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SMS hot amidst slowdown

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CIOL Bureau
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INDIA: 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, 80per cent 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 25per cent mark.

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On the contrary, text messaging is not showing any signs of slowing down. In May 2008, Ovum predicted an increase of 60per cent 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.

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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 15per cent 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.

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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.

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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, 5.5per cent 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.

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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.

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Furthermore, the operator controls the main vehicle for the digital dialog: mobile messaging. According to IAB, 95per cent of text messages are opened compared to 25per cent 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.

(The author is CTO, Asia Pacific, Acision)

 

 

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