Inside Mobile Marketing

Besides the obvious SPAM question, the issue as I see it, is that we have a double standard in play for Carriers versus marketers when adhering to established mobile marketing guidelines.

Wireless Carriers, AT&T included, strictly enforce adherence to their own mobile marketing rules and to the Mobile Marketing Association’s (MMA) Best Practices Guidelines – which clearly state that users MUST opt-in to receive messages from a marketer regardless if the messages are standard rated or free-to-end user (FTEU).  (Yes, Carriers can waive opt-ins at their choosing, but in this case they are promoting a TV program that they happen to have the exclusive text messaging voting rights to – seems to be a disconnect.)

So what gives AT&T the right to send out messages to their subscribers to promote a television program via unsolicited SMS – especially to those subs who may have never voted via SMS for the Idol show a.k.a “heavy texters”?

Many people in the Mobile Industry will interpret this action by AT&T as a double standard fueled by greed. Expect some “eyebrows” to be raised in the blogosphere and at upcoming MMA industry gatherings when the Carriers are present.

NOTE: I do support marketers having the ability to communicate with participants via SMS if the users opt-in and are clearly aware they may get marketing messages in the future from a brand.

To the outsider, these changes may elicit a “so what?” response. To mobile practitioners these changes have a two-fold impact:

First, they reduce costs (except #4) for marketers. Significant effort is required by engineers to ensure their messaging platforms comply with the ability to deliver carrier-specific messages. It also lessens the amount of compliance review time required of marketers.

Second, and arguably most important, is that these changes (except #4) signal a willingness by a major Carrier to “play nice” with the other Carriers to help standardize a set of cross-industry, cross-Carrier mobile program regulations. This bodes well for all in the Mobile ecosystem as the biggest knock on the industry is fragmentation. Fragmented Carrier messaging just got some help. Thanks T-Mobile.

So now that pretty much everyone in the Mobile industry has heard that Verizon Wireless (VZW) has told its U.S. messaging Aggregators that starting November 1st 2008, they will be charging them 3-cents for every standard and premium MT (outgoing message) that goes over their network for off-deck programs – let’s take a closer look at the situation:

1. SPRINT has long stated that it would charge 3-cents per MT, but has yet to enforce the policy to date. Will they wait to see what falls out of this VZW news OR follow suit?
2. T-MOBILE has charged for MT messages for some time now, but their charge is definitely less than 3-cents and may feature tiered-pricing depending on volume of messages. Will this change?
3. AT&T to my knowledge has never charged for off-deck messaging program MTs. Will they follow Verizon’s lead OR wait out the maelstrom?

Other questions…

MMS – Most of these aforementioned Carriers haven’t determined what their Standard or Premium messaging rates will be for MMS programs. Not that there are a lot of MMS programs running in the U.S. today, but will this 3-cent rate be tacked on to these forthcoming delivery charges? Hell, those companies trying to get MMS-MO programs off the ground (aka User Generated Content) may have to hold-off even longer now.

FTEU – I have written about this topic previously– the industry is still waiting to see what the economics will be for running these types of programs in the future. VZW states that 3-cents will not apply to FTEU programs, but how will the 3-cents charge influence the per message fees that will be associated with FTEU?

Senate Oversight Committee – Will Senator Herb Kohl and his gang of anti-trust committee members throw this development into the mix of items to investigate? Probably will, especially if other Carriers follow suit.

SMTP SMS – will companies start to seriously look at sending SMS via SMTP to consumers as viable option? I would think that the Carriers will anticipate this move and enhance their filters to watch for it and potentially block it. An argument can also be made that the SMTP option will make things worse for wireless subscribers due to SPAM and lack of MMA/Carrier compliance regulation.

Direct to Carriers – will this force large enterprises like Google, Yahoo, Visa, etc,etc that are sending millions of messages on a monthly basis to negotiate preferred rates with the Carriers or Aggregators?

PREDICTION

With the industry backlash that is swirling on the internet now, I am predicting that VZW will pull back on enforcing this policy until further notice. They will need some time to listen to ideas/pleas from other ecosystem players before moving forward. Heaven forbid they do go forward with this and they start losing subscribers to other Carriers because their subs complain of not being able to use ChaCha or vote for their favorite dancing star because the program provider can’t afford to support VZW.

Props to reporter Diane Bartz for this story! Nothing like a Senate subcommittee to stir the pot and place the U.S. Carriers on notice . I am not well versed on how these sub-committee processes work so I won’t comment on that angle.

However…..On the Carrier side of the business, perhaps these price increases are being used to ‘influence’ subscribers to sign up for a recurring messaging bundling where revenue recognition is greatly enhanced?? Are these higher prices designed to ‘milk’ the increase in SMS traffic all of the Carriers have experienced year over year??

While text messaging functionality may be ubiquitous on today’s U.S. installed handset base, not everyone is using SMS nor is every wireless sub signed up to a text messaging plan. Mmetrics/comScore peg the number of active (sends at least 1 message per month) at around the 50% mark.. other analyst firms come in around that figure as well. Yes, frequency of use does differ across demographic profiles e.g. Gen Y are heavy text users -72% text at least monthly according to Forrester Research. PLEASE ALSO KEEP IN MIND that the overwhelming majority of the text messages being sent are Peer-to-Peer (P2P) versus Application-to-Peer (A2P) aka Mobile Marketing programs.

