The Power of Social

facebook

As the social landscape has turned digital in recent years mobile operators have been hit with dwindling messaging revenues as users look for different ways to communicate. Here we look at a new threat to operators…losing voice too! Facebook have edged into the mobile space a little further this month with the launch of their Facebook Home. This follows closely behind a voice service which is currently being tested in various corners of the globe. Are operators getting hot under the collar yet? 

Mark Windle, head of marketing, at OpenCloud see’s the mobile landscape evolving, “Mobile voice services are changing rapidly. Once the key revenue generator for operators, voice is now being fought over by numerous players, including OTT providers such as Skype and Viber, as well as Internet giants, such as Facebook. There has never been so much competition for voice as there is today.”

Differentiation 

Mark went on to say “However, operators have a unique advantage, by being able to provide interoperability for both VoIP and VoLTE applications. Operators have the experience of connecting consumers to different networks and geographies and can apply this experience to their applications. This will differentiate their offerings considerably from OTT applications, which generally have closed user groups, making them a much more appealing service for consumers.

“Differentiation for operators is key to keeping their market edge in a highly competitive landscape. In addition, they must take control of their services’ roadmaps. This will provide them with the ability to innovate for themselves, and adopt the innovations of others, without being dependent on any third party.

“The key step is that operators must break away from the habit of accepting the compromise of proprietary, closed solutions that are expensive and time-consuming to customise.  Instead, they should harness the power of open service-layer solutions, and the independent developer ecosystems that come with them, in order to cost-effectively establish the competitive differentiation needed to build and retain market share.”

Lyn Cantor, CEO of Tektronix Communications agrees with Mark, “To differentiate themselves, operators need to leverage their data assets. Doing nothing is not an option. Smarter subscribers want constant access to social media and the ability to send and receive photos on the move. The demand a modern, connected lifestyle and expect their mobile device to deliver the wide variety of entertainment, information and connectivity options to help them live it.

“Operators themselves have the power to introduce new commercial models, deploy profit-enabling analytics, troubleshooting tools, and techniques and approaches that would greatly benefit OTT applications.

“They have more access to granular details that provide more actionable intelligence about their business, and their customers, than ever before. Utilising this data enables them to develop new business models rooted in security and quality of service to enrich the customer experience.

“By offering new and innovative services to drive revenue they can meet the lifestyle expectations addressed by OTT providers, but with the added bonus of secure and uninterrupted connections – with no service drop in a roaming scenario, no frustration due to lack of interoperability, just happier subscribers prepared to pay for better services.”

Home Sweet Home

Jan Dawson, chief telecoms analyst at Ovum, had the following initial reaction to Facebook Home. “Any broadening of Facebook’s appeal on mobile devices would have to be broad-based, and the Android launcher approach allows it to target a huge installed base of hundreds of millions of Android users, which will be a large chunk of Facebook’s total user base of more than a billion people.

“To users, the sell here will be making it easier to share information, photos and so on with friends. But to Facebook, this is about becoming more deeply embedded in the operating system on mobile devices, and creating a broader platform. Since Facebook doesn’t make an operating system for mobile devices, this is the next best thing. It will allow Facebook to track more of a user’s behaviour on devices, and present more opportunities to serve up advertising, which is Facebook’s main business model. And that presents the biggest obstacle to success for this experiment: Facebook’s objectives and users’ are once again in conflict. Users don’t want more advertising or tracking, and Facebook wants to do more of both.

“This is a great experiment for Facebook – it’s much lower risk than developing a phone or an operating system of its own, and if it turns out not to be successful, there will be little risk or loss to Facebook. If it does turn out to be successful, Facebook can build on the model further and increase the value provided in the application over time. The biggest challenge will be that it can’t replicate this experience on iOS, Windows Phone or BlackBerry, the three other main platforms.

“For carriers, the risk is that this puts Facebook’s communication services front and centre on the device and makes them easier to use and more integrated with the core experience on the device, which should make them easier to use than when they’re buried in an app, and should accelerate the shift from carrier services to over the top (OTT) services. It should be a big boost to Facebook Messenger and the associated voice and video services.”

Revenues

Ovum forecasts that social messaging cannibalization of SMS revenues will grow from $32.6bn in 2013 to over $86.0bn in 2020! According to Bloomberg Facebook is in talks with Apple and Microsoft about offering a version of the Home interface for the iPhone and Windows phone range. Unlike Android, where Google very much takes a hands-off approach to how the platform is used, both Apple and Microsoft prefer to control the user experience, limiting the potential for third-party modifications.

