The time has come for us to offer social-networking services, says Vodafone CEO Arun Sarin

BusinessWeek has a story claiming that Vodafone plans a social networking service, but specific details are regrettably scarce, so it’s not really news—it would be more newsworthy if Vodafone came out and said they weren’t planning some sort of social networking service.

The one detail in the article is that Vodafone plans to offer access to online social networking services: The British company is in talks with a number of social-networking sites, and expects deals to be completed during the first quarter of 2007.??? If accurate, it means that Vodafone doesn’t see the benefit in launching a purely mobile effort, and also does see the benefit in providing access to as many services as possible, instead of only one. Which makes sense, since MySpace is huge in the US, but other countries are dominated by other networks.

 The time has come for us to offer social-networking services,??? says Vodafone CEO Arun Sarin. He declined to identify which service Vodafone was talking to, or whether one or more partnerships were expected.??? There’s also no mention as to whether the efforts will be a group-wide thing or confined to specific countries, or how access will be offered.
BusinessWeek mentions one of the social networks in talks with Vodafone as being MySpace—but MySpace is making a big push into the global mobile market and is probably talking to any operator that will listen.

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Original Article from Business Week

Wireless-phone giant Vodafone (VOD) will let customers use their mobile phones to gain access to online social networking services, BusinessWeek.com has learned. The British company is in talks with a number of social-networking sites, and expects deals to be completed during the first quarter of 2007.

Social networking sites such as MySpace (a unit of News Corp. (NWS)) and Facebook have become a primary communications platform for millions of younger people around the world. They use these sites to create home pages loaded with blogs, photos, music, message boards, video, and more. MySpace, for example, is the second busiest site on the Web, after Yahoo! (YHOO), according to market researcher comScore Networks (see BusinessWeek.com, 7/21/06, “The MySpace Ecosystem”).

That same audience is equally attached to its cell phones. Millions of younger people live without a traditional landline, or use it mostly as a fast Internet connection. As a result, the convergence of social networking and the mobile phone is all but inevitable. “The time has come for us to offer social-networking services,” says Vodafone CEO Arun Sarin. He declined to identify which service Vodafone was talking to, or whether one or more partnerships were expected.

Tight with MySpace
Mobile-phone companies have stepped tentatively into social networking. Cingular, which is owned by AT&T (T) and BellSouth (BLS), struck a deal with MySpace earlier this year. Both companies will send customers a text message letting them know when people post messages to their MySpace pages, but users can’t access MySpace itself with their phone.

Mobile-phone startup Helio has a much more extensive relationship with MySpace, but Helio is still a niche player. Helio customers use special phones that allow them to access a mobile version of MySpace with the touch of a button (see BusinessWeek.com, 5/30/2006, “Social Networking Goes Mobile”).

Helio debuted last in May, and at the moment it’s the exclusive distributor of MySpace Mobile. “Our relationship with MySpace has done very well,” says Rick Heineman, spokesman for Helio, based in Los Angeles. Helio is a joint venture between EarthLink (ELNK) and Korea’s SK Telecom (SKM). The privately held company declined to say how many customers it has signed up in the U.S.

The convergence of social networking and mobile phones creates all sorts of opportunities for new features. Users can take pictures with their Helio camera phones and upload them directly to MySpace, using the wireless network. Helio also has created a new service, independent of MySpace, known as Buddy Beacon. The global positioning satellite technology in Helio phones identifies customer whereabouts. The user can allow up to 25 buddies to track his movements on maps that appear on his friends’ Helio phones.

New Attractions
Industry executives say Helio’s exclusive relationship with MySpace is expected to expire at the end of the year, opening the field for Vodafone and other mobile-phone companies that want to tap the social networking market. Helio is preparing for the competition by preparing a new, advanced version of its mobile MySpace service, Heineman says. Executives at MySpace and Facebook weren’t available for comment.

Vodafone and other mobile-phone companies are looking to social networking and other wireless broadband applications for growth. The growth of their core voice business is slowing down as market penetration reaches the upper limit. In some countries, market penetration is close to 100% or even higher, because so many customers have more than one wireless phone. As the voice business matures, prices tend to decline as well.

Sarin says social networking, mobile advertising, mobile video, and other advanced applications are on the rise. “We expect these services to generate 10% of our revenue within three or four years,” he says. Vodafone generated $29.4 billion in revenue and $6.6 billion in profit during the first half of the year, beating analyst forecasts.

A Wide Open World
Some analysts say it remains to be seen whether social networking will generate revenue for mobile-phone companies. “Cell phones are still primarily used for personal or one-to-one communication,” writes David Schatsky, president of researcher JupiterKagan, in a report. “Services relying on unique features of the cell phone offer better, though modest, revenue prospects.”

Wireless phone companies have been reluctant to open their networks to third parties. In the past, they have offered proprietary, high-margin services such as text messaging. The Internet offers cheaper, open platforms such as instant messaging and social networking. As the cell phone becomes equipped with increasingly powerful Internet browsers and faster Internet connections, the migration of open Internet standards to the wireless world is all but inevitable (see BusinessWeek.com, 11/3/06, “Cingular: Giving Away the Music Store”).

Arun says mobile-phone companies have more to gain than to lose as the Internet and the wireless network converge. “I don’t think there’s a risk,” he says. “We expect each of these new services to generate growth.”