Is SMS dead?

Two weeks ago Google shut off its free SMS platform to 3rd parties (the one that powered Infinite SMS on the iphone). Days earlier Google had also shut down Dodgeball, the SMS powered location based social app. One might conclude from this that the services were unpopular. Instead, the real problem was just the opposite; and the fact that Google was paying for each tiny message.

Unfortunately, unlike with most technologies, when it comes to SMS the marginal costs do not necessarily shrink with higher usage. This economic problem is caused by the operators (outside of the US) and SMS aggregators (in the US) who can afford to demand applications to pay a price for reaching their subscribers.

With the rise of new open platforms the current SMS model will begin to deteriorate. Platforms such as the iPhone are paving the way for other means to reach users without having to pay a toll to the operator or aggregators. Another important trend is the growing popularity of flat data plans. These are gradually being adopted and marketed by operators to expand their more advanced premium services and content (ah, the irony).

But getting real... there is still a long way to go.

Today SMS is still the optimal way to reach a really wide mobile audience. In the US for example, mobile users with data plans who are able to reach their favorite applications via mobile web are just about 60 million. In contrast, almost all mobile users (over 200 million of them) can be reached via SMS. This gap is even greater in emerging markets, where Mobile Web penetration can be as low as 3%, while SMS is over 90%.

So to answer the question... it's getting closer and closer, but it has a long while to go.

Going Mobile the Easy Way

You can build your mobile web site, iphone application, and what not... But at the end of the day in order to reach the masses you will still need SMS.

The bad news is that it is a royal pain in the a##. In the US you are looking to pay a monthly fee for your shortcode (~1K), plus an aggregator set up fee (~2K+), and if you want your users not to pay a premium fee to stay connected, you have to pay for the messages yourself (anywhere from 2 - 5 cents per message). You can also expect anywhere from 2 to 3 months before the operators approve your campaing.

There are a few answers to this problem:

One way is to charge your users. Don't expect the majority to sign up for your service, though.

You can also subsidize via text based advertising. The problem is that there aren't enough advertisers who are pumping cash into this form of advertising yet. Companies that you can connect to are 4INFO or Textmarks.

The solution: outsource your integration and DON'T try to build it yourself! A few companies have already have gone through the troubles described above and expose API's that should make it easy for you to integrate. One such company is Unwired Nation. Some of Unwired Nation's customers boast a 3-4 week time period to get up and running. Other successful companies such as 3jam have gone through this trouble at a global scale. They might just be willing to allow your company to integrate into their network and leverage their relationships with aggregators and operators all over the globe.

The Long Tail: A Glimmer of Hope for Premium SMS

In a matter of just a few years premium content over SMS grew from nothing to a multi-billion dollar industry. In the US this growth has been losing momentum in the past year and a half. This would not come as a big surprise if it weren’t for the fact that in the rest of the world PSMS continues to grow.

The problem in the US could perhaps be attributed to the shortsightedness of some content providers who, so intent on making easy money, consistently delivered a poor and, in some cases, even deceptive user experience. Or perhaps the mobile operators are to blame for discouraging investment by content providers as a result of imposing controls that not only are demanding on content providers, but that also stifle user adoption.

From where I see it, however, where there is easy money there is little innovation. Many mobile content providers have settled for delivering the same user experience over and over again. The common recipe is a combination of uninspiring Web sites, cheap late night TV ads, and itty bitty print terms of service. So I’d be willing to bet that consumers also got bored, and smarter.

This is why it is so refreshing to see content providers delivering innovative ways to spread the adoption of mobile premium content. And more importantly, for delegating the discovery to parties better positioned to deliver a relevant and compelling user experience.

ThumbPlay’s Open Marketplace provides all the tools any independent Web publisher would need to distribute ThumbPlay’s vast library of digital content. By doing so distributors can partake in the revenue. Integration of the set of APIs and feeds promises to be not only easy, but also to provide a set of rich tracking and optimization tools.

Open Marketplace also allows independent artists and content creators to submit their content for distribution

Following this trend, FunMobility also announced MoMoney. MoMoney is a widget that allows any Web site or independent publisher to provide a storefront for mobile content by embedding simple code on their Web property.

I expect this is just the beginning of a trend that may result in users becoming more receptive to this type of product. When offered within the context of something else, these products should be less perceived as a hard sale. Another benefit could be that the cost of user acquisition will be reduced as these Web publishers already have a captive audience.

However, in order for this model to work well these content providers must ensure that the end user experience is preserved. Systems and processes for completing the transaction, splitting the revenue, reconciling, and reporting must be well implemented and supported.

If this model works it could mean a turn of tides for the troubled Premium SMS space.

Simple Wins, Especially in Mobile

In past posts I have ranted about the challenges of developing applications in the mobile space: the closeness of various platorms, the fragmentation of devices (ranging from hardware to operating systems to development platforms, and even to applications, such as browsers).

Today, even as I anticipate the blossoming of open platforms, I still strongly recommend SMS as the simplest and fastest way to reach mobile users. This is why I was ever so delighted to see that TechCrunch's first "Best Mobile Start Up" Crunchies award went to Twitter. I am a huge proponent of Web meets Mobile services; in a not so far future all applications will fall under this category.

