Boston-based 80108 Media is launching an SMS-based push service today (see 80108 Launches Mobile Content).
Push services are a double-edged sword. In the early days of a market, they are important because they reduce one obstacle to mobile data service adoption by making it easy to access the service.
One problem with SMS-based push services is that most mobile phones do not have an SMS client that makes it easy to manage pushed SMS messages. If the consumer subscribes to more than a couple push services, the usability cost of managing the messages exceeds the usability savings in push. In the end, the consumer cancels the service.
SMS-based push is also quite a challenge to the creation of a sustainable business. In the direct-to-consumer scenario, the business incurs a significant cost for each message it sends to the subscriber. From this cost, the SMS aggregator gets paid and the mobile network operator gets paid (and in the States, the MNO gets a second dip from the consumer for receiving the message). While there are some price breaks at higher volumes, the built in costs of the service scale pretty linearly with the success of the company.
The business can obviously offset these costs with revenue, but the choices here are not grand either.
The business can charge the consumer. With today’s value chain, that typically means a subscription via premium SMS. Subscriptions are increasingly used (vs. pay per event) because the business gets a higher % of what the consumer pays at higher price points (again, the aggregator and the MNO get a cut of this revenue). Subscriptions also allow the business to take advantage of breakage or arbitrage.
But the bigger problem is that youthful consumers are averse to subscription models, leading to a significant reduction in serviceable market.
The business can charge content originators (the source of the pushed content), but that typically means that the value from the pushed content can be monetized by the content originators in some way. Perhaps they see it as a marketing expense for their primary business model — for example, mobile is used as part of their customer relationship programs, or to differentiate or match a competitors offer. But there are few enough businesses out there that would support such a model that the business begins to look more like a consulting practice than a product or service practice.
Advertising is the promised holy grail. But SMS is not a good technology for advertising (for a variety of reasons that I won’t explore here).
Net-net: From what I can see, I am skeptical that 80108 Media will be a successful “big” business. In all likelihood, they will either mutate into a consulting services company (we build a push channel for you) or they will be bought by someone that needs the technology but drives revenue from other sources (for example, web advertising).
What would I do?
I don’t think a pure SMS play is sustainable.
First, I don’t think consumers will stay with the service for a long period of time. Once the novelty of receiving push SMS wears off and the inbox gets increasingly hard to manage, they will drop from the service. As a result, I would develop a downloadable Java/BREW client that makes the experience easy to use (auxiliary to the SMS) and allows for advertising. Subscribers can start with SMS and “move up” to Java when and if they want to.
Second, I think the “trusted correspondent” model is dated. Consumers in all demographics increasingly look to blogs for this type of information. As a result, I would look at how to create user-generated communities around the correspondents.
Third, I would add a mobile commerce component around ticketing. If you are going to be talking about events, make it a one stop shop to purchase tickets to those events. Create channels for the clubs and small venues, etc.
