• by Ross Fadner , September 8, 2004

The mobile communications market is maturing faster abroad than in the United States, according to several recent reports. The U.S. mobile market, which includes cell phones, PDAs, and other wireless communications devices, will reach $2.8 billion a year by the end of 2004, according to the Yankee Group. That figure represents just a sliver of the projected worldwide revenue of $61 billion for mobile services, according to market research firm Strategy Analytics.

A more mature market not only indicates stronger consumer usage, but also encourages tech providers and broadcasters to spend more on innovation. Therefore, a glimpse into a more sophisticated mobile market--such as the European Union's--is in many ways a glimpse into the United States' future.

For example, interactive cross-media initiatives linking Short Message Service (SMS), or mobile text messaging, with TV programming have been so successful that it has nearly become its own television subcategory in Europe, where viewers regularly vote on what they want to see happen onscreen next.

What's more, incorporating SMS into TV shows has led to ratings growth in Europe, according to research by the McKinsey Global Institute. A recent McKinsey survey, cited in the organization's June 2004 quarterly report, revealed that 58 percent of European TV buyers said they would allocate a larger portion of their ad budgets to channels with attractive ratings growth resulting from the use of SMS. In addition, of the group that intended to allocate more to such channels, 46 percent said they'd bring new money to TV by either reallocating funds from other media budgets or by making new investments.

SMS-TV models vary, although the majority of applications involve allowing viewers of music contests and reality shows to vote for their favorite song or contestant. Currently, 65 percent of all SMS-TV interactions in the European Union are voting-related. Certain American television shows like Fox's "American Idol" offer SMS-TV interaction, but the market is much smaller than the estimated $700 million generated by broadcasters, mobile operators, and technology providers in the EU.

Other SMS-TV models include shopping, in which consumers purchase merchandise on certain domestic programs with SMS text codes, or SMS-TV chat lines, like Internet chat, in which broadcasters host TV broadcast message boards. Nearly 70 percent of broadcasters in Europe host SMS chat lines, offering an excellent indication of a show's popularity or potential, according to McKinsey.

By the end of 2005 McKinsey predicts that the European SMS market will reach $1.32 billion--of which broadcasters might capture one-third, depending on their contracts with the technology companies and service providers. Broadcasters will also be able to gather a significant amount of data from engaged users, and send them program updates, previews, and special promotions.

The McKinsey data from 60 SMS-TV shows in Western Europe indicates that 5 to 15 percent of the total audience for these programs were converted into active SMS participants from passive viewers.

While the McKinsey data refers to what is still the early-adopter stage in Europe, industry pundits in the United States agree that cross-media partnerships in America are imminent now, too. Russell Kagan, managing director of mobile marketing firm Proteus, said that U.S. mobile market industry innovation is certain because two main growth barriers have been lifted over the last year: the establishment of a universal short code, and number portability.

Roger Entner, research director for the Yankee Group, agreed that the establishment of a universal short code is the key to growth. Previously, advertisers had to strike individual agreements with cellular carriers to run interactive SMS campaigns. For instance, in the past, hot shows like "American Idol" could only reach AT&T's SMS customers, but now the universal short code enables connectivity with the entire mobile market. Entner said that the difference for a show like "American Idol" is a reach of 170 million versus 20 million.