So here’s my attempt at a wooden stake through the heart. I know my stake won’t work. I know entrepreneurs will keep trying it. But this is at least a reference point I can point them to, rather than re-stating the same arguments again and again and again.

By the way, the reason I know this is because I’ve also been sucked in to this kind of thinking. So it’s the voice of experience, rather than my little pet theory.

Just to set the context here, I’m specifically talking about Permission Based Marketing (PBM), though the points may well apply to other models too.

1. You don’t need to

If you think citizens need paying to see advertising, you’re on the wrong track. It’s the wrong way of thinking about the messages you’ll be sending out.

Instead, you need to think about the content in the same way as an editor of an old skool newspaper thinks about her editorial. Will this be of interest to the reader? Will it add value to their lives? Will it be welcomed as part of the ongoing communication? If you can honestly answer “yes” to this, you can send it. if it doesn’t pass this test, don’t. Simple as that.

5 years ago, I wrote a post about what constitutes value and it’s probably worth a look if you’re interested in this area. But the basic point was that adding value was about providing the user with an IDEA – or Information, Deals, Engagement or Advertainment. More detail in the original post or in my White Paper on LBS, which I’ll send you if you email me russell AT mobhappy DOT com.

2. The Consumer Won’t Earn Enough

Once you start crunching through the numbers, no matter how you slice and dice it, it’s hard to find a scenario that earns a person a (very) maximum of $10 a month. Why? Because advertising is about scale. You have to deliver ads in very large volumes to make money or earn money.

Let’s do some basic maths. If you charge the advertiser $50 CPM (by the way – approximately 5 times the going rate) and give say 10% of that to the consumer, that would seem reasonable, right? So, every 1000 ads the consumer sees, earns them $5, which equates to 2000 in a month to earn $10.

Don’t forget we’re talking PBM here, so that’s 2000 messages (think SMS or email) over a month or 66 a day. It’s just not going to work.

Now, people will say. Yes, but this is a new form of marketing. It’s post-advertising advertising. Maybe it is, but with inflated cost you get minimal advertisements to sell, which means the consumer earns less than ever.

Of course, I can’t cover every scenario here. It maybe that providing the value in some other form of currency with a high perceived cost, but low actual cost is possible. But if you heed my first point above, you don’t need to worry about this element at all.

3. Contingent Liability

When you issue your user the right to claim money from you, from an accounting perspective (this may depend on where you’re based), you have to make provision on your balance sheet that you will pay them. Even when it’s perfectly clear (like 5 years later) that you won’t be paying them.

This can create a huge liability for a small business, hogging increasingly large amounts of precious cash.

Of course, there are ways to get round this, like having an expiry date, but this makes it less attractive for the consumer. Back to Point 1 again.

4. The Wrong Users

If you do pay people and they are really doing it to get their grubby little hands on $10 a month, how attractive do you think this audience is going to be to an advertiser? If they really need money that badly, are they going to be able to afford anything that the advertiser wants to sell?

Even if they really are a great audience, you’re going to find it hard to overcome this widely held belief among agencies, especially. It’s just another reason not to try your groovy channel out.

5. The Nick Syndrome

Apologies if you’ve read this little story before.

I had a friend I shall call Nick, because that’s his name. When he gets very drunk and happens to be in a restaurant, he calls the waiter over and asks for 15 eggs and 15 wine glasses. The bemused waiter normally brings them and Nick spends about 20 minutes building a complicated pyramid of eggs and glasses. By this time, most of the restaurant are watching in suspense.

Nick then announces that he’s going to pull the table cloth out and all the eggs will break and fall neatly into their corresponding glasses. The suspense is palpable as it would be truly amazing if he managed to pull this trick off. With much theatre, Nicks grasps the table cloth, (even the kitchen staff are watching now) and with a flourish, he yanks it hard.

Glasses and egg fly everywhere, coating the immediate vicinity in broken glass and yolk. It’s also noticeable that not one egg has broken cleanly into one glass. The restaurant is hushed in shock and Nick stares at the wreckage. He then shakes his head and says, after a 4 second pause:

“It never works….”

