Operators can use SMS to make money, instead of racing to the bottom
What follows is an excellent article from Stewart Easby, head of product marketing, Telsis. Despite the fact that operators are giving SMS bundles away for nothing (and read on for some shocking examples of this race to the bottom) Easby makes the case for SMS as a driver for future operators revenues. Consumers like it, it’s adaptable and easy to use, and by using smart text services, as well as application-to-person services, Easby argues operators can still use SMS to drive profitable future services, including the likes of mobile social networking. It’s well worth five minutes of your time. – Keith Dyer, Editor, Mobile Europe.
Stewart Easby writes:
At an event in London to mark 25 years of cellular telephony, presenters were invited to discuss what the future of mobile will bring.
I was struck by how most of the talk was of high speed data services, and about related technologies. It was not surprising that vendors should promote whatever technology or service they had to offer. Put a group of technologists in a room together and it’s almost inevitable that they are going to end up breathing their own fumes. However, I was surprised that over the course of the presentations there was so very little acknowledgement of what subscribers actually want.
To me, it pointed up the persistent disconnect that exists between phone users and much of the mobile industry. WAP, IM, MMS and video have all been heavily promoted, yet subscribers in the main have ignored them and simply got on with the business of talk and texting. After an agonisingly slow start, MMS is now growing and, says Portio Research, could be generating $51 billion globally by 2014; but in the same year, Portio says, subscribers will send over 11 trillion text messages to generate revenues of $124 billion.
It is almost as if, in spite of the astonishing revenues, the mobile industry devalues text because it is such a simple, low-tech idea. However, subscribers do not have the same dismissive view, and despite increasingly having access to alternative on-phone communication channels such as IM and email, are sending ever greater volumes of text messages. The different channels seem not to be cannibalising each other. Subscribers treat each medium differently and use them for different purposes. It’s said that the average time taken for a recipient to read an email is 48 hours, while for a text messages it’s four minutes.
Nonetheless, text messaging has become a commodity, and one subject to the price pressures of the market. In one European country there are three competing operators. The operator with the smallest number of subscribers offered 1000 minutes of voice plus 1000 text messages for €10 per month. Just two days later one of the other operators offered the same deal for €9 per month. The third operator hit back a day later by offering the same for just €1 pm. The other two quickly matched the price. Between them, and in less than a week, the three operators threw away tens of millions of Euros in revenue – and ended up in the same competitive situation they started out in.
The first operator recognised the differentiating power of text messaging, but set about using it in the wrong way. Rather than competing on price, they should have competed by rolling out innovative new text services. With minimal extra investment, they would have seen a beneficial impact on recruitment and retention, plus won the bonus of new revenue streams from services for which subscribers were willing to pay a premium.
There are multiple reasons why text has the potential to return substantially greater revenues. All handsets can send and receive text, whereas only a small percentage support mobile data. Text is a push service, has low battery impact and provides an instant receipt. It is also a service with which subscribers are demonstrably comfortable, one that is firmly embedded in youth culture globally and which has propagated through the age classes as yesterday’s teenagers become today’s businessmen and women, parents and grandparents.
Operators that avoid the trap of competing on price and instead use smart text services as a route to achieving differentiation will leverage these factors. Some operators have already embarked on the first wave of such a programme by deploying generic smart text services such as divert to another handset, copy to another handset, archive in network, anti-bullying and auto-reply. The first operators to do this have created temporary first-mover advantage, but to consolidate their lead they must drive forward with a second wave that adds fully custom services, targeting multiple customer segments with text-based applications that appeal directly to special interests.
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