Mobile phone maker Nokia turns more into an internet-services company; announcing the acquisition of location-based social network Plazes

The world’s largest mobile phone maker Nokia continues its evolution into an internet-services company by announcing the acquisition of location-based social network Plazes, a startup based in Zurch and Berlin. Plazes, a company employing just 13 people, provides a social network in which users can plan, record and share social activities based on their locations. Financial details of the deal were not disclosed.

This deal represents another in a raft of recent deals for Nokia over the past year that illustrate the company’s wish to evolve into a service-based firm. Twango, EnPocket, LoudEye, and mapping company Navteq have all been bought by the Finnish company as it adapts to a mobile market that is increasingly focused on entertainment services. Nokia realises that it has to change its strategy if it is to remain at the top of the mobile sector (which it currently dominates with a 39% global market share). Rival Motorola, for example, is struggling to simply meet handset delivery targets, and Nokia knows it must transform into a next-generation vendor to avoid a similar fate.

The company has taken recent steps to kick-start this evolution. For example, it has set up internet service and online music store Ovi last August, a move intended presumably to compete with Apple’s iTunes offering. Now Nokia is making a bold move into the hot sphere of social networking, positioning itself as a promoter of this trend, along with photo and video sharing and games for its consumers. Nokia predicts that 25% of time spent using smartphones will be devoted to entertainment over the next five years, so naturally the firm wants to provide the services related to it.

This deal is in line with Nokia’s strategy of acquiring companies that allows the handset maker to own key content intermediaries and content providers; acquiring social media firms such as Plazes will beef up Nokia’s brand performance across the mobile internet space. But this strategy comes with several challenges. Mobile media content management is a complex issue – transferring software applications across to the mobile space will be difficult in the medium term. Evidence currently shows that porting such applications is costly, and this, coupled with the process of securing compliance with European content certification laws, means that the merger will not be without its snags.

Finally I expect to see more such forays into the social media sphere by handset makers. Danish startup ZYB was acquired by rival Vodafone in May, Nokia has responded by buying Plazes – who will be next?

Published by Reinout te Brake

Reinout is a games investor and strategic business consultant specializing in the games industry. Reinout established his credentials through his own successful investments, start-ups, consulting and (advisory) board positions that led through time to strong bonds with key stakeholders in this fast paced industry. He is known for his outstanding results in the gaming industry. He has worked with many game studios around the globe and is therefore well known in the international gaming industry. Check out his games podcast; https://www.game-consultant.com

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