• by Shankar Gupta , January 26, 2005

Frost & Sullivan, a software industry market research firm, Tuesday released the results of a study touting the potential and effectiveness of mobile marketing as a method of reaching and engaging consumers.

The study, entitled "An Insight into the United States Mobile Marketing & Short Code SMS Markets," predicts dramatic growth in the number of short messaging service (SMS) subscribers and the number of subscribers participating in SMS campaigns, as well as touting the high response rates to SMS-based campaigns.

Frost & Sullivan predicted that the number of U.S. SMS subscribers was expected to increase to 75.5 million by the end of 2007, from 26.4 million in 2003. The number of those subscribers participating in short-code SMS campaigns--which allow mobile marketers to use shorter, easier-to-remember numbers, rather than full 10-digit numbers as the contact numbers for their campaigns--is likely to increase from 9 million to 35.9 million over the same period, the study predicted. Short code SMS campaigns are commonly used for online votes, quizzes, sweepstakes, and mobile coupons.

The study also found that opt-in SMS-based interactive campaigns have a much higher response rate than other channels. The study stated that those campaigns might see response rates as high as 70 percent, compared to the average click-through rate of Internet ads of about 3 to 6 percent on average.

Tom Burgess, CEO and founder of Third Screen Media, one of the leading mobile media-buying firms, said that his firm's campaigns haven't hit the 70 percent mark, but they've enjoyed a high response rate nonetheless; the campaigns run at 5 percent on average, with their most recent campaigns exceeding 8 percent. The highest response rate for a mobile marketing campaign that Burgess had ever heard of was 25 percent.

The study was bullish about the growing popularity of mobile marketing, stating that SMS campaigns are increasing in popularity, and will help increase revenues for involved companies.

Burgess agreed that mobile advertising was a quickly growing field. "What I am seeing is a lot of marketers who are starting to initiate some form of direct response campaigns that include mobile," he said. "There's no doubt that the media world is climbing on to the mobile bandwagon." JupiterResearch Analyst Niki Scevak agreed that mobile devices are a good method for getting customers to respond and interact with ad campaigns, but warned against using them as a method to deliver advertisements.

"In terms of allowing consumers to respond to ads, it's a wonderful response mechanism," Scevak said. "But the personal nature of a mobile phone and the interruption it would entail, not to mention the extremely limited creative formats available, makes it a very poor delivery mechanism for advertising."