The SMS Gold Rush
The SMS Gold Rush
By: Tom Dibble
Oct. 28, 2003 02:01 PM
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.
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