Research Notes

Strand Consult identified 10 Bad and Ugly threats and trends which mobile operators need to take into consideration about Facebook.

Strand Consult has just published the results of its global investigation of mobile operators worldwide and their use of Facebook.  Our analysis shows that many mobile operators experience challenges with Facebook. Here are the 10 Bad and Ugly threats and trends operators’ need to consider about Facebook:

1. Facebook is under pressure from Wall Street and needs to find viable business models to monetize its nearly 1 billion users.  Given its size and scale, Facebook could disrupt a number of firms or industries.  What if Facebook decided to become competitor to Skype? Imagine if Facebook decided to become the customers’ communication channel of choice and rollout a VoIP network?  Facebook is already cannabalizing SMS revenue from operators.  What is to stop Facebook from taking the next bite of operators’ revenue?

2. Facebook boasts a “free” and open platform. This misleads operators to think that Facebook is an inexpensive medium for marketing. To control its costs and force companies to pay up, Facebook limits the distribution of a company’s message to its fan base, so only a fraction of the fans see the company’s posts.  Facebook is not interested to talk to you unless you are already a major brand and are willing to invest hundreds of thousands, if not millions, of dollars in advertising. The dirty little secret about Facebook is that you have to pay to play.

3. Operators have a dream to transition their marketing from paid advertising to earned media, meaning that customers’ word of mouth will become free advertising Facebook. There is no viable business case for earned media in Facebook for mobile operators.

4. One ugly point about Facebook is not Facebook itself, but rather that companies have made a perversion of accumulating Likes. In fact “Like Farms” are sprouting up around the world, offering companies the ability to gather likes for their pages a few cents per click.  There is no inherent value in a Like, but companies pursue it in a near mindless and irresponsible fashion.  Only a small fraction of people who Like a page are true fans and ambassadors.

5.  In spite of spending millions of dollars on Facebook activities, operators can’t get more than 2% of their subscribers to Like their page. Facebook is already too crowded by cool consumer products brands (Coke, Disney, Starbucks, iTunes). These brands take account for the majority of mindshare in Facebook, crowding out the space for your company.

6. Operators unwittingly build Facebook’s brand at the expense of their own by referring their valuable customers and traffic away from their own properties. Facebook already has credibility with users as a place to communicate. What would stop Facebook by starting an MVNO?  It could roll out as virtual network operator in 10 countries in 48 hours.

7.  Facebook doesn’t build brands; it reflects brands. The biggest brands on Facebook already have a large presence outside of Facebook, and they have large advertising/marketing budgets both online and offline. Almost no companies have been able to build a brand on Facebook from scratch.

8. Facebook advertising is not competitive given other digital channels. It costs 10 times as much as Google AdWords to get the same results.  Additionally half of all of Facebook users access the platform with a mobile device, though Facebook is still struggling to monetize this.  In addition, most mobile users of Facebook live in poorer countries where the revenue per person is much less than the developed West.  As such Facebook may look for business models that competes with mobile operators (see point 1 and 6).

9. In a number of authoritarian countries, Facebook has become a de facto channel for news.  Governments in these countries pressure Facebook to limit its activities.  This could be a concern for operators in countries where there are political tensions and groups decide to take their fight to Facebook. Facebook could be shut down in that country along with all the companies in that country on Facebook.

10. Facebook can change its terms of service for any reason at any time and with no warning.  These changes can have material and negative impacts to operators.  One example was when Facebook announced its change to the Timeline format.  All those tabs and apps the mobile operators developed, the mini-websites within Facebook so to speak, were made nearly invisible. . Collectively, companies spent hundreds of millions of dollars to customize their Facebook page, and thousands of independent Facebook developers and agencies sprung up in the process. With one announcement, Facebook effectively and instantly rendered operators’ investment on their platform worthless.  Indeed Facebook prides itself on its “hacker” culture, where new changes to the platform are implement instantly and without stakeholder or advertiser input.  While Facebook has a prerogative to innovate and try new things, it thinks little of the impact to mobile operators.
You can read more about these threats and trends in our reportThe good, the bad and the ugly side of Facebook – A report that describes how Facebook affects the mobile industry strategically, operationally and financially”. We discuss the problems and challenges and suggest ways for operators to respond.  Already a number of the world’s leading operators have purchased this report. 
Receive more information about this unique new report by simply sending us an e-mailIf you purchase the report, it can be on your desk immediately, giving you quality information about your Facebook strategy and evidence about operators’ challenges with Facebook.
More information: 

The good, the bad and the ugly side of Facebook – A report that describes how Facebook affects the mobile industry strategically, operationally and financially

Digital strategy for Telecom and Media industry

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