Monetization may be easier for Mobile Social Networks

Bill Gurley's has an interesting post on his blog - “How to Monetize Social Network: MySpace and Facebook Should Follow TenCent” (http://abovethecrowd.com/2009/03/09/how-to-monetize-a-social-network-myspace-and-facebook-should-follow-tencent/ ). He writes that social networks have a monetization problem because users are heavily immersed in the task of interacting with other users and so are less inclined to be interested in advertising; conversely nline advertising is more successful on sites where the user's intent to purchase is already formed (e.g. travel sites or on search result pages where the search query was triggered by an intent to purchase).

The post states that social sites can enhance monetization from other sources and gives the example of TenCent which generates revenues from digital items and casual games. Examples of digital items on TenCent include virtual clothes and accessories that users can buy to dress up their online avatars. Only 12% of TenCent's revenues come from advertising (as compared to over 90% for Facebook and MySpace). Gurley also explains why he thinks that people who dismiss the viability of such revenues as being an “Asian fad” are wrong.

Given the increasing popularity of social networking on mobiles and the fact that a number of mobile users are looking to personalize their handsets, I think that mobile operators can increase sales of digital items by enabling users to use the same content within the social networking application and to customize their handset. For e.g. users could purchase digital item packages that include personalization elements for their social networking avatars, wallpapers for their handset, downloadable ringtones and subscription to ring-back tone(s). As mobile users are already used to paying for digital items, it is likely that a social networking site oriented towards mobile users will be more successful in selling such items as compared to a site that is accessed primarily by desktop users. Common digital items would also mean closer integration between the handset and the social networking service (i.e. beyond the creation of specific applications such as the Facebook app for Blackberry, MySpace app for iPhone).

It will be interesting to explore how social networking on mobiles has evolved in different markets. Bill Gurley's post mentions two popular services in Japan that are accessed more often from mobiles than from desktops: Mobage-Town from DeNA (http://www.dena.jp/en/services/mobileportal.html) and GREE (they only seem to have a Japanese site; a write-up on the service is available at http://www.tokyotronic.com/2008/01/review-japans-no-2-social-network-gree.html). The creation of such “mobile-friendly” solutions in Japan seems to be mirroring the different approach taken by NTT DoCoMo as compared to operators in US during the early days of the mobile web; while the former created I-Mode (a new set of web-based services designed for mobile users), the latter viewed the mobile web as providing the desktop Internet on the handset.