Leveraging the profile information of more than 500 million users, Facebook is now competing directly with various cross-industry players, including telecom operators. How can operators avoid becoming simply pipes, and instead control their resources and create value?
The power of address books
Facebook saw its market capitalization reach USD82.9 billion on SharesPost on January 28, 2011, taking it past Amazon and placing it second only to Google. Its stock price fluctuated around USD55 in Q1, which meant that most investors valued it at more than USD100 billion.
Why are investors so optimistic about Facebook? It is because Facebook has more than 500 million users and knows their social relationships. Leveraging the profile information, Facebook covers nearly all the Internet business models. A real competitor of Google has appeared.
Similarly, in China, Tencent also has more than 500 million users and has a presence across nearly all Internet business models. Its stock price has also kept hitting new highs.
Social networking has become so popular that leading organizations within and beyond the industry are preparing to tap into its potential. Nonetheless, telecom operators, despite having larger user information databases than those of Facebook and Tencent, along with real and accurate data on social relationships, have not received equal attention from Internet investors.
With basic communications services such as voice services, short messaging service (SMS), and Internet access, operators have valuable data such as personal information, usage habits, and communication records. They have direct access to first-hand, real-world social relationships between customers, and this is primarily in the form of mobile address books. A lack of innovation, however, means that operators have never been able to leverage the potential of these address books. Meanwhile, user and media attention to personal privacy has made operators act cautiously.
New applications thrive
Although operators have not found a good way to tap into the potential of mobile address books, this is not a problem for innovative technology companies looking to cash into the growth of the mobile Internet and smart devices. For example, Kik Messenger was launched on October 19, 2010. Developed by a team led by Ted Livingston, this messaging application gained one million registered users within two weeks of its release. That number topped two million six weeks later, and exceeded four million by July 2011. It is undoubtedly a successful innovation. What does Kik provide to its users? Why is it growing so rapidly?
To answer these questions, we need to look at the differences between Kik Messenger and traditional address- book-based messaging services provided by operators.
Use of existing social relationships
Kik Messenger offers simple installation and registration, with an uncomplicated guide helping you through the program interface. The program first scans users’ mobile address books, and is able to add contacts currently using Kik as Kik contacts. It then enables messages between Kik contacts; users can also invite other friends to become Kik users. Such a way makes full use of existing social relationships, and users need not maintain a separate set of contacts.
Excellent user experience
Kik provides a chat-like user interface for receiving and sending messages similar to instant messaging software, eliminating the need for users to learn anything new. It is a lightweight, easy-to-use mobile application with a clear interface, proper division of functionality, and high interaction efficiency. Kik runs smoothly and reliably, making it at least as good as applications built into the mobile phone.
A much lower cost
Compared with SMS, which costs money, Kik is a free messaging service. Users only need to pay for the data traffic, which comes to a few hundred bytes or less for every message sent. The cost is therefore minimal.
The FaceTime video calling feature of the iPhone 4 and iPad 2 is a service with similar features, except that it provides video calls instead of messages. FaceTime provides an excellent experience through video calls without the participation of an operator, while the rapid popularity of Kik has resulted in several similar attempts within the telecom industry. Here is a closer look at some popular communications applications based on Internet architecture:
WhatsApp: WhatsApp Messenger is similar to Kik in terms of functionality and usage, but it features a simpler registration process in which no account or password is needed. Instead, the mobile phone number of the user serves as his/her WhatsApp account. After it is installed, the program automatically scans the user’s address book and, adds contacts who are already using WhatsApp, making it very convenient to use. WhatsApp supports mainstream smartphones such as iPhone, Android-powered phones, and BlackBerry. It enables immediate reception of texts, pictures, audio files, and video information from buddies.
Weixin: The service from Tencent supports receiving and sending texts and pictures. Its latest version supports voice messages. Weixin also supports mainstream smartphones like iPhone, Android and Symbian phones.
TalkBox: TalkBox is an application for sending voice messages, eliminating the need for typing on the mobile phone. By sending voice messages quickly, it achieves speed and immediacy. Users may either manually add their buddies or synchronize their buddy list using their Facebook account. TalkBox features simple one-touch voice recording. It comes with a message push mechanism and also group chatting, so multiple users can communicate at the same time.
