Social Networking Goes Mobile

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1 WHITEPAPER Social Networking Goes Mobile This whitepaper is an extract from: Mobile User Generated Content Dating, Social Networking & Personal Content Delivery (Second Edition)... information you can do business with

2 Social Networking Goes Mobile Introduction Over the last year, UCG (user-generated content) on the mobile has been the focus of much industry attention. This is hardly surprising: from social networking sites to dating, from usergenerated clips to chatrooms, UGC has seen adoption levels soar. The astonishing success in the fixed environment of sites such as YouTube, MySpace and Match.com had, not unnaturally led both those companies and others to consider that similar services could be offered within a mobile environment which, with the advent of 2.5G and especially 3G services, is itself increasingly capable of hosting such services. Within a comparatively short space of time, this belief appears to have been vindicated, with several sites now counting a registered user base in the millions. Furthermore, this success is not simply limited to on-portal sites: off-portal, sites such as itsmy.com and BuzzCity have proved highly successful. That said, the industry remains in its relative infancy, and only a handful of sites are generating multimillion dollar revenues. Types of User Generated Content Juniper Research splits out UGC users and revenue into the following three sub-categories: Mobile dating and chatroom services are in essence a highly specialised form of social network, in that subscribers join in the hope of meeting a long term (or short term!) partner. Personal content distribution which refers to audio and video files uploaded on to third party sites for other mobile users to watch or listen to. Social networking a social structure made of nodes (which are generally individuals or organisations) that are tied by one or more specific types of interdependency, such as Page 1 Juniper Research Ltd Tel +44 (0)

3 values, visions, ideas, financial exchange, friendship, kinship, dislike, conflict or trade. Social networking services in the fixed Internet and, more recently, mobile world have essentially sought to build online communities whose members are tied by a variety of common interests. There are three types of social networking service in the mobile space: the major brands who are seeking to transfer their popularity in the fixed Internet to mobile; the mobile only service providers; and, those companies who have sought from the outset to develop services geared for both the mobile and fixed environment. Obviously, there are some sites which offer at least two, if not all, of these subcategories, but it is our intention to give some approximation of the relative size and value of each of these respective areas at the present moment, and of their likely developments in the future. Market evaluation is also further complicated by the fact that such services are increasingly being bundled both by operators and service providers with branded content such as ringtones and games. In such cases, we have sought to allocate a proportion of bundle revenue to UGC, depending on both the relative retail price of such services elsewhere in the market, and on the data usage of such services relative to other content in the bundle. The Hurdles to UGC Adoption While many UGC services are up and running, their future prosperity depends upon facing up to the many hurdles en-route to mass market adoption. These hurdles are summarised in Table 1 below. Table 1: The Hurdles for UGC Issue User-interface Industry Structure Network Speed and Capacity Service Pricing Cost of data services Handset capacity and battery life Why is it a challenge? Difficulty in discovering content; Difficulty in accessing content; Difficulty in navigating content; Difficulty in utilising multiple applications simultaneously; Difficulty in creating content; Difficulty in uploading content Operator dominance of value chain perceived by start-up service providers as restricting industry growth and limiting opportunities Latency issues with 2.5G and 3G; excessive uptake of some mobile entertainment services could place a strain on network capacity Pricing UGC content at too high a level may alienate the user base. Conversely, by setting prices too low, providers may fail to extract maximum value from their products Retail price per MB much higher than in fixed space, pricing structure often unclear to consumers Concerns remain over impact of multiple active applications on battery life; significant capacity Page 2 Juniper Research Ltd Tel +44 (0)

4 Privacy Differentiation Customer Retention Regulation needed to store/upload/download media files Possible (criminal) misuse of information Start-ups in particular will need USPs to gain a critical mass of users In a competitive market, service providers will need to ensure of high quality of service to maintain customer acquisition/retention levels Providers must ensure compliance with copyright, age-verification and data mining regulation Source: Juniper Research Mobile UGC Revenue Opportunities Interestingly, there has been a sea change in the attitude of service providers towards business models in the past 12 months or so. Many initially believed that a subscription basis (albeit at a low retail price point) would be the optimal business model. This perception has shifted towards a belief that entry must be free, and the best means of extracting revenue from the customer lies in the sale of premium add-ons, be they events, music downloads or in the case of mobile dating the ability to interact with potential dates. Furthermore, as social networking and mobile dating sites move away from the subscription model to one-off billing for premium services, advertising becomes increasingly important as a revenue stream. The proportion of revenue generated by advertising clearly varies enormously by service provider: typically, these proportions are higher at social networking sites than dating sites as there is a significant value to be extracted from dating site customers who wish to interact with one another, thus it makes solid commercial sense to charge a premium here, be it per message or for the initial interaction. For operators, the launch of various forms of UGC service appears to be a win-win scenario, the only difficulty being how best to maximise their potential. A number have partnered with established brands from the fixed environment; others (such as 3 UK) have partnered with applications and site management providers to create their own branded services. The success of GoFresh/itsmy.com has already indicated that users are increasingly willing to access mobile content off-portal, although in this UGC content is mimicking at least to some extent the early successes of small ringtone and logo providers who offered content offportal, accessed via short codes, and which dominated the mobile content market in its infancy. A number of service providers are increasingly adopting a dual approach strategy, seeking to partner with network operators and MVNOs (Mobile Virtual Network Operators) when such partnerships are beneficial and appropriate but also investing substantial resources in their offportal marketing. Page 3 Juniper Research Ltd Tel +44 (0)

