Premium SMS flameout opens door to improved opt-in rates
With AT&T, Sprint, T-Mobile and Verizon all dropping most premium SMS billing, this could open the door to higher opt-in rates for mobile programs and the loosening of regulation around these programs.
Last week?s announcement that the carriers would stop supporting premium SMS was not unexpected and points to how cramming ? the practice of third parties adding a charge to a phone for a service the customer did not order ? has become a major problem, adding up to an estimated $2 billion a year in fraudulent charges. The move also reflects how SMS has not evolved into a significant channel for paid content distribution and is, instead, embraced by marketers for driving actions such as downloading a coupon.
?Marketers who use SMS should be very happy right now,? said Alex Campbell, co-founder and chief innovation officer at Vibes, Chicago.
?By eliminating premium, consumers don?t have to worry that they?re being deceived when they opt-in to a mobile program,? he said. ?This should start to improve opt-in rates for mobile programs because consumers don?t have to worry about fraud.
?My hope is that without having to worry about consumer deception, the industry can ease some of the regulation that?s formed to combat sketchy premium programs. This regulation has put a lot of unnecessary hoop jumping in place for marketers who just want to effectively communicate with their customers.?
Last week, AT&T, Sprint and T-Mobile agreed to not charge customers for premium text messages as part of an agreement reached with 45 states and led by Vermont.
While Verizon was not part of the agreement, it also said it will stop charging for premium SMS. The United States is the first mobile market to take such a move regarding premium SMS.
The carriers, the Federal Trade Commission and state attorney generals have all previously tried to address cramming, but it has continued to be a serious problem in the U.S., leading to numerous highly visible law suits.
There is one exception, with the carriers saying they will still support the use of premium SMS to make charitable and political contributions, particularly after a natural disaster or for political contributions.
These services have grown significantly over the past few years, with charities raising millions of dollars to help those affected by events. Typically, mobile phone users are able to text a keyword to a short code in order to make a small donation of between $10 and $25.
Premium SMS also played an important role in the recent presidential election, helping candidates to drive smaller donations from a wide swath of Americans.
The importance of trust
One of the key takeaways for marketers from the premium SMS example is just how important trust is to consumers in the mobile space.
?It is an example of how a useful model of mobile commerce can forfeit its place in the market,? said Andrew Bud, global chair of MEF, London.
?This development vividly demonstrates the fundamental importance of consumer trust and confidence to the mobile content & commerce industry,? he said.
?Lessons must be learned and applied, in particular to the growing issue of consumer data privacy.?
However, the decision by the carriers does not address another area of concern in SMS ? spam ? that also undermines users' trust.
Better billing solutions
The move also reflects an admission by carriers that premium SMS has not evolved into a particularly effective billing solution.
Since the launch of premium SMS in 2004, new and more effective billing solutions such as PayPhone and BilltoMobile have hit the scene.
?PayPal, Play Store, and iTunes all fill the gap of providing Value Added Services billing solutions with greater controls of the billing ecosystem,? said John Styers, executive vice president at Sumotext, Little Rock, AR.
?It is appropriate for the carriers to move away from the world of Banking and focus on the world of Connectivity,? he said.
?These new payment options will provide current vendors with the same access to the subscriber, while making the cramming more difficult.
Most brands and entertainment companies have also shied away from using premium SMS for paid content.
Instead, they use SMS more as an avenue for distributing free content whereas other channels, such as apps, have evolved into viable avenues for paid content distribution.
?The heyday of premium SMS was downloading a ringtone,? said Michael Ahearn, vice president of customer development and marketing at Archer Mobile, Seattle. ?It was never adopted by mainstream industry.
?Most consumers see content as free,? he said. ?Most entertainment entities saw that content was not a product but a vehicle for marketing.
?The value in SMS is transactional, driving traffic to a Web store or bricks and mortar store, driving coupons and conversions. It provides a lot of value to brands and consumers.?
Chantal Tode is associate editor on Mobile Marketer, New York