The Third Screen: A Netflix Lesson for SMS

Watching the recent stumbles of Netflix, moving from its tried-and-true model of DVDs mailed in those red envelopes to Internet-streamed movies is another stark reminder of the challenges of moving from the old to the new.

Although there's little doubt about the direction of the market ultimately moving to streaming movies, the timing of splitting the businesses into two (and a price increase) was a change that some of that market did not appear to be quite ready for.

As anyone managing technology knows, living with legacy systems may not be where a company wants to be, but those systems can be what keeps the business going. The timing of transitions can be very tough.

Which brings me to SMS and MMS.

Heading to 50 percent US smartphone penetration and more than a billion mobile apps available, why on earth would anyone still be talking about SMS and MMS marketing?

But it's not yet time to abandon them. The masses of mobile users participate in it day in and day out and companies still find it effective, which means it's not going away anytime soon.



SMS is a person-to-person tool we're going to see for the next 10 years, says Jared Reitzin, CEO and founder of mobileStorm, one of the pioneering SMS companies started in 1999.

(Interestingly, that was the same year that Kodak completed a five-year shift to digital technology. At the time, its CEO George Fisher stated that Kodak's digital strategy was poised to reignite sales. "We've finally turned the corner, even though we don't have the results to prove it yet," he said at the time. Like Netflix, Kodak's timing may have been a bit early in relation to market reality. In 1999, Kodak stock was trading at $75. Today it's just over $1.)

So as technology continues to evolve in the mobile world of geo-fences, 2D barcodes, NFC (near field communication) and augmented reality, SMS and MMS keep rolling along.

"MMS is exploding," says James Citron, CEO of Mogreet, the North American market leader in MMS. "Mobile messaging is going to be here forever."

There's a market need for MMS, says Citron -- since images, audio, video can be sent to every phone in America. "If I'm a brand, I can push out a tune-in trailer to a phone and it's instant."

Remember the promise of the paperless office? New technologies of faster, interconnected computers would eliminate the need for so much printing. But that speed, combined with better and faster printers, actually facilitated the ability to print more pages faster.

Smartphones and higher-speed networks are doing the same for SMS and MMS, with the messaging capabilities being embedded and integrated into apps. So rather than SMS and MMS fading into the sunset, they're getting a smartphone steroid boost.

"SMS for us took off three years ago," says mobileStorm's Reitzin. Not coincidentally, that was not long after the introduction of the iPhone and the beginning of the smartphone revolution.

Whether transitioning from DVD rentals to digital streaming, film to digital imaging or text messaging to the next shiny thing, timing is the key. "Netflix did it too soon and did it the wrong way," says Reitzin.

The timing of a move from old to new has more to do with behavioral than technological change.

While technology to do something differently or even better may come along, the people who are anticipated to want and use the new technology may not be ready to adopt it.

For example, even though an unlimited amount of current news is available online, many residents still subscribe to newspapers faithfully delivered to their doors or driveways each day. Behaviors are hard to change. Untethered consumers still remain totally conditioned to receiving mobile messages.

SMS and MMS are in a somewhat similar situation. Although there are more than a billion apps, an estimated 7 trillion text messages will be sent globally this year. There also is the outside-the-U.S. phenomenon of mobile adoption, and in many countries mobile usage is far different. "In Africa, SMS is their mobile network," says Reitzin.

“SMS is ubiquitous,” says Jeff Hasen, chief marketing officer of Washington-based Hipcricket. "Over 70 percent of mobile subscribers text and the average age is in the 40s. We've had conversion rates of 15 percent."

And person-to-person texting is in transition and within the next five years application-to-person messaging will overtake person-to-person messaging (texting), according to Juniper Research. Application-to-person messaging includes messages to or from an app or through a large number of customers in advertising, financial services, ticketing, business administration, etc.

Part of the long-term viability of SMS and MMS, of course, is that it involves person-to-person or company-to-person communication, one at a time.

The other significant aspect of transitioning from old to new is benefit. And in the case of SMS and MMS, a key metric for sticking with the old is measurable result.

Marketers can still provide value via SMS and MMS because they can craft relevant, targeted messages, whether texted coupons from Target or free rental offers from Redbox.

"Marketers are driven by ROI," says Citron. "The click-through rate on banner ads is around one percent but on MMS we see 10 to 20 percent. Marketers will continue to use MMS because it has the best ROI."

And the click through can be just a first step in a valuable interaction with a customer. "An SMS message campaign can lead to a richer experience and 160 characters are often just a springboard," says Hasen.

In the case of Mogreet, Citron sees the first MMS as just the beginning of customer interaction. "It's the most powerful way to get a response," he says. "You can do deeper-level targeting."

Despite the age of SMS and MMS technology -- the first commercial text message was sent in 1992 -- they show no sign of being "Netflixed," which is to be prematurely put out to pasture to make room for the new.

Chuck Martin is author of The Third Screen; Marketing to Your Customers in a World Gone Mobile, CEO of Mobile Future Institute and Director of the Center for Media Research at MediaPost Communications.

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