The Hidden SMS Costs and Opportunities of Social Networks

Twitter and other social networks have rapidly ushered in a new era of SMS. Operators must now manage unpredictable and unprecedented traffic spikes on outdated network equipment. With changes at the SMS network core, however, operators can capitalize on Twitter's and other social networks' soaring growth, subscribers' SMS updates and Twitter's groups of "followers."

Social networks, particularly Twitter, are driving operators to re-examine how they manage SMS traffic and evolve their SMS architecture. Consider:

>SMS accounts for 3% of all Twitter publishing tools, and 15% of mobile Twitter posts (

>On AT&T and Verizon networks in Q4 2008 alone, 812,000 unique users sent or received Twitter text messages, with an average of nearly 240 tweets per person (Nielsen Mobile)

Saving Money While Managing Spikes
Twitter presents operators with a compelling business case to evolve their SMS architecture. Multimillion message spikes -- already seen from person-to-person communications around holidays or during breaking news -- are more likely with news organizations having millions of Twitter followers. The cumulative results for the SMS network can be network bottlenecks, crippled SMS service, damaged customer relationships and expensive upgrades.



The reason for the overload is the original SMS architecture developed in the early 1990s. Then, when service providers delivered a limited number of person-to-person (P2P) messages, the short -message service center (SMSC) could adequately handle the traffic. The legacy SMSC "store-and-forward" delivery model, though, is ill-suited for today's messaging needs and operational costs.

A better approach is a modular, next-generation SMS network that breaks down the SMSC into separate functionalities. This enables operators to augment capacity only where needed, adding flexibility and reducing costs. Messages are sent via first delivery attempt (FDA), which succeeds 85%-95% of the time, requiring far less storage, overhead and maintenance than the SMSC approach.

New Revenue Opportunity
In-message SMS advertising appended to social network SMS messages maximizes operators' profit and strengthens their subscriber relationships. This approach allows operators to insert customized sponsored content into the unused portion of text messages, delivering ads directly to the handset.

Twitter and other social networks add new elements of reach and relevance that one-to-one in-message advertisements could never achieve. Operators can piggyback on highly followed celebrities by selling advertisements, for example, for Oprah's Book Club to Oprah's followers or Britney Spears' latest album when she tweets. Because subscribers opt in to receive updates, advertisers and operators have confidence about the ads' value. This increases customer loyalty, expands advertisers' audiences and brings new revenue streams.

In-message SMS advertising also provides granular measurability for advertisers and operators. By sending ads directly to mobile subscribers, operators can measure responses and even structure advertising agreements based on success metrics.

At a technical level, operators position the advertisement below the tweet text, with a separator character between the two. If there is insufficient room for both the message and the advertisement, operators can create an additional message segment (not charged to subscribers) or send a Flash SMS, where the subscriber sees the advertisement immediately on the screen and must click it to view the SMS tweet.

Service providers face an SMS profit problem in the coming years. According to Frost & Sullivan's forecasts, the number of text messages will expand at a compound annual growth rate (CAGR) of 15.6 percent from 2007 to 2011, while SMS revenues are only expected to grow at a 5.9 percent CAGR over that same period. As Twitter SMS usage grows, so will this disparity. Now is the time for operators to close the gap and improve customer relationships by adding targeted advertising and improving delivery architecture.

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