Ringtone Ecosystem – Part 1

With the recent performance of the stock market – unprecedented for those under the age of 80 – it’s easy to become consumed and forget that a broader world exists. In a way, it’s a strange, almost self-fulfilling cycle. You hear bad news, focus on bad news, focus less on the job at hand, and end up ushering in the predictions by not operating as you might but more conservatively, with less risk, and greater hesitance. Those with their heads down mitigate if not escape this, none better than those in the performance-marketing space.

Historical Context

For those who suffered their way through the bursting of the Internet bubble, this current credit crunch is starting to feel incredibly familiar. Interestingly, many of those who suffered, didn’t really suffer but thrived. Any notion of stress came from the general economic uncertainty and litany of bad news that permeated every page and pixel. That meant keeping adBrite founder Phil Kaplan’s F’d Company in the background, refreshing it constantly to see the latest round of layoffs, memo’s, and insider reports of downsizing in progress. It was a world before blogging, one with any number of sites to waste time but with fewer sources of journalism. It was a time where, for a little more than two years, online spending decreased month to month. That didn’t inhibit optimism from existing, because the macro trends all suggested a strong future for online advertising. Those macro trends, which proved true, still propel the industry today – a continued shift of media consumption online and ad dollars disproportionate to that consumption.

Counterintuitive as it might sound, plenty of companies saw significant growth during a time when the amount of money available to make online shrank significantly. If you work at a company that has existed before 2002, you work at one of those companies. If you don’t, chances are the founder of your current company worked for one of those companies. Even more likely, your company then and now only makes money when users complete an action on an offer, be it a sale, a sign-up for a free trial, or a request for more information. Companies that specialized in performance-based advertising, worked with a different type of client than the countless who went out of business when the Internet economy contracted. These companies didn’t simply want exposure; they wanted customers and could quantify what a customer was worth and how much of that value they’d pay. For them, the Internet offered the holy grail of marketing – fully trackable, completely accountable, and cost-effective. The marketers who now had access to relatively affordable inventory and figured out how to connect those who wanted customers with the web surfers found themselves almost printing money. It’s a cycle that has repeated itself multiple times over online – relatively not well understood but scalable ad inventory and a healthy demand to reach the users of this inventory by a large enough group of companies that do not have the marketing expertise or risk profile to figure out how the new inventory works. It happened with banners, email, desktop, paid search, and now with social media.

The offers that can best leverage the different mediums evolve, going in and out of vogue based on larger business pressures and their competitiveness online. Some seem to come out of left field and end up commanding an unprecedented share of the performance-marketing space. The incentive promotion space did this, and more recently, the mobile subscription service. When people hear mobile, they often think of mobile as the third-screen, the next big hit in online advertising since 2000. In the performance-marketing sector, mobile means something else. It means completing a transaction, in this case, a sign-up for a subscription service. It’s a process that uses the web to generate interest with the transaction completed on the phone. In the past three years, mobile subscription services have become one of the pre-eminent offers across multiple traffic channels.  With any success comes growing pains as the market attempts to create the optimal balance of stakeholders. The mobile subscription services market has gone through it, and one of the newest changes to come into play is the focus of Part 2. To understand the impacts of the change and why a certain side might desire a change another wouldn’t, we must first know the players who control the market.

The ecosystem surrounding mobile subscription services is anything but simple. Each piece is essential, and if one link in the chain has issues, the whole process is at risk of breaking. As we see, it’s not just complex, but aligning interests is a full-time job, and like the game of telephone, the message often changes in translation.

Flow of Money – Starting with the top, how money passes hands in the mobile subscription marketing space.

• Customer – You, me, and everyone else with a mobile device capable of receiving phone calls and in most cases interacting with other types of data.
• Carriers – The companies that provide the communications backbone; the ones that sell you airtime for voice and other data services.

•  Aggregators – they provide infrastructure and play a key role in the connecting of carriers and the off-deck content services. They are used in much the same way that affiliate networks are, to stream line the connections between two parties; instead of advertises and publishers, it’s carriers and content service providers.
• Off-Deck Content Services – In the context of mobile subscription marketing, the content providers are aggregators in their own right; it is they who have license deals with the artists, studios, etc. and have created and administer the offering to the end-user. They are "off-deck" because the user accesses the content through Web or WAP sites instead of navigating through the user-interface associated with their phone.

• Affiliate Networks – Technology and sales infrastructure providers for those who have Internet traffic and those who wish to advertise online. Affiliate and general CPA networks lower the friction cost and act as a major catalyst for the generation of subscribers; they also play a major role in regulating the industry.
• Performance Marketers – The specialists in performance-based customer acquisition. This group includes the affiliates, many of whom rely on paid search to gain users.

Regulators – The outside influencers

• Federal Trade Commission – The top of the food chain, whose rules apply throughout all states and all forms of commerce. They are often the last to enact policy given the overarching consequences.
• State Attorney General – Each state has its own legal task force responsible for protecting the interests of its people. In the mobile marketing world, the Florida Attorney General has taken the lead on policy setting and penalty collection from different components in the above list of stakeholders.

• Mobile Marketing Association – A professional trade association that works on setting guidelines for those in the mobile marketing industry; plays a similar role as the IAB, a non-regulatory, best practices agency.
• Google – The largest source of online traffic, with a history of creating guidelines for advertisers in order to create the customer experience they feel is best.

• Carriers – They now have specific requirements in place and complex penalty systems for those who they feel do not abide. In the past, they have not gotten into the regulation game.

continue to part 2 of Ringtone Ecosystem