How service providers can meet consumer demand using the social cloud

The social cloud is an integration of cloud-based services with traditional communications and social media channels.   The two driving forces behind the social cloud evolution are the transition of content from traditional media like books, magazines, and CDs into bits and bytes, as well as the desire for everyone to share and communicate instantaneously.

The social cloud is an integration of cloud-based services with traditional communications and social media channels.   The two driving forces behind the social cloud evolution are the transition of content from traditional media like books, magazines, and CDs into bits and bytes, as well as the desire for everyone to share and communicate instantaneously.

The integration of the social cloud is already taking place:  A recent report from Ovum found the use of social messaging platforms by consumers, such as Google Talk, will cost telecom operators more than $23 billion in mobile messaging revenue in 2012.  To combat this market shift, some operators have already developed new revenue streams by integrating communication tools directly into social applications.  This integration enables users to see buddy lists with presence information as well as the contact’s location and device, and give consumers the ability to automatically launch communications across the proper medium – be it SMS, instant message, or email – based on their friend’s status. 

While incorporating the social cloud into communications platforms will not necessarily lead to an increase in messaging revenue, it can result in an increase in up-sell opportunities – as integrating all communications platforms and services makes it easier for communications service providers (CSPs) to deliver cross-promotional offers to customers, and makes it simpler for consumers to purchase new applications, in-game upgrades, or other content, all of which can grow providers’ revenue.  By 2015, in-application up-sells and purchases are expected to generate $5.6 billion in revenue.  If CSPs don’t claim a position in the social cloud, they face losing pricing power and market influence, enabling companies such as Apple and Facebook to drive the market and reap the profits.

CSPs are an integral part of the new digital lifestyle, as their networks facilitate the new cloud ecosystem.  Consequently, their networks and customer relationships place them in a prime position to capitalize on consumer demands for faster and more reliable services.  But CSPs’ place in the social cloud is not a given.  While consumers are increasingly using mobile channels to communicate via the social cloud, CSPs stand at a crossroads between simply serving as a pipe that disseminates information or providing innovative and revenue-generating services that enhance an individual’s social experience.  

Certainly CSPs can stick with the status quo.  After all, it will take time, as well as significant investment in service providers’ networks, service delivery platforms, analytics capabilities, and other back-office infrastructure to transition to the social cloud.  There is also nothing wrong with simply being a provider of bandwidth and network speed.  But with the spectrum crunch limiting the amount of bandwidth available, CSPs will stunt future growth if they do not embrace additional revenue opportunities.  For example, when networks are used for voice calls or Internet connectivity, service providers can profit directly – and when customers use more minutes or upgrade to faster Internet speeds, CSPs see increased revenue.  But with data-based services, such as apps or music downloads, the revenue stream is not so direct.  When consumers download an application, the revenue goes to the store operator, such as Apple, and the developer.  More app downloads currently do not result in more money for the CSP.  If anything, more downloads can cause network headaches as bandwidth is squeezed, and potential service outages occur.

Further, as both businesses and individuals turn their focus to the cloud, social communications platforms, and apps, CSPs risk achieving little financial gain from expensive network upgrades to 4G technology if they do not embrace this technological shift.  Applications alone are expected to generate $37 billion in revenue by 2015.  Apple currently has 85% to 90% market share of total dollars spent on apps.

To keep up with consumer expectations and serve as leaders in the social movement, CSPs must embrace the cloud and quickly innovate and evolve their platforms to facilitate the creation of new services, establish value based pricing, and allocate network resources fairly to grow revenue.  This also includes developing new partnering models with existing over-the-top (OTT) cloud providers, and offering differentiated collaborative services, which are embedded with core communication services such as text or voice.   

First and foremost, to keep pace with customer demands for new services, CSPs must evolve their platforms to facilitate service creation.  Traditionally, service providers have not offered an attractive ecosystem for developers.  Because third parties often find it difficult and time consuming to work with CSP platforms, they are instead choosing to primarily work with companies like Facebook or Apple to create new services and applications.  This means CSPs are missing out on revenue opportunities – such as percentage of download and/or ad revenue – associated with publishing application developer content and exclusively offering new popular applications in the vein of Angry Birds and Instagram.