In an interview with Wired at the time of the Home launch, Mark Zuckerberg, the social networking giant’s CEO, said that although the company has a “pretty good partnership with Apple”, the iPhone maker “wants to own the whole experience themselves”.

As far as Apple is concerned, handing over a significant chunk of its interface to a third party would mark a significant change in strategy – and it is not immediately clear how it would benefit from it. Facebook (alongside Twitter) is already tightly integrated into Apple’s iOS 5 platform.

With regard to Windows Phone, The Verge said that the positioning of Home, as a people-centric interface, is similar to that already used by Microsoft as its differentiator – making it unlikely to want to cede too much control to the social networking company. Indeed, Microsoft has already used its official blog to describe the debut of Facebook Home as “remarkably similar to the launch event we did for Windows Phone ”two years ago”.

Vanessa Barnett, technology and media specialist at Charles Russell LLP said: “The launch of Facebook Home shows Facebook’s intention to truly integrate itself into our lives. Essentially, Facebook has taken the Android system and wrapped it inside a Facebook skin which allows Facebook data to be channelled to a phones home screen as an integral part of the user experience, rather than buried in an app. This is a key move for Facebook and people will be watching closely.  The USP of Facebook Home is that it is ‘people first’ rather than ‘app first’ – so your mobile will essentially revolve around your friends activities.  By creating the prominence of Facebook on the physical device, Facebook is also creating a more prominent real estate space on the phone from which to generate advertising revenue. This is also a bold step for Facebook, because for the first time success relies on people liking a physical product.”

Informa Telecoms & Media believes that Facebook could generate about US$1 billion in revenues from mobile advertising in 2013, or about 10% of total global mobile advertising revenues of US$12.8 billion in 2013. Facebook itself reported that its revenue from mobile advertising represented about 23% of its total advertising revenue of US$1.33 billion in 4Q12, or US$305 million. The social network had 680 million monthly active users (MAUs) on mobile in 4Q12, representing 64.4% of the company’s total MAUs of 1.1 billion. Facebook also stated that it had 157 million mobile-only MAUs in 4Q12 (14.9% of total MAUs)

Mutually Beneficial?

Facebook’s partnership with 18 mobile operators in 14 countries in a promotion to provide free or discounted access to Facebook Messenger for Android and iOS, and Facebook for Every Phone, has the potential to deliver benefits to both the operators and to Facebook. Both parties will likely be able to use the promotion to boost customer acquisition and retention, and also to increase their revenue from mobile data and mobile advertising, respectively.

The promotion has the potential to drive existing smartphone users to download and use the Facebook application/s, and it may also help the mobile operators to gain new smart-phone and mobile data customers, whether they are new customers or customers that have been up-sold from feature-phones.

Many of the operator partners listed by Facebook for this promotion are in emerging markets, where smartphone penetration is low, but where Facebook is very popular. A number of the mobile operator partners (for example, Smart, DiGi, XL) have also been offering Facebook Zero to their subscribers, a text-only version of Facebook for which the operators do not charge their subscribers data fees. It is possible that Facebook has come under pressure from its mobile operator partners to provide a strategy that would allow them to migrate Facebook Zero subscribers to a service that would generate revenues. However it is as yet unclear whether the mobile operators concerned will shut down their Facebook Zero services. Moreover, the partnership is described as a promotion, which would seem to indicate that it has a finite lifespan.

Facebook will potentially benefit from the partnership by being able to increase its reach, and consequently its ability to generate revenues from advertising.

In late January Facebook’s CEO Mark Zuckerberg proclaimed that in 2012, Facebook became a mobile company. Since then the social network has either executed on or announced a number of product developments that add weight to Zuckerberg’s pronouncement, including the addition of VoIP to its Messenger for iOS application and its iOS mobile application, for users in North America only.

Ed Says

There you have it, Facebook IS a mobile company! Facebook needs to tread carefully. Consumers in the UK and US have already expressed frustrations about the levels of advertising they receive. So far Facebook has recognised that the growth in impressions available to marketers as mobile penetration grows does not equate to bombarding people with advertising. While emerging market consumers may be more amenable to mobile ads, heightened or intrusive advertising will not hold up well in developed markets long term.

 

 

 

 

If you have any comments please click the link
Comments 0

Leave a Comment