Short message mania snares new demographic
By Joan Engebretson
Just when short message codes appeared destined to be the exclusive province of the cellular industry’s youngest customers, along came the hit television show “Deal or No Deal.” On screen, contestants try to guess the dollar values hidden inside Halliburton cases held by svelte models and to maximize the amount of cash they win by playing the odds. Meanwhile, viewers have the opportunity (for 99 cents a call) to play a simpler game of chance by entering short codes using their cellular provider’s text message service. Participants guessing the correct number are entered into a $10,000 sweepstakes, with the grand prizewinner announced at the end of the show.
“One thing that excites us about ‘Deal or No Deal’ is that it penetrates a different demographic,” notes David Oberholzer, associate director for content programming at Verizon Wireless. “They’re older and less urban.” Verizon is one of several wireless carriers supporting the offering--and in the process garnering both airtime charges and a piece of the revenues. Although industry stakeholders decline to reveal response rates, everyone seems to agree that they’re substantial.
“’Deal or No Deal’ caught everyone by surprise,” comments Laura Marriott, executive director for the Mobile Marketing Association. Although most consumers who use short message codes for purchases and promotions are between the ages of 13 and 34, “Deal or No Deal” and similar shows are helping to change that. “They’re driving a lot of consumer adoption around premium short codes and doing a lot to educate the consumer on the opportunities available,” said Marriott.
The widening of the audience for short message code promotions is one factor that is helping to drive exponential growth in the market. As of mid-2006, cellular customers were sending 10.2 billion text messages per month—up from 7 billion a year earlier, said Marriott. That includes peer-to-peer, or traditional friend-to-friend text messaging, which Marriott believes is growing at a slower rate than promotional applications.
Some are predicting even stronger growth for 2007. “Business is really booming,” said Oberholzer. “We expect to double our business year on year.”
As of October, research firm M:Metrics found that just 2.4% of mobile phone users had responded to a short message code ad, with a third of that group having actually purchased a product. As such offerings become more mainstream, that leaves plenty of room for future growth. “We’ve done very well with a relatively small subset of users,” said Chris Black, director of mobile marketing and interactive media for Cingular. “If we can increase the amount of customers using these services, we should be in great shape moving forward. There’s a lot of room to grow. As time goes on, more and more people over the age of 35 are starting to discover this. What’s made them come out of the woodwork are things like premium television voting. That has taught them how to text. Later on, they may be more apt to go onto the carrier deck and grab a ringtone or grab some niche content from outside.”
Reverse auctions
Providers of the sort of niche content to which Black refers are equally effusive about their future prospects.
One such content provider is Limbo 41414, which embeds its short code address in its name. After less than a year in operation, the company--which offers a hot new reverse auction offering--claims several hundreds of thousands of users per month.
“We want to occupy that time of day when you’re not doing something important,” commented Limbo CEO Jonathon Linner. “At any time we have 20 or 30 games going on where you can win anything from iPods and Tickle Me Elmos to Porsches.”
Games last anywhere from a few hours to more than a week, and the winner is the person who picks the lowest number that no one else picks. Participation is usually free (aside from airtime charges), with costs covered by sponsors as diverse as Proctor & Gamble and videogame publisher Electronic Arts.
Advertisers are attracted to the offering because of the ability it gives them to influence users, Linner says. The average participant makes between 50 and 60 plays per game, according to Linner—and each play offers the advertiser an opportunity to send a text message response. In a game centered around Gillette’s Venus razor, for example, a player texting the number three might get a message back saying, “That was a close shave. You got here second. Somebody already picked three. Want to play again?”
“Everything is user-initiated, so they pay a lot of attention to the messages there,” notes Linner. Two percent of participants report purchasing featured products with price tags above $200, while another 49% reported that they were more likely to purchase the product, Linner says. “On the Internet, if you got a two percent click-through you would be happy,” he added. “In this case, two percent are actually buying the product.”
Like “Deal or No Deal,” Limbo also is introducing new users to short message codes. “About half of the people who play had never text messaged prior to joining Limbo,” said Linner. “Their age bracket depends on the prize and how they’re hearing about it. We gave away a trip to La Costa Spa on Lifetime and the average age was mid-30s and mostly women.”
Although service providers do not earn revenue on Limbo promotions beyond airtime charges, those charges can add up. “Carriers typically make millions of dollars a year on our text services from standard carrier fees,” noted Linner. Recognizing that, he says Sprint and Cincinnati Bell have begun promoting Limbo—and he speculates that airtime charges may have been one of the reasons Sprint and Virgin Mobile recently launched short message contests of their own. “They win in two ways,” he said. “They’re happy to get more people to send more text messages. And a service that gets people who haven’t used text messages before is exciting and customers will look favorably on them for doing it.”
Impulse-enabled
Another company that has centered its business around short message codes is ShopText, which launched in November. “We’re a direct-to-consumer mobile commerce company for physical goods,” said ShopText founder and chief marketing officer Mark Kaplan. “We have the first end-to-end system for using text messaging to close the loop between the media, product and the consumer. It creates a point-of-sale opportunity out of traditional media and events.”
The company is working with Cosmo Girl, Lucky, Details and other print publications to offer advertisers a new way to reach potential purchasers of their products. Print ads invite readers to send short message codes to ShopText to request product samples or to purchase products. Consumers can register with ShopText for any promotion the company supports by providing their street address and payment information, which can be done through text messaging or by replying later via an email sent out automatically by ShopText. According to Kaplan, 50% of consumers who initiate a text message to ShopText complete the registration process. “We issue you a unique PIN number and from then on, you can shop ‘til you drop,” he said.
In some ways, ShopText’s business model resembles that of companies that provide ringtones, cellular “wallpaper,” and other electronic content. As with such offerings, cellular operators get a cut of ShopText’s revenues. Unlike with such offerings, however, ShopText has the extra task of processing orders for physical goods. “On the back end, we integrate the datastream to get the fulfillment taken care of,” Kaplan explained. “It’s not something that downloads and gets consumed.”
Kaplan used the term “impulse-enabling” to describe ShopText’s technology. “If you’re in a park reading a magazine, what’s the likelihood that you’ll remember to go to a Web site later to request information?” he asks.
Creative new short message applications such as premium television voting, reverse auctions and impulse-enabled fulfillment should help drive text messaging to the ambitious growth targets that cellular operators have set. As we saw with Internet promotions, however, what’s hot today may quickly become passé, requiring content providers, network operators and advertisers to continually devise new applications in order to fuel continued momentum.
Both Limbo and ShopText are already plotting their next moves. Limbo expects to join ShopText in the merchandise fulfillment business, as auction participants have requested the ability to purchase the products they see promoted through Limbo’s offering.
Meanwhile, Kaplan says ShopText’s next venture will enable attendees of an upcoming concert tour to purchase merchandise through their cellphone using short message codes. “You could order a CD of the concert you’re at while you’re there and have it shipped so you don’t have to carry it around with you,” he said.
