Capgemini TME Lab_Social Networking

8/9/2019 Capgemini TME Lab_Social Networking

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Evolving Social Networking Trends

Telecom, Media and Entertainment

February 2010


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2Copyright 2010 Capgemini. All rights reserved.

Consumer interest and time spent on social networks have rapidly increasedin recent years

Evolution of Social Networking Users and Usage

Source: Capgemini TME Strategy Lab Analysis; Comscore Global through Morgan Stanley, Economy and Internet Trends, Oct 2009; TechCrunch, Top Social Media Sites of 2008 (Facebook Still Rising),Dec 2008; comScore Press Releases; OPA Internet Ac tivity Index

Note: 1) Facebook had over 340 Mn unique visitors globally in June 2009

Total Unique Visitors, 000s, Select Social

Networking Sites, Global, Jun 2006 - Nov 2008Share of Time Spent on Internet Activities, %,

July 2008 - July 2009, US

43.40%

2

8.20%

14.10%

5.30%

9%

39.60%

24.40%

10.90%

4.50%

20.60

%

Content

Comm

unication

C

ommerce

Search

SocialN

etworking

Jul-08 Jul-09

-9%

-13.5%

-22.7%

-15%

129%

0

50,000

100,000

150,000

200,000

250,000

Jun-06 Jun-07 Jun-08 Nov-08


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Paid approaches beyond advertising present potential incremental revenue streams for telcos

Despite advertising being the mainstay of social networking, newer revenuemodels are beginning to appear

1,200 1,300 1,3001,400 1,500

1,600

502627

8111,005

1,211

1,40529%

33%

38%

42%

45%47%

2008 2009 2010 2011 2012 2013Advertising Spend Paid SN Sites Revenue

Paid Revenues as % of Total

Advertising Spend and Paid1

Revenue, SocialNetworking Sites ($ Mn), US, 2008-2013 Virtual goods appear to be the most promisingmodel of social network monetization:

The market for virtual goods in the US is estimated todouble to over $2 bn in 2010

The virtual goods space is already witnessingsignificant activity:

EA purchased Playfish, a social gaming developer for$275 Mn in Nov 2009

Zynga, makers of popular games such as Farmville,raised over $180 Mn on an estimated revenue base ofover $300 Mn

Internet advertising is showing signs of decline,forcing developers to push for paid approaches:

Social gaming firm Crowdstar abandoned in-game ads

in favor of virtual goods

Source: eMarketer, Worldwide Social Network ad spending, Mar 2009; Piper Jaffray, Pay to Play: Paid Internet Services,July 2009; Reuters, Virtual goods give Web firms new revenue in ad slump,Dec 2009

Note: a) Paid services include membership fees, premium features and virtual goods


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Overview of Monetization Models in the Social Network Space that Telcos Can Potentially Deploy

Early successes of advertising and new monetization models indicate theinherent potential of the social networking space

Source: Capgemini TME Strategy Lab analysis; Company websites and annual reports; Piper Jaffray, Pay to Play: Paid Internet Services, July 2009; Inside Social Games, The Latest Stats on Zynga: NewTraffic, Revenue and a $1 Billion Valuation?, Nov 2009; Virtual Goods News, $50 Mil Revenue from Virtual Goods Sales for Zynga in 2008, Jan 2009; 1) Zynga is one of the leading social gamingcompanies, operating popular games including Farmville, Mafia Wars, on Facebook 2)Xing is one of the popular business-user oriented social network operating primarily in Germany

Advertising Subscriptions MicropaymentsMonetizationModels

Revenues through display andsearch advertising

Revenues through recurringsubscription payments

Revenues through transactions forvirtual goods

GrowthIndicators

Revenues by Segment, Euro (Mn),Xing, Q2 08 Q2 09, Germany

Facebook Revenue Estimates($ Mn), 2007-2010E, Global

Zynga Revenue Estimates ($ Mn),2008-2010E, Global

68%CAGR

167%CAGR


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Telcos and social networks are witnessing an increase in mobile socialnetworking traffic, indicating its rising attractiveness

Growth in Social Networking Traffic on Oranges Mobile Network in the UK and Popular Japanese

Social Network Mixi

Source: Company websites; Orange, Digital Media Index, 2008 & 2009; Morgan Stanley, The Mobile Internet Report, Dec 2009