It is true that Twitter is more than a mobile application; it integrates many communication mediums. But when it comes to taking the best it has to offer, its simplicity, and taking it to the next level by integrating mobility, Twitter is still one of the best examples I can think of.

In the Spirit of the New Year: Mobile Awareness

My first post of 2008 goes out to RareEarthTones. Unlike the vast majority of mobile content providers, RareEarthTones is leveraging the most ubiquitous access technology to promote awareness about endangered species. It does so by offering FREE ringtones featuring the sounds of animals at the brink of extintion.

I tried it on my Verizon phone and it worked like a charm.

This is truly liberating. The economics of SMS are very unlike the Internet. There is a considerable cost that the Center for Biological Diversity (or some very generous donor) must be incurring. I cannot think of a better purpose!

>play's "Beyond Mobile 2.0"

I attended the UC Berkeley Digital Media and Entertainment >play Conference this past Saturday. The mobile panel focused around a somewhat vague, yet interesting topic: “Beyond Mobile 2.0”. The panel consisted of Steve Lee, Product Manager at Google Mobile, Tico Ballagas from Nokia, Jeff Sellinger, VP of Mobile at CBS, Rick Robinson, VP Products and Services at XOHM/Sprint, Evan Tana, Director of Product Marketing at Loopt, and moderated by Mike Rowehl of Sillicon Valley’s Mobile Monday, and AdMob’s tech dude. Some of the predominant themes were:

Location:

The most heard theme was: LBS is the key to providing targeted content.

According to Rick Robinson, the biggest problem with adoption today is the lack of privacy. However, I would agree with Evan’s response that the privacy control tools are in place today, so the biggest challenge is education (of consumers about these controls).

On Future of paid on deck applications:

According to Steve and Evan, both Google and Loopt get the whole ‘playing with carriers’ deal today, but believe the market is slowly moving to a more open environment. Nokia truly believes this, which was clear by Tico’s constant reminder that Nokia is evolving into a services company. Proof of this is the company’s launch of Ovi and late acquisitions (Navteq, Enpocket, Twango, and Loudeye). Rick Robinson from Xohm went as far as saying that "Xohm will tear down this wall..." (BIG statement!), but will still provide an on-deck expericence that is customized for the device.

Interoperability of different technologies:

The best description of what a rich end user experience might be was Jeff Sellinger’s. This would call for an interactive behavior between the different applications that exist on the mobile device. Jeff said it would be great to be able to tie SMS/MMS with WAP and Location. I would add streaming video and interactive gaming to this fabulous equation.

Limitations in the U.S.:

* Limited MMS support by U.S. carriers was the top item

* Absence of unlimited data plans, as in Europe, was mentioned repeatedly as a roadblock for user adoption

* Pervasive broadband (both availability and adoption) was mentioned a few times as an issue
Device fragmentation, specifically with browsers, was also mentioned as "old" but never ending "news"

Consumers should not have to pay

As a follow up to my previous post, here is a good example of how working with U.S. carriers to develop new economic models can create opportunities for growth in the mobile econsystem.

mBlox, Inc. is making inroads with U.S. carriers to make SMS free for end consumers. Why would carriers care to lend an ear to this seemingly ludicrous proposal? And who will pay for these messages?

Today when you receive an alert from your favorite Web application, such as Twitter, your carrier collects money from you for the delivery of the message. On the other hand, your carrier does NOT charge a fee to the aggregator who delivered the message to it, nor to Twitter for delivering you your message.

mBlox’ proposition is that by removing the charge to the end user will drive more user adoption of messaging applications. In other parts of the world the model has been proven to work better for the players in the ecosystem, beginning with end consumers. In Europe the amount of traffic for simple mobile terminated messages by far exceeds that of premium content (e.g., ringtones, wall papers).

The most interesting part of the proposition is that the carriers would receive a bigger payout for each individual message. This is due to the higher willingness to pay that exists in specialized services and applications, where the ability to send a message to an end user signifies a cost saving. Examples are financial institutions and brands, which otherwise have to invest significantly to reach consumers through other means; and which, presumably, should be willing to pay for the ability to make messages received by end users feel less intrusive.

Google Navigator

I pay $4.99 per month for Verizon Wireless's VZNavigator. VZNavigator is a Brew based LBS applications that gives turn by turn directions, local directories, maps. VZNavigator has gotten me out of many a hairy situation. The past few times I have used the application, however, I get a sporadic error telling me it is unnable to retrieve the directions I have requested.

When this happened to me today, I decided to try Google's SMS directions. I sent "directions from (my work address) to (graphing social paterns conference address)" to the short code 46645 (GOOGL). Within 30 seconds I received three messages including the turn by turn directions. So while I didn't have a friendly voice dictating to me where to turn, nor access to a map, I was able to get to my destination just fine. I must admit it is pretty tempting to want to save myself $5/month going forward... Especially when it takes almost the same amount of time and effort to type the directions request onto the SMS message, than to navigate through the device's convoluted menus to get to VZNavigator.