5 Global Market Product Breakdown Pulling together the figures for end-user generated revenues and adspendd from personal content delivery, social networking and dating gives a total market of $540 million in 2007 to $7.3 billion by Figure 1: Mobile UGC Market ($m) by Service Type, (Dating, Social Networking, Personal Content Delivery) $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $ Dating Social Networking PCD Source: Juniper Research At the present time, the largest contributor to UGC end-user revenues is mobile dating, which comprised 66% of the total in This is primarily due to (a) the long-standing popularity of mobile dating services, particularly in Japan, and (b) the fact that most mobile social networking/pcd (Personal Content Delivery) sites are relatively new. By the end of the forecast period, the number of active users of mobile social networking is expected to rise from 54 million in 2008 to nearly 730 million in Note that the dominance of mobile social networking is somewhat less than envisaged previously, primarily due to the increasing reliancee on the ad-funded of UGC adspend, accounting for approximately 94% of the model. However, social networking will be overwhelmingly dominant in terms total throughout the forecast period. By region, Far East & China accounted for nearly 53% of total expenditure on UGC in 2007, followed by Western Europe. The Indian Sub Continent will become the largest region for mobile dating services by Order Full Report This whitepaper is taken from Mobile User Generated Content: Dating, Social Networking, Personal Content Delivery (Second Edition). The report provides the most detailed analysis of the subject currently available in the market. Through 52 tables and 38 charts within 4 comprehensive forecasting chapters, the entire mobile UGC market is projected for 6 years up until Page 4 Juniper Research Ltd Tel +44 (0)

6 This highly anticipated study includes extensive one on one interviews with senior executives within the mobile user generated content space, profiles 33 key companies and organisations, discusses all the developments across mobile social networking, dating and personal content delivery over the past 12 months and presents current market data as well as six year forecasts. An in depth analysis of the business models currently being utilised and planned by service providers is presented, while the forecast suite includes extensive analysis of the advertising models utilised by the different mobile UGC players. Key questions the report answers: 1. How much were mobile dating, social networking and personal content delivery worth in 2007? And how much will they be worth by 2013? 2. To what extent have service providers amended their business models in the UGC space, and what impact has this had on their revenue streams? 3. Will advertising become the primary source of mobile UGC revenues? 4. What impact has the reduction in data charges had on the mobile social networking space? 5. What strategies should operators and service providers deploy to maximise their returns from UGC services? 6. What are the main hurdles to mass adoption of UGC services? 7. Who are the leading players in the mobile UGC environment? Juniper Research Limited Juniper Research specialises in providing high quality analytical research reports and consultancy services to the telecoms industry. We have particular expertise in the mobile, wireless, broadband and IP-convergence sectors. Juniper is independent, unbiased, and able to draw from experienced senior managers with proven track records. About the Author Dr Windsor Holden Dr Windsor Holden is Principal Analyst with Juniper Research. He is responsible for developing Juniper Research's report portfolio and designing a forthcoming range of market intelligence services focusing on the mobile content market. Dr Holden has written extensively on mobile content, emerging telecoms markets and digital TV. He is also a regular conference speaker and a former Research Fellow of the Institute of Communication Studies, University of Leeds. Page 5 Juniper Research Ltd Tel +44 (0)

7 Publication Details Publication date: September 2008 For more information, please contact: Michele Ince, General Manager Juniper Research Limited, Wakeford Farm Business Park, Pamber End Tadley, Basingstoke, Hampshire RG26 5QN England Tel: UK +44 (0) / US Fax: +44 (0) Further whitepapers can be downloaded at Page 6 Juniper Research Ltd Tel +44 (0)