"I'm going to take a shower now ...

"
Opportunities for mobile network operators to cooperate with social communities
Published in "Think!", DMR 04/2010 Online: http://www.detecon-dmr.com/en/article/im-going-to-take-a-shower-no w_2010_12_15 Dr. Mike Radmacher Stefan Kistler Part of people's lives today is taking place in social communities. The related increase in mobile data communication offers carriers new potential for turnover.

The number of people using social communities is rising every day. These users give other users around the world the opportunity to participate in their very personal everyday lives. Right after she gets up, Kerstin writes to her friends about the dream she had last night and uploads this message, along with a picture of her crumpled pillow, onto Facebook. While she is brushing her teeth, Annett, her best friend, reports in; she has used her smartphone to read Kerstins message. The two make a date to meet at Starbucks to discuss the content of the dream and get ready for their workday. Soon after Kerstin leaves her apartment, she tweets that she is on the way. 30 minutes later, Kerstin checks in at foursquare. Now all of her friends, including Annett, know that she has arrived at Starbucks. Kerstin retrieves the latest tips from other foursquare members who have already been to Starbucks this morning. Tim wrote that the rolls at 7.30 were inedible. Since Kerstin drops in at Starbucks almost every day, she was selected to be the mayor of this location on foursquare. The perk today is a voucher for a large latte. Kerstin orders one for herself and Annett, and they immediately start talking about her dream from last night. While they are talking, Kerstin notices Annetts new shoes. She is certain that she saw these in the pictures from the last party given by her friend Mike at MySpace. When Kerstin asks Annett about the shoes, Annett

Published in "Think!", DMR 04/2010

tells her about a new shopping platform called ThisNext and assures her that these shoes are the latest style from the USA. After she authorized ThisNext to obtain her contact data from her carrier, the shoes were ordered immediately, paid for using a wireless invoice, and sent to her by mail. But the shoes are not the only thing that Annett noticed at the party. A good-looking young man is staring at her in some of Mikes photos. Neither of them know who he is. A quick message to Mike, and the answer comes back with a link to Stefans Xing profile. Annett and Kerstin look through Stefans profile and place a message for him on his bulletin board. Relieved to have discussed the dream, bought new shoes, and learned that a cool guy is attracted to Annett, the two leave Starbucks. This example illustrates that social communities have changed the manner of communication as well as the way people deal with communication technologies forever. This change also means a steady rise in mobile data communication, where carriers see great potential for turnover. Owing to the great importance of data transmission, the unique selling points of carriers are of only limited use. Carriers are facing a choice: 1. Bit Pipe: strict limitation of provider role to data transmission; 2. Developer APIs: development of interfaces or services which generate added value for the members and operators of social communities; 3. Partnering: entering into cooperative ventures with operators of social communities; or 4. Carrier community: establishing their own communities and placing the communities on the pre-installed home pages of their own end devices. Which of the above alternatives will make a long-term contribution to carriers success and in what way depends on the nature of the communities and on the capabilities and relative advantage of carriers to cover the scope of functions. The markets as shaped by social communities and their development Social communities remain the most popular way of passing the time for Internet users. The communities which generate the greatest data traffic worldwide are found among the Top 20 and include Facebook, YouTube, Twitter, Wikipedia, or MySpace ( http://www.netzpolitik.org/2010/das-internet-wird-hauptsachlich-genutzt-fur/).

User figures for Facebook in Germany rose by 275% to 9.54 million users

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between August 2009 and June 2010 ( http://facebookmarketing.de/zahlen_fakten/facebook-deutschland-nutzerzahle njuni-2010). Worldwide, Facebook counted 500 million active users as per July 2010 and generated turnover of $800 million, although profit was not given ( http://www.zeit.de/digital/internet/2010-07/facebook-mitglieder-zuckerberg ;  http://facebookmarketing.de/news/500-millionen-aktive-facebooknutzerweltwei t). During the first half of 2010, the business network Xing was able to increase its total sales by 20% to €25.86 million and showed a provisional profit for the year of €2.6 million. Xing has 9.63 million members worldwide, 718,000 of them paying premium customers( http://corporate.xing.com/deutsch/presse/pressemitteilungen/pressmitteilunge ndetailansicht/article/pressemitteilungbr-5/138/ac6f6d32e020202c814683949 59f3ffb/) . One answer to the question as to what makes social communities successful is provided by a study in which 150 marketing students analyzed 600 social communities and 60,000 profile attributes of members over a period of three months ( http://www.seedfinance.de/2009/01/08/erfolgsfaktoren-fuer-social-networks/ ). Besides clear focus on target groups, strong bonding of the members among one another, or simple navigation, the scope of possible functions provided by a social community (picture uploads, messaging service) is equally important. Moreover, the income model such as financing from advertising, premium memberships, or online games directly impacts the success of a social community. While the number of users of social communities is continuing to rise, the search for a revenue model viable for the future remains open. Along with social communities, carriers are also searching for additional revenue sources as a way to counteract the strong cost pressures and the declining margins in voice and data communication. If the demands made on a carrier today are to be given due consideration and the market launch of innovative ideas is to be accelerated, organizational changes as well as requirements for product development will be necessary. Fast response to changes on the market on the part of the carrier presumes a modularization of services. When this approach is used, new products can be built on the basis of existing services (building block system). Core competencies of the carrier can be used in different ways, among them their provision as additional services within social communities. Features of todays social communities Over the past few years, a diverse range of communities has appeared.

