As social networks continue to grow, carriers, content
providers and handset manufacturers are all looking for ways
to create an ease-of-use scenario that will generate revenue.
Everyone wants to know where the money is in social networking. Carriers and handset manufacturers are working to create handsets that quickly connect users to their chosen communities. The sites 
themselves are experimenting with everything from virtual gifting to nominal subscription fees. So what’s the hold up? Why did Facebook, which currently boasts 175 million users, only gross a rumored $150 million for 2007?
Two important factors appear to be holding up the social networking gold rush. First, no one understands the dynamics of these incredibly complicated networks. Second, all the players are getting closer but still struggling with an ease-of-use scenario for which consumers will be wiling to pay.
ANALYTICS
The current enormity of social networks could no more have been anticipated than the complexities inherent in generating revenue from them. These virtual coffee shops, and the possible behavioral insights that can be gleaned from them, are a potential gold mine.
That’s why analytics firms are beginning to concentrate on the dynamics behind these communities as a way of helping carriers understand the unique and valuable body of information to which they are privy.
The idea of social networking analytics stems from an academic movement back in the 1960s that attempted to combine mathematics and social theory in an effort to identify patterns and social ties among Hollywood actors. With regard to communities like Facebook and MySpace, the intent is to find ways to market to these communities in a manner that is incredibly accurate and identifies users’ specific interests.
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Kathleen Brush, vice president of marketing at Openwave, explains how her company collects user data in an effort to understand these communities. “We’re installed as a gateway in the operator’s network,” she says. “So we see and record all Internet requests by subscribers. We can see every URL that I have accessed on my mobile device.”
From there, the company can group like-URL behaviors and build subscriber profiles that show the types of activities a user engages in while at a social networking site. Brush says that ultimately, the opportunity for marketing might not be on the social networking site itself. “So here’s this LinkedIn subscriber and they have a BlackBerry,” she explains. “We also know that they went to The Economist and gravitated towards cultural Web sites, so we have that level of detail. So we can go to any number of properties and place ads at those endpoints where they’ll be most effective.”
This kind of information is obviously valuable and unique to social networking, but the debate over using that data is fraught with privacy concerns. “There is some legislation that is in discussion that will change what can be done and what cannot be done. The debate about privacy is being renewed because of the social networking phenomenon,” says Saverio Romeo, analyst for Frost & Sullivan.
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However, by truly understanding the way people engage with their communities, Romeo says the data could be used to reduce churn and develop incredibly effective marketing strategies. That may be true, but carriers don’t want to stop there.
CARRIERS AND EASE OF USE
Over the last couple of years, carriers have seen the world turned upside down by the high data demands that go along with smartphones and social networking. Instead of simply ensuring that the relatively cheap voice call is consistently placed, carriers are now concerning themselves with the highly profitable although more complicated realm of data services.
Mobile social networking takes the most exciting, complex and bandwidth-sucking of the data world and mashes it all into one potentially rich revenue generator. The statistics are incredible. A third-quarter Nielsen survey showed that social networking is the fastest growing sector of mobile content. The possibilities are seemingly endless, so long as someone can identify them and find a proven way to capitalize.
Ease of use appears to be of the utmost concern if carriers are going to generate revenue from their customers’ hunger for social networking. It’s important to note, that “ease of use” has come to mean not only one-click or no-click access to the customer’s favored social networking communities, but also a sustained, always-open conversation between the customer and his or her carrier or handset manufacturer.
A recent survey of users connecting to the mobile-centric social network, itsmy.com, found that 75 percent of all active mobile social network users in the United States and the United Kingdom would love to have a quick link to their personal operator or phone manufacturer portal on their personal community site.
“A closer relationship with the operator and the mobile phone manufacturer … would offer a new service level to the consumer,” says Sabine Irrgang, COO and co-founder of itsmy.com. “This is the way to stay in touch and communicate with customers you normally don’t get any feedback from once they left your shop … nowadays you have to be lucky to see him again unless he has troubles with your product.”
Such a scenario would mean customers would be able to top-up their minutes, purchase ringtones, wallpaper, even music and other content all from their mobile social networking sites. That spells revenue for handset-branded app stores and carriers alike.
On the device side, handset manufacturers are trying everything from cross-branded phones to address books that come already integrated with social networks. Melissa Gardener, vice president of marketing for Motorola, acknowledges its part in the trend. “We see social networking as a really important area. We’re spending a lot of time and resources trying to understand and integrate that experience for our customers.”
MySpace, which claims it will be on every major smartphone this year, is working with carriers to “virtual preload” the MySpace icon to the user’s device. Upon registration, the user will receive the MySpace icon. When the user clicks the icon, he or she will be prompted to download the application.
SOCIAL NETWORKS TRY IT ALL
If carriers are going to make money on social networking, it stands to reason that Facebook, MySpace and all their cousins have to be profitable as well. Another survey of itsmy.com users asked respondents in the United States whether the current economic crisis was hindering them from spending money for mobile services; 67 percent said “No.”
That’s good news for social networking. Vince Stabyl, CEO at Gofresh, the parent company of itsmy.com, agrees. “If you have a clear value, people are willing to pay for the service,” he says.
Stabyl should know. Itsmy.com averages about $1.50 per user per month, or about $18 per user per year. That revenue is coming from premium services like virtual gifting, mobile gaming and splashy page templates for users to brand their personal sites. Stabyl says the original inspiration for itsmy.com was to be a pure ad-based provider, but he admits that you have to change with what’s appropriate for the moment and adding paid services to the mix has shown users are willing to pay for a unique and entertaining experience.
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But it might not be all fun and games for social networking if they’re looking to make serious money. Warren Faleiro, vice president of multimedia applications for VeriSign’s Messaging and Mobile Media division, says he thinks it’s going to take practical value that’s targeted at a broader audience. “I think now it’s gotten to the point where we’re past problems with the browser,” he says. “A certain demographic is able to get lots of things done right now. But it’s going to have to go outside that demographic and offer serious value. People need to be able to find jobs and keep a reliable network as they move from one place to another.”
LinkedIn, which currently boasts more than 36 million users worldwide, makes a step toward more practical social networking, but Faleiro says that even Facebook and MySpace have to be thinking about ways to give the user more control over who sees what. “There’s a lot of content that you’re just not going to want your employer to see,” he says. “Virtual gifting is one thing, but over the long run, they’re gonna have to offer real value.”
KEEP IT SIMPLE
Because social networking is just beginning to be understood, possibly the only certainty realized by every player in the game is that ease-of-use has to be achieved before all else. Consumers have spoken, and they’re saying that true value comes in the form of one-click access to their communities. And they’re just beginning to hint that they might even be willing to pay for a service like that.
