April 13, 2008

Is social networking the key?

Mobile social networking stands a good chance of jumpstarting mobile Internet adoption because mobile social networking is based more on communication than content. Time and again, communication services have led the way for content and advertising to follow. In the case of the Internet, it was e-mail and discussion boards—not Web pages—that triggered the explosion from early adoption to mainstream consumer use. SMS services drove mobile data use and they still account for the majority of mobile data revenues by carriers.

It is not surprising, therefore, that mobile carriers and mobile content providers have warmed to mobile social networking as a new opportunity to ramp mobile Internet use. In truth, they have little choice. Their attempts to convince the mass market to sign up for mobile Internet have proved moderately successful, at best.

According to February 2008 research by Informa, the global market for all current forms of paid mobile entertainment should reach $31.7 billion by 2012. Back in 2006, the same forecast optimistically predicted $42 billion by 2011.

Juniper Research published a far more bullish outlook for mobile entertainment in January 2008, projecting $64.8 billion worldwide by 2012. Earlier research by Juniper also tried to quantify the revenues associated with mobile user-generated content such as chat room services or mobile dating, predicting $5.7 billion for 2012.

Even with the most upbeat projections, paid mobile content is a tiny market in comparison to revenues from communication-based mobile services. In the US alone, mobile data service revenues (predominantly message-based) reached $23 billion in 2007, according to industry trade group CTIA—The Wireless Association. Mobile messaging for SMS/MMS/IM/e-mail worldwide is expected to be between $100 billion and $200 billion by 2011. When voice traffic is included, the global mobile industry is on track for almost $1 trillion in total revenues by 2012.

The stark reality is that mobile users are more inclined toward communications or task-centric interactions with their mobile device than toward content or entertainment. The UK's Office of Communications study of global mobile markets showed a decided preference by users to engage in mobile data sessions that are communications-oriented rather than information-oriented. Even in Japan, long the poster child for mobile information services, the primary use for the mobile device was e-mail (57% of users) compared to mobile Internet access (20%).

The upshot for mobile carriers and mobile content providers is that they need a new context in which to pitch mobile data access to users. Without a compelling incentive for users to sign up for mobile data access, it is likely that mobile carriers will see their mobile data revenues jump sharply at first and then start to stall at around 30%, as was the case in Japan. Mobile social networking potentially could not only push mobile data access over that hump, but could pull in other communications services to a social networking session.

Mobile content providers also need a relaunch to jumpstart their business. To date, mobile content is generally considered difficult to find as well as inferior in quality to other media channels—a reputation that is somewhat deserved. Mobile social networking offers a new environment for content discovery through recommendation as well as distribution via the network effect.

Courtesy of http://www.emarketer.com


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