It's Time to Tell the Carriers to Wake Up (In 160 Characters or Less)

Increased SMS Fees Will Stifle Mobile Marketing Growth

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Craig Daitch Craig Daitch also writes the blog Thought Industry.
I've been a staunch critic of how the U.S. telecom carriers have handled their SMS-based programs. From charging exorbitant, recurring short-code-registration fees to the lack of internal infrastructure to support quick and timely campaign approvals, the SMS industry has yet to deliver on its promises as a stand-alone marketing channel.

The greatest offense to date however, transpired last Wednesday when blog sites reported that SMS aggregator Open Market had sent letters to its customers informing them that Verizon was in the process of doubling, even tripling, their rates per message.

What does this mean to marketers? A number of things:

  • SMS aggregators may simply decide to discontinue their relationships with Verizon, which subsequently limits reach.
    The fact that a mobile campaign in this scenario would exclude roughly 30 million subscribers sends a message to brands. To quote a former client of mine, "Nobody likes to be excluded from offers, Craig."

    And that client is absolutely correct. When you can only sell in a value proposition to three-fourths of an industry's 260 million subscriber base, you've got a problem.

  • Verizon really doesn't want you to cultivate "off deck" applications.
    Earlier this year Verizon announced it would become an open platform, where outside applications can coexist in harmony with the status quo "on deck" applications (those that run on the device). What it fails to mention, however, is that in a world of 300% SMS rate hikes, the increase in fees to send your application to Verizon subscribers eats even further into the margins of the revenue-sharing agreement you have with carriers.

  • Some of your favorite applications will disappear if you're a Verizon customer.
    Are you a fan of Twitter? Do you enjoy receiving alerts from friends via your mobile device? Well if you're a Verizon customer, kiss those goodbye. Talk about an increase in burn rate! There's already an example of this: Twitter stopped offering SMS service in the U.K. because the costs were apparently $1,000/year for 250 messages per week per user.

    What if you're not Twitter and don't have an infusion of capital to mitigate your burn rate? Many large SMS power users are on unlimited flat-rate message plans. For $10,000 a month for instance, they can send unlimited traffic. No longer. Now they may be on the hook for $.03 per message. You get the idea.

  • Other carriers may soon follow.
    This is only speculative, but don't think other carriers are ignoring what's transpiring. If the rate hike goes through and SMS traffic isn't impacted, they too will want to get in on the incremental changes in costs.

  • E-mail/HTTP will become the new mobile gateway ... again.
    HTTP posting, or sending a text from a PC internet site, will again become a popular mode of sending SMS messages. The same website you may use from your carrier's homepage to send a text to a friend is the same one used by many offshore SMS services to send low-cost messages. It's unreliable, but it will get the job done when you need to send a message from an application to a mobile device.

    Additionally, SMTP (better known as e-mail) has its disadvantages, especially when sent directly to the phone, whose gateways have spam and traffic filters, which prevent high-volume usage from a single IP address and make it a difficult platform for mass distribution. Times have changed and the latency and formatting issues that previously plagued e-mail-to-phone gateways are relatively stable. If you have a database of consumer opt-ins who have agreed to receive your company's services/information to their cellphones, this is an easy, low-cost, acceptable medium.

It continues to amaze me just how short-sighted the leaders of the telecom industry can be. More than 82% of Americans, roughly 250 million people, have mobile subscriptions. You leave your house every day with three things: keys, wallet and mobile phone, and virtually every phone produced today can receive SMS messages.

Yet if I search, the sole destination for procuring short codes, there are still hundreds of vanity codes available. Their equivalent in web-based URLs would be snatched up in seconds if unregistered.

So to my friends at the carrier level, I beg of you -- before you make a catastrophic decision to turn away the evangelists of the mobile marketing industry -- to fight the temptation to raise prices and work diligently to approve more campaigns quickly.

I can understand the level of scale necessary in human power to support and manage the growth of mobile marketing campaigns, but I can't understand and refuse to support an industry that remains steadfast in its decision to prohibit growth.
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