1) Mixi is one of the most popular social networks in Japan, available on both the fixed and mobile platform

Monthly Page Impressions (in Mn) and Unique Users (in 000s),

Social Networking Sites, Orange UK, Dec 2008 & May 2009Monthly Page Views (in Mn), Desktop and Mobile, Mixi Japan,

Q1 07-Q3 09

129%

48%

6,800 6,000 5,200 4,900 4,200 4,400

3,4006,200 7,800

9,500 11,40011,600

Q1 07 Q3 07 Q1 08 Q3 08 Q1 09 Q3 09

Desktop Mobile

Dec 2008 May 2009


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Consumers are rapidly scaling up their usage of social networking on themobile

Note: 1) % of total market refers to the number of mobile users using mobile Internet services during the three-month periods ending May -8 and May-09

Source: Comscore, Social Networks on the Move, Sept 2009

Consumers are increasing their consumption ofsocial networking on the mobile

Networks such as Facebook are now seeingsignificant traffic from their mobile users

27.5

24.0

Average Usage Per Day

27%

150%

Mobile Internet Audience Growth, % of Market1, UK,May 08-09

Usage per day (Mins) and Visits per day, Facebook-on PCand Mobile, UK, 2009

PC Mobile

Increased usage of social networking on the mobile platform is likely to drive mobile data traffic


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Top 5 Social Networking Websites Based on Unique Visitors, 2005-2010E

The dynamic nature of the online social networking space has meant thatmarket leadership remains volatile

MSN Groups

Classmates

AOL Hometown

Windows Live

MySpace

MySpace

Facebook

Classmates

AOL Hometown

Windows Live

Facebook

MySpace

Twitter

Linkedin

Classmates

2005 2007 2009

1

2

3

4

5

Facebook

Twitter

MySpace

Classmates

LinkedIn

2010?

Even if telcos are able to garner a user base in the short-term, ensuring sustained leadership is likely to be achallenge.

Increase in Ranking Decrease in RankingSource: Capgemini TME Strategy Lab Analysis; Nielsen, Top 10 Social Networking Sites in the US, 2005-2009


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Moreover, there appears to be early indicators of the younger demographicmoving away from social networking sites globally

Change in Unique Audience Composition of MemberCommunity* Websites, %, Dec 2007 Dec 2008

-9% -1%

2%

4%

7%

2-17 Yrs 18-34 Yrs 35-49 Yrs 50-64 Yrs 65+ Yrs

Source: Nielsen, Global Faces and Networked Places, March 2009; Comscore press releases; Ad Week, Is Facebook Getting Uncool fo r 18-24s?, Nov 2009;

Note: Member Community implies Social Networking and Blogging websites; Global refers to Australia, Brazil, China, Germany, Spain, France, Italy, UK and USA only

Youngsters are spending lesser time on social

networking sites: Average number of minutes spent on Facebook among

18-24 year olds declined every month for the three-month period ended Sept 2009

Drop-off rate accelerated from 3% in July to 13% inAugust to over 16% in September 2009

There is a perceived decline in the quality ofrelationships on social networks:

A consumer survey done in August 2009, indicated thatover 51% of 18-24 year old respondents agreed thatsites such as Facebook are diluting the quality ofrelationships

There appears to be early indicators of movementtowards niche networks:

Around 40% of the group surveyed above indicated that

they now visit social networks based on particularinterests such as TV, music or movies


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However, these broader global trends also mask regional peculiarities makingtarget audience identification a significant challenge

In UK, social networking subscribers in the 15-24yrs age segment continues to grow

And this audience appears to be consolidating

around larger networks

Total Unique Social Networking Subscribers,Age 15-24 (Mn), UK, June 2008- June 2009

Total Unique Subscribers, Select Social Networks,Age 15-24, Mn, UK, June 2008- June 2009

6

6.8

Jun-08 Jun-09

3.8 3.9

2.4

5.8

2.8

1.8

Facebook Bebo Myspace

Jun-08 Jun-09

CAGR 14%

51%

-27%

-25%

Source: Nielsen, Global Faces and Networked Places, March 2009; Comscore press releases

