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Mobility: Content: A cut above(Total Telecom Via Thomson Dialog NewsEdge) Innovation in the premium SMS market is being stifled by mobile operator revenue-sharing models, with smaller content providers and aggregators being hit the hardest. But the growing interest of larger companies such as eBay in using premium SMS to charge for new services could force operators to change their business models. At present, mobile operators can take up to 50% of the revenue generated through premium SMS, but models vary widely. Jeremy Flynn, former head of commercial partnerships at Vodafone and now CEO of mobile video specialist D2see, says UK operators generally keep around 20% of revenue from premium SMS. Mobile transaction specialist mBlox confirms this, adding that while 80% is passed to the hosting content company or aggregator, 95% of this revenue share is then passed to the content provider. This is a similar model to the participation TV revenue share (see diagram). But for smaller content platform developers such as Mobiya, the revenue share model breaks down on average to 50/50. Based on the model of a premium SMS costing 1.50, Orange UK keeps 68 pence including VAT while Virgin Mobile keeps a whopping 98p. These figures relate to SMS volumes of fewer than 5000 per month, notes Martin Davis, CEO of Mobiya. The revenue share will largely depend on the technology that the aggregator provides and the complexity of the service that the aggregator is running for the service provider, says Davis. The more the aggregator does in terms of user support and IT infrastructure then the more revenue the aggregator will keep. Davis says high transaction fees charged by operators for premium SMS services are increasing costs for consumers. Were struggling to make a margin. We look forward to mobile operators reducing their costs, he says, adding that mobile operators in Scandinavia quickstarted the market by reducing their cut in premium SMS services. But Flynn adds that countries such as Italy and Spain are far behind the UK with appalling revenue share models. In future, the increased involvement of larger brands such as e-commerce payment system PayPal and its parent eBay have a greater chance of helping to reduce these rates, forcing network operators to rethink the unbelievable portion of the revenue that they charge, says Ben Wood, director at CCS Insight. Smaller companies cant afford this, which may be a blocking point for the business case, adds Wood. Premium SMS is typically used by businesses that make use of the mobile channel to bill customers. According to mBlox, it works like a standard text message that is wrapped in an invoice, which appears on the consumers monthly mobile phone bill or is deducted from their pre-pay account. A new report from Telephia shows that premium SMS revenues totalled more than $273 million in the first quarter of 2007 in the US alone. Meanwhile consumer spend on premium SMS in the UK totalled 400 million in the financial year 2006/07, according to regulator ICSTIS. Generally, companies like Mobiya are trying to drive innovation in the premium SMS market, while network operators have typically been reluctant to invest. Mobiya hopes to turn the mobile phone into a classified advertising platform. It has brokered a deal with free daily newspaper Metro in Belgium and is launching a trial service in September with Reed Business Information in the UK. Service providers have stood away because they are worried about spamming, [but] they will enable other companies, says Emma Mohr-McClune, principal analyst, wireless services Europe, Current Analysis. Theres a reluctance to blend the SMS model to the advertising model. Nonetheless, mobile operators are increasingly being forced to explore new revenue streams, including advertising. In the case of Mobiya, posting an advertisement costs a maximum of 9 and a minimum of 3 if you dont add location and tag information. Respondents pay 25p to send an SMS to a short code. EBay, for its part, signed a deal with Vodafone at the start of the year to provide the eBay mobile application for free on the Vodafone live! portal, and enables bidders to track auctions using premium SMS. But there is an increasing threat that PayPal, which makes use of premium SMS now, will usurp SMS for mobile payments because of its dominant position in the online payments market. The company has already launched Mobile Checkout, a service that allows consumers in the US, UK and Canada to buy items securely using the mobile Web. Meanwhile start-ups such as D2see are backing premium-rate services such as mobile video using video shortcodes. Premium SMS [growth] is flat; video is the growth marketcontent providers are looking at video as the next genre, says Flynn. Copyright 2007 Terrapinn Ltd |