We are still a few days away from May Day, yet the signs of revolution are in the air. It may be hard to read the tea leaves, but reading recent industry research and the debate it has encouraged may be leading indicators of what lies ahead.
The first item involves documentation that Facebook is losing customers. The second involves research by noted analyst firm Informa that online Chat is now more popular than SMS for messaging. The latter revelation has touched off a debate as to how mobile service providers in particular, but physical network service providers in general are going to make money in the future by being something other than “dumb pipe” companies.
Facebook Losing its Mojo?
A posting on The Guardian in the UK looked at statistics from social media tracking aficionado SocialBakers, which showed that Facebook has seemingly tapped out its addressable market in the developed world. SocialBakers results show that in the last six months, Facebook has lost nearly nine million monthly visitors in the U.S. and two million in the U.K. The article also says they have found similar trends in Canada, Spain, France, Germany and Japan, where Facebook has some of its biggest followings.
As the company gets ready to report earnings on May Day, expectations are that, even if they are losing users or slowing down, revenues will be robust. In fact, the stock has been trading up on anticipation that Facebook is starting to monetize its subscriber base, and investors are looking to their performance as a measure of how well mobile advertizing is working.
Observers have said that the loss of users is partly due to market saturation, and partly due to the fact that Facebook, like Apple, has lost its “coolness” factor. Another way of saying this could be to say that the less mature are not looking to the more mature as a place to go. The new kids on the block have been and always will be enticing. That being said, it is not time to take up a collection for Facebook, given it has over a billion users, lots of addressable market in other parts of the world and certainly is paying attention with things like Facebook Home to the mobile market. Where attention should and will be paid is on the “monetization” of all of those users.
Facebook remains the place where vast amounts of people spend vast amounts of time per month. As I have written many times, the goal online is to create ecosystems where the user never has a reason to leave, and that in the battle of the giants I need to leave Facebook to search and look at YouTube and need to leave Google (despite Google+) to connect with most of my friends.
The real question is: who do advertisers prize as the best means to engage customers’ eyes, and hopefully wallets, anywhere, anytime and most of the time? The answer is to be determined. However, it does seem likely to be with one of the so called OTTs (Over-the-Top) providers.
This is great for the OTTs current and all of those entrepreneurs seeking to become the next big thing and the next online multi-millionaires. It also is directly related to the Chat surpassing SMS as the messaging platform of choice and what this means for the future vitality of the traditional service providers.
The Medium is the Message?
In 1964, famous social observer and futurist Marshall McLuhan coined the term, “The Medium is the Message.” While the phrase has meant many things to many people over the years, what McLuhan meant was that the form of a medium embeds itself in the message, which in turn creates a symbiotic relationship by which the medium influences how the message is perceived. Turns out he got that right.
There is a lengthy and fascinating piece on Gigacom that discusses the most recent findings by prestigious analyst firm Informa. The highlights of the Informa analysis are as follows:
Those are the basics. The buzz it has ignited, including in the TechZone360 offices, is whether this is the death of texting as chat rules, and whether – because people pay for SMS either as part of a package or per message, and do not pay for OTT services – this spells peril for the network service providers as apps like the popular WhatsAPP and its copycats take off.
It might be time to take a step back from hyperventilation for a moment.
As to the first question about chat versus SMS, the history of communications is that new capabilities (and chat is hardly new despite what the article says and is almost as old as SMS) tend to be additive and not necessarily competitive. For example, radio did not get replaced by television nor was going to the movies. In addition, as the number of channels has exploded context – when to use what – has become a critical differentiator.
The ability for consumers to maximize the nature and perceived value of communications is undeniable. For example, voice messaging became rampant in no small measure because there are lots of times when we do not wish to talk with someone but want to leave them a nuanced message (something that cannot be done with text). So we call when we know they are not there, or call an individual who we know does not answer the phone in real time.
The same is true for chat and SMS. There are times when we are online on social media where it is most useful to just chat, since we know who is available and we have connectivity with them. There are other times when we are on the go, have a mobile phone number and just need to send a quick note and that is why SMS will continue to grow. The medium is the message.
The Future of the Service Providers
Where things do get interesting is regarding what mobile providers are going to do. The fact of the matter is that voice has become a commodity, ARPU continues to sink and, based on demographics and user behavior, is not a candidate for growth in usage or revenue. Data is in the process of transformation as what was once unlimited does not make sense and service providers struggle with new business models and pricing plans.
They are, however, getting a boost in terms of what they can charge from the growth of devices per person and household, multi-screen experiences and the desire for more bit-hungry apps and “immersive” experiences. The problem is that because of the cost of accommodating the new world order of data-centricity, there is a real question as to whether making it up in volume will generate enough revenue to cover expenses and return a nice profit.
Truth be told, on the question of the future of the service providers, history does not bode well. Let’s just say that partnering is not their forte. That is unfortunate. Even a casual look into the future says that from opportunity abounds. A random short list includes:
What they all have in common is that service providers, be they fixed, wireless (fixed and mobile) or both, cannot do it alone. They need partners and new business models. They also need to change their culture to accept the fact that owning the connection and a billing relationship no longer means you “own” the customer. What is does say is that the connection and billing relationship are things that you have and others need, and the opportunities all stem from leveraging those assets in non-traditional ways.
The bottom line, as they say, is the bottom line. SMS will roll along because of its utility based on context. Chat is going to take off because we all spend so much time online, and the convenience and price of using it are irresistible because of the context in which it gets used. This is why the ecosystems of the big guys are expanding in functionality. It is why forward-looking service providers like South Korea Telecom have gone to a connectivity everywhere (fixed, mobile and Wi-Fi ubiquitous broadband) all the time approach to capture and keep customers on their network and attract third parties, because that is where the customers can be easily reached.
Whether the cable and wireless providers of physical networks can keep up in what I have called, “The Age of Acceleration,” where the only constants are change and the increase in speed of change, is problematic. However, to use a sports analogy, this an instance where the service providers will have only themselves to blame if they continue to have trouble monetizing their unique assets and they allow the OTTs to be the sole proprietors of next generation value creation.
What I can say is that the time for service providers to change is now, and that the window of opportunity is closing. Google, Facebook, Twitter and a host of others have their own view of their respective manifest destinies, and they will find a way to be first and fast in the market with or without service provider help. The next 12 to 18 months are going to tell us a lot, especially as the pace of service provider industry restructuring picks up around the world and possibly distracts management into looking at the wrong places for creating sustainable competitive advantage.
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