Note: Member Community implies Social Networking and Blogging websites


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Such challenges are further exacerbated by the differing demographictrends exhibited by different networks such as Facebook and Twitter

Facebook is seeing a strong rise in activity from anolder demographic

While Twitter appears to be exhibiting the

opposing trend

Facebook Users by Age (%), US, Oct 2007 July 2009 Unique Visitors by Age (%), US, July 2008 July 2009

Source: Nielsen, Global Faces and Networked Places, March 2009; Comscore press releases

Note: Member Community implies Social Networking and Blogging websites

19.2% 16.6% 13.5% 10.2%

62.2%

54.0%

40.9%

26.0%

14.3%

21.2%

26.8%

26.1%

7.0%

16.6%

29.3%

8.5%3.4%

Oct 07 Jun 08 Jan 09 Jul 09

0-17 18-24 25-34 35-54 55+

2% 2% 2% 2% 3% 3% 3% 3% 3% 3% 4% 5% 5%6% 6% 6% 5% 6% 7% 6% 6% 7% 6% 7%

9% 10%12%17% 9% 8% 11% 8% 9% 10%

10%13%15%

14%15%

28%20%

14%18%19%18% 15%16%15%

17%18%17%

16%

32%31%

41%38%35%38% 40% 39% 38%

34%31%29%28%

19%24%28%27% 26%26% 27% 27%26% 26%25%25% 25%

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

2-11 Years 12-17 Years 18-24 Years

25-34 Years 35-54 Years 55 Years+


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Audience migration from core social networking sites remains asignificant risk in view of the early indicators from social gaming developers

Zynga is looking to drive users of its games awayfrom Facebook and onto its dedicated portal

In doing so, Zynga gets more freedom indetermining payment channels and ad models

No of Unique Visitors to FarmVille.com, Millions,Oct-Dec 2009

Source: Capgemini TME Strategy Lab analysis; Compete traffic data Note: Zynga operates social games such as Farmville and Mafia Wars on Facebook; Users install those applications on their profiles andplay these games together with their network. These games have primarily been limited to the Facebook site till now, however, Zynga is now attempting to migrate this audience to its own domain. However,overall impact remains limited on Facebook since the pace of organic growth of Facebook remains strong

Dedicated sites allow for better control overcontent and ads:

Zynga faced an issue with Facebook over specific kindof ads in its FishVille game and Facebooksubsequently took it down

Having an own domain helps in exercising better

control on the kind of ads that will show up on the site

There exists strong potential to launch cross-game virtual currencies:

Zynga can potentially launch a common cross-gamecurrency which it can use across all of its games, ratherthan be tied down to the specific payment engineoffered by a social network

Such behavior is likely to result in social networks ending up as breeding grounds for third-party services,which will end up deserting them.


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Services that over-expose themselves face a significant risk of being outdone by third-party application

Moreover, while adopting an open approach helps in driving uptakeand building an ecosystem, there exists a risk of marginalization

Twitter faces a threat of marginalization of coreportal:

With multiple applications and third-party sites offeringthe ability to update Twitter status, the core portal facesa significant risk of becoming sidelined

This is likely to reduce the importance of Twitter.com inthe overall ecosystem; already over 50% of all tweetsare estimated to come from third-party applications

Such an outcome also limits the monetizationmodels that Twitter can adopt:

Limited traffic to Twitter.com represents a downside riskin terms of monetizing models; for instance, prospectsof display advertising on the site are low

Source: Capgemini TME Strategy Lab analysis; Sysomos, Inside Twitter Clients, Nov 2009; Sysomos, Inside Twitter: An In-Depth Look Inside the Twitter World, Jun 2009

Market Share Evolution of Twitter Applications,Jun 2009-Nov 2009, Global


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Market leader Facebook has firmly established itself across the world

We believe the online social networking1 space is not attractive, given itsrelative maturity and the reach of the current market leader

27% 28%29% 30%

33%

38%

44%47%

Switzerland

Spain

Fra

nce

Global

U

SA

Australia

Italy

UK

Source: Nielsen, Global Faced and Networked Places, Mar 2009; Admob, Social Networking: Mobile Consumers Weigh in, Sept 2009 ; 3) Reach refers to Facebook users as a percentage amongst online users that geography; Global refers to Australia, Brazil, China, Germany, Spain, France, Italy, UK and USA only

