Clearing the Hurdles

Marketing across consumers’ mobile phones is beginning to gain traction in the U.S., but it is not all smooth sailing. Hurdles remain: consumer acceptance is still modest; brand marketers are still learning what it is and how it should be used; the regulatory environment is uncertain; carrier competition and bureaucracy is an impediment; and the technology is still evolving

The first two hurdles, enthusiasm among consumers and brand marketers, are changing, and we expect to see the pace of change accelerate rapidly. A recent Wall Street Journal article estimated 2003 revenue to be almost $1 billion in data services, including text messaging across cell phones; the authors projected this to grow to $5 billion by 2005. This is a rapidly rising tide. The other hurdles, however, remain and are less easy to wish away.

There are three key regulatory issues (so far) that mobile marketing firms are wrestling with:

SPAM This is the ‘boogie man’ of mobile phone marketing. While reputable mobile marketing firms and trade groups are strident in their insistence that all programming must be permission-based, nonetheless when you make a call or send a text, the receiving phone gets your number. Lists can be built and sold, spam can happen (and does).

Congress has begun discussing regulation and it is not clear where this will end up. The carriers insist they can police their own networks to avoid spammers and no regulation is required. Pardon my skepticism. The only saving grace is that it costs money cash to send a text message — unlike email counterparts, where a million messages can cost just a few cents to generate and send.

ILLEGAL LOTTERY The real “killer app” for SMS marketing is instant-win promotions and sweepstakes. Take the cap off your soft drink, text in the code under the cap, and find out instantly if you’ve won a prize. Play again and again until you’ve emptied the fridge! At some level, however, consumers pay for the texts they send in. How much varies by carrier and plan and can be nearly unmeasurable. “Short code” use reduces the problem but adds cost.

Rules on lotteries are clear in other promotion vehicles but yet-to-be-written in mobile phone marketing (and who’s job is it to write them? The carriers? The FTC?). Each client’s legal team has found a place where they are comfortable — and each place has been different.

COPA Mobile phones are becoming more data-enabled and are appearing more often in younger hands. This grabs the attention of COPA (Child Online Protection Act) specialists. COPA doesn’t cover SMS currently, so no proof of age is required for a mobile marketing program. However, the ground is shifting fast in this area, so don’t take my word for it. As phone penetration gets younger, as phone-as-payment-device becomes common, and as marketing programs across phones become ubiquitous, this issue will surface.

Tech Evolution

Then there are the challenges, unique to the U.S. market, surrounding carrier competition and bureaucracy. The USA is “blessed” with six major carriers and umpteen minor carriers whom, as near as I can tell, all hate each other. Despite the examples in Europe and Asia of how lucrative collaboration on mobile phone marketing can be for them, they have fought it tooth and nail. Only in October 2003 did they finally agree to common short message service (SMS) standards and common short codes. As it is, carriers prefer to run programs exclusively across their own networks.

This obstinacy has led to the emergence of a second tier of “aggregators” who buy data minutes from all the carriers and resell them to mobile marketers. These in turn work with brand marketers to run programs across all carriers (delivering up to 95% of the U.S. cellular market).

But the process is cumbersome and slow. Carriers have to approve each program individually and weigh against differing standards. It makes the aggregators’ task of “provisioning” a program or a new short code labor-intensive and time consuming (five to six weeks to complete the process). This is a hurdle that some brands — think those in high-volume, high-turn categories — have a hard time overcoming.

Speed-to-market is an issue in other areas. Camera phones arrived in the U.S. very shortly after they debuted in Japan. These phones are MMS capable (Multi Media Service), and can transmit around 80 Kbs of data at a time (roughly equivalent to this article compared to the 140-160 character limit of SMS). This data can take the form of text, pictures, sounds or video. About 90% of new phones are MMS-capable and roughly 50% of consumers will have a MMS-capable phone by 2005. It won’t be long before this is the dominant technology — and it happens to be one that is very marketing-friendly!

Next in line: 3G technology (1-2 Mbps) and 4G (up to 10 Mbps) within five years. 3G is broadband speed enabling real time video; 4G will be five times that fast. The phone will become a true entertainment device with all the glorious marketing implications that promises!

Before we get too excited, keep in mind who we are relying upon to bring us this technology…the carriers. Each is betting on what technology will give them the best competitive advantage over their fellow carriers. They want to defeat their competitors, and technology is a weapon. Europe is rapidly adopting 3G as we speak, but the carrier dynamic at play in the U.S. may delay it or prevent it altogether here.

While these hurdles are real, they are manageable. The key is flexibility — among brand managers, brand lawyers, mobile marketers and aggregators. If we can’t get over a hurdle, we’ll put it in “low” and go under it! The fun and excitement of the end result will be worth it.

Wes Bray is chief marketing officer of HipCricket, a mobile phone marketing company with offices in Essex, CT, Los Angeles, CA, Seattle, WA and Sydney, Australia. He can be reached at [email protected].