Yahoo! is preparing to unveil a new push into social networking on mobile phones in the second half of this year.
The new service is being developed by the company's global Connected Life division, which yesterday announced a new mobile internet search service. It will aim to recreate the phenomenal popularity of the current generation of social networked sites such as Bebo and Facebook.
Yahoo! believes that more consumers will be using Yahoo! services through their mobile phones than through a PC by 2016. After giving warning on profits three times last year, sending its share plunging on each occasion, the group is under stong pressure to assert itself in the mobile phones market, which it believes can fuel revenue growth through advertising, after trailing Google in desktop searches.
According to Telephia, the research group, Yahoo!'s existing mobile services are used by 7 per cent of mobile subscribers in the US, compared with 3 per cent for Google. However, Yahoo! executives admit that available estimates are patchy at best in this very young market.
Online communities play a key role in Yahoo!'s strategy with services such as Yahoo! Answers, where Yahoo! users ask questions and give solutions online, attracting tens of millions of users.
A mobile social networking service would aim to give its members the means to share content such as music, video and photos over handsets, and Yahoo! has some of the building blocks already in place. The group yesterday showed off a mobile version of Flickr, its image-sharing website.
The site was regarded as one of the pioneers of the web 2.0 wave of companies - a set that also included sites such as MySpace, the leader in social networking. MySpace is owned by News Corporation, parent company of The Times.
The business model would initially rest on display advertising, which Yahoo! executives expect to take off first on mobile. They believe the paid-search advertising model, which has seen explosive growth rates on PCs, will be slower on mobile - in part because consumers are yet to develop the habit of buying goods through mobiles, a feature that has driven the format on the conventional web.
At the Consumer Electronics Show in Las Vegas, Motorola, the world's second-largest mobile handset maker, shared a stage with Yahoo! to announce a new mobile internet search service, in a joint effort by the two beleaguered companies to shore up investors' flagging confidence.
Ed Zander, the Motorola chief executive who is a close friend of Marco Boerries, the head of Yahoo!'s Connected Life division, showcased the new mobile internet service, Yahoo oneSearch, as part of a two pronged defence of the mobile market's prospects – focusing on new "airborne" services such as web access as well as growth rates for more basic models in emerging markets.
"We are adding a Denmark every month in India," he said, referring to estimates that six million mobile users are being added in the subcontinent every month.
Mr Zander warned on profits on Thursday after being forced to slash handset prices to raise the group's 20 per cent market share.
In Las Vegas, he also announced a partnership with Warner Music Group, the first such agreement between a music company and a handset manufacturer.
The tie-up will allow Motorola to offer exclusive content including full-length songs and ringtones and videos from Warner's catalogue. He added that Motorola expects Wimax wireless internet adoption, which it claims will reduce the time it takes to download a song down to just 10 seconds, to drive demand for mobile music downloads.
However, the spectre of last week's warning from Motorola hung over the proceedings. Showing off a 1983 model handset, one of the first mobile phones on the market, which was sold for about $4,000, Mr Zander said: "The analysts would like it a lot; lots of gross margin dollars."
Analysts have urged Motorola to reconsider its aggressive pricing after becoming locked in a price war with the market leader, Nokia. "We … hope to see Motorola shift its primary focus to profitability rather than market share targets," Merrill Lynch said in a note.
Yahoo! announced agreements under which Nokia, Samsung and Research In Motion, the maker of the BlackBerry e-mail device, will include its new software on some of their devices. It also said it had extended its partnership with 3 Group in the UK, Ireland, Denmark and Sweden and will also market its new service over the web to encourage users to download the search software independently.
In a bullish address, Mr Zander cited the hgue potential of emerging markets for Motorola, predicting that the industry would add another one billion subscribers to the current two billion over the next two years. He added that Motorola was developing voice activated phones with battery life of up to five days for territories such as Africa where literacy levels are low.
He also demonstrated a system that allows cyclists to recharge handsets through a dynamo. "There are 500 million cyclists in China alone," he said.
