Is it time to shoot the messenger?


7 Apr 2005

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Think of the odds — some 92pc of the population carries a mobile phone and some 75pc of people who receive a text message instantly open it compared with 10pc of people who receive email. Mobile marketers must have it made. However, this is not the case.

Premium SMS scamming and spamming is pushing exasperated consumers to abandon existing mobile phone accounts thereby infuriating mobile network operators anxious to avoid churn. In the UK in recent weeks Vodafone was on the verge of closing down its premium messaging business — estimated to be worth £400m sterling a year — because it feared the effects of increasing rates of premium SMS scamming were having on customer churn. Vodafone, it appears, would rather abandon a multimillion-euro business to protect a more lucrative multibillion voice and data business.

Mobile marketing is not all about premium SMS and, in fact, embodies sophisticated well-planned campaigns that take months to organise. At last week’s Wireless Wednesday Event in Dublin Donald Douglas, chief executive of Return2Sender, illustrated sophisticated campaigns by Coca-Cola, Danone, Kelloggs, Jameson and Ulster Bank. “In the UK Fanta invented a downloadable mobile video game aimed at boosting brand loyalty,” Douglas said, indicating another campaign his company was involved in for Leinster Rugby Club whereby text alerts and rugby news was sponsored by Bank of Scotland. “The mobile marketing sector has been tough at times, but it has evolved,” he said.

Púca’s managing director Eamon Hession described how the industry has banded together to create a Mobile Marketing Forum aimed at promoting higher standards in the industry. James McNab, head of corporate affairs at UK operator Opera Telecom, attested to the need for higher standards. “The future of mobile marketing is not all about Crazy Frog ringtones and text-to-win competitions. However, the trend of spamming and scamming threatens to destroy mobile marketing. The danger is that big brands do not want to be associated with scamming.”

Premium SMS works in a similar fashion to the 1800 premium-rate number business insofar as customers pay higher-than-average costs for their text messages if they reply to competitions or sign up for ringtone updates or adult content. However, the mobile sector recently has been dogged by problems surrounding ambiguous opt-out clauses contained in contracts for services customers sign up for. When consumers wish to opt out of a service they discover they are eating up valuable call credit that in turn goes to the errant firm providing the premium SMS service — be it a competition or ringtone service — and when they ring up to opt out they are being held on a premium-rate number for long periods of time.

Last year, UK watchdog the Independent Committee for the Supervision of Standards of Telephone Information Services levied fines of £500k sterling to six companies found to have been sending out SMS spam. In some scams users would receive messages telling them they have won a prize and would be given a number to call. The number would turn out to be a premium-rate number with no prize at the end.

In Ireland, however, a more prevalent form of scamming coming mostly from overseas has unfortunately been targeting children with ringtone and game offers that locks them into a contract difficult to opt out of. In the Dáil recently, Labour TD Mary Upton highlighted a German-owned website called Jamster that was selling ringtones, logos and games and attracting young people’s interest through glossy advertisements in magazines bought by children and teenagers.

Siliconrepublic.com spoke recently to a father of an 11-year-old boy and nine-year-old girl who are both finding their call credit being decimated after signing up for ringtones, games and logos that they heard about either in the playground or through the media. “In my boy’s case he saw an ad on Nickelodeon for a service called RingtoneKing and it has been next to impossible for him to unsubscribe. For every €10 in call credit we pay for, between €6 and €8 is taken because he receives these messages,” the concerned parent claimed.

According to John O’Shea, chief executive of Irish mobile software firm Zamano: “Premium text messaging is forecast to grow 80pc in Ireland in 2005. In the UK it is forecast to grow 60pc. Of this market approximately 25pc of revenues come from adult content. While adult services are not available in Ireland trials are expected to take place in July for adult services in the Irish market using short codes. It is predicted that the adult premium SMS market in Ireland will grow at the same rate as that of the UK.”

Eoghan Patton, partnership manager at O2 Ireland, described the concern felt by operators: “The key is to make it easy for people to opt out. The mobile phone industry is suffering because of services people can’t get out of easily. Operator lines are getting flooded and it certainly could influence churn. For one thing, we need to promote and regulate for the use of the ‘stop’ keyword that enables people to opt out of premium SMS contracts.”

While the scamming issue awaits resolving, there is a ray of sunshine on the horizon for Irish mobile marketers. This summer O2 will be launching the i-Mode services to the local market as part of a deal with NTT DoCoMo. I-Mode has more than 45 million subscribers using more than 6,100 official content sites in 10 countries and regions and works easily on most handset brands, including NEC, Panasonic, Siemens, Motorola and Samsung. I-Mode contains a comprehensive online mobile library of content, covering everything from 3D-based games to online shopping.

I-Mode may enable marketers and content developers to gain a greater slice of the mobile revenue market than is currently the case. O’Shea cited existing premium SMS services whereby for a 30-cent premium-text message the mobile operator gets between 45pc and 64pc of the transaction and for a 60-cent premium text message the operator gets up to 48pc of the transaction.

O’Shea predicted that unlike the punishing environment for premium messaging providers in the UK and Ireland, the arrival of i-Mode could mean the advent of models whereby 92pc of the revenues gained by users accessing content will go to the content providers.

However, Patton corrected him, saying the actual figure is closer to 86pc in Japan. He said it would be unlikely that Irish content providers could anticipate such a revenue sharing model. “The model in Ireland will be specific to the Irish market.

“We haven’t decided what the payout to content providers in the Irish market will be when we launch the service,” Patton added.