Published in "Think!", DMR 04/2010

Whether social communities, social networks, meta communities, or mobile virtual communities, all communities have one thing in common people who share the ideas and thoughts that have an effect on their lives.

The analysis of the social communities shows that there are basically four different categories of social communities. Live-oriented communities put the focus on the users and their need to share experiences and thoughts with one another. The best-known examples of this type are Facebook and Schler/Studi/MeinVZ. The primary objective of the members is to tell their friends about their current experiences. Among other services, the communities provide the opportunity to upload private videos and pictures and to comment on one anothers uploads. Facebook

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integrates new functions into the community through open interfaces. The most prominent example of such a function is the simulation Farmville programmed by Zynga. Media-oriented communities put the media at the center of the communitys focus. MySpace (for the USA) and Bebo (for Europe) are the best-known communities of this type. Discussions about well-known and less well-known musicians and their music videos are at the forefront of interest on these sites. Users profiles can be personalized extensively, e.g., by adding links to favorite music and a background picture. Business-oriented communities aim at networking in the business environment. Xing is very common in Germany. On the international stage, LinkedIn is the most important platform. The objective is to network users in the business environment with one another. Their members are also making increased use of the subject-oriented discussion groups. Retail-oriented communities make use of the community idea to carry on trade actively via the platform. ThisNext or Venteprivee embody this type of community which enables its users to buy products directly via the platform without a middleman and to obtain information about the product from other members. Core competencies of carriers and their economic added value within the social communities A number of different studies (STL http://www.stlpartners.com/telco2_2-sided-market/index.php ; E-Billiung http://www.tmcnet.com/channels/billing/articles/59278-telcosbenefit-from-ebilli ng.htm ; Obopay https://www.obopay.com/consumer/welcome.shtml ) in recent years have examined the core competencies of carriers with the aim of identifying new sources of revenue going beyond the classic markets for voice and data communication as the margins on these markets are being squeezed more and more tightly. The focus on core competencies is a reflection of the fact that carriers, unlike the so-called over-the-top players, are not in a position to drive Web 2.0 innovations forward fast enough and successfully because of their organizational structures. Furthermore, their market positioning is usually reduced to their own clientele. The orientation to core competencies relevant for Web 2.0, on the other hand, promises sustained carrier development. There are four core competencies which appear especially relevant in the context of social communities:

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The three use cases below illustrate how these core competencies can be concretely implemented in the social communities. Use Case 1: Identification and Authorization Every day, the shopping community ThisNext recommends new products from all over the world to its members. Among others, the recommendations include electrical products and designer fashions from Paris. Users can buy the products they have selected without any further diversions by clicking on a special link. In the ideal case, users have already set up their own profile containing stored contact data such as address and bank account. Since not all users are prepared to reveal their contact data, ThisNext makes it possible for customers to identify themselves with their cell phone number. Customers send a confirmation text message to verify their identity to the platform and confirm their purchase. The carrier acts on behalf of the users and discloses the address for the purpose of carrying out the order without giving permission to store the address. Use Case 2: Billing and Payment Social communities offer additional functions to their users at a charge. Whereas Xing makes available a premium membership featuring an

