Comments on: Will Peer-to-Peer SMS Advertising be Huge?

By: Rick Joubert

Rick Joubert — Wed, 24 Sep 2008 17:26:01 +0000

Russel, I would agree that in industrialised western markets the model has limited chance of mass adoption although may still succeed in certain niches (e.g. students)
In developing markets however there is an opportunity to allow for ad funding of telco services for the “masses” of people with low disposable incomes.
Most often these users would not have sent the SMS or made the call anyway and operators can at least extract some revnue from GSM events which then also tend to have a stimulatory impact (via the network effect).
The trick is in the shape the actual ad funded proposition takes.
It cannot simply be a regular MO SMS with ad insertion at the operator SMCS – we need to be advertising primarily to the opted-in and profiled sender to ensure a clear value exchange and also the protection of existing normal SMS revenue streams.

By: Anders Borg

Anders Borg — Sat, 20 Sep 2008 20:26:17 +0000

“cost to the consumer or revenue to the operator”

My bad. That’s for making a point with an invalid argument .

My point was that…
1. SMS revenue is SMS margin (more or less), so the SMS price could be anything, and balanced with the rest of the subscription.
2. Most operators already provide free SMSs within their own networks. No user would accept ads in those. The cat is already out…

It should be noted that such free SMSs to my knowledge can’t apply to SMS-based services, as that’s considered off-network. In other words it’s a cost for the service provider, that needs to be recouped. Ads might make sense for such services, but they would most likely not cover the cost, so some level of premium is needed to cover operator costs and of course to get some revenue.

Maybe operators should provide web services that subscribers want to use again and again (like free news feeds, directories etc, instead of the “pay for anything you see; no point coming back” policy) and advertize there. What a thought.

By: Russell Buckley

Russell Buckley — Tue, 16 Sep 2008 18:49:32 +0000

Anders – I’m talking about cost to the consumer or revenue to the operator.

Thanks everyone for your comments.

Russell

By: Anders Borg

Anders Borg — Tue, 16 Sep 2008 18:28:08 +0000

“US 10 cents to send”

You mean the operator’s cost? Hell no. There’s no noticeable per-message cost for sending SMSs for operators that have their own networks. The cost is though spread out on the very expensive equipment. It’s anyone’s guess how expensive that is, considering operators constantly improve their networks.

As someone said, completely free SMSs, when operators could charge for them, doesn’t make much sense, unless they get the revenue from elsewhere. At least in Europe it’s through long subs (18 to 24 months). It’s all about ARPU and moving over users from competing operators.

By: Chris

Chris — Mon, 15 Sep 2008 16:09:30 +0000

Great analysis as always Russell. Two thoughts 1) Long term, SMS prices will fall to compete with Mobile Instant Messaging therefore the model MAY work in 3-4 years if/when SMS stagnates because of IM. However I thought SMS would stop bloody growing this year but it keeps on edging upwards! 2) Converting the SMS to an MMS on the fly means that the operator can charge much more for the ad as it is suddenly rich and visual. But issues with recipient handset compatability and penetration (not to mention flaky MMS in general) would make this hugely difficult when selling to advertisers. I have to agree it’s a wonderful idea in concept – and one that I have longed to see in practice – but I am not sure we’ll ever see it if SMS continues to grow exponentially.

Chris, Mobext

By: hugh

hugh — Fri, 12 Sep 2008 12:50:55 +0000

The various examples are definitely niches but two related points are important…(a) each niche can be the size of the youth userbase of an entire operator (b) most of the advertising market is local or national anyway, so those are pretty big niches.

separately, Marc (comment above) misunderstands the Belgium/Sweden cases. In those cases the operator just gives away SMS without advertising. The point there is that giving away SMS is a BAD business model for operators. Ad funded SMS is a much better business model for them.

By: Steve

Steve — Fri, 12 Sep 2008 07:49:33 +0000

Another example of a working model is in South Africa where you can send a “call me back” SMS and it funded through advertising.

what is emerging though is that the ad funded P2P SMS market is for particular niches in the market and that greatly reduces the overall effectiveness.
That said, I believe the niches will indeed be successful in their own right, just not supplying untold riches.

By: Marc

Marc — Thu, 11 Sep 2008 18:43:31 +0000

I can’t stand the idea of advertiser-funded SMS, but it is inevitable. I would be interested to know how low the CTRs are in India, Belgium, Czech and Sweden compared to mobile internet. The recall rates to campaigns might by higher though, which would be ok for simple ‘broadcast’ messages.

By: Lalit

Lalit — Thu, 11 Sep 2008 16:31:54 +0000

160by2.com in India gives a free sms service supported by ads.
Their Mobile client allows p2p free sms’s. Ad supported free sms makes a very attractive business case in India where SMS cost is maximum 2.5 cents/sms.

By: Hans-Peter Kurz

Hans-Peter Kurz — Thu, 11 Sep 2008 15:29:25 +0000

Let’s stay at the above “example user” paying 10 cent /SMS, but lets change the setup: Let’s show two ads to the sender when he is pushing the send button, plus one ad inserted into the SMS shown to the receiver (the ad Russel mentions above).

For each SMS the operator gets now three Ads in his inventory – two highly targeted and interactive and one less targeted and less interactive.
If we assume an ad sales ratio of 70% we end up with app two sold ads per SMS. But as soon something is free, usually it gets used significantly more. (Did not SMS start off ten years ago because it was the “cheap alternative” compared to the expensive voice calls?) If our example user doubles his sending, our operator breaks even with a CPM of $25.

But let’s leave theory: Vodafone CZ launched such a service
http://www.frog2frog.com/news/news_eng.html#09_2007_czech

It seems to me that:
http://www.vodafone.com/start/media_relations/news/local_press_releases/czech_republic/czech_republic_press/sixty_thousand_vodafone.html

is the more profitable alternative compared to free SMS of:

Proximus Belgium
http://www.e-proximus.be/e_commerce/fiche.cfm?produit_id=46&languesite=EN

Teliasonera, Sweden
http://www.halebop.se/kontantkort/mer_om/
(Free SMS worldwide during 30 days if reload was above EUR 20)

or even
http://www.blyk.co.uk/

If I was an operator I would try to keep my SMS price at 10 cent and offer an ad funded SMS4free alternative – rather than lowering the SMSprice to e.g. three cent during the coming years.