Mobile Social Networking Will Be Ad-Funded

Over the last 12 months, service providers seem to have changed their minds about mobile social networking and user-generated content in at least one respect: Where many initially thought they could build a subscription-based social networking business, they now think basic access must be provided free, with the revenue model then built on enhanced services.

 

In other words, it won’t do to require payment to join communities or interact with members of those communities.

 

Much the same conclusion seems to have been reached about the business model for mobile user-generated content.

 

Ad-funded social networks will provide the bulk of revenues in the mobile user-generated content space by 2013, according to a new report from Juniper Research (News - Alert). Part of the reason is that user-generated content and social networking are related.

 

The Juniper Research report says that the total value of the UGC market, including social networking, dating and personal content delivery services, will rise from nearly $1.1 billion in 2007 to more than $7.3 billion in 2013, with social networking overtaking dating to become the largest revenue generating segment by 2009.

 

The report also notes the increasing importance played by advertising, which will account for nearly one-third of total revenues in the UGC space by the end of the forecast period, and more than half of mobile social networking revenues.

 

“It’s clear that we have seen an industry wide shift regarding the implementation of business models in this area,” said Windsor Holden, Juniper Research analyst. “Whereas initially there was a perception that users would pay a small mobility premium to access social networks on their handsets, it rapidly became clear that to achieve truly mass adoption, it would be necessary to offer free membership and then to augment that with advertising and the sale of premium content.”

 

As social networking and mobile dating sites move away from the subscription model to one-off billing for premium services, advertising becomes increasingly important as a revenue stream. The proportion of revenue generated by advertising clearly varies enormously by service provider. Typically, these proportions are higher at social networking sites than dating sites as there is a significant value to be extracted from dating site customers who wish to interact with one another, thus it makes solid commercial sense to charge a premium here, be it per message or for the initial interaction.