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Are SMS-Based Marketing Campaigns Sustainable?
Are SMS-Based Marketing Campaigns Sustainable?

In every market there will be winners and losers. This is especially true for early-stage "experimental" industries such as wireless. Those companies brave enough to jump in early pave the way for lasting business models. I loved hearing about new dot-com business models - even if some didn't quite add up - just as I now follow innovative wireless capabilities.

The very young wireless marketing space is already experiencing casualties. Indeed many, including myself, question whether this space can support itself in the long run. So many issues must be addressed and resolved, not the least of which is whether wireless campaigns can generate adequate revenue for everyone involved. The closure of two prominent SMS-based marketing firms sheds some doubt on this.

In the past six months, two European firms, ZagMe and Airmedia, closed their doors due to "lack of funds." Incidentally, I wrote about ZagMe's mall campaigns in last October's issue (WBT, v. 1 n.8), reaching the conclusion that their "double opt-in" approach was very feasible and successful (face-to-face recruiters urged sign-ups, and shoppers would also notify the service to receive special offers while they were at the mall). Of course, the company was shy on specifics, but they appeared to be doing everything right.

Airmedia, the other defunct wireless marketing firm, ran SMS-based campaigns for Columbia Films and Pepsi, among others. While running out of funding is the easy answer used by many in the dot-com world, perhaps there are more fundamental concepts at work here.

"ZagMe may look feasible from the outside, but the appeal of SMS is the viral sharing of information, and coupons are not it," states Seamus McAteer, head of wireless advisory firm Zelos Group. "You must offer an incentive to opt in, and you need a creative idea to take advantage of the viral nature of SMS." He points out that this is far superior to trying to force-fit a campaign to the medium, noting the potential of competitions/tournaments and anything where the user can make a personal statement.

A Web forum posting by a former ZagMe staffer may shed further light on the matter. In it he states: "Relying on the consumer to activate such a service is not going to work, as consumer inertia is working against you - always a fatal flaw. So this service is only going to work properly with a location feed. In fairness, when we launched we thought we'd have a location feed by now, but these things always happen more slowly than you think."

In other words, require recipients to jump through too many hoops and you'll lose them. A personalized, user-centric grassroots approach, taking into account the user's location, would seem a much better bet indeed.

To further muddy the waters, several reported legislative actions could disrupt the industry. An upcoming European Union directive would require inclusion of company registration and contact details in all messages, and with SMS limited to 160 characters, doing so would be impossible. In the U.S., Verizon won a case against the Acacia National Mortgage Company, which had been sending text messages to subscribers through the Verizon network.

That's not to say there aren't other firms running SMS campaigns and reporting success. With an estimated 30-billion SMS messages per month sent on GSM networks around the world, the incentive is certainly there. The question is which companies will still be around in a year, or in six months for that matter. Those that are will have learned important lessons and taken into account the nature of the medium. When that happens in the U.S., maybe I'll even participate...and save a buck too.

About David Cotriss
David Cotriss is a freelance writer covering e-commerce and new media topics for many local and national publications. He specializes in wireless and interactive television marketing and advertising.

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