|Issue:||Asia-Pacific III 2001|
|Topic:||Interactive SMS – A New Media Solution|
Interactive Short Message Service (SMS) is ripe for market placement now. Here Marie Holmes, Executive Vice-President, Logica, makes a compelling case for the development and enhancement of interactive SMS service applications offering further revenue generation opportunities. Until now most SMS applications have been passive, with message flows directed solely at the subscriber. Interactive SMS goes beyond this to generate responses that might include TV voting, mobile banking, mobile commerce and a range of other activities.
The mass-market acceptance of Short Message Service (SMS) has presented network operators and their partners tremendous opportunities to build customer loyalty and generate additional revenue streams through the development of value-added services built upon SMS infrastructure. The various array of services currently available to mobile phone subscribers, such as ‘pull and push’ information services, ring-tone and image downloading and more recently wireless instant messaging, is a testament both to the operators’ desire to bring extra value to their customers and to the growth of an application development community who have seen SMS as an accessible and exciting development platform. However, the wider marketing community has been slow to recognise how SMS can be used to open a new and interactive channel of communication with subscribers, hence new possibilities to generating revenue. Hence the majority of service applications launched to date, other than person-to-person messaging, have been one-way in nature, requiring little interaction between the content originator or provider and the end user. However, the opportunities that exist for two-way, ‘interactive SMS’ applications are too great to be ignored. Interactive messaging presents a huge, untapped market in 2G especially amongst non-WAP subscribers. (Inter-active SMS services are defined as ‘services which require a mobile subscriber to respond with a mobile originated message to a request for information which in many cases, though not necessarily, will be received in a mobile terminated message’). Service Applications Examples of interactive SMS applications could include: TV Voting: Information is broadcast on-screen inviting viewers to ‘text’ in their selection, for example ‘the man of the match’ during a soccer match. Results could be combined with the votes sent by SMS from the audience watching the game (they are given details on how to vote on the stadium scoreboard). A user could be offered the chance to view total number of votes cast for each player. To get this information, users send an additional text message to the network. There are already applications evolving in this area, for example MTV Asia is offering viewers the facility to text in their vote to decide which music video to air. The growth of reality TV programmes such as Big Brother and Survivor could present opportunities for SMS voting. Mobile Banking: Using SIM Tool Kit technology (STK), this has now been widely implemented in most markets, as opposed to secured WAP transactions, due to the wider reach of plain SMS/STK-capable handsets. Mobile Commerce: This follows the same lines as m-banking as one of the more popular service being stock trading which is also typically STK-based (for security and interactivity). To a lesser extent will be shopping-related services. These services are readily available within Asia-Pacific region, for example trading via SMS (Singapore, Thailand, Philippines, Taiwan). Competitions: An SMS message invites recipients to respond to a multiple-choice question, generating a mobile-originated SMS from each contestant. However other methods could be employed to increase the traffic levels, for example designing competitions, which required contestants to guess numerical data i.e. the number of goals, scored in the last soccer world cup. Following each incorrect answer the recipient could receive a message informing them whether there entry was too high or too low prompting another attempt via SMS. Market Studies/Consumer Opinion Polls: Interactive SMS could provide a quick and cost-effective complement to existing methods of conducting market research surveys, particularly where quantitative data may be required to support qualitative information obtained from activities such as focus groups or face-to-face interviews. The information could take the form of answering a single question sent via an SMS or several questions over multiple messages depending on the target market and the nature of the study. For the above type of survey applications it is likely recipients would require some incentive to respond. Wireless Marketing: Some innovators are already using SMS to deliver promotions to their customer base. For example, some night-clubs in Asia have for some time used SMS to offer free or reduced entry to customers who arrive with the selected message posted on their phone’s screen. Sales promotions can also be combined with competition: for example, enter the man of the match voting and if your player selection is the one who receives the most votes you receive a promotional coupon that allows you to receive a discount on the player’s replica shirt. Recent findings from Probe research that advertisers who have adopted SMS as a new media to reach consumers have reported a higher response rate than existing media such as TV and radio, at a fraction of the cost. While the ‘novelty factor’ is undoubtedly at play here, it is revealed that click through rates based on SMS advertising are three times the average expected by advertisers for the fixed Internet. Some market forecasts have estimated that in Western Europe alone, wireless advertising market could be as big as US$3 billion by 2004. (Forecasts for Asia-Pacific not available at this time.) Critical to this success is the fact that SMS marketing and advertising campaigns (in common with other interactive SMS applications) require users to actively opt in, to either respond to or receive information. Benefits to the Mobile Network Operators What all the above services do is bring an interactive end-user experience to the widest possible consumer audience. However the ubiquitous nature of SMS means there are short-term opportunities for operators, their content and business partners to bring interactive services to mass market. This can bring significant benefits for each of these parties. Operators can generate significant additional revenues from the increase in SMS traffic as a result of the deployment of interactive SMS applications while providing new and innovative services can be an important way to strength