide them with opportunities to opt out of the service if they feel their privacy is being compromised. An important lesson can be learned from Facebook’s Beacon misfortune in the online space. The social networking site got in hot water when users reacted negatively to its Beacon feature, an advertising platform that automatically informs members about their friends’ purchases. Users complained that Facebook did not make it easy for them to opt out of the platform, resulting in an online petition against the program and several high-profile advertisers severing their ties with the platform.
Looking into the Crystal Ball
Perhaps the most predictable development in the mobile social networking domain will be the mass-scale adoption of targeted advertising. In the past, low data speeds left complex advertising out of scope, limiting marketers to banner and SMS-based campaigns. With upcoming 4G technology and advertising-capable devices, there will be a barrage of ad-supported mobile social networking sites a la Mobile MySpace. Social networks are primarily about communication, and mobile devices grant the instant gratification factor that the core user group craves. This is the holy grail of mobile social networking, and a primary reason for its success thus far in the wireless environment. However, targeted advertising will also bring forth the twin evils of clutter and privacy invasion. If wireless carriers and marketers are not wary of flooding the user’s screen with untimely and irrelevant messages, they will drive consumers to opt out of the ad-funded service or, worse, start a mass-scale boycott and drag carriers to court.
The logical progression from advertising on the mobile screen is to enable sales of the advertised product within the system, transforming mobile social networking sites into economic platforms where consumers and peer groups are empowered through collaborative economic activity. Most mobile consumers already use their cell phones to purchase content such as ringtones and wallpapers within the walled gardens. In the past year, monetary transactions over cell phones have increased with the launch of services such as mShopper and ShopText. As ad-funded social networking services gain momentum in the mobile space, more marketers are bound to set up payment mechanisms over the wireless networks to satiate consumers’ whims instantly. These sales will not only provide a good indication of the success of a promotional initiative, but they will also reinforce the instant gratification element that social networking fans seek. M-commerce via mobile social networking sites will quickly gain traction due to the possibility of higher levels of interaction such as chatting with sellers, getting opinions from third parties and comparing product prices. The primary driving force will be the viral nature of social networking sites, which marketers can take advantage of by adopting the affiliate advertising model, where marketers offer a commission to users that help their items get sold, bringing the elusive word-of-mouth advertising feature into the mix. However, advertisers and carriers need to agree on a set of parameters to measure the effectiveness of the advertisement and carriers need to create a system where they can earn a fixed percentage of commission on product purchases and market research.
As their popularity increases, mobile social networking sites will receive greater enhancements (i.e., better user interfaces) and increased functionalities (i.e., better upload and download features) from carriers, which need to satiate their fickle and sometimes ruthless core users. The number of new mobile social networking sites will trend down, and mobile-only social networking sites that offer nothing unique to their users will soon disappear. In a bid to extend their control over the user, carriers will start integrating social networking categories into the device and network services, starting with the phone’s address book, gallery and camera. The uploading and sharing of content are important cornerstones of social networking, and carriers are in a unique position to add this value on top of social networking sites. Address integration will allow users to invite their friends from their phone’s address book to the social networking site of choice. This is a win-win for carriers and social networking sites, because it benefits both while preserving the relationship between the carrier and its customer. Data intensive services like video applications and games will begin incorporating social networking elements into their applications to get consumers more involved in their service. For instance, mobile games will allow users with different devices to compete with each other in the mobile space while comparing scores, and video-based services will allow users to comment, share and view clips together. Advertisers and marketers will also optimize their Web sites for small mobile screens and take measures to target consumers effectively and avoid screen clutter. With the onslaught of handset-based application stores, there will be fewer mainstream offerings that are tied to the carrier’s network (users will not be able to interact with members on a different network) and witness applications that are centered around the user creating a truly competitive playground for future services.
Recommended Vendor Actions
• Wireless carriers that adopt the ad-supported model of social networking applications should make sure that they do not cannibalize their paid offerings. Carriers can avoid alienating paid subscribers and alleviate confusion in their rate structures by establishing a clear line between the two types of services. They should give customers the option of choosing between ad-supported social networking sites and premium ones, and they should also make sure that the premium service has access to more data content and services as a way to justify the cost premium.
• Marketers looking to launch video clip ads via mobile social networking sites should make sure that the applicable ads only run when customers have requested specific services. For example, if a customer is logging onto YouTube to view a music video, a promotional advertisement for a music CD should run before the clip begins, essentially mimicking the fixed Internet’s philosophy. Carriers should also make sure that video clip ads on mobile devices last no longer than 30 seconds to avoid overwhelming the customer.
• Location-based advertising in mobile social networking sites must be used only with the customers' full knowledge of what this means, as well as their consent. This is a powerful advertising tool if the option is not abused. To prevent privacy invasion, people should be able to hide their location, or set who can see where they are and when.
• Virgin Mobile USA should expand its Sugar Mama Service to include social networking applications in the mix. The carrier should consider offering its customers two to four hours of free access to the social network application of their choice each time they watch an online advertisement or participate in a survey. Adding social networking and related data-centric applications will enhance the perceived value of Sugar Mama Service and increase the participation of its customer base.
• Facebook should tout its Whereaboutz feature from TeleNav, which allows users to track their friends and remain updated about their activities. The social networking corporation should also quickly update the component and make it compatible with a wider variety of phones including the iPhone (it is currently only available on Java phones and BlackBerry with trackballs) to truly compete with up and coming players such as Loopt and Whrll.
• Mobile advertising aggregators should highlight the benefits of geo-social networking applications to prospective marketers who are looking to reach a specific demographic in a set geographic area. Social networking sites are excellent promotional vehicles as they use the elusive word of mouth approach and the location-based services (LBS) component will increase the relevancy of the advertised message, increasing the overall ROI for marketers.
Recommended User Actions
• AT&T and Sidekick (T-Mobile) consumers who subscribe to the MySpace application on the carrier’s deck should consider the MySpace Web WAP site if their usage is limited. MySpace Web is supported by all U.S. carriers and it allows users to send and receive messages and friend requests, comment on pictures, post bulletins, update blogs and search for friends free in exchange for viewing advertisements on the cell phone.
• LBS-social networking site subscribers should look for the option to hide their location details and only disclose it as they desire and also make sure that they have the ability to opt out any time they feel their privacy is being compromised.
• Anthem users should look forward to the company’s new cloud-hosted solution that supports a series of additional communication services such as email and instant messaging. The tiled user interface can be personalized to manage all types of social communication, with one-click access enabling users to centralize messaging, communication and even digital media consumption.
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