By Chris Nicoll
Telemanagement World 2011’s second day presented continued focus on the event’s themes around the End User Experience. We prefer to look at the idea from four viewpoints: The Network, Devices, Apps and Content, which roll up to the Connected User Experience. The second day of the show highlighted that we are correct in this perspective.
It also highlighted an interesting dichotomy as presented by the Facebook’s Director of Online Operations, EMEA Colm Long that strikes to the very core of the monetization of the internet. More on that in a minute.
If User Experience is the theme of the event, the ability to register and share that experience is the engine powering that train and that was perfectly underscored by Mr. Long. The day’s keynote speakers spoke unanimously of their iPhones and how they would be lost without them, the integration of applications and services at home and while mobile is a powerful driver. All professed to be Facebook users (to the delight of Mr. Long) with Foursquare coming up as well.
General consensus was that user behaviour is changing. The update to the morning coffee is the morning coffee while checking Facebook and Twitter to see what is going on in the world. Where are people checking in, what are they doing and increasingly what do they think about where they are? Experience is quickly becoming the currency of the internet as demonstrated by the Like button and personal reviews. What are the hottest new technologies from GiantNerd, and increasingly what the sales are via Facebook’s corporate links. Levi Strauss (OTC:LVISF) reported that 50% of its Cyber Monday sales came through Facebook. That people are turning to the internet to buy is no secret, according to Mr. Long, 90% of people trust their friends opinions more than the ‘experts.’
However the ability of social media sites to generate revenue is completely dependent on the mobile networks. Mr. Long was clear and explicit in saying that ubiquity is key. Facebook needs to be where the people are for FB to be relevant. We call this ‘Anywhere.” Does anyone care that you found a great sale while you were shopping at 2pm, or that a new restaurant is fabulous and has tables open NOW if you don’t share that information until you got home at 8 or 9 pm? The immediate sharing of your personal experience generates the value that increasingly is powering internet commerce.
Ticketmaster has found that each Facebook link generates around $5.30 in real revenue. Game vendor Zynga is the creator of the hugely popular Farmville, where people use real money to buy goods and supplies for their virtual farm. What Mr. Long shared was that until recently, despite a huge following on Facebook for Farmville, Facebook was not sharing in the nearly $1B in revenues Zynga is enjoying. So Facebook changed its terms and now it's are getting a piece of each transaction. Sounds like a workable model and it certainly benefits both Zynga and Facebook. Facebook, like Apple’s (NASDAQ:AAPL) App Store, provides the framework by which commerce occurs and there is value in that ‘service’.
The facts are that everyone in the value chain is compensated for the value of the commerce being executed except for the one link that is irreplaceable: the mobile networks.
So why aren't Facebook, Zynga, or the other online retailers cutting the mobile operators into a piece of the revenue pie? Without the mobile broadband networks, without the ubiquity of coverage, without the advancements of higher speed networking technologies such as 4G, these business models don’t just break down, they disappear. Mr. Long of Facebook said as much.
It’s time for the Over The Top players to share their revenues with the mobile network operators to benefit all users. The credit card companies provide a clear model for the MNO’s to follow – a share in the revenues. Internet commerce is an ecosystem whether the OTT players like it or not and its time to make it a healthy one.