their brand loyalty and help reduce customer churn. The ability to offer a new one-to-one marketing channel can also deepen their relationship with partners, although, this may necessitate a rethink of their attitude toward revenue sharing. However when such revenue is being generated by new sources, such as advertising and sponsorship, the decision to share these spoils is potentially less contentious. By carefully monitoring the take-up and use of interactive SMS services by end-users, an operator can add a further layer of valuable customer information to their marketing databases. For operators, content or business partners, interactive SMS provides a new media for communicating with customers. This extends the reach of their brand to the consumer, therefore a potential conflict exists here with the desire of the operator to brand services and, therefore, to brand primacy would depend on the nature of the application and the relative brand strengths of the operator and the partners. Again opening this channel presents new revenue stream opportunities for these partners. There are also opportunities for operators to use these services as a major weapon in the battle to capture inbound roamers into their network. These roamers are potentially a source of high revenue. Hence any tools that can increase the likelihood of roamers connecting to a specific network need careful consideration. Unlocking the Potential To maximise the benefits highlighted above there are however a number of key issues which operators need to address both from a technical and commercial perspective. The majority of operators already have the technical infrastructure in place to allow them to begin offering interactive SMS services directly to their own customer base. Their existing Short Message Service Centre (SMSC) and billing engines allow messages to be received from subscribers and where appropriate assigned the relevant charges. However, what are missing in many cases are the business partnerships to help drive innovative applications into the market place. Hence while operators have developed some interactive services, these have often been designed as extensions of existing applications. The major driver has been to create loyalty with their subscribers as opposed to opening revenue streams. From the operator side there has been the reluctance to share revenue streams with potential partners, while these partners have been slow to develop services until there is a mechanism for delivering services to the maximum audience. Potentially, the market for interactive SMS services will develop significantly if there is a need for cross-network solutions whereby subscribers from any operator, including inbound roamers, have the ability to easily access services. To offer such a solution requires an operator to have in place a method of capturing and charging customer data from subscribers of other ‘foreign’ networks (definition of foreign includes other networks located in a domestic market and networks located in other countries). This in turn is reliant on both technical development within the operator network and interconnect charges being agreed between operators. Removing the Technical Barriers One of the key technical issues concerns how to route messages generated from the mobile subscriber of ‘foreign’ networks. For example, a message is generated by an application, linked to the SMSC of a local operator, and transmitted to a mobile subscriber of a foreign network. This subscriber is currently unable to reply to this message, and hence access the application without first changing the settings on their handset. Specifically they have to change the address of the destination SMSC. This would require considerable education of subscribers and does not present a satisfactory end-user service experience. Enabling the SMSC reply path mechanism does not resolve the problems. As we have seen in the earlier service examples, many requests for information will be generated from sources other than mobile terminated SMS, e.g. stadium scoreboards, TV broadcasts. In order to overcome this, operators need to find a method of routing the SMS from a foreign mobile subscriber back through the foreign network’s SMSC. This will ensure these subscribers have access to the applications, which sit on the SMSC of the operator providing the applications. It also ensures that revenue is generated for the foreign network, providing an interconnect agreement exists. The local operator may have to share a percentage of this revenue with the content/business partners who may for example own the intellectual property rights around the competition or have lent the weight of their brand (and associated marketing funds) to the initiative. There may however be an opportunity for operators to leverage sponsorship or advertising funds from these partners in return for opening access to their subscriber base. There are of course a lot of additional issues to resolve to ensure such a model would work in practice. However it does illustrate how operators can tap into a significant source of revenue. Other critical elements being billing and reporting, operators need to consider the implications on capacity. Offering cross-network solutions around applications such as TV voting could generate potentially huge responses. Operators need to consider how their messaging infrastructure can be scaled to handle increases in traffic, what flexibility they have to deal with traffic peaks. An inability to handle an increased throughput of messages will lead to an unsatisfactory user experience and kill services before they are established. However the issues around capacity should not dissuade operators from examining the potential for interactive services; nor do operators have to wait until all commercial agreements are in place to begin offering these services. An outline roadmap would initially see an operator offering a wide variety of interactive SMS services to existing subscribers. This requires minimum technical development but rather relies on the ability to identify creative applications and choose the right partners to help design and deliver these. Conclusion In all phases of development operators need to ensure they have a partner who will understand the demands that will be made on their messaging infrastructure, and who provides the flexibility that enables them to capitalise on revenue opportunities. The market is ripe for interactive SMS and the window of opportunity is open to exploit now. Those operators that aim to be the innovators in this market will find SMS provides them a way of developing relationships with customers that both strengthens brand loyalty and stimulates revenues.