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Summary:

Though they probably never saw it coming, mobile phone companies have a new secret weapon: social networking. Indeed, thanks to our growing usage of social networks like Facebook as communication tools, more and more people are signing up for mobile data plans, which are far more […]

Though they probably never saw it coming, mobile phone companies have a new secret weapon: social networking. Indeed, thanks to our growing usage of social networks like Facebook as communication tools, more and more people are signing up for mobile data plans, which are far more lucrative than increasingly commoditized voice services. Of course, so far smartphones have gotten most of the attention, but information gathered by at least one handset company makes clear that even budget phones with a focus on web services can facilitate the consumption of large amounts of data.Today, I got my hands on some data collected by INQ Mobile, a handset maker that recognized early on the potential of handsets specifically tailored to match popular web services. The company, which is wholly owned by Hutchison Whampoa, launched a Facebook phone in October of 2008 known as the INQ1. (It plans to soon launch a Twitter phone as well.)

Nearly 65 percent of the INQ1′s customers are using Facebook, according to the company, many of them at least once a day. And nearly 30 percent of INQ1 customers are regularly using email on the device, despite the fact that it’s a non-QWERTY handset, while nearly half of INQ1 owners use Windows Live Messenger once a month. Skype usage is also high, at 19 percent of the INQ1 base.

In Hong Kong, where the INQ1 launched back in March, nearly 50 percent of its owners regularly use data services on a level that is four times higher than the typical 3G user base. Facebook usage is also 3-4 times higher than the average on other 3G devices on the 3 Hong Kong network, the company said.

The success of this little phone illustrates two things. One, you need to build hardware that is web-centric, not the other way around. Most companies graft web access onto the existing hardware; Nokia, for example. Now compare this with the iPhone, Palm Pre and INQ, and you see how it all works.

Two, mobile operators should realize that they’re no good at developing popular applications. Instead of trying to get people to use their services, backing popular and fast-growing web services is the way to go. Sure, they become dumb pipes. So what? They can manage their networks, offer large-scale services and be the all-important billing provider. In doing so, they are only going to help attract more excitement to the mobile platform.

In the meantime, the use of social networks as communication tools will only continue. Like email and instant messaging, Facebook (and soon Twitter) are what we use to stay in touch with our friends, colleagues and family. These little status updates and messages add up to a lot of bandwidth growth. Who said you needed a smartphone to drive data growth?

  1. “Most companies graft web access onto the existing hardware; Nokia, for example.” This is no longer a true statement. ;)

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  2. I have an O2-Ireland data plan which lets me eat all I want for EUR30 a month. It actually redlines at 10 GB on a month and my normal usage stays below a gigabyte. If I stayed data-only, I’d save a minimum of EUR 70 a month in my normal usage.

    My personal cost figures suggest my network usage aren’t going to generate a cash pile for O2 and if I throttle back my voice, stay with socnets and use webtext, that I can keep O2 as a dump pipe merchant.

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  3. social networks have become an essential part of internet and grouping

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  4. Good post, Om. As you say, telcos are no good at picking winners. Having just worked for an incumbent telco and suffered through the service development process first hand (and been starved of capital for my projects by wireless projects that tried to pick winners), it is of some satisfaction to see telcos get it in the teeth. There is no small irony in seeing service providers flashing the logos of Facebook, MySpace and others in their advertising in recognition that they hit the wall.

    The fact that a wireless service provider does not want to be seen as a dumb pipe does not hide the fact that they are a dumb pipe. I as a consumer will gravitate to the provider that recognizes that reality and gets out of the way.

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  5. I absolutely agree that telcos are lousy both at building and picking winners.

    However, I don’t necessarily agree that they have to be just dump pipes – they have lots of infrastructure and functionality which can increase the value of social networks and make them richer and more integrated with the mobile experience. They’re not necessarily very far down this road yet but I believe it’s an avenue they absolutely need to explore (wireline operators too). The future of telcos is exposing APIs etc. to their core functionality in order to allow developers to combine the best of web apps and network capabilities.

    And I think you’re wrongly conflating bandwidth, data and revenue growth. First, status updates are minimal in the grand scheme of things as far as bandwidth goes when video is growing so rapidly, so the idea that they will drive bandwidth growth is misleading. Second, growing bandwidth once you’ve got someone on an unlimited plan (which is the most common arrangement in many markets) is actually bad, because you squeeze your margins. Rather, you want people to communicate as efficiently as possible, and status updates and other social networking activity are ideal from a telco’s point of view because they’re sticky and highly desirable and therefore drive revenues but don’t take up too much bandwidth, so they keep costs low.

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  6. @Kenneth Trueman

    You very much speak the truth. I agree that consumers always gravitate to what THEY want when supplied at a cost that THEY think is reasonable. Hutchinson did it originally with the Orange brand in the UK. Orange wiped the floor with competitors when they launched the Talk 30 plan – 30 minutes airtime for 30 pounds – in 1993. The innovation there was they simplified complex business oriented billing plans and utilized new GSM technology. The general public were offered small affordable handsets wth billing plans that made sense. Consumers buy things that they can understand. Hutchinson again through INQ looks like they are giving people what they want and can understand – The Facebook Phone, The Twitter Phone, the “My Favorite Web App Phone”. And no, I am not forgetting the iPhone. The iPhone simplified the ludicrously complex and contrived process for acquiring software and content, they also made affordable the unlimited data plan. Look what happened there…. 1 BILLION served.

    So back to the dumb pipe debate – I think people don’t care about the pipe. They care if the phone does what they want it to do and if they know they can afford it and be assured they don’t get ripped off. How many of us in the early days got indigestion when we saw our carriers roaming data charges? :-)

    By the way Frank Meehan, CEO of INQ will be speaking at our Mobilize conference on Sep 10th. http://mobilizeconf.com/

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  7. Interesting, but actually in this case no-one cares of being a bit pipe since both, the product and the operator belong to the same investor.

    BR.
    Simone Cicero

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  8. I have an INQ1 here in the UK, on the 3 network – I’m on a £15-a-month contract that give me unlimited texts and Internet. The built-in Facebook and Skype apps were what attracted me to this phone, plus the fact that 3 are actively encouraging use of Skype on their network. Oh, and did I mention the INQ1 came free with that contract? :D OK, it’s not an iPhone, but it’s doing all the stuff I need, and it’s not draining my wallet nearly so much!

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