For mobile operators, text messaging has become one of the most successful
data applications with the volumes increasing year on year. However, ongoing
price erosion in messaging has caused increased pressure on margins and this has
resulted in the mobile industry frantically searching for revenue growth
opportunities in new services. Software consulting firm, Ovum, states that no
other single service has been able to get even close to the text messaging
revenues. Even in 2009, 80% of worldwide messaging revenues will be generated by
SMS.
Besides exploring alternative options to add to their existing text messaging
revenues, operators need to consider a more evolutionary approach. In this case,
text messaging should be used as a starting point. Future revenue growth can be
reached through differentiation and the creation of new business on existing
text messaging channel. Mobile messaging has not reached its limits and the time
is right to leverage the unique values of mobile messaging beyond
person-to-person traffic. In fact, Acision believes that messaging revenues have
the potential to double by 2011, reaching a market size of $165 bn.
Real Truth of Future Text
The success of text messaging is often attributed to its ease of use,
reliability, and transparent pricing. Yet, some argue that rich Internet-based
messaging services will take over dominant position in a few years. This outlook
is inspired by a few notable trends such as how mobile broadband coverage has
increased dramatically, with market share of Internet enabled mobile devices
surpassing the 25% mark.
On the contrary, text messaging is not showing any signs of slowing down. In
May 2008, Ovum predicted an increase of 60% in the volume of text messaging by
2011. The popularity of text messaging has turned it into a key operator tool
for subscriber acquisition and retention, which has resulted in near flat-fee
pricing. The truth is that it will not decrease in volume or usage, but is more
related to the operator's margins. However, if the right solutions are put in
place, operators can increase their text messaging prowess.
Differentiation Drives Margins
Over the past 15 years, most operators have adopted a similar strategy of
positioning text messaging as a new service. In recent years, however, messaging
has reached mass market adoption and is like a commodity. To address this
challenge, operators need to do what every business does when faced with
commoditization. Operators must differentiate their mobile messaging portfolio
by further refining the service positioning to address the different messaging
needs of various user segments.
At the same time, it is crucial to avoid disruption of SMS's key asset:
simplicity.
Confronting subscribers with complex features easily results in poor adoption
rates. By gradually differentiating mobile messaging, operators will ensure text
messaging relevance across their entire subscriber base and increase overall
revenues. To realize the required margin growth, it is crucial to minimize the
costs associated with service differentiation.
Based on this vision, leading messaging company, Acision defined a text
messaging strategy aimed at doubling the messaging revenues. This strategy
consists of five key elements that will drive subscriber and channel revenue.
Personalize the messaging experience: By offering personalized messaging
services, operators are able to charge for a number of new features that are
already proving to be effective. Currently, a vast majority of subscribers are
using multiple messaging services. Through email and instant messaging, users
are increasingly getting familiarized with features such as automated replies,
forwarding, signatures, threaded messaging and presence information, and these
should be applied to text. Initial launches of personalized messaging services
indicated a growth potential of up to 15% on text messaging revenue. An example
of such a personalized service launched by SingTel and Maxis in 2008 is
auto-copy. This service automatically forwards copies of received text messages
to another phone number or email address.
Extend mobile messaging to fixed: Besides mobile phones, many subscribers use
a range of fixed devices such as PCs and TV sets daily. When offering access to
text messaging on these devices, the barrier to use text messaging would be even
lower. A fixed extension to text messaging offers the operator a viable entry
for service revenues in the fixed domain. The additional user interface may also
produce additional text messaging usage chargeable by the operator. The enhanced
user interface may improve advertizing effectiveness and the user's abilities to
personalize the messaging experience. Finally, delivery of text messages could
be done over 3rd-party bearers such as cable or DSL Internet connection. This
could substantially reduce costs as it would relieve the operator's radio
network.
- Widgets as extension to SMS: PC and web-based widgets enable users and web
developers to have full control over where to position certain third-party
applications. This drastically limits the barrier to use such applications. It
is therefore not a surprise that in June 2008 alone, over 600 mn people
communicated through widgets. If operators were to allow access to text
messaging through widgets, it would enable them to increase the value of text
messaging and help realize the opportunities mentioned above.
- Instant messaging as extension of SMS: When faced with the instant
messaging concept, most people will have dominant brands like Windows Live
Messenger and Yahoo! Messenger in mind. In recent years however, the IM
landscape is getting ever more diverse. A long list of social networks, mail
providers, niche communities and mobile operators have launched their own IM
services. Operator IM may not be a new killer application but could well act
as a logical extension of mobile messaging for mobile and fixed Internet
users.
Use messaging to mobilize the web: Internet usage among teenagers has grown
to a staggering 12.5 online hours per week. Yet, the average teenager is
available at least 112 hours per week through his mobile phone. In other words,
teens are almost ten times more likely to be available through their mobile
phone. Clearly, the mobile channel is a crucial link in enabling people to
interact. As a result, a value-added services market has taken shape since the
1990s. However, there is still a large number of (Internet-based) service
providers that do not mobilize their service offering through mobile messaging.
Mobilize business applications: On an average, 5.5% of patients do not show
up at a doctor's appointment. A simple text messaging reminder would
substantially reduce this number of no-shows and the associated costs.
Incentivated, a mobile marketing agency, proposed a simple SMS reminder service
for UK-based optician and helped to generate $8 mn in savings.
Operators have addressed the mobile enterprise opportunity mainly through
technological innovations such as the wireless application protocol (WAP) and
push email. This has resulted in a plethora of device specific applications with
low reliability and high integration costs. Consequently, enterprise mobility
has brought little or no productivity improvements for the average business.
Combining the reach and reliability of text messaging with the relevance of
data in enterprise applications promises a quantum leap in enterprise
productivity.
Set up a mobile marketing business: Operators can play a pivotal role in
mobile advertizing value chain. They own customer relationship and access
channels, the advertizing inventory, location information, and customer profile.
This profile includes phone number, usage behavior, demographics, and content
preferences.
Furthermore, the operator controls the main vehicle for the digital dialog:
mobile messaging. According to IAB, 95% of text messages are opened compared to
25% of emails. This puts mobile operators in a very strong position indeed when
competing for advertizing budgets.
At the same time, operators are often anxious to protect existing service
revenue streams, as it may well remain the most substantial part of their
business. To date, mobile advertizing is making slow but steady progress towards
the forecasts of becoming a $19 bn industry.
In summary, advertizing revenues will never be adequate to replace service
revenues but are a welcome supplement for operators. Mobile operators are
uniquely positioned to monetize the best advertizing inventory in the world.
Combining customer location and profile enables the delivery of unprecedented
levels of advertizing relevance and reach. By addressing the essential enablers
mentioned above, the competitive position of operators in the advertizing market
would be second to none.
The future of messaging continues to be a bright amid the negativity in the
current economic markets. Mobile operators can effectively extend their revenues
by leveraging their existing assets and exploit the potential still left in
today's mobile services, allowing them to remain agile and profitable.
Ronan Casey,
CTO, Asia Pacific, Acision
vadmail@cybermedia.co.in
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