Those of us in the marketing, branding, mobile, content business are delighted that text messaging is outpacing voice in usage numbers. But wait! It seems a company wants to bank on this at a time when "banking" is getting a bad name. Verizon has decided to increase its MT transaction fees by 3 cents per transaction for all content owners.
Bottom line on what this means: "It will kill most people's business - this will have huge imact!", says Terry Hsiao of HookMobile, an MMS aggregator.
Why this dramatic statement? There are two levels of SMS/MMS messages - one is MO or "mobile originated" message which is when you or I, consumers, send messages out from our mobile phones. We pay for these through our text messaging plans or per message. MT or "mobile termination" messages are those that come from content owners. These are paid for by the content owner. The rates they pay depend on the aggregator they work with and the fees those aggregators charge, often sliding scale per volume of messages.
Verizon is suggesting that as of November 1, each single MT message will cost at least 3 cents, on top of the usual charges they and the aggregators charge. The bottom line cost impact is enormous both on content owners and the mobile marketing ecosystem as a whole. Some of the companies which will be affected:
- Advertiser or brand companies that use SMS/MMS to targets and communicate its offerings: Coca Cola, Target, Ikea, etc.
- Banks doing mobile reminders or other customer contact transactions
- Political campaigns pushing messages out to constituents
- News, sports, horoscope and other similar types of content owners [note: these are some of the most successful uses of text messaging]
- Social Networks like Facebook, Twitter
Fundamentally, any company trying to build brand connectivity, invite transactions or provide customer service to their consumers will be penalized by this rate increase.
What are some of the market implications:
- Mobile marketing as we know it will shift. SMS is currently the most advanced form of mobile marketing - it may diminish significantly as a medium, disappear, or used only when customers will perceive a real value in the message being delivered to them [ie a bill payment alert].
The mobile marketing landscape may change as a result with other forms such as WAP or client based applications taking a lead. There are significant negatives to both these forms that do not compare with SMS for certain functionality so they do not fully fill the void of diminished SMS messages.
- Content owners will push the price increase to consumers. Consumers may agree to this if they see value, as written above, but otherwise, consumers will be forced to pay more for text and the question is, will they want to do this? And for receiving advertising messages?
- Content owners will diminish the amount of mobile marketing they do.
- Content owners which have smaller revenue potential will go out of business [ring tone companies].
- Advertising companies focusing on helping companies do mobile marketing will see a significant decrease in campaigns and revenue.
- Consumers may ultimately not receive the services and content they now expect.
Rumor has it that AT&T is considering raising MT message costs by 1 cent. Has the cost of delivering MT increased. I think not. This move to increase fees is a taking an overreaching advantage of a market phenomenon of exponential increase in text messaging and of a just budding mobile advertising marketplace to - effectively - kill it off.
Maybe it is Verizon's gambit to create such an outcry that when they lower the MT fee increase to 1 cent or half a cent, the content owners will be grateful and buy into it more readily.
Whatever the reason, Verizon, is gnawing, ripping into, and stripping the hands that are feeding its network and hurting the companies attached to those hands as well. The market will respond - and I hope it will use its power - particularly that possessed by the large content owners [banks and brands] - to tell Verizon "No!" in no uncertain terms.
If your company is in this ecosystem, speak out loud and strong.
p.s. - if Verizon pursues this increase - this will be a huge opportunity for other carriers who do not do an increase to grab significant marketing and advertising dollars, content dollars and new consumers.