Per-message fees may kill the business model for SMS and MMS-based marketing, concluded a panel at the CTIA Wireless 2009 Mobile Life conference.
24% of consumers who have received an mobile-based offer respond to such messages, according to a July survey by the Direct Marketing Association.
Given that more than 2.6 billion text messages are sent every day in the US, mobile boasts the broadest reach of any mobile channel.
Text messages are also the most effective: 70% of consumers that responded to a mobile marketing offer responded to a text message, compared with 41% who responded to a survey and 30% to email offers, the survey found.
Still, many consumers are held back by price (see chart). Marketers, too, have to consider the potentially high cost of sending text messages. Advertisers and aggregators don't find the messaging business model viable, panelists said - and they are hesitating mostly because of the per-message fees.
"The net revenue per message for advertising-supported SMS is $0.004," explained David Oberholzer, vice president of Limbo. "The model isn't completely solid, and it's unrealistic to think the CPMs we’ll be able to charge will go up dramatically."
Carriers have not done much to support the growth of the mobile marketing channel, the panelists said. One of the only breaks they've received has been from Verizon Wireless, which told SMS aggregators it will not impose an additional 3-cent transaction fee for every outbound SMS message sent to its subscriber base, preventing the cost from doubling or even tripling.
Among all of the messaging types - SMS, XHTML, optimized XHTML, iPhone-specific messaging and XMPP - companies are still struggling to make sending messages profitable and scalable, reports Mobile Marketer.
"We don’t want to drive billions of messages and get a billion dollar invoice and $100 in revenue," said Chip Canter, vice president of wireless platform development for NBC Universal. "That's a fundamental issue in terms of investment, because we cannot make that investment if there's uncapped liability on wholesale pricing."
It is also difficult to sell SMS advertising because messaging is not plugged into its ad infrastructure (DART), and it has to be able to integrate into other media.
Other panelists agreed. "SMS is great when you weave it in as part of your overall mix, but it’s not incredibly exciting as a stand-alone," said Eric Harber, president/COO of HipCricket, which said some of their larger brands, Jameson and Nestle, are increasing their investment in mobile this year.
If you think of a pyramid - the bottom foundation layer is SMS, because it has the broadest possible reach and you don’t have to change behavior because they’re already doing it, he added. Then layer the mobile Web or WAP on top, for richer engagement, then on the very top rich customized apps.
Brands still have to figure out how to purchase advertisements within messaging - it's still too hard to buy today. To be most effective, brands also have to be able to quickly provision short codes, which today takes months.
But in the long run, mobile marketing will progress faster than the internet, some panelists noted. Mobile analytics are able to show and demonstrate ROI, which is super important, Harber said.