Paying consumers doesn’t either.

Happy for a startup out there to prove me wrong and maybe it is possible. But I doubt it.

Have a look.

A couple of interesting things to note.

Firstly, there’s a big shout out to Twitter “233,000 people just Twittered on Twitter and 26 percent of you have no idea what that means.” The fact that it’s featured in a prime time TV campaign really does indicate that Twitter has truly gone mainstream. As do the facts – that’s a lot of tweeting if 233,000 people are typically using twitter on Sprint and that, by implication, 74% of people do know what twittering actually is. I wonder if it’s a throw-away guess or if it’s really representative?

Secondly, it doesn’t set out to do this, but it does illustrate quite how powerful an operator could be if it could ever harness all this information in realtime and make it available to marketers in a seamless and useful experience. If all these people are say, researching restaurants in the back of New York cabs, advertising certainly has a valuable role in helping them find what they’re looking for.

Fast forward to 2008, and the Rabbit history lesson is still useful, what with the launch of mobile VoIP services that work only over Wi-Fi, or even with services calling themselves “mobile” phone networks. Check out UK01, which bills itself as “the UK’s 6th mobile phone network.” The company behind UK01 won one of the low-power GSM licenses offered by Ofcom last year, so they’re rolling out their picocells on “hundreds of payphone kiosks”. Interesting, right?

Give a spotter’s badge to Patrick at SMS Text News, who noticed an important detail on the site’s instructions page: “When you leave the UK01 location simply change SIM cards.” Meaning put the SIM from your real operator back into your phone. UK01 does give you a number so people can call you, but that call will only go through if you’re in range of one of their picocells (the site doesn’t give any indication where they are, by the way) and have the SIM in. Otherwise, it’s voicemail.

Sound familiar?

(Also, yes, I did notice that UK01′s site is at http://uk01.mobi, and it doesn’t seem to serve up mobile content if you visit it from a handset browser, and it of course fails the ready.mobi test. And yes, I thought that thing was supposed to be against the rules of .mobi, as it sort of undermines the whole position that when people see a .mobi site, they know it’s for their mobile phone, and so on…)

China Mobile, Japan’s Softbank and Vodafone have agreed to establish a Joint Innovation Lab (JIL) to promote the development of new mobile technologies, applications and services. The three companies expect the initiative will help to accelerate the commercial deployment of mobile internet services.

The JIL will launch projects based on emerging technologies and market demand.

The JIL will focus on the rapidly growing areas of mobile internet services, such as mobile widgets. Initially, the JIL plans to develop a platform for mobile widgets to encourage the development of innovative new services that can leverage mobile operators’ unique capabilities.

Vodafone: 200m or so subs. China Mobile: 400m or so. Given that there are already scads of mobile widget platforms out there, why is there a need for another? Because none of the existing ones were developed by operators? The implication here is that operators control innovation — they get to decide where it happens, who can innovate, and what. Plus ça change…

But hey, WIDGETS WIDGETS WIDGETS! Right?

I set MH up on Mippin with the Mippin Maker a few moments ago. It took me about 5 minutes — all I needed to do was upload a banner graphic, pick a site name and some colors, then fill in our AdMob ID, and boom, it’s done. If you have a site with an Atom or RSS, feed, head on over and get things going. Chances are somebody’s already looking at your site with Mippin anyway, so you’ve got nothing to lose. And if you want to see MobHappy on Mippin, you can visit mippin.com/mobhappy.

With more wireless competition looming, executives at Telus Corp. are believed to be mulling a pricey swap of the firm’s network technology in a bid to offer subscribers a bigger selection of mobile devices and grab a larger slice of lucrative international roaming fees.

In the wireless equivalent of moving from Betamax to VHS, Telus executives are considering adopting new technology “as early as this year,” industry sources say… The idea “has been presented at the board level and is being actively considered,” said one source familiar with the situation who asked not to be identified. The source cautioned that there were no guarantees Telus will go ahead with a changeover, which analysts say could cost about $500 million.