Note: 1) Online social networking refers to social networking services offered primarily on the fixed-PC platform and those targeted at PC and laptop users; 2) The survey was carried out on Smartphone users

Reach of Facebook, % of Total Online Audience,

Select Countries, Dec 2008

Social Network Usage on PC and Mobile, User

Survey2, Aug 2009, US

PC

Mobile


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Social Networking Platforms Differentiated by their Opportunity for Telcos

The mobile platform offers the right market for capitalizing on the socialnetworking opportunity, given its nascent state

Online Social

Networking

Mobile-Only Social

Networking

Social networks that see significant traffic onboth the fixed and mobile platforms

Source: Company websites and press releases; Informa, Mobile Social Networking Forecasts, 2009; Piper Jaffray, Pay to Play: Paid Internet Services, July 2009;

Intensity of

Competition: High

Market Maturity:Mature

User Base of Market

Leader: 400 Mn

Estimated Revenues

(US), 2009: $1,927 Mn

Estimated Revenue

Growth Rate (US),2008-2013 CAGR:12%

Competition: Low

Market Maturity:Nascent

User Base of MarketLeader: No clearleader; Foursquare has

around 300,000 users

Estimated Revenues(US), 2009: $250 Mn

Estimated RevenueGrowth Rate (US),2008-2013 CAGR:

39%


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The risk of volatile user behavior too is low since early trends from the mobileweb indicate an evolution path that is different from the PC-based web

Source: Capgemini TME Strategy Lab analysis; Facebook presentation at Mobile World Congress, 2010; Morgan Stanley, Mobile In ternet Report, Dec 2009

Indicators from the PC-

based Web

Indicators from Mobile

Web

Approach to Privacy

Significant public backlash when Facebookstarted its Beacon targeted advertising

Negative publicity for Google when itpublished lists of frequently emailedcontacts online in Google Buzz

Consumers have shown inclination to signup and opt-in for targeted mobileadvertising campaigns; Eg: Blyk

Rapid rise of mobile social networks whereuser location is broadcasted in real-time

Consumer Behavior

Engagement with Sites

Social networks such as Facebook areseeing very strong growth in engagementon the PC-platform, with both usage andrepeat visits showing significant rise

On the mobile platform, Facebook iswitnessing 2x across all engagementparameters when compared to its desktopversion

Inclination to Pay Research from Morgan Stanley indicates

that on the desktop web only 30% of usersare paying for instant access

The same research indicates the figure tobe as high as 76% for the mobile Internet

The PC-based Web and Mobile Web Indicate opposing trends

Nascent state of mobile web provides an opportunity for telcos to try and define the monetization modelsand not be burdened by the history of the desktop web


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Moreover, recent evidence suggests that presence on the fixed platform is nolonger a pre-requisite for success on the mobile platform

Mobile dating andflirting website

Over 175,000 paid customers with an averageARPU of $12

Over 30% of users sign-in to the service overseven times a day

Mobile geo-locationbased social network

The network had close to 100,000 userswithin three months of launch

The company raised over $8.4 Mn within tenweeks of service launch

Foursquare was launched in March 2009, andcurrently has close to 300,000 subscribers

The service is currently seeing a check-inevery second

Mobile geo-location

based social network

The service gained over 450,000 users inunder one month of launch with average dailyusage time of over 30 mins and 31 Mn check-ins from over 2.1 Mn unique locations

Mobile geo-location

based gaming service

Service Name Success Indicators Platform Availability

Fixed Mobile

Launch Date & TargetMarket

Beta LaunchMar 2009; Global

Beta LaunchOct 2009, Global

Beta LaunchDec 2009, US

Launch2006, UK

Source: Venture Beat, Booyahs MyTown steams ahead in location-based gaming with 450,000 users, Jan 2010; GigaOM, GoWalla About to Pass the 100,000 User Mark, Jan 2010; Tech Crunch,Foursquare Who? Gowalla What? MyTown Has 500,000 Users And 31 Million Check-Ins, Jan 2010; Daily Finance, Flirtomatic: Selling digital ice cubes and other online bling for real dollars, Oct 2009;Note: Target market and platform refer to the primary focus of the service provider,

Documents

Capgemini TME Lab_Social Networking