Making Premium SMS USA Pay

In Asia, Europe, and the Middle East, many wireless subscribers swear by premium SMS services. What will make U.S. subscribers clamor for fee-based content?

In Tokyo, Yumi Shimbun relies on premium short message service (SMS) for fashion tips, horoscopes, daily news about her favorite celebrities, and help with her homework.

In the United Arab Emirates, Leila Al Zarad downloads ring tones and games to her mobile phone regularly. She also subscribes to a daily service that sends her a text alert when it's time to pray.

In London, Jane Murray credits premium SMS with helping her lose 11 pounds. Murray participated in a BBC offering that provided dieters a forum to compare the results and effects of various diet plans, in conjunction with a BBC television show called "Diet Trial." Users received daily diet tips and could interact directly with show guests.

Making SMS a Must-Have

All three women agree that their mobile phones are their "No. 1 essential tool for living," as Shimbun puts it. But tell one about the services the other two use on their phones and the response is, at best, a polite yawn.

Compelling content that is also targeted to a particular regional or consumer market is the key to making premium SMS sell well anywhere, says Forrester research fellow Lisa Pierce.

"Content that is valuable, that enhances a user's life, that provides useful information or enjoyment will be a revenue driver," she says. "But looking at, say, the Asian market for specific ideas on what will work in North America isn't a good idea. The physical infrastructure is different, consumers' interests vary widely ... all this is obvious but sometimes gets lost in the rush to deliver services."

To come up with compelling content, you have to know your customers.

Al Zarad and Shimbun say they wouldn't be interested in the sort of diet service Murray swears by. Meanwhile, Al Zarad, 22, has "absolutely no interest" in horoscopes. Murray, 24, says she very occasionally reads them in the paper. Shimbun, 18, says she and all her friends couldn't live without their SMS horoscopes.

"A lot of people subscribe to more than one horoscope service, so they have a consensus on what their day will be like," Shimbun explains. "It's a weather report for your life; you just have to have it."

The only premium mobile service all three women use regularly with equal enthusiasm are downloadable ring tones.

The Keyword Is 'Compelling'

Last May at the Consect Global Wireless Summit held in New York, providers pondered whether the American market would adopt or eschew premium SMS.

Premium SMS certainly seems like an ideal vehicle to deliver appealing content offerings. It not only enables the instant delivery of exclusive content, services, and entertainment, but it also converts a phone into a credit card of sorts, allowing users to purchase goods by dialing a number or simply pointing their phones at products or vending machines.

Enpocket, based in New York, is developing a premium SMS service that would allow users to purchase event tickets. For a moderate service fee and the cost of the ticket, an image with a bar code would be delivered to a user's phone. The bar code could then be scanned to gain entrance to the event.

Premium SMS can also allow for micropayments—sums less than a dollar—to view online content or participate in contests, polls, or other activities. Because of the associated processing fees, credit cards aren't a viable medium for these tiny transactions. By comparison, adding a 50-cent charge to a user's mobile phone bill is convenient and affordable.

"But don't assume that you need to get a cut of every single service your users access," warns Pierce. "(NTT) DoCoMo has been successful in partnering with companies offering high-value or obviously popular premium SMS services. But there are many, many offerings that DoCoMo doesn't get a percentage of. The point is that all those offerings have enhanced the value of the overall service, and that's where DoCoMo sees its profit."

The company knows when to charge, and how much, to keep customers coming back for more.

"Don't be a gatekeeper," Pierce advises. "You can't own a piece of every service you offer. Nextel is another example of a company that's doing it right."

If You Build It, Will They Pay?

But will U.S. users pay any fee for SMS content, no matter how small? In parts of Europe, the Middle East, and Asia, mobile phone subscribers quickly embraced premium SMS. But U.S. customers are currently getting used to standard text messaging, and experts at the Consect Global Wireless Summit agreed that it would behoove the industry as a whole to get premium SMS up and running now, before customers become too accustomed to getting their text for free.

"The Internet was free for so long that it's incredibly difficult now to add a fee structure to content," says Okinawa-based Internet business analyst Hidero Hokai. "Even in Japan, people will not pay for Internet content that they access over their computer, but are happy to pay for the same content when viewed on their phone screens. No one here ever got used to receiving free premium content on their phone."

According to the Shosteck Group, a consulting firm, the average premium text message could generate as much as 6 to 10 times the revenue of a standard text message. In a June 2003 study, Shosteck analysts predicted that premium SMS will account for about 12 percent of gross revenue from non-voice services by 2007, particularly for GSM operators in Europe and Asia.

Virtually every industry analyst agrees that premium SMS will be the next big thing—assuming carriers, solutions vendors, and content developers team up to create quick and easy ways to access targeted, useful, irresistible products and services.

Forrester's Pierce concludes: "The big question is not whether customers will pay for content, but whether they will pay for the content that's offered."

Article taken from: http://www.sun.com/br/comms_1021/feature_sms.html

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