Catching the Wave

There’s MySpace and YouTube. Friendster and Classmates. Kazaa and eBay.

Those not familiar with these sites likely have been on an extended vacation. Or maybe they’re just old and out-of-touch. But if you’re reading this magazine, you know these marquee names have contributed to the latest, greatest of Internet trends: social networking and user-generated content. These companies, my friends, are the foundation for the so-called “Web 2.0,” where viable business models are back and dot-coms have reclaimed their position center stage.

Of course, in “Internet time,” social networking — while still a popular activity — is old news. What’s new here is that social media now is coming to the mobile space.

However, a phenomenon with roots in the carrier-agnostic world of the Web may not translate well to an industry built on a walled-garden, pay-to-play concept. Social networking’s considerable online popularity is in large part built on wide and shallow socializing, collecting friends across networks and watching videos uploaded in Kazakhstan, say. Plus, it’s usually free. That begs the question of whether service providers will ride the wave of opportunity, or wipe out on the rocks of innovation.

At first blush, it looks like carriers are fitting social networking into their existing business models. For instance, Verizon Wireless has struck a deal with YouTube for mobile video sharing, allowing V CAST subscribers to browse and watch the Web site’s videos on their cell phones. Eventually, users may be able to upload their own videos shot with their V CAST handsets, according to The Wall Street Journal. YouTube says this is the first in a series of deals it expects to sign with mobile operators.

Click to Enlarge NTT DoCoMo's S! Town is an example of a fully mobilized social community.

Other major communications firms are feeling out the mobile social networking space as well. News Corp. COO Peter Chernin said late in 2006 that mobile content will be the next great focus for the media giant, adding that no expense or lack of vision will stand in the way of success. Lack of uptake in the United States for mobile entertainment beyond the ringtone is a “marketing problem,” he said, but he indicated that Fox and its affiliates will dive into the breach regardless.

Creating innovative approaches and more interactivity for social networking are high on the to-do list: “We need to be more experimental, no matter how unorthodox,” Chernin said of the mobile platform.

News Corp. recently took a 51 percent chunk of VeriSign Inc.’s ringtone and mobile content production business, Jamba!, for $188 million. The venture will leverage MySpace.com (which News Corp. recently bought) by working with UIEvolution Inc. to develop a mobile user experience that will be shopped to the carriers. UIEvolution offers cross-platform technology allowing users to access content from any device and any network, dynamically updating features and content without disruption to the user experience.

The ability to update MySpace sites from a handheld now is available on the upscale MVNO Helio’s content deck; the UIEvolution agreement points to the end of that exclusivity, but no concrete details were available at press time.

Meanwhile, in Japan, NTT DoCoMo Inc. has developed a wildly popular application based on Gemini Mobile Technologies Inc.’s eXplo software platform. Users have custom avatars and interact within a video game-like virtual world filled with stores and houses with different rooms that can represent everything from music catalogs to news feeds to m-commerce sites. Subscribers have their own rooms, which they decorate with digital goods. And members can post pictures, blogs and listen to music — all while chatting with their friends and virtual “neighbors.”

While carriers are interested in bringing social networking into the fold, there are hurdles to the strategy. Cost and a lack of functionality may constrain adoption, notably.

“Ultimately, social networking is about the right side of the brain, the tip of the long tail,” says Chris Ruff, CEO at UIEvolution. “It’s extremely disruptive because you will have many people honing their craft digitally, whether that’s making movies or writing the next Pulitzer Prize-winning novel. This completely changes the model of who controls, makes and monetizes content — away from the carriers, to the user. If that experience isn’t there to allow that, it won’t be successful.”

Juice Wireless Inc. has created JuiceCaster, a mobile content-sharing community that allows members to search for and stream user-generated videos and pictures directly to other JuiceCaster users’ mobile phones, regardless of network. “We think it’s fundamentally a new way of communicating,” says Nick Desai, chairman at Juice Wireless. “Web 2.0 is about the fact that everyone is a content creator. And open interactivity between networks and platforms — phone, Web, television — will be the future.”

Off-portal services such as these may be more attractive to users than carrier-created versions. “Now that service providers are trying to provide Internet applications on the mobile device, they’ll learn that users want to use their existing, favorite sites, not a carrier-created knock-off,” says Eric Hernaez, CEO of Solegy, a provider of an outsourced service delivery platform. An example lies in the existing carrier music stores, which go to great lengths to protect the walled-garden idea, and none of which has approached the popularity of iTunes.

On the flip side, “social networking sites will want to reach all subscribers, not just the ones on a certain network,” he adds. Thus, while multiple carriers may cut deals with MySpace, for instance, users from carrier X may not be able to see the blogs and information of users from carrier Z. That makes mobile access of limited value to members of a community like MySpace.

Further complicating matters is cost. An unlimited mobile Internet package often runs $15 per month in addition to voice minutes, text messaging and download charges. Most say carriers will be forced to embrace an open-access model to justify that kind of pricing. “The cost of data plans for the end user for what they get is still too much,” says Mike Krasner, president and CEO at Oxy Systems Inc., whose new phling! application for music sharing works across the Cingular Wireless, Sprint Nextel Corp., and T-Mobile USA Inc. networks. Users connect their mobile phones to home PCs, and view and play music tracks and podcasts from their own media collections. They also can connect with others in the phling! community by browsing their profiles, music libraries and music ratings. “However, service providers could package our application in with just the amount of data access to support it — say, a dollar per 24 hours of use — and reach an acceptable rate for adoption,” he says.

The JuiceCaster portal

Opening up the walled garden and losing control of the content doesn’t mean the end of the value proposition for service providers. They still can leverage the phenomenon of social media in various ways. “Users need a good delivery mechanism and experience,” says Ruff. “Service providers need to consider things like integrating messaging, providing optimization for user-generated content, bundling the support in with the triple play and bridging together users across networks in an intuitive way. Whoever does that effectively is who will win this race, gain the subscribers and justify their data plan.”

Krasner adds carriers also can monetize such services through advertising or hooking the application to their music stores to offer ringtones and track downloads.

And, being the network operator has advantages. “The network is still in the best position to do certain things, such as collecting payment and providing fraud protection,” says Hernaez. “Also, LBS — being able to make available the status of the user and whether the phone is on or off — is of tremendous value. Also, QoS, bandwidth and security become very important.”

Social networking also offers an opportunity to hold on to subscribers. “Churn is a huge issue for carriers, and it’s difficult for them to get it down below 25 percent,” says Scott Driggers, CEO at Gemini. “If you’re the portal to reach all their favorite media and networking sites, that’s very sticky.”

For now, cellco behemoths Orange and T-Mobile already have announced plans to scrap their walled gardens outside of the United States, instead embracing an open-access policy for content. It remains to be seen whether the trend is headed stateside.