If social media platforms are focused on converging network assets with Web technologies, CSPs must focus on that as well.  Through the implementation of an open, standards-based, next-generation network and service delivery platform, network operators and service providers can leverage third-party application developers to introduce new services and applications that harness and monetize social networking – meaning the next Words with Friends or Spotify could be developed leveraging a CSPs’ platform, and downloaded through a Verizon or Sprint app store, giving CSPs a direct cut of the revenue.

While embracing the social cloud will prompt CSPs to deliver applications and content to customers, these same services are more data-intensive and require extensive bandwidth to operate properly, which can strain carrier networks and erode profit margins. 

For example, consumers are increasingly replacing their digital cameras with their smartphones, and using apps, email, and social media sites to instantly share those photos.  Just one email with a photo attachment is estimated to use 10 megabytes (MB) of data.  Similar shifts are taking place for music and movies as well – iTunes, YouTube, and Netflix all clog network bandwidth.   Just 30 minutes of video streaming, for instance, uses 60MB of data.  By 2014, data traffic is forecasted to be 35 times higher than 2009 levels, according to a Federal Communications Commission (FCC) report, and many experts are warning that customers will soon face a broadband spectrum crunch due to the increase in data use.

To overcome these obstacles, CSPs must leverage a flexible policy management solution that enables them to not just limit users who consume too much data, but to shape their behavior.  This type of technology can also enable service providers to generate income based on the services used, which can help monetize the social cloud shift.  Instead of just throttling heavy users, which has raised customer ire in the past, flexible policy management gives providers the ability to distribute bandwidth based on personalized service plans that can be adjusted to consumer preferences – separating charges for social media, video streaming, and voice over Internet protocol (VoIP) data use.  For instance, advanced policy capabilities can enable a CSP to offer a plan where consumers can purchase unlimited data for video streaming through Hulu.  In addition, a CSP could offer additional data to users who download videos from Netflix between midnight and 6 a.m., when network traffic is at its lowest.  Interactive policy management can help support a richer customer experience while also enabling providers to generate a greater return on network investments – a key element as consumers become more attached to the digital lifestyle.

Winning a place in the social cloud is not only about updating back-office technologies – it’s about better integration of existing services.  Operators must enable customers to manage all communication through one platform and aggregate their existing social communications into one service, which keeps messages and contacts in-sync across multiple access points, Web sites, and applications.  If service providers can bring to market a differentiated, full-featured communication and collaboration platform that supports messaging services and gives users anytime, anywhere communication availability, they can create a stronghold in the social cloud.

Cable operators serve as an example.  As they deliver triple and quadruple play offerings, a greater number are unifying and differentiating their subscribers’ communications experience to help limit churn, particularly as the number of “cord cutters” turning off cable in favor of services such as Hulu continue to grow – Nielsen found that households with broadband Internet, but only free broadcast TV have grown 22.8% over the past year.  For instance, operators are implementing calendaring services that enable users to set their DVR via a mobile phone, as opposed to solely through a set-top-box.

Cable providers and other CSPs who engage within the social cloud will soon be able to unify their services with social networks, enabling viewers to share their opinions with their friends online while watching live television.  Viewer communications such as tweets are already read by broadcasters on-air, but the next step will be the automatic posting of such feeds, where viewers can have the option to filter or contribute to them as they like.  For example, viewers may soon be able to view tweets from their specific network of friends on their television while watching a network show. 

In addition to optimizing and evolving their own networks and service, CSPs must be open to creating partnerships with OTT providers to expand their service offerings.  By creating partnerships, CSPs can have a greater say in content management and more monetize service consumption.  One example is Verizon Wireless, which recently announced it will work with Redbox to offer OTT video streaming. 

Across the telecommunications landscape, the digital lifecycle is evolving – social networks and the integrated experience they provide consumers are here to stay.  CSPs must act quickly to differentiate their services, boost shrinking revenues, and optimize their networks to secure a place in the social cloud.