If you read Part 1, you see the makings for an industry ripe for change. It’s a market that relies heavily on affiliates to drive new sign-ups and has little to low barrier to entry. Few offers have the breadth of reach, the run of network quality found in mortgages and online education, but unlike those two popular and widely run verticals, there is no cost to the user. Ringtones, though, cost money, but there’s no credit card transaction. Users simply enter their phone number onto the site, wait for a text message to their phone, then enter the PIN received in the text on the web to confirm sign up. Do that, and your phone bill receives charges of $9.99 per month. It’s a process that, despite its double opt-in nature, still leaves room for a user to not truly understand the nature of the product being received, especially in our instant gratification world. There is nothing illegal going on today, no FTC related inquiries into the ringtone market, but there is an incentive that piques the users interest, and when there is an incentive, especially one where money changes hands, you will have issues. In the grand scheme, those facing the ringtone space aren’t major – no lawsuits – but there is too much room for error and a system that has given affiliate marketers too much control. Now, all major stakeholders are pushing for change, and all at once – the off deck ringtone providers, Google, and the carriers – and what they want.
Off Deck Ringtone providers
At the heart of the business sit those that created a compelling product, one that has relationships with the carriers and the content and has turned that into a service for users. They have found a good working relationship with the CPA networks, and outside of slightly decreasing returns (users not staying on board long enough), they have one major focus – compliance. They belong to the Mobile Marketing Association which has taken the lead on setting the standards for marketing. It’s not an official regulatory board but a trade association looking out for the best interest of the users and the companies. Compliance today revolves around disclosures and language – display of terms and conditions, price, and the proper use of phrases such as complimentary or lack of use of certain phrases such as free.
With direct marketing, especially in a competitive traffic acquisition landscape where affiliates bare the cost of media, this means pushing the envelope. It’s a cat and mouse game all too familiar to those in the space, that is generally benign, but work nonetheless to make sure they push enough, but not too much. When it comes to ringtones though, the process got thrown off towards the end of last year when the Florida Attorney General started to look at the practices of certain players. Then, the "free" issue, and the combination of the complexity involved in search marketing along with a few bad apples has kept the industry in catchup mode. The providers have tolerated the carrier page method to date, tolerated certain networks and traffic providers having the ability to do what the lead gen world refers to as host and post – two things that have played an integral role in the ability of marketers to drive users in scale profitably. Whether pressured by financial or legal reasons, the major lead buyers have changed their stance and issued, jointly, new guidelines to "ensure that consumers have a great experience and are treated fairly." As they say, "We believe that these guidelines combined with strong policing will enable our industry to successfully utilize the online affiliate channel the way major brands such as Netflix, Ebay and Blockbuster have been doing so for years." "We (Buongiorno, Dada, Flycell, Jamster, Playphone, and Thumbplay) encourage every company selling content off-deck to join this initiative and agree to follow and enforce the practices outlined in this document."
What does this agreement say? Namely that, "As of September 11th, 2007, affiliates/partners will not host or control the pages in the sign-up flow. This means that the following pages will only be hosted by the Advertiser – Phone # entry page and PIN/Password entry page." And, "As of October 1, 2007, affiliates will not be permitted to host a “choose your carrier page.” All advertising must point to a page hosted by the Advertiser by October 1, 2007." This is big stuff if you are a ringtone marketer. The timeline is a little too aggressive but once implemented it’s, on the surface, a landmark change. It accompanies other specific rules regarding their desires for search marketing and other traffic channels. Speaking on search, Government Google has decided to make some changes of its own.
Google
Some have estimated that as much as 5% of their revenues comes from ringtone marketers. The rise of carrier pages has lead to the most efficient user generation, but there are so many that it was almost inevitable that Google would bring up the user experience card. Whether these often changing, rarely branded, pages are an effective user experience is debatable but in the end irrelevant. From Google’s perspective, it simply allows too many people to market the same thing, which in their eyes is always a problem. It’s in their eyes a form of double listing. In this case, ringtones became a victim of its own success – converting too well, running too successfully that Google saw them as a threat to their brand and mission – super relevance not broadcast marketing. The marketing of ringtones continues to get more refined, but Google has decided to speed up the process in two ways – requiring their own changes to the pages their users see and in quality score. As for the physical changes, Google wants greater upfront disclosure of pricing and the subscription nature, which they feel is best done with the addition of a check box explicitly stating those two things prior to submitting the phone number. The backup policing comes from quality score changes which they announced on September 18th. That announcement is a whole other subject as it seems, for lack of a better phrase, to put the smack down on some of their biggest advertisers. From the post on Inside AdWords, "The following types of websites are likely to merit low landing page quality scores and may be difficult to advertise affordably." They list four, two of which are "Comparison shopping sites" and "Travel aggregators." To top it off, Google "will no longer post advance notice of upcoming updates." Nice.
Carriers
Last and absolutely not least come the carriers, the ones with the billing relationship to the consumer. Those in favor of ringtone marketing like to point out how much the carriers make – especially given their almost 50% take off any subscription price. On the flip side though, losing a customer costs them much more than they could make on ringtones. Think of what they will do to get one – free phones, high CPA’s, and what they do once they have them – long contracts, high penalties, big incentives to renew. If not the most complex, theirs is certainly the least nimble piece in the equation, especially as cooperation among them isn’t a high priority. Two things have started to emerge, nothing quite as formal as the agreement between off deck marketers, but still changes that could impact conversions significantly. The first is price. $9.99 has been the standard charge. Some carriers allowed more, but now it seems as though $9.99 will be the max. The second is more significant. Currently, the text the users receive is not just initiated by the off deck marketers but controlled by them too, i.e., what the users actually read. At least one carrier has started the process to change that, where instead of the users receiving a PIN code couched in marketer speak, they would receive a carrier written message to which instead of entering numbers on a website they must reply with a sign of their understanding. It would presumably lower conversions, but perhaps as much a monkey wrench, it makes tracking difficult, removing the cookie / pixel process and all the benefits that come from web based conversion tracking.
Like incentive promotion, ringtones is too big to go away, but like incentive promotion, it was ripe for change. I’m not sure if any would have expected quite as many changes from as many parties. There are some loopholes, so while these sound severe, it won’t hit like a stock market crash. It will come in waves. Stay tuned.
Network