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advanced search engine and file storage for letters of reference and qualification certificates, Facebook offers a virtual currency which can be used for the payment of additional services such as games. Both of these revenue models presume a pay function. Traditionally, this is handled by credit card or PayPal. In addition to established payment procedures such as these, a carrier is also in a position to handle the billing and payment via the users telephone invoices. Facebook and Xing could permit users to identify themselves through their carrier and settle payments directly with this company. Use Case 3: Marketing Services and Business Intelligence As mentioned at the beginning, financing through advertising is a major component of income for social communities. The prerequisite for placement of goal-oriented advertising is the best possible identification of the users. Information about users which is normally generated during use of the community services lays the foundation for the analysis of user behavior. In addition to data they have captured themselves, carriers also have the opportunity to acquire anonymized and aggregated behavioral data related to specific contexts. The data thus obtained in combination with the data they have themselves collected make it possible to carry on goal-oriented marketing. Use Case 4: Telecommunications Services Yet another interesting use case is the integration of telecommunications services into social networks. A striking example of this case is the cooperation of Facebook with 82 providers in 35 countries. These providers allow users to change their status by means of conventional text messages so they are not restricted to only the Facebook Internet site for this purpose. This cooperation is today just the beginning. Other possibilities include the adaptation of the voicemail or the hold melody by means of status changes in the social communities (DEB Partnering with Facebook). There are many other use cases besides the three described above which would need to be examined in detail and in accordance with the underlying strategic orientation of the company. Social communities as additional revenue source for carriers? The alternatives mentioned at the beginning bit pipe, developer APIs, partnering, or the establishment of an own community represent four basic business models for carriers. Owing to the high data volume for videos and music, the media-oriented

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communities are most interesting for those carriers which pursue a bit pipe strategy. The bit pipe means that the company participates solely in the data revenues. However, such revenues are only a small portion of the total income from a social community. Since carriers have a broad range of competencies, they should select a bit pipe strategy solely in exceptional cases. The development of interfaces which the developers of community applications or even communities themselves can use directly is another possibility. A carrier can make its own SDK (software development kit) available and thus provide to the community developers interfaces to the core systems such as billing and identification so that they can operate important core functions of their community. This is a way for a carrier to develop another revenue source. The decisive point in this context is the aspect of the bond between a carrier and its community and the separation from its competitors. Besides the established communities, niche communities, such as those for cyclists for fishermen, are above all appropriate targets because their size allows them to utilize additional services such as billing, identification, and marketing services/business intelligence of a carrier. The offering of services via interfaces does not cause the communities to lose their independence because merely a function is offered while the content remains an essential element of the community. The possibility of establishing partnerships with existing communities is also highly interesting for carriers. However, the interests in this case are extremely divergent. Carriers want to participate in turnover and obtain exclusive advantages for their own customers. The operators of social communities, on the other hand, are interested in avoiding third-party participation in turnover and in allowing access to as many members as possible. Nevertheless, it can work, as is shown by the example of E-Plus: a reduced Facebook version (Facebook Zero) has been prepared for the mobile network customers of E-Plus which they can use without charge for data traffic. However, as soon as they want to look at pictures, etc., the customers must pay for the data which is transmitted. The linkage of social communities with text messages/voicemail services mentioned above is another interesting opportunity because they have direct impact on user behavior and may possibly provide a USP on the market with respect to other carriers. There would appear to be a number of reasons why it is difficult for a carrier to establish its own social community. The carriers are generally not especially renowned as innovative companies and address only that part of the general population which has a contract with them. This is a major limitation especially in the international environment because Facebook, just as one example, can be used in almost every country on Earth. Many attempts in the past have indicated that this approach does not result in the desired success. Current communities operated by carriers today frequently have low numbers of users and lack an adequate scope of functions and

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services. The cooperation of social communities and carriers will continue to affect the daily lives of Annett, Kerstin, Mike, and Stefan. The exact form it will take is still unclear, but at this time it represents enormous opportunities for carriers to set themselves apart from their competitors for the long term and to generate additional sources of income. In particular, the establishment of a general platform for smaller communities and the partnership with existing communities appear to be very promising.

Dr. Mike Radmacher Dr Mike Radmacher works in the Competence Practice Strategy and Marketing, specializing in product innovation. As a participant in many different projects, he has gained experience in the development of innovative concepts and products related to ICT. They include concrete topics such as social communities, cloud computing, and identity management. His major priorities are not restricted solely to the development of concepts, but also include support during their implementation. Stefan Kistler Stefan Kistler is a consultant in the Compentence Practice Strategy and Marketing. His position has enabled him to gain experience on three continents, and his developments include the group strategy of an international carrier, the strategic positioning of sub-divisions of a carrier, and product strategies in the mobile environment.

Published in "Think!", DMR 04/2010