Marketers salivating over smartphone potential

SAN FRANCISCO — Jeff Smith is a diligent social-networking user, but he doesn’t own a PC.

"I prefer a cellphone and a service for a
cellphone," says Smith, 40, a postal worker in Detroit who served as an
Army Ranger in Desert Storm and Somalia.

For about a year, Smith has used MocoSpace (for
"mobile community space") to chat, meet people, search the Web and play
games. "Anything else feels like too much."

The majority of people who participate on social
networks do so from their PCs. Yet a growing number — many of whom
can’t afford a PC or would rather not use one — are using mobile
devices to tell their friends where they are and what they’re up to and
for sharing pictures.

Mobile users are an important part of the mix for behemoths Facebook, Twitter and MySpace.
But many folks are migrating to a new crop of mobile-only social
networks such as MocoSpace, Mig33 and Peperonity. MocoSpace has emerged
as a favorite in the U.S., where it is available in 22 cities,
including New York, Seattle and Los Angeles. It offers chat, instant messaging, photo- and video-sharing, and games.

The number of people who use social networks
from their smartphones skyrocketed 187%, to 18.3 million unique users,
in July, compared with the same month a year earlier, says Nielsen.
Social networking is among the fastest-growing activities on mobile
devices, along with search and checking news, says Jon Stewart, Nielsen’s research director for technology and search.

With so many eyeballs increasingly fixated on
mobile devices, opportunities for advertisers abound. Visiongain
Research predicts mobile-social-network-related revenue will reach
about $60 billion in 2012. Gobs of money is to be made from consumers
buying virtual gifts when playing mobile games, for example, says Doug
Bewsher, Mig33’s chief marketing officer.

A potentially fertile opportunity is with users of iPhones and Google Android-enabled devices, who have shown an affinity to view ads from large screens.

"There is an enormous opportunity" for display
and banner ads promoting movies, TV shows, autos and restaurants in
specific areas, says Jason Spero, general manager of North America for
AdMob, a mobile-advertising network.

Advertisers are smitten by the prospect of
reaching millions of twentysomethings worldwide who are smartphone
devotees. Many of those users have shown a willingness to view online

These users tend to be more tech savvy and younger, says David Berkowitz,
senior director of emerging media and innovation at digital-marketing
agency 360i. He predicts that as all-you-can-eat data plans become more
widespread and affordable, mobile Internet use will explode, especially
for social networking.

"It’s more convenient: My cellphone is always
with me. It’s part of my lifestyle," says Courtney Collins, a
23-year-old hair stylist who lives near Detroit. She does not own a PC
but is a religious user of MocoSpace and Facebook from her cellphone.

Social games

About 65 million of Facebook’s 300 million
members are mobile users. Eight months ago, it was 20 million. Of
MySpace’s estimated 125 million members worldwide, about 25 million use
mobile devices. A year ago, it was 6 million.

A significant slice of the growth is taking
place in urban settings and developing countries, among young people
who cannot afford PCs. "Mobile social networks have become a way of
life for young people, especially for those who like to play social
games," says Mig33’s Bewsher. He says Mig33 is adding more than 500,000
users a month in Asia, Africa and the Middle East. The international
service, with 25 million members, blends free and low-cost services,
including VoIP calls, chat and instant messaging, e-mail, text
messaging, photo sharing and social-networking features.

Forrester Research
analyst Charles Golvin predicts that the next huge wave of Internet
users — potentially billions of people in developing countries — will
predominately use smartphones instead of PCs. In the USA, younger,
economically challenged people in urban areas will "follow the same
pattern," he says.

"This might be the best way to bridge the
digital divide," says Justin Siegel, CEO of MocoSpace, a 4-year-old
start-up that has a large following of young, non-white city dwellers
who cannot afford PCs and use mobile devices instead. The free service
is also popular among military members.

Often, it is a lifestyle choice. According to a
Sprint survey, 80% of young adults (18-34) cite their wireless phone as
their "lifeline" to others.

"Lots of people, particularly younger ones,
don’t want to be tethered to a desktop or even a netbook," says Michael
Osterman, an independent analyst.

Kevin Lomax, a 29-year-old
singer/songwriter/producer in New York, notes, "These days, who carries
a laptop unless you are a businessman?" He uses an iPhone and Palm Pre
to post songs on his MocoSpace page, where he has 4,000 fans.

But with any nascent technology, promise doesn’t
necessarily guarantee profitability, venture capitalists and executives

Actual ad revenue has been fleeting, says Tim
Chang, a partner at venture-capital firm Norwest Venture Partners: "It
has been a failure until now."

"Ads on small cellphone screens can be a
turnoff, " says Frank Meehan, CEO of INQ, a London-based maker of
handsets for social-networking use in Europe and Asia. He thinks
search-related ads hold more promise.


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