Regarding a messaging plan – I have seen where Jupiter Research estimates that 2/3 of all wireless subscribers belong to some sort of text messaging plan. (I’d like to confirm with each U.S. Carrier what they actually see)

With the FCC hovering in the background, the U.S. Carriers are certainly doing their best to police their own off-deck mobile marketing/commerce programs as all of the major Carriers now utilize third party program audit firms. And while the Mobile Marketing Association (MMA) continues to try and establish a set of cross-Carrier industry standards via their Consumer Best Practices guidelines, the major U.S. Carriers still have not adopted the guidelines as their de jure “LAWS’ as each major Carrier has issued addendum’s to the MMA’s guidelines. These addendums are essentially enforced by the audit firms each Carrier has contracted with.

As I’ve blogged about before, this is part of the reason why Mobile Marketing – at least from a program execution standpoint – is confusing and at times exasperating. Ensuring your mobile marketing program is compliant with the MMA guidelines, plus say 4-5 subtly different sets of Carrier rules is taxing on human (QA, account managers, engineers, etc.) and technical resources – especially when the individual Carriers make sudden, unexpected changes to their policies (as they have been known to do).

Quick note on the audit firms: program auditing is a niche industry that has recently grown to prominence within the U.S. Carrier-Aggregator-Marketer ecosystem. It is NOT a perfected science yet, as the audit teams have the tough task of educating their employees on the current set of “rules”, keeping up with ever-changing executions of 3rd-party programs and maintaining a fair and balanced interpretation of the many “grey” areas found within the many sets of policy guidelines we as an industry strive to adhere to.

So what’s the hold up? One of the major hurdles to overcome is the ability of the wireless Carrier’s existing billing systems to process FTEU messages. Generally speaking, all messages sent through Aggregators for off-deck marketing programs are either tagged at a Standard or Premium rate and are processed accordingly by the Carriers. Technical changes need to be made by both parties – especially on the Carrier’s side.

In addition to technical enhancements, I suspect the Carriers need to map out the business processes for these FTEU programs. At a high level, the current process for off-deck messaging programs works like this: The Carriers receive messages via their Aggregators. These messages are “tagged” as either Premium (if they carry a charge) or Standard Rated. In either case, the Carrier is responsible for billing the consumer and/or debiting the user’s message allotment if the consumer has a messaging plan. For Premium programs, the Carrier will send the Aggregator a record of successful billing attempts and will pay the Aggregator their negotiated share of revenue. The Aggregator then pays the Marketer their share of revenue. Everyone is happy.

For Standard rated programs, the Aggregator more often than not simply tallies the number of messages processed via their gateways to the various Carriers and charges the Advertiser/Marketer the pre-negotiated messaging delivery fees. (NOTE: I am aware of only one major U.S. Carrier that currently charges their Aggregators for Standard rate messages (MTs only) once a specified threshold is hit. Another major Carrier has stated it is well within their rights to charge for Standard MTs, but has yet to enforce this.)

The FTEU business model poses some interesting challenges and questions. A possible scenario will have Advertisers/Marketers negotiating FTEU message delivery rates with their Aggregator (assume the Carriers will have special rates for Aggregators as well for these programs). Unlike the current Standard rated process, the Aggregator may be forced to reconcile these FTEU messages with the Carriers especially if the Carriers are charging per MT and/or monitoring the delivery of these messages on their end – all of which requires manpower and system changes.

QUESTIONS FOR FUTURE: what happens when Advertisers want to run FTEU programs that establish a 2-way dialogue with a consumer – who will pick up the tab for messages sent by consumers (MOs)? What happens when Marketers start inserting advertisements in their FTEU messages and the Carriers want a cut of the advertising revenues?

SIDE NOTE: I am aware that one of the major Carriers is working on their FTEU business model now and we would hope to see something from them by the end of 2008.

I attended last year’s NYC event and must say it was worth the trip to the Big Apple. The abundant networking opportunities with the who’s who in the industry goes without saying, but I was more impressed with the slew of lil’ nuggets of “insider” information provided by most of the sessions/speakers. For example, the co-founder of Zumobi Dr. Ben Bederson talked about how his research at the University of Maryland revealed that the majority of handset users preferred operating their devices with one hand versus two. Coca-Cola Executive Mark Greatrex said Sprite sells 10 billion bottles per year. Scanbuy’s CEO Jonathan Bulkeley said 2D barcodes can trigger 26 actions on a mobile phone (e.g. SMS)

This year’s event is again filled with accomplished Mobile entrepreneurs and seasoned marketing & advertising executives from some of the Nation’s top companies. Here’s what I’ll be listening for:

• What is the MMA doing to exert more pressure on the Carriers to minimize their continued practice of creating new and ever-changing rules that ultimately supersede the MMA’s Best Practices Guidelines? (This is perhaps THE most frustrating issue within the Mobile Marketing space as the mad scramble to appease individual Carriers and their program Audit firms places costly demands on vendors and marketers alike to change systems, promotional materials, etc.)
• Will more brands step up and disclose their actual campaign results. (Look, everyone knows that the numbers will be low and in most cases disappointing, but we have to remember that we are in an experimental phase with this nascent channel. We can learn from each other’s efforts.. that’s how this is going to work for all of us.)
• Will the vendors, publishers, marketers dealing in the mobile advertising space talk about things OTHER than banner ads this year. It was a bit ad nauseam last year and according to eMarketer messaging advertising is expected to account for 88% of all mobile ad spend in 2008. I do see that 4INFO and Quattro Wireless have some executives on the docket discussing SMS advertising and “other” opportunities.

