Despite little revenue potential and many barriers to overcome, the mobile social networking market is luring hundreds of startups

The social networking phenomenon, given credence by Web giants MySpace and Facebook, has taken hold of the mobile market, and every company wants a piece of the action. As heavily funded startups begin to crowd the space already occupied by PC veterans and software makers, the need to both define and refine the market is becoming clearer.

Although catalyzed by the popularity of online social communities, the mobile social networking industry is essentially as old as mobile phones themselves. Some might argue that mobile phone owners “network” every time they make a phone call, even more so if they opt to text. Yet SMS capabilities alone are no longer making the cut. Being a true mobile social networking company requires more than offering the ability to send text messages, said Jill Aldort, wireless senior analyst with the Yankee Group. In her definition, it takes the ability to post a personal profile complete with photos and message contacts, form groups around common themes and post comments and feedback to the entire group. When put in this context, the market narrows to two kinds of companies: those taking a fixed-Internet presence mobile and those with the lofty ambition of starting a mobile community from the bottom up.

“Where it becomes more crowded are any number of little start-up companies who are trying to create a community from scratch within the mobile environment,” Aldort said. “There are a million companies out there, and I think the big challenge that they have, even more so than this overcrowding phenomenon, is how to create a brand name from scratch, especially when they are up against a MySpace or a Facebook--someone that already has a very significant and strongly loyal following.”

With more than 110 million monthly active users, MySpace remains the largest social network in North America, although Facebok is catching up with more than 60 million active users, a number which has doubled every six months since its inception. Furthermore, according to M:Metrics, MySpace’s is the most popular mobile site, with 3.7 million users in the U.S., despite its exclusive carrier relationships with Helio and AT&T. Facebook comes in second place with two million U.S. users and third place goes to YouTube at 901,000 mobile users. As Aldort pointed out, the common demoninator for the top three contendors is a fixed-Internet presence that preceded their mobile versions.

Not everyone, least of all the purely mobile social networking companies, agrees with Aldort. Fred Ghahramani, founder of almost-eight-year-old mobile community company AirG, said that in most markets, the people using data services heavily aren’t even Internet users. As an example, he cited the case of mobile IM. Over the past seven years, carriers on a global basis fought to get mobile IM running, making deals with AOL, Yahoo, MSN and others, yet despite the money spent on the infrastructure, mobile users still prefer SMS to any mobile IM client.

“Migrating customers from the Internet to the mobile experience isn’t necessary; it still seems forced,” Ghahramani said. “Mobile is a unique platform, and you can still build a mobile presence by targeting only the users on the mobile platform and giving them a unique value proposition.”

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