Cell phone manufacturers, Internet service providers, and telecom operators are in fierce competition to secure a foothold in the 3G market.

Cell phone makers are now distributing cell phones with the Social Network Service (SNS) function.

The penetration of 3G paves the way for new competition in the mobile Internet market.

In January, the Ministry of Industry and Information Technology issued 3G licenses to telecom operators such as China Mobile, China Telecom and China Unicom, officially declaring the start of the 3G era in China.

As transmission of massive data became possible, the mobile Internet market also expanded. According to data released by the Ministry of Industry and Information Technology, the number of cell phone users was 720 million in the third quarter of 2009, and the number of Internet service users increased by 12 percent year-on-year to reach 360 million.

SNS providers such as Facebook and Kaixin are rapidly growing, as is the SNS market. According to market researcher Hitwise, Facebook's market share in the US social networking market rose by 40 percent to reach 59 percent in September.

In China, Kaixin and Renren are emerging as strong players. Kaixin, which opened in March 2008, already has 60 million subscribers, and 200 thousand new people subscribe to the site every day.

Large cell phone makers also released cell phones with the SNS function. In June 2009, Sony Ericsson released SNS-enabled cell phones embedded with Kaixin's program.

In October, Ericsson formed a strategic alliance with Kaixin and decided to expand its services. At the 2009 International Telecommunications Fair, Samsung showcased Corby, which adopted the Renren service for the Chinese market.

Samsung already had introduced cell phones that adopted Facebook and MySpace services for the US and European markets.

Nokia also introduced new cell phones with the Facebook service. Motorola is expected to release SNS cell phones in cooperation with Chinese SNS providers.

A new medium

Cell phones with the SNS function have emerged as the new medium of social networking. Cell phones have portability and overcome the spatial limitations of the Internet.

And SNS complements the limitations of one-way communication. Therefore, the convergence of cell phones and SNS provides an optimal space for personal communication, which combines both privacy and the openness of the Internet.

SNS' design and entertainment function appeal to its users who comprise mostly young people. Cell phone makers have enhanced brand loyalty by providing the SNS service.

SNS is an attractive service at a time when people are paying more attention to proper etiquette in public places and security of communication. As more people frequently change their cell phones, the market distribution rate of SNS cell phones will rise.

China's CCID Consulting projected that more than 50 percent of SNS users in China are prospective customers of SNS cell phones.

As SNS cell phones have a stable customer base, and clear business model, its growth momentum will continue. SNS-related services such as the download of ring tones and images can be offered without much effort. It is also possible to create a new business model in alliance with other businesses.

Telecom operators launched the service for SNS cell phones in recognition of market potential. Beginning in the second half of 2008, major Chinese telecom operators advanced into the SNS market. China Mobile introduced the 139 Community, China Telecom launched China Q and China Unicom introduced U-Power.

Telecom operators have also enhanced brand royalties through SNS cell phone services.

The mobile phone industry needs to set its sights on young customers whose purchasing power has increased.

It is projected that the number of mobile Internet users will exceed the number of Internet users as the service diversifies and the price of using cell phones becomes cheaper.

According to IResearch, the number of cell phone users in China increased in all age brackets, but especially among the younger generation. The amount of mobile Internet use has also increased rapidly. SNS cell phone providers need to grasp the pattern of Internet use and provide differentiated services and products.

To cell phone makers, the SNS cell phone market is valuable in terms of gaining an early mover advantage. The Chinese SNS market is a valuable tool to promote Internet sites to attract more customers.

A lot of investments and efforts are required to create diverse products based on SNS. Therefore, cell phone makers and the SNS industry formed an alliance to gain a foothold in the new cell phone market and expand service into various areas.

It is important that each sector in the industry chain cooperates to increase the number of mobile Internet users.

Handset manufacturers, telecom operators and content providers that are linked in the mobile Internet industry chain need to secure the competitive edge through partnerships.

The author is a researcher with Samsung Economic Research Institute (China). The views expressed here are his own.

(China Daily 12/14/2009 page2)