Monday, February 18, 2008

Mobile phone startups are chasing the consumer

By Efrain Viscarolasaga

The movement that made Facebook and MySpace household names -- and legitimate businesses -- is driving mobile-phone entrepreneurs to bring social networking to the mobile handset.

A groundswell of local companies have staked a claim in the space recently, running parallel to their Internet-based equivalents -- social-networking websites -- which are seeing a surge of activity in New England (See related story, this page). Yet some observers are skeptical that mobile social networking based on advertising is a recipe for major long-term growth.

Over the past month, Boston-based uLocate Communications Inc., a maker of mobile location-based service applications, has led the local charge into the mobile social networking space. The company bought back the trademark rights of its well-known friend-finder application, "Buddy Beacon," from wireless carrier Helio LLC, and this week launched its newest version with four new carriers and included integration with online social networking websites including Facebook.

The company also paid an undisclosed amount for Zync Inc., a Boston-based developer of predictive social-networking application software and owner of city-guide website Zync.com.

But there is more to mobile social networking than location-based applications. Flixwagon, a service by Boston-based MyFrame Inc. allows mobile users to upload video, even live broadcasts, straight to the web. The company recently partnered with MTV Networks Inc. to broadcast "citizen journalist" reports during Super Tuesday. Most were released on the company's social-networking website, but some were broadcast live on MTV, according to MyFrame vice president and co-founder Sarig Reichert.

Meantime, users who want to incorporate blogging, pictures or voice-to-text in their mobile network, can use Utterz, a service from Maynard-based RPM Communications Inc.

For those looking for a mobile-only networking experience, Boston-based JNJ Mobile Inc.'s Mocospace is a network of its own and avoids online counterparts such as Facebook and MySpace, according to Justin Siegel, its CEO. JNJ recently took in $4 million worth of venture funding.

What ties all of the services together is a reliance on advertising to generate sales. But while Internet-based advertising is based on banner ads, search engine algorithms and "impressions" to generate dollars, the mobile advertising environment is more limited, and entrepreneurs will have to get more creative to generate dollars, observers say.

"The whole mobile industry is going through the same transition (the online) industry went through when people were putting advertising on a 19-inch screen," said Michael Bayer, CEO of RPM Communications.

Getting advertisers to buy into mobile social networks may be easier said than done. Online advertising, including social networking, is not growing at the expected pace, according to New York-based eMarketer Inc., and the mobile model is even less mature.

"Social networking is still new, and advertisers are still trying to decide how to effectively use it," said Elgin Kim, formerly a vice president at Boston mobile advertising platform maker EnPocket Inc. and now an executive at Enpocket's parent company, Nokia Corp. "You bring in the mobile aspect, and it's 'new plus new.' "

Dan Gilmartin, VP of marketing for uLocate, said, "Down the road, mobile banner ads will be a thing of the past. If (an ad) doesn't have some kind of interactivity to it, it will be irrelevant."

One local mobile social-networking company, however, is not looking at advertising as a main source of revenue. Weston's Proxpro Inc. has developed two mobile social-networking applications aimed at business users rather than consumers. While the company's applications most likely will be targeted to consumers at some point, founder and CEO Julian Bourne said selling to corporations makes more sense for an early-stage company and eliminates the need for advertising to generate sales.

"A B-to-B sale is easier, and cheaper, than a million B-to-C sales," he said.