Wednesday, April 8, 2009

"Mr. Carrier, Tear Down That Wall!"

Jumping from the world of politics to the world of economics, I believe that wireless carriers' artificial inflation of the rates they charge for SMS messaging are causing a big drag on mobile marketing in the United States. Indeed, others share my same concern among those in the industry and those in the hallowed halls of Congress. The dirty (and very rich) little secret is that wireless carriers are double dipping on all commercial text messages. One, they are charging you, the marketer, for every text message that you send to your subscribers. Two, they are charging your subscribers for every text message that they receive from you.

If you are running an interactive messaging campaign, then the carriers are actually quadruple dipping. One: they are charging the subscriber to text a keyword to your short code. Two: they are charging you to receive the keyword. Three: they are charging you to send the response message. Four: they are charging the subscriber to receive the response. Were you also aware that carriers charge marketers one rate for inbound messages and another rate for outbound messages?

In spite of the Kool-Aid that the carriers want you to drink, remember that a whopping 45% of mobile subscribers do not have all-you-can-eat text messaging plans. If you are an iPhone owner as I am, you pay a per-month charge for unlimited text messaging on top of the per-month charge for unlimited data. AT&T ain't dumb. They know that you love text messaging! You want text messaging! You need text messaging! You can't live without text messaging! And so they can charge you anything they want because they know they can.

If you're a marketer wanting to jump into to the mobile arena, be forewarned that you are going to pay a lot! If you want your own common short code, then you'll be renting one to the tune of $50 to $100 per month. Uh, by the much are you paying to rent a domain name? $30 for three years should be about right. So what justifies a common short code costing up to 120 times the cost of a domain name? One could argue that you can have unlimited domain names, but there are only 100,000 possible common short codes (assuming five digits) hence the higher cost. Sure, but I mean really...120 times the cost?

Let's talk CPM rates now. When its all said and done, you'll be paying five to ten times more CPM for text messaging than you'll be paying for email messaging. Why? An SMS message is only 160 characters long - 140 characters long for some carriers. So why costing so much? SMS messages are delivered to the hand set too. They aren't stored on the carrier's network like emails are stored on the ISP's servers. So why costing so much?

Bottom line: SMS marketing is expensive and carriers are making obscene profits off the billions of text messages being sent worldwide. Dan Butcher from the Mobile Marketer estimates that a small SMS-based campaign can run for less than $10,000, but that you'll be spending in the range of $50,000 to $100,000 for an effective two-month opt-in SMS campaign.

But it doesn't have to be so expensive. And that's my point. The technology for SMS messaging is so simple. The only reason why SMS marketing is so expensive is that carriers set non-competitive prices. I'm not a socialist so I don't believe in government price control as the solution. I believe in the free market and that ultimately the market will set the prices. How long that will take is unknown, but hope springs eternal.

I'm going to keep speaking to all mobile marketers whether they want to hear it or not: don't button-hole yourself into SMS messaging as the ONLY channel for mobile marketing. It isn't. It is one channel and a highly effective one, but it's an expensive channel. Expand your mind and remember that email marketing is also a very effective mobile marketing channel. Mobile email is a heck of a lot cheaper and it's a heck of a lot more widely adopted that you might think.

Mobile handset manufacturers get it. The latest smartphones unveiled to oohs and aaahs at the CTIA Wireless conference last week were all "messaging-enabled" phones. The HTC Snap takes messaging-enabled one step further with special email features built into the device.

SMS Messaging rates will eventually come down. They have to. But until then, don't limit yourself. Think about mobile email campaigns. They have proven ROI ten years running and the cost is within your reach.

1 comment:

  1. Manny Ju,
    Great post! I agree that mobile is an expensive channel but when done correctly can be extremely effective that drives a significant ROI. You had some great points on the carrier pricing model and their double and quadruple dipping. Its crazy.
    Just two things of note, the pricing is even worse than you thought for the Short Codes. To get a Short Code, you have to go through Neustar (Common Short Code Administration... and they are $500 per month for a random code and $1000 per month for a vanity code. They charge for 3 months in advance. From my experience the pricing for the bigger campaigns is a little cheaper than the $50K - $100K you stated for a two month campaign. For the big campaigns that we run, there is usually some custom development, like a zip code lookup for a store locator, or an instant win module, and they might tack on some major expenses, but strictly for messaging its usually lower than that. I would love to chat more about SMS campaigns with you. Hit me up on twitter and let me know when you are available next week. I also want to get some insight on the mobile mail ideas that you presented.