• by Ross Fadner , February 10, 2004

Long a profitable buy for marketers in Europe, premium rate short messaging services are now on their way to the United States. London-based One World Interactive, in an alliance with US Cellnet Information, announced plans Monday to bring its premium content and billings expertise to what it believes is an untapped American mobile market.

In Europe, the premium rate short messaging service (PRSMS) has become the favored platform for interactive consumer activities like voting, sweepstakes, games, shopping, and maps. Marketers like to use PRSMS for direct marketing initiatives.

"In Europe it has already been established that you can get between three and four times the revenue yield using Premium Rate SMS as you can for standard advertising space," says Nigel Tatlock, CEO-One World Interactive, in a release about the service. Tatlock underscores the value for direct marketers: "You can also build invaluable databases with SMS campaigns which can be sold to clients," he adds, "ensuring precision marketing, and gaining accurate feedback on customer reactions to products and services."

Mobile marketing campaigns have become big business in Europe. In the United States, short message service (SMS) is only beginning to take off vis-à-vis wireless tie-ins with TV shows like American Idol and Temptation Island. In the U.K., the mobile marketing business model is more sophisticated, and messaging took off among consumers much earlier than it has in the United States.

Brits send upwards of 55 million text messages per day, according to the Mobile Data Association. In April 2003, 1.7 billion messages were sent in the U.K. alone. Such high volume has left direct marketers in the U.K. foaming at the mouth; according to Forrester, 56 percent of direct marketers are planning regular SMS use in the next year.

From a marketing perspective, the low cost of entry, fairly high response rates, and two-way communication drive the PRSMS value proposition. But from a consumer perspective, the challenge for U.S. marketers will be similar to the one facing paid music services providers: to convince the public to pay for something they're not used to paying for. In the U.K., PRSMS costs significantly more than a regular text message, sometimes as much as $5-$6 dollars per message. Most U.S. providers charge about 10 cents per SMS message.

The premium content being offered by One World Interactive and US Cellnet sounds similar to what other SMS content providers like Mobliss currently offer. Brian Levin, CEO-Mobliss, claims that "(in the U.S.), we have an educational curve to overcome. In Europe, mobile phones are the primary means of communication. People are starting to use text, but they're not ready to interact and pay premium services." He adds that people are more than willing to pay a small charge for a service that provides value. "Under $5 [per month] is the sweet spot," he adds.

To be sure, PRSMS resonates with youth more than adults in the U.K. According to research by Beaufort International, frequency usage is highest among 16-to-17-year-olds. SMS usage tends to skew toward the teen and tween markets all over the world. In May 2003, 21 percent of 14-to-19-year-olds sent 150+ text messages per day, while 15 percent of 20-to-29-year-olds produced the same volume.

Beaufort reports that mobile marketing messages have recall rates of 60-90 percent, and response rates between 5 percent and 20 percent. Users older than 18 are also more likely than younger age groups to agree that PRSMS services are expensive, less useful, and not good value for the money.

It's not altogether clear how Americans will embrace the new suite of offerings for a price provided by One World Interactive and US Cellnet. Consumers may be unwilling to pay extra fees for voting, games, polling, and other direct marketing initiatives that end up costing more than basic SMS.

A parallel can be drawn between paid online music services and wireless marketing: Consumers accustomed to free file-sharing are gradually showing a willingness to pay for quality content if the price is right. In the case of online music, 99 cents per download or less. Ultimately, it will be carriers such as Verizon Wireless and Sprint PCS that will have to establish attractive packages.