Premium text messaging is now a reality in the United States-essentially creating a new market in the U.S. wireless industry.
Most of the nation’s wireless carriers have installed the necessary billing and management systems to offer the service-including all of the nationwide operators-and already a handful of technology and media companies have offered premium-messaging campaigns. Indeed, the market could grow into one of the main components of the consumer wireless data industry.
“Everyone has been looking for a killer app. This is a killer business model,” said Steinar Svalesen, chief executive officer of premium-messaging company Telenor Mobile Interactive USA.
Although premium text messaging uses perhaps the simplest of all wireless data technologies-short message service-it gives rise to a wide range of business models and services. The reason is that premium messaging covers two key basics: it holds the promise of revenue for third-party players, and most of the nation’s 150 million mobile-phone subscribers can use it.
Premium text messaging is just that-a service that delivers content through text messages priced at a premium. One of the most ambitious premium-messaging campaigns to date involves Fox TV’s new “Joe Millionaire” reality dating show, and offers a clear example of how the service works.
During commercial breaks, “Joe Millionaire” viewers are encouraged to sign up for exclusive wireless content under a campaign called Joe 2 Go. Viewers can sign up for the content-and thus register for the premium services-by sending the text message “Joe” to the Fox short code, 36988 (FOXTV). The advertisements for the service include the note that “premium fees apply.”
After sending the message to the Fox short code, viewers then receive a text message confirming their interest in the service. The reply message asks viewers if they wish to sign up for Joe 2 Go content for $3, plus standard messaging rates. Viewers who reply with the message “yes” then have their account billed and are enrolled in the premium-messaging service. The text-based Joe 2 Go service offers exclusive tidbits about the show as well as text-based games, polls and show information. The content is delivered in a series of text messages throughout the course of the show, and users can stop the flow of messages by sending the word “end” to the same Fox short code. Most wireless carriers charge 10 cents to send a text message, and some charge a few cents to receive a message.
“This is where things are going now,” said Brian Levin, chief executive officer of Mobliss Inc., the technology company behind the Joe 2 Go offering.
Although Joe 2 Go works through a short code, short codes aren’t required for all premium-messaging services. However, many in the industry agree short codes are the most effective method for registering users to premium services. Also, premium text messaging does not necessarily have to involve third-party content or cross-carrier messaging access. For example, AT&T Wireless Services Inc. in May announced a text-messaging-based directory-assistance service, allowing its subscribers access to phone numbers, business locations and driving directions. The service cost 40 cents per listing, delivered as a text message, and an additional 50 cents for driving directions.
Further, Joe 2 Go is an example of just one possible premium-messaging business model-although it is so far the most popular. Joe 2 Go falls under the interactive TV segment of premium messaging, which allows TV viewers access and information through their mobile phones. Most premium TV campaigns involve voting for reality-show participants. According to the Shosteck Group, European operator MmO2 offered a premium voting campaign for the United Kingdom TV show “Big Brother,” and scored $3.3 million in premium revenues. Telenor Mobile recently conducted a similar premium voting campaign in the United States for ABC Daytime TV’s “All My Children.” Each vote cost 50 cents, and Telenor said viewers cast more than 2.5 million wireless and online votes. Other premium-messaging business models involve delivering information like news and weather or marketing campaigns conducted by consumer goods companies.
Premium messaging also can be used as a vehicle to deliver content beyond text messages. After a user agrees to pay a premium-messaging fee, content owners then could send ring tones or graphics to the user’s phone. Premium messages can even include Internet links, which would direct users to a downloadable Java game or other advanced content.
One of the key aspects of premium messaging is that it encourages third-party content through revenue-sharing agreements. According to the Shosteck Group, a typical revenue-sharing deal sees the carrier scoring about 40 percent of the revenues, the content owner (like Fox TV) earning 25 percent, the service provider (like Mobliss) getting 15 percent and the rest going toward taxes. Some have said WAP failed in large part due to the lack of revenue-sharing agreements; carriers typically keep all the associated WAP browsing revenues.
Another key aspect of premium messaging is that most mobile-phone users can do it. Text messaging is the most widely deployed mobile-phone data technology-around 80-90 percent of the nation’s phone users are able to send a text message, and virtually all new phones sold are capable of text messaging. Conversely, only about 40 percent of U.S. users can access the wireless Internet through their phones, according to J.D. Power and Associates, and an even smaller number have access to Java and BREW applications.
The rise of premium messaging in the United States follows the solid successes of premium-messaging services in Europe and Asia. In the United Kingdom alone, the Shosteck Group estimates premium messaging will generate up to $121 million in revenues this year. Interestingly, the firm said premium messages will account for less than 1 percent of all text messages in the United Kingdom this year-the vast majority will be messages sent to and from mobile-phone users.
As premium messaging begins to gain more steam in the United States, several wireless players are looking to take advantage of the market. Mobliss, Telenor Mobile, M-Qube Inc., mBlox and Mobileway are just a few of the major players. These companies essentially are looking to be the glue between wireless carriers and media companies like Fox.
“Initially, we’ve focused very much on (interactive) TV,” said Telenor’s Svalesen. “In order to drive revenues, we need to educate consumers … and I think TV is the preferred medium.”
Svalesen said Telenor benefits from its experience in Europe, the birthplace of premium messaging. In the United States, he said the company will first work with TV channels to introduce premium-messaging campaigns and voting services. Early next year, Svalesen said, Telenor plans to expand with the launch of a marketing service for major advertising brands that are looking to offer wireless services.
Although the U.S. premium-messaging market is still in its infancy, some already are calling for caution in the market. During the recent CTIA Wireless IT show in Las Vegas, mBlox chief executive Andrew Bud called for self-imposed industry regulations to ensure the future of the premium-messaging market. Indeed, in Europe premium messaging is already regulated by various government agencies.
Bud argued that premium messaging could give rise to unwanted wireless spam, or that users could get burned by unclear pricing schemes. In Europe, premium messaging is even used to deliver adult content, thus bringing up major child-protection concerns. Bud said the Mobile Entertainment Forum and the Cellular Telecommunications & Internet Association should develop industrywide guidelines for the service.
