Time now to partner

In the world of mobile social networking, service providers can either travel alone or with a partner in tow. Whichever way they choose, challenges - and rewards - await them.

Mobile operators have two main options for developing a mobile social networking service: by Internet extension, that is by providing access from mobile phones to existing Internet social networking services, or create new social networking communities from scratch on their mobile network.

These options are not mutually exclusive. They offer separate, distinct value propositions.

Strength in partnering

Mobile operators are finding that social networking sites are becoming keener on partnerships as a result of their experience in trying to do it alone. Ideally, social networking sites prefer to address the mobile opportunity independently. However, most of them have come to realize that by doing so, they will end up being confined to a niche.

As a case in point, Orange UK is now talking to several of the current leaders in social networking.

In early negotiations, social networking sites have all started off with a bullish view of conditions in the mobile world - discounting handset issues, business models, customer demand and so on.

Initially, they often try building Java client versions of their sites, despite the known complexities of such developments for many devices, and the resulting costs for operators of managing several different clients for many different devices.

Such impacts are not initially appreciated by individual social networks and they are skeptical at first, but when they try provisioning Java clients, they realize that it is difficult to make it work smoothly.

Most social networking sites are currently engaged in a 'race for scale,' and are keen to work with established partners to manage the disparity between the scale of their operation and the size of their user base.

There are resulting mismatches between the expectations of the social networks and those of the operators, regarding both the uptake and the revenues of their mobile services. The benefits for operators are initially relatively small, yet could still be comparatively large for some social networks.

The going it alone approach is more of an uphill journey. Rather than building on something that already exists, operators are re-inventing social networking as a new service on the mobile network.

Apart from the investment required to build the service infrastructure, substantial marketing investment is also needed to build the critical mass of service users required to make usage take off.

Another disadvantage of this approach is that the addressable market for the service is confined to the operator's own subscribers - unless operators can agree to interconnect their separate social networks.

However, there are also advantages. There is no need to share revenues and branding. It is also more viable to make this a free service to users since they will be staying on-net anyway to use it.

Orange UK believes that the operator's own approach is well worth exploring.

 

The social networking culture of creating, sharing and interacting with content through reviews, ratings or comments is moving into the mass market much faster than expected. Therefore, there are new customer groups emerging that can easily be interested in communities run by Orange, particularly if such communities are carefully targeted to the needs of those groups and not directly competing with the online social networks.

As well as generating revenues, Orange believes that operator-branded services can also be a powerful tool for increasing users' engagement with its brand.

New revenue stream

Operators can also cash in on the operator's own approach by way of not only charging for the service, but also through ads.

3's Kink Kommunity, for example, reported 55,000 paying users in the UK, generating about 400,000 messages a day, just four months after its launch in July 2006.

But the revenue is not in the traffic, but in the ads.

3 believes that the traditional telecom business model of paying according to usage is unsupportable in social networking, as people will not use it if they are anxious about running up big, unpredictable bills.

The operator believes that the idea of making money from data traffic charging does not work, either with social networking or with mobile Internet/media services.

In the long term, sources of revenues other than end-users will be increasingly important, primarily advertising, which 3 is convinced can be made to work successfully on mobile.

Kink Kommunity demonstrates that operators can build their own viable communities in the mobile network.

John Delaney is a principal analyst in Ovum's Consumer Group



Going the partnership way

One operator finding that Internet social networking providers are getting keener on partnering is 3.  'They all think they can do it themselves, until they've tried it. It's really hard to do,' according to the operator.

For Internet service providers, providing a good user experience and making the business model viable is difficult enough even when they cooperate with the mobile operators, let alone by themselves.

Making 3's mobile MSN Messenger service work well, for example, took a lot of hard work on the part of both Microsoft and 3. It's also important to note that some of the leading social networking sites are still small companies that are struggling with the rapid scaling up of their existing businesses, and don't have the resources to address the mobile opportunity.

Once they are past the 'we can do this ourselves' stage, Internet social networking sites find the idea of partnering with mobile operators attractive, because operators can provide detailed information about their subscribers, their preferences and their behavior.

In 3's case, the operator believes it can offer the additional advantage of a customer base whose demographics closely matches some of the social networking sites' user demographics.