 

I was unable to attend the event, but judging from the various articles from those marketers and press members that did attend it sounded like both sides or rather all sides (marketers, government and consumer watch groups) all brought up valid and thought provoking points.

As a mobile marketing practitioner however, what I was looking for is the FTC’s stance on the possibility of getting more actively involved in the regulation of the industry.  IF the FTC does get involved, you can add them to the list of those drafting ‘rules’ for marketers to abide by (SEE –  MMA, CTIA, MEF and of course the Carriers).   For now, however, the FTC looks content to continue to lean on the MMA and Carriers to set the pace, but will be keeping one eye open on the space as it evolves.  (Rest assured though that if complaints start piling up they will be forced to act.)

FTC Commissioner Jon Leibowitz was quoted as saying, “In an era of broadband and information services, the FTC will be watching and is watching closely. We strongly believe, as many of you know, in self-regulation, but we are also going to police the wireless space.” 

So mobile marketers, take notice.  The industry has the feel that things will only get harder in the short term with regards to ensuring software platforms, program briefs, business processes, etc. are in compliance with ALL of the various players before a SINGLE, common-set of guidelines is established (pipe dream?).  The Carriers especially are NOT sitting back idly waiting for the gov’t to start regulating their business practices – they have tightened their screws around their interpretation of the MMA Best Practices and their own ‘addendum’s’ to the MMA guidelines.

OK. Now those of us within the mobile industry especially those companies playing within the Software space have heard all of these comments for some time now. The big question is what are vendors doing to make things easier for Advertisers and Marketers? The business requirements are there for the taking!

YES! I completely agree with the argument that ingesting the requirements from say Media planners and building perfect solutions to meet their needs is going to be a daunting task due to the complex and immature state of the mobile ecosystem in the U.S. The Carriers, which hold the majority of mobile user data aren’t exactly opening their floodgates to vendors or advertisers at this time and I would argue that the quality and volume of their data is the “Holy Grail” motherlode for all in this market Space.

That said, there is no reason why we don’t see more strategic alliances between traditional Agencies and vendors to build out robust marketing platforms that display data in useful formats and integrate with other existing marketing platforms. Companies like iPSH and Velti come to mind with their respective relationships with OmniCom and InterPublic Group. ALSO – there is an opportunity for vendors to start to better leverage user data outside of the Carrier walls via industry research firms like Nielsen Mobile and MMetrics – PLUS I would recommend that vendors start leaning on their Aggregators to start exploring ways to share consumer usage data.

I’ll close by saying that vendors should also work with their Clients and the MMA to exert some more pressure on the Carriers to come up with ways to make a Cross-Carrier media buy possible, map out standardized metrics and allow for more transparency into current usage data.

For those companies working within the Mobile Content & Marketing space – it’s no secret that the U.S. Carriers are very protective of their subscriber bases (and brands for that matter) and will take the necessary actions to protect these valuable assets. Just a short time ago, the Carriers employed protection measures in the form of forcing marketing companies to adhere to the MMA’s (mobile marketing association) Best Practices Guidelines . Subsequently, EACH Tier 1 Carrier created and distributed (to aggregators) a set of ADDITIONAL “rules” to be met by each Mobile Marketing Program that was running over their network. This of course did and continues to place a strain on marketing companies playing in this space in terms of keeping up with changes in compliance, policing the marketing actions of clients utilizing mobile and making technical changes to enabling technology.

The rather recent emergence of the niche business of 3rd-party mobile “Compliance Testing” – is adding yet another layer of complexity to the mix. Now these Audit shops are monitoring all the promotional activities associated with a mobile program (i.e. web-based, print, TV, wap, etc..) – plus the actual MO/MT messaging flows. If they see a program – mostly of the premium flavor – that is not in compliance, they serve an audit notice to the respective aggregator in which the shortcode is provisioned with and then the aggregator must work with the Client to correct the issue in a timely manner OR risk penalties that can be as severe as having the shortcode shut down.

All of this means that longer lead times will be required of marketing firms looking to launch mobile programs to ensure that their promotional materials are ready for compliance review by the Carriers when submitting new program briefs. It also means that Creativity will be constrained in terms of how a content retailer or marketer decides to merchandise, promote and utilize copy within their actual consumer facing programs. Advertisers and Marketers that are new to the Mobile Channel are always complaining of the “influence” that the Carriers are inserting into their marketing efforts and the Audit shops will certainly not mitigate this sentiment.