Detecon Executive Briefing

Partnering with
Facebook
Blessing or Curse?

As Internet users are migrating to mobile, usage patterns on

the fixed and mobile Web are becoming increasingly similar:
Top-10 lists of leading mobile applications are consistently
occupied by familiar Internet companies such as Google,
Facebook, Yahoo, and Twitter. Nearly half of users’ time
online on a mobile device is spent on social networking.

In light of such developments, telecommunication operators

are increasingly abandoning pure do-it-yourself strategies to
increase mobile data traffic in favor of more collaboration-
oriented approaches. Many carriers are actively supporting
third-party mobile Internet services next to their own
proprietary applications. They now face the challenge of
creating sustainable and attractive partnering strategies with
self-confident Internet players.

Despite significant risks, operators are poised to benefit from

active approaches to partnering with Facebook and Co.
Successful collaboration strategies leverage the partner’s
experience and brand strength in customer-facing Internet
applications to drive mass market adoption of mobile data
services and promote the operator’s own brand image.

We make ICT strategies work

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Where the mobile Internet is heading

Users want the services they know and love – on their PC and on their phone. Accordingly,
established Internet players such as Google, Yahoo, Facebook, and Twitter are at the center
of user migration to the mobile environment. Mobile versions of their services are becoming
the primary drivers for widespread adoption of mobile data services. In the U.S. mobile
devices already serve as social network access points for 20% of the young users (16 to 24
years). In “mobile first” markets, such as Indonesia, South Africa, and Kenya, this number is
approaching 60%.

As telecom operators’ proprietary efforts to establish large-scale Internet user communities

have historically been ill-fated, carriers are now re-adjusting their strategies in favor of more
open approaches. Vodafone is increasingly distancing itself from its Vodafone 360 strategy
and has cancelled its 360-optimized “H2” handsets and discontinued the “LiMo” line of
phones after disappointing user uptake. Deutsche Telekom has announced its coopetition-
based strategy, which opens DT towards actively supporting web-based services provided
by leading partners.

The collaboration between carriers and service providers thereby typically revolves around
four areas: accelerating the uptake of mobile Internet portals and applications; linking web-
based services to traditional revenue drivers, such as SMS-based messaging and data
access; leveraging a partner’s brand-strength in joint marketing activities; and coordinating
joint device strategies. Early findings from over 250 carrier collaborations worldwide with
Facebook in these areas are encouraging. Leading operators are promoting joint entry-level
offerings to create significant cross- and up-selling potential for mass market adoption of
mobile data services.

Collaboration Strategy

Mobile Internet SMS Services

Co-Marketing Device Strategy

No Entry-Level Up-Selling
Partnering Services Potential

How to extract value from partnering with Facebook

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Extracting value from collaboration

Low risk, low bandwidth, and low cost Internet services lower the barriers for new users to
adopt mobile data applications. These services may include for example entry-level bundles
for social media, productivity, or entertainment services. Such services are light-weight as
they typically do not contain multimedia content and are optimized for entry-level data usage.
For instance, “Facebook Zero” offers a text-only version of Facebook’s mobile site.
Embedded images and videos are replaced by links to the fully-fledged multimedia version of
the site. The text-based version of the portal is free to the end user. Revenue is generated
by charging users for clicking on links to access multimedia content, e.g. through the links to
a friends’ photo gallery or to other services, applications, games or external portals.

The proliferation of some Internet-based services will increase pressure on traditional

messaging-based revenues in the short-term. To mitigate some of the immediate impact,
leading operators are working together with service providers to connect SMS-based and
Internet-based messaging services. On the most basic level, such features may include
integrating SMS to post status updates to social networks, or enabling the use of SMS to
receive messages sent to users’ online profiles. For instance, Facebook has deployed such
integrated SMS-based services with more than 82 operators in 35 countries, with options to
optimize either for SMS (“reply to this message”) or towards driving mobile Internet traffic
(“click here to reply”). Innovators at the intersection between telecommunications and IT,
such as Ribbit, Sendflow, or Twilio, also offer more complex services including advanced
voicemail management, call routing, converged inboxes, enterprise data collection, and
reporting.

User demand for such highly interactive mobile Internet services is impressive, e.g.
Facebook’s mobile sites and applications account for 45% of total time spent online on
mobile devices. Carriers may benefit from co-marketing, i.e. using the partner’s brand,
showcasing key product features or devices, or highlighting value or pricing of data and
devices, to leverage the service provider’s brand strength in customer-facing mobile data
services. For example, a viral campaign targeted at a Eurasian carrier’s subscribers to vote if
they wanted to get free Facebook-browsing for a month resulted in more than one million
votes. Promotion of popular services by Internet players in sync with operator marketing
activities can also open the door to up-selling of higher-volume data bundles. A German
network operator found that a joint promotion campaign led to an immediate 20% increase in
mobile browsing usage (post promotion).

Web-based services are increasingly being integrated natively into the device. Examples
which are already found as standard features on modern smart phones include social
network contact integration into the on-device address book or direct uploading from the
phone’s camera to the social network profile. As applications and devices are being
integrated further, competences in managing the customer, device, and application portfolios
require alignment. Leading operators have benefited from bundling collaboration
competences in dedicated partnering teams. Special units that are exclusively focused on
managing partnerships can scale with the complexity of the ecosystem, as collaborating with
third-party Internet application providers is increasingly becoming more of a question of how
rather than if.

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Sharpen your partnering strategy

Extracting maximum value from partnering with Internet players requires a pragmatic
approach. Decision-makers need to consider:
 The most popular applications on the mobile Web are Internet services that users are
familiar with. Due to impressive user bases – Facebook today has over half a billion
members – social networking accounts for nearly 25% of all time spent on the Internet.
 While scale tends to favor the most popular services, Facebook is not the only service to
see rapid growth. Although growing from a much lower user base, the business social
network LinkedIn increased its user community by 96%, Twitter by 56%.
 Leading operators profit from actively steering the transition to mobile data services.
Entry-level bundles provide access to ultra light-weight, fast, mobile, and cheap text-only
sites, keeping data usage low. Further revenue potential lies in offering access to
multimedia content for additional charges.
 Leverage the partner’s brand through co-marketing. Picking the right and relevant
partner that resonates with the operators’ customer base is crucial. This should include
aligning the device portfolio with flag-ship applications and innovative services.

Local and contextual factors need to be taken into consideration when formulating a
sustainable, long-term partnering strategy:
 Ensure alignment. Your partnering approach needs to harmonize with the overall
business strategy. Consider market maturity and customer segmentation, strategic
positioning of successful proprietary customer-facing Internet applications, ARPU
expectations, etc.
 Start small. Scale up from partnering with strategic partners as the basis for formulating
a more comprehensive and coherent collaboration strategy. Managing the partnering
ecosystem through an organizational entity dedicated to partnerships is essential for
building an attractive mobile applications portfolio. Consider innovative services of over-
the-top players to complement partnering concept.
 Time-to-market remains key. Innovation in mobile data services is fast-paced; well
executed partnerships with the right partners can be a catalyst for short-term user uptake
and a basis for long-term growth.

The authors

Daniel Kellmereit
daniel.kellmereit@detecon.com

Dr. Jan Hartmann

jan.hartmann@detecon.com

Jan Steglich
jan.steglich@detecon.com

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