Having looked at a number of companies in the MSN arena, some of which no longer exist and some of which continue to chug along….I can't help but think in terms of frameworks for success.
The obvious Venture capital response to mobile social networks ("MSNs") and arguably the correct position is "…..I know who's going to win the mobile social networking race…...Facebook". Brilliant!
When I look at MSNs, I look at it as a three step analysis:
1. Does the MSN offer something that other online social networks don't offer, something uniquely mobile and is it getting traction?
2. Does the company have a clear value proposition for its users and do users have the same understanding of why they've joined this particular MSN?
3. Is there a clear path to monetization?
While investors appear to be focused on point 3, I am more often caught up on points 1 and 2. I find it rare that MSNs have been able to deliver a compelling offering to its users and often MSNs represent a kluge of mobile services that the company refers to as a "community" of users. There are exceptions to these rules. Companies like Mocospace know their users and their users know why they are engaged with Mocospace i.e. to meet new people. The challenge is that often, as is/was the case online, these networks end up with some pretty racy content. This isn't necessarily a bad thing UNLESS…you need to attract ad dollars to the party. Which bring us to point 3. If the only MSNs that appear to be satisfying points 1 and 2 above, fall into the low priced inventory category then, satisfying point 3 becomes even more challenging. Hence the vicious cycle of MSNs.
Solution?
One of two things need to happen:
1. Non-racy MSNs that satisfy points 1 and 2 above that can better capitalize on ad dollars need to become more prevalent. As business operators learn more about what mobile users want and what aspects of their offering are uniquely mobile, I predict the emergence of MSNs with clean and cool content that can attract very large communities of users (Buzzd is a good example of keeping it clean and cool!) The advertisers will show up and these companies will also have access to alternative revenue streams such as affiliate revenue.
2. Those that have created large communities of users with inherently racy content need to determine a mechanism to monetize independent of ad dollars. I also think this will happen. Virtual gifting, rewards for getting others to download your UGC, private chat rooms etc. all represent excellent long term revenue opportunities.
I wouldn't say in either case that there is a clear path to monetization but '09 is definitely the year to figure it out and break the vicious cycle!
2 Comments
It's important to keep in mind that social networks on mobile devices is not a new trend and that multi-billion dollar business models already exist. I am, of course, referring to the 30-year old social network of the mobile phone, which became "digital media" in the 90's.
The typical iPhone user spends less than 10 minutes on an app. Meanwhile, cellphone users spends from 30 minutes on a pay-as-you-go plan to more than 250 minutes on a pre-paid plan. No doubt, mobile data is enabling, but if someone is looking for inspiration when designing mobile social network apps, the mobile phone is a good reference point. When they reference, they would realise that it is built on a business model of few suppliers that lead to monetisation.
If RIM's long term strategy is to help people communicate effortlessly, Social Networking apps on the BlackBerry will always be competiting with RIM's $613M secret sauce, pushed email.
The most interesting social networking tech built on digital media for consumers today is Google's "GrandCentral". Let me throw this in too. Google is not a search engine company, advertising company, or digital media company. It is indeed organising the world's information, but it is doing it as a 'communication' company, at least as we know it today. Think about what is at the core of what RIM is pushing.
Thanks for your comments Tim, interesting perspective. Not sure I agree that the pre-smartphone, highly fragmeneted mobile phone market in and of itself ever really constituted a meaningful mobile social network. In my mind, you'd have to have a meaningful social interaction in order to qualify as a socail network and consumption of stand alone digital media doesn't quite get me there but that's just my opinion and can appreciate where you're coming from.