The SMS Gold Rush
- by Craig Barrack - Oct. 28, 2003
The gold rush for mobile content is far from over.
Ten percent of Europe's SMS traffic now comes from value-added
services and content such as ringtones, quizzes, and mobile
chat. The opportunities are there, the infrastructure is in
place, and mobile users are willing to pay for content. The
European market for ringtones alone is estimated to be worth
over 1 billion euros per year. So what does it take to make
money from SMS? Craig Barrack, UK country manager for Netsize
explains some of the dos and don'ts of launching a successful
SMS service.
1. Define your market: There are thousands of
mobile services available today, but relatively few are successful.
Before launching your service and deciding upon your content
and applications, it's important that you define to whom you
are going to sell and how you will reach them. Consumers of
mobile content and services make impulsive buying decisions,
and it's important to identify and reach them via the best advertising
medium. Some services enjoy much higher usage depending on where
and when they are promoted, so it's critical to have the right
marketing and promotion strategy in place. For example, in the
UK, content providers selling ringtones and logos enjoy maximum
response via print advertising in newspapers and selected magazines.
Even companies with very memorable Web addresses need to use
both online and offline marketing to maximize revenues.
2. Play by the rules: The mobile industry is wrapped
in regulation and safeguards. You must play by the rules or
you risk incurring fines or legal proceedings. For example,
companies in the UK need to comply with regulations by ICSTIS,
OFTEL, OIC, FSA, BACC (if advertising on TV), and conform to
the individual terms and conditions of mobile operators. You
also need to take care of copyrights and digital rights management.
Your service must fulfill local regulations and you should receive
assistance from your SMS service provider in understanding such
rules. Some services that are legal in one country may be illegal
in another, and often the interpretation and implementation
of regulations can be different in the same market. For example,
Vodafone UK does not allow micropayment services for all of
its customers and 02 only makes such services available to its
contract customers due to individual interpretations of the
recent EMoney legislation. However, T-Mobile and Orange have
no stated policies on restricting micropayment services.
3. Have a viable business and revenue model: It
may seem like common sense to suggest that services need to
be profitable. However, all too often companies launch services
at basement prices in order to attract customers. This approach
may work in the short term, but such a business model cannot
be sustained for long. Companies need to assess the prices normally
accepted by consumers for similar content, and price their own
services accordingly. For example, in the UK, ringtones are
priced between £1.50 and £4.50. Companies charging on the higher
end need to justify the price by offering either better quality
ringtones or leveraging on their brand. Inflated prices work
in an early adopter market, but fade away as markets become
more mainstream. It is also vital to select a billing mechanism,
such as premium SMS, that is widely accessible by all customers.
4. Choose the right technical partners: It's important
to have SMS connectivity and billing partners who have direct
connections and revenue-sharing agreements with mobile operators.
A long supply chain means that there are too many players in
the value chain taking a cut of your revenues. Financial stability
of partners, suppliers, and customers needs to be checked, as
it is difficult to retrieve revenues from companies with whom
you do not have a direct relationship and where multiple parties
are involved. SMS service providers need to have highly scalable
messaging infrastructures with robust billing systems to ensure
quality of service and avoid any loss of revenue. Partners need
to offer international coverage to maximize revenues from your
service, reaching as many customers as possible. Ultimately,
you should be left to concentrate on the service, leaving the
SMS partner to take care of technical service delivery, revenue
collection, and payments.
5. Offer the best content and applications:
Content is still king, and it is crucial to have the right content
and applications. You may have direct agreements with multiple
providers or an agreement with a content aggregator who can
accelerate the service delivery process by providing an end-to-end
solution. It is key to choose partners who can understand and
manage digital and copyright issues. Remember, branded content
from a recognizable company can attract a lot of customers in
a very short time.
Craig Barrack is UK country manager for Netsize,
the European leader for customized solutions that enable mobile
business and entertainment. For more information on SMS services,
download the Netsize European SMS Guide from www.netsize.com.
Copyright © 2006 SYS-CON Media.
All Rights Reserved.
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