A number of CDMA operators worldwide have been switching to the GSM camp the last few years, including Brazil’s Vivo and Reliance in India. Meanwhile Korean operators SK Telecom and KTF have shifted their focus to WCDMA and HSDPA, and Verizon Wireless, the biggest operator in the US, has said it will use LTE (a product of the GSM world), for its next-generation network, rather than Qualcomm’s UMB technology.

What’s driving these changes? A desire for more competitive handset and network equipment pricing, for starters. But perhaps the perception of Qualcomm, and its position as the single standard-setter for CDMA technologies, isn’t helping matters either.

Interesting trend to watch, this one.

But perhaps the bigger angle here is that it shows Nokia is doing what it takes to avoid another huge battle with operators — a la Club Nokia earlier this decade. The Vodafone announcement talks about integrated services, meaning that the Nokia devices that go through Vodafone channels will have built-in links to both Ovi and Vodafone’s competing services. It also says that Vodafone will get a number of exclusive Nokia handsets, a useful tool for it to grab subscribers.

The real key, though: as in the Telefonica deal, billing integration gets mentioned, and a Vodafone exec says that the companies will share some revenues. It’s notable that Nokia’s decided it’s okay to pass some of the revenues on to the operators; but it’s also evident that the operators are providing some value beyond simple access to their subscribers — and that may be one of the first signs of the smart-pipe strategy that outsiders have been banging on about for a long time taking hold. At first glance, this just sounds like A Big Deal for Nokia and Ovi, but it could portend something more disruptive, should operators like Vodafone worry less about owning the entire experience, and more about adding value in ways that justify compensation.

Update: Forgot to mention this as well: it looks like Sony Ericsson is trying something of an Ovi of its own, by expanding its PlayNow content storefront to include music and other services.

Like O2 in the UK, T-Mobile says it will spend a bunch of money deploying EDGE across its network, despite its huge investment in 3G and its current rollout of 7.2 Mbps HSDPA. Nevertheless, it’s forced to try and defend El Jobso’s skewed worldview about 3G, battery life and Wi-Fi, so it trots out this gem:

By the end of 2007, T-Mobile will be the only network operator in Germany to offer EDGE throughout its entire GSM network. EDGE accelerates the mobile data transfer rate to over 220 Kilobits per second, which makes it almost four times as fast as ISDN in fixed-line networks.

Four times as fast as ISDN? Seriously? The company’s launching a leading-edge HSDPA network, yet thanks to Apple’s technical indifference or incompetence, they’re forced to act like being faster than dialup is something wonderful. No word on whether T-Mobile’s CEO is now wearing black turtlenecks as well.

Back in January, one of my predictions for 2007 was that more flat-rate data plans would emerge in Europe, and I was optimistic that they’d be affordable. In the UK, both Orange and Vodafone recently announced new data tariffs that show a slow start down this path, at least at first glance.

Orange postpaid customers can get unlimited browsing for 8 pounds a month, while prepay users can get a week’s worth for 5 pounds. Vodafone’s new tariff slashes data prices to £1 a day for 15 MB. Sounds great!

Until you get to the *, friend of shifty data tariffs everywhere. For Orange, the biggest * is that you get unlimited “browsing”, not internet access. They’ve explicitly forbidden VoIP, P2P, “non Orange internet based video” and even IM. There’s a * after unlimited, since it apparently means up to 1 GB for Orange. Vodafone has plenty of *s of its own, too. If a user goes over the 15 megs, they’re billed at £2/MB. Vodafone says you can’t use VoIP or “Peer-to-Peer services”, which it says includes instant messenger services, text messaging clients and file sharing. If you do, you get billed at £2/MB with a minimum of 5p per session (a fee no doubt designed to eliminate the cost advantage of IM and third-party SMS services).

Plenty of questions abound — is checking your email included in Orange’s definition of “browsing” if you use an email client or an app like Gmail for mobile, rather than via a web page? How is Vodafone’s tariff any simpler than just a flat per-MB charge? And how can users track their usage?

