The mobile content gold rush is far from over. 10% 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 1billion 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 is 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 is 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. It is important 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 maximise revenues.
2. Play by the rules:
The mobile industry is wrapped in regulation and safeguards. It is important that you 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 with the individual terms and conditions of mobile operators. You also need to take care of copyrights and digital rights management.
It is important that your service fulfils local regulations and that you 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 micro payment services for all of its customers and 02 only makes such services available to its contract customers due to individual interpretations of the recent E-Money legislation. However, T-Mobile and Orange have no stated policies on restricting micro payment services as yet.
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 is 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 maximise 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 chose partners who can understand and manage digital and copyrights issues. Remember, branded content from a recognisable company can attract a lot of customers in a very short time.
Of course, these are just a few of the points that need to be considered. As content providers look to extend their services into Europe there is a maze of further regulation and cultural differences to be considered. Not that this should put you off. The market for mobile content is one of the few sectors that has continued to grow across the UK and Europe. For those that understand the industry, the gold rush isn’t over.
For more information on SMS services, download the Netsize European SMS Guide from www.netsize.com.