IBM unveiled a new report, “The Changing Face of Communications” that highlights the need for Communication Service Providers (CSPs) to embrace social networking in order to protect and enhance their role in the communications industry. CSPs who don’t take bold steps to adapt to this rapidly evolving cultural phenomenon risk losing revenue and marketshare.

Social Networks have become primary destinations for a rapidly expanding universe of online users to manage and enrich their digital lifestyles both personally and professionally. In June 2008, unique monthly visitors to social networks represented approximately two-thirds of the world’s Internet audience, according to “Internet Users worldwide by region, 2007-2012,” eMarketer. Based on the projected growth of the global Internet audience, IBM estimates that by 2012, the number of unique monthly visitors to online social networking sites will surpass 800 million, according to “Social Networking Explodes Worldwide as Sites Increase their Focus on Cultural Relevance,” comScore, August 12, 2008.

Social networking, considered a “communication fad” in recent years, is transcending that phase and is weaving itself into the intrinsic fabric of the Internet. Throughout the world, Internet users are turning en masse to such sites as Facebook and MySpace to meet their communication needs. For example, before 2005, not a single social media network was ranked among the world’s top 20 English-language Web sites. By June 2008, social networking sites comprised half of the same list, surpassing many traditional Internet “stars,” such as AOL, eBay and Amazon in the upper tier.

Not only have social networking sites become a primary communication platform, but these sites are also increasingly being used as distribution channels for digital content which leverages the “viral” nature of an individual’s network of relationships. While first gaining a foothold among individual online users, companies are now more actively recognizing the potential benefits of a social media strategy to build brand loyalty by involving these networks of consumers. Depending on the brand and its goals, establishing a social network site dedicated to its clients can attract a better-targeted audience, more actively engage them, and allow them to exchange information among a community that is most suitable for the user.

According to the IBM study, the rise of social networking is changing the fundamentals of the telecom industry and creating a future that is being shaped by two key trends. Communication patterns are shifting from point-to-point and two-way conversations, to many-to-many, collaborative communications; sharing videos, photos and other multimedia content that substantially enrich the user experience. Control of communications is shifting away from the proprietary domain of Telecom providers to open Internet platform service providers.

These two trends are enabling new entrants, such as Skype, Google, Microsoft, Facebook and MySpace, to enter the communications marketplace, undercutting the position of traditional providers and capturing a significant share of incremental communication time. These providers feature disruptive Internet-based business models and a diverse set of communication tools and applications, ranging from e-mail and instant messaging to social networking and collaboration.

The evolving communications marketplace represents both a window of opportunity and a challenge for telecom providers. Over the long-term, CSPs should broaden the scope of their traditional “voice” business to more actively encompass both point-to-point communication and many-to-many collaborative models that include “voice, internet-based communications and content,” and align their organizations and industry partnerships accordingly. This has strategic and transformational implications for the business, impacting areas such as product and services offerings, skills, platforms, revenue models and markets, among others.