Obviously something’s driving these significant, if rather unsatisfying, changes from Orange and Vodafone. What seems likely, though, is that they’ll just end up intensifying attention on other operators’ data plans — and driving them to the likes of T-Mobile and 3, whose tariffs tend to be cheaper and/or less restrictive. While it’s nice to see prices come down, it’s still endlessly frustrating to see operators make these tariffs so much more complex than they need to be. All these *s and restrictions do — even if they don’t really affect that many users — is lead users to churn. One argument against flat-rate data is that they encourage usage, but put a ceiling on revenues. While that’s true, you would imagine that having a customer pay you £5 per month for data on top of a voice plan would be preferable to them churning to another operator and paying you £0 per month.

(No, I don’t have any idea what the image at the top is about, I’m just borrowing it from Vodafone’s site. Any ideas about what the picture of the nice lady has to do with data pricing can be written on the back of a postcard and sent to the usual address. I’m guessing it’s intentionally nonsensical — sort of like data tariffs.)

The fuss is mainly being kicked up by Truphone, providers of the type of VoIP service that can’t run on a Vodafone or Orange N95. Its CEO told El Reg he’ll complain to British telecoms regulators, and accused the operators of contravening European laws.

I’m not quite sure what to make of the situation, and I’ve got some conflicting feelings about things, so let’s try to make some sense of it, then tell me where I’ve gone wrong (or gotten it right) in the comments.

Operators blocking this sort of thing is stupid. But if that sort of stupidity were illegal, the operators would be in jail already. It’s rather pointless to block this stuff, because all it’s going to do in the end is piss off some users. At this point, there aren’t enough people using, or even aware of, these services for any revenue loss to be a concern. Second, the people trying to use these things are savvy users who, if they can’t do something on one operator, will just churn to another — and how is that preventing “lost” revenues? Third, if people want to make cheaper calls, they’re going to do it one way or another. If it’s not VoIP, they’ll use a landline, or a calling card, or a callback service. (More along these lines from Dean Bubley.)

Truphone obviously isn’t a disinterested party. Their agenda here is pretty clear: if all compatible phones have the software required to use their service removed by operators, it’s going to make life pretty difficult for them. So, they whip up a frenzy about the big, bad operators’ anti-consumer policies, and even if they don’t get the operators to change their ways, they’ve gotten a ton of free marketing — even if this particular issue affects only a handful of users. (Keith McMahon has some more talk about Truphone and the size of its market.)

All that said, if operators want to remove the VoIP capabilities, let them. As I said above, it’s a move that will backfire in the end. But at the same time, I can understand how they’d see a company like Truphone as leeching off the subsidies they pay out on mobile devices. These companies depend on operator subsidies to get high-end devices which can access their services into the hands of potential customers cheaply — and then they want to sell a service that directly competes with the operators’ core offering. That would probably upset me, too — though my reaction wouldn’t be to try and block their services. To suggest that operators shouldn’t be allowed to determine what’s included on or left off the handsets they sell will hasten the end of operator subsidies. And as much as people love to get worked up about operators “crippling” devices, they love the cheap handsets subsidies provide even more. If they didn’t, the reaction to this sort of story would be “fine, I’ll just pay more and get the unlocked, SIM-free version.”

For me, this is an issue of disclosure. Operators and retailers should openly disclose the specs of the devices they sell. Should this mean they have to make it clear what functionality or applications they remove? I’m on the fence about that, but I think as long as they make some detailed specs listing the features the devices they sell do contain readily available, it shouldn’t be a problem. However, judging by the listing for the N95 on Vodafone’s web site, they’re not doing this. I think a useful example could be how cars are advertised and sold: manufacturers’ advertising plays up certain features, which are often options. Not every model features those options, but when you go to a dealer, it’s made very clear which features a particular car does have. Conversely, the window sticker doesn’t say “This car does NOT have…” and list all the options it doesn’t have.

I think that more transparency and better information for consumers is something that we can all get behind, but to imply that operators shouldn’t be able to change the devices they see fit is a step too far. As I said, doing so endangers subsidies — but it could also see handset vendors start selling dumbed-down handsets to all their carrier customers, leaving out features from unlocked versions as well so operators wouldn’t fall foul of “anti-crippling” laws.