Verizon Wireless Makes Move Into Nascent M-Commerce Market Via Netpace Alliance

Verizon Wireless has aligned with mobile marketing company Netpace to enable consumers to make purchases directly through their cell phones. While the few premium wireless services aimed at the U.S. market thus far have involved content offerings and the occasional real-time voting promotion (think American Idol), the agreement represents the next step toward closing the mobile marketing loop.

According to the agreement, Netpace's premium SMS (Short Messaging Service) text messaging platform and marketing services will be made available to advertisers looking to target Verizon Wireless SMS subscribers. Netpace's ReadySet two-way messaging platform will be integrated with the Verizon Wireless network and billing system, allowing mobile phone users to buy items by dialing a four- or five-digit code and have those charges added to their phone bill. The platform also enables dynamic results tracking to track campaigns in real-time through application service provider (ASP) software.

"Short codes are becoming an enabler of premium SMS, particularly when small payments are involved," observes Naqi Jaffery, president and CEO of market research firm Telecom Trends International. Charges associated with credit cards often make it prohibitive to allow credit payments on low-priced commodities.

In 2003, Verizon Wireless and Netpace partnered for a national text messaging sweepstakes promotion for Warner Bros.' "Lord Of The Rings" movie.

Netpace developed campaign creative, did back-end fulfillment of prizes, and analyzed the campaign by region. According to Netpace co-CEO, Vajih Khan, the promotion served the dual purpose of promoting the film and educating consumers about text messaging.

Through the partnership, Netpace envisions cross-media efforts involving, for example, newspaper ads featuring special short codes for airline ticket deals or television-driven mobile phone purchases of autographed books. Verizon Wireless did not respond to calls made by MediaDailyNews for this story.

Just how U.S. consumers will respond to the notion of using their cell phones to buy team merchandise, pay for a can of soda from a vending machine, or respond to a special offer from a fast food purveyor remains unknown. Although it's been touted for years, mobile marketing and commerce has yet to take off in the United States, despite its popularity in Europe and Asia.

"We're very early in the stages of mobile being a commerce channel," believes Avi Greengart, senior analyst at Jupiter Research. The research outfit conducted a study a year ago in which mobile phone users were asked what types of activities they want to use portable devices for. According to Greengart, 82 percent said they want to talk; far less were interested in using their mobile devices for other purposes such as making purchases.

The Cellular Telecommunications and Internet Association found that 1.5 billion text messages were sent in the United States in June 2003--a 50 percent increase over 2002. According to a May 2003 report from technology research company IDC, the U.S. SMS market will grow to 75 million subscribers in 2007. Despite the growth in mobile messaging, a December 2003 Forrester Research brief entitled "U.S. Mobile Marketing Is Still Two Years Away," suggested that "through 2005 most marketers will get far better returns by expanding their email and online advertising programs."

The April 2004 "Mobile Commerce Takes Off" study from Telecom Trends International pegged 2003 m-commerce revenues in North America at $176 million, compared to $6.86 billion globally. The report also forecasted a revenue increase in North America to $33.77 billion in 2008, compared to $554.37 billion worldwide.

Why the sluggishness of SMS mobile marketing in the United States? For one, only certain demographic groups, particularly 18- to-24-year-old mobile phone owners, are poised to accept cell phones as more than just a talking device, according to Jupiter's Greengart. And due to the lack of technology standards and cross-carrier network capabilities, advertisers are hesitant to consider mobile marketing as a means of reaching a broad audience.

In addition, while the wireless industry has successfully targeted the consumer market overseas, most U.S. firms have focused their efforts on providing enterprise services for customer relationship management and salesforce-related functions. "Enterprises have been slow to embrace wireless," says Telecom Trends International's Jaffery.

Through the agreement, potential mobile marketers will most likely be introduced to Netpace by Verizon Wireless. "It's the struggle of an early adopter market," admits Netpace's Khan. "The ones who are aware of it will probably go to the carriers first, and they'll point them to us."

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