Qik: Qik is a mobile video software provider acquired by Skype. Its Qik Video Connect is a mobile video application that enables users to stay in touch with friends and family members by means of video calling, messaging, and sharing. Qik integrates users’ address books to allow them to easily check whether their friends or family members are available for real-time video chatting. If they are unavailable, users may send private video mails to them through email or SMS, no matter what devices or phone networks they use.
Tango: Tango is a free, high-quality video calling application. Unlike FaceTime that restricts usage to only Wi-Fi, Tango is able to work on both 3G and Wi-Fi. It also scans users’ mobile address books. Users may enjoy video calling by paying merely the cost of data traffic.
fring: fring is free cross-platform (iPhone, Android, and Symbian) mobile VoIP software. It provides video calling services through 3G or Wi-Fi networks. It features enhanced functions through the real-time availability of online contacts, as users can see online contacts before they make calls. It enables communication with Skype, MSN Messenger, Google Talk, ICQ, AIM, and conventional phone contacts. It provides steady connections with higher stability of video and voice calls.
Success not accidental
The success of innovative communications services is not accidental. Instead, it relies on several key factors.
Penetration of smartphones
Smartphones have been receiving unprecedented attention since Apple launched the iPhone. With lower barriers, Google Android and numerous mobile phone vendors with the Open Handset Alliance (OHA) have stimulated the smartphone market to start a period of wild growth. Low-end and mid-range smartphones are sold at the prices feature phones were three or five years ago. With the natural replacement of mobile phones and subsidy policies of operators, a lot of consumers have turned into smartphone users. Smartphone operating systems (OSs) provide fertile soil for innovative applications due to their higher computing power and storage capacity, support for multiple access modes, and excellent software extensibility.
Emergence of mobile Internet
The penetration of smartphones has brought computing centers closer to users. Users may carry networks with them, which has greatly stimulated the growth of the mobile Internet. Wi-Fi has become a required option for home and office environment thanks to years of efforts made by various industry players. The 3G wave is sweeping the globe with help from operators and equipment vendors. Wi-Fi and 3G improvements have been rapidly increasing mobile access speeds. These devices provide consumers with a good mobile Internet experience, while consumer demand is driving the fast growth of the mobile Internet.
Through consumers’ mobile address books, real-world social relationships are easier to maintain than those on Facebook and QQ. It is costly to reconstruct social relationships, while consumers do not want to migrate their social networks. Starting from mobile address books is therefore a convenient and effective way. These services enable more convenient mobile communications since they use existing social relationships.
Operators must adapt
Innovative mobile communications services have undoubtedly pushed operators to the verge of being bypassed again. However, it seems to be more relentless this time, because such services have shaken the foundation of traditional communications services.
Traditional communications services are the cash cow of operators, while data services are always in an awkward situation where revenues from those services do not increase with traffic. Innovative communications services happen to be data-based services that are eating away at operators’ traditional communications services, which may become disastrous for them.
Operators already suffered pain when Skype was launched. Should they face the challenge head on or stick to restrictions on VoIP services? Today, Skype includes messaging and video calls. Moreover, it utilizes mobile address books, which operators have long believed to be their possession.
The vested interests will never readily exit. Major European telecom operators have reportedly planned to revise Internet data transmission regulations to charge traffic fees from online content and service providers such as Google. They complain that their networks are forced to respond to the pressure from the data explosion but that they have not achieved the requisite revenue growth from it. Most data traffic is for the U.S. websites such as YouTube, a video service website of Google.
Nonetheless, there are two sides to everything. Operators have a great deal of information about their subscribers, and operators know who they are, who they contact, and what time they leave home for work, break for lunch and take an afternoon coffee break.
Subscribers use various services, and operators know their service preferences, their choices of colors, and how they interact with media. They even know that the users do not like Lady Gaga and skip to the next song before the current one is over. Such information is the very treasure coveted by every innovative IT company attempting to enter operators’ territory.
This raises more important questions: How can this treasure be mined? How can valuable data be identified? How can critical information be dug out of it? How can private information be distinguished from that to be made public? A new way will become available to operators as long as they recognize the market position of innovative IT companies, try to answer those questions, and provide such companies value beyond that of pipes.
The game is on. Will operators become pure pipe providers or be able to control their resources and create proper value? Let’s wait and see.