Research Notes

Old technology and new innovation allows millions to access Facebook with an ordinary mobile phone and no internet connection

Operators serving the 15-24 aged segment now have a novel, revenue-generating solution.

U2opia Mobile, a startup based in Singapore and India, has created a USSD platform which allows users to connect to Facebook with a basic mobile phone and no internet connection. Its application Fonetwish allows users to make status updates, browse news feeds, post on walls, send/accept friend requests, send messages and view notification on Facebook.

The app is already live with over 25 operators in South East Asia, Africa, Latin America and the Indian Subcontinent. Uninor (Telenor India) launched the service in September 2012 for Rs20 per month ($0.39/mo) for unlimited access. The revenue split with U2opia is generally 60-40% in favor of the operator.

USSD (Unstructured Supplementary Service Data) is a low bandwidth data service that allows information to be shared on a basic 2G network with no internet connectivity. It feels like engaging with Facebook via SMS, and it works on any phone. The suite of U2opia Mobile applications includes solutions to access Google and Twitter without a data connection.

Competition in India for mobile subscriptions is fierce, so the Fonetwish application is an important churn reducing enhancement. Given that internet penetration in India is only about 10%, the opportunity for customers to upgrade to a smartphone with a data package is limited. Operators with Fonetwish not only keep their customers, but they may recover marginal revenue that might have gone to internet cafes instead.

Naturally the bare bones service does not support video or images, but that is not a deterrent for this target audience of Fonetwish. Indeed their expectation from Facebook, Gmail, and Twitter is not the same as a typical Westerner with a smartphone. So the USSD solution is an upgrade over no Facebook access at all.

While the majority of Facebook users in Western countries are middle-aged, Facebook users in India and similar developing countries are primarily teenagers and young adults. Naturally this is an important segment for operators who want to establish their brand with consumers as early as possible.

Presently the Fonetwish service operates without Facebook advertising. However U2opia Mobile plans to explore advertising, not just for Facebook, but for operators, partners and brands.

Facebook makes their platform and API accessible to mobile developers because it wants to maximize its user base. However the growth in mobile users has not immediately translated into revenue for Facebook. This reality underscores the challenge that Facebook has not only with mobile advertising, though revenue on mobile rallied in the second half of 2012.

The bigger issue is that the majority of Facebook users are in the developing world, and they access the social network with a mobile phone. These users are not the target audience for Facebook’s current major advertisers. Simply copy-pasting ads from the USA to Indian users is not an option. Whether Facebook can find appropriate advertisers and a business model for emerging markets is an important question.

Facebook’s 4th quarter disclosure noted the global ARPU of $1.54; $.69 for Asia, and $.56 for the rest of the world. This is less ARPU than U2opia Mobile and its operator partners earn in a month with the Fonetwish solution. Such a low ARPU underscores Strand Consult’s assertions that Facebook needs to explore non-advertising methods to monetize its platform. Facebook has an unexploited opportunity with communication services. People buy data packages from operators to access Facebook, but they could just as easily by the data package from Facebook in an MVNO arrangement with an operator. We can’t think of any operator in the world that would not want Facebook as a wholesale customer.

It is also interesting to consider whether such a platform would be interesting for a Western audience. Such a service might be a choice for day-to-day browsing and an option for people to stay connected on the go without paying for any data charges.

The launch of U2opia Mobile also illustrates the consequences that American operators in their stubbornness to stick to the CDMA standard and reluctance to invest in other countries are missing out on new innovations and markets in emerging countries. In any case U2opia Mobile and its USSD solutions are exciting development for operators in developing countries and their customers.

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