sms

It's been a while since the Mobile Muse developer platform was made available to the public and I always looked at it with great interest. Other projects were always getting in the way and I didn't get to play with it until late February. It only took me a few hours (and several email exchanges with Jim) to have the PHP framework running on my server. Connecting to the mobile networks has never been so easy! It seemed that I was mere hours away from having a great, usable application accessible from anywhere in Canada.

At that point, John and I already had an idea about what our application would do. Delivering Translink bus schedules over text messaging was thought of before, but high costs of SMS aggregators prevented many developers from taking a shot at the problem. We decided to do it just to set a precedent.

Invented only a decade ago, text messaging quickly evolved into a major source of income for telecommunication companies. It is said that it has the best dollar-per-megabyte ratio of all existing forms of data transmission. Several factors contributed to its success - low consumer cost (combined with high telco profits), its asynchronous and non-intrusive nature as well as the sheer efficiency of "impulse-driven" knowledge exchange. While it's far from perfect, SMS continues its triumph worldwide.

Simultaneously with text messaging, another form of communication was stirring a revolution. E-mail maintains double-digit growth rates years after it was introduced (admittedly, spam is responsible for a big part of it). Nowadays, e-mail provides a reliable way to exchange all kinds of media (and text of course) with peers all over the world. Best of all, it's free (not including the cost of internet access).

World wide text messaging revenues for 2005 are estimated to be a cool 75 billion USD. To put that in perspective, if text messaging was a country, it would have the 65th highest GDP in the world (sorry Syria). And while we are still waiting for the 2006 numbers to roll in, I'm going to use my amazing powers of deductive reasoning to predict they will be similarly outrageous. Even mobile challenged Canadians are catching on, sending over one million text messages a day. With so much money trading hands over SMS in Canada, is it possible to construct a self-sustaining business model based purely on providing SMS based services?

As part of the Mobile MUSE project, I have been involved in creating a platform of multi-media services for mobile devices.  We'll get to what that means in a minute, but I'd like to explain some of the rationale and concepts behind the motivation for the platform.

One of the problems in delivery content to mobile devices is barrier to entry for developers.  These barriers take many forms.  These barriers invariably fall into three different categories:

• Financial - it can be difficult for small cap companies in early development phases to afford the investment required to begin working in the mobile space.
• Technical - At the end of the day, mobile devices differ radically from each other in terms of capabilities and even implementations of standard level technologies.  This situation is in stark contrast to the traditional Internet world where PC's generally support a myriad of standard and de-facto standard implementations.  Usually the biggest headache for Internet developers is accounting for two different browsers: IE and Firefox.  The mobile world should be so lucky.
• Business - Multiple wireless network operators put up various barriers - some technical, some financial - that make it difficult to create generic cross-carrier content.

The platform that's been developed for Mobile MUSE is an attempt to redress these barriers and provide a more hospitable environment for rich-media content development.

Over the past 4 months I (Nicholas Simon, Technical Lead for Ubiquity Interactive.  My login for this blog shows up as metroCode) have spent many long nights trying to make sense of revenue models for cell phone services.  I'm a software engineer, not an MBA but I know the idea behind a business is to make money... or at least break even.  Trying to figure out who to charge, what to charge and how to recoup costs seems tricky and so far I have quite a few ideas about how to approach this, but the nagging question is: what is the revenue model behind all of this that will work?



For those you unfamiliar with metroCode service we are currently working with IVR, SMS and MMS capabilities.  At the moment providing these services isn't a problem because of Mobile Muse funding, but come March 31st, 2007 we are hoping to take what we have done and turn it into a sustainable business.  We intend on commercializing the IVR and SMS portions of our project as those are the services people have been indicating they would pay for and/or use in real world applications. We gathered this information from the user studies sponsored by Nokia and conducted by Richard Smith's grad students Florence and Sean at SFU. I believe the results of the focus groups will be made available here on the Mobile MUSE site in the new year.



So... the question remains... and feel free to jump in with any

comments/ideas... how do we address the issues and costs associated with hosting these services, which I'll break out in the next paragraph, and how can we generate enough revenue to not only keep these services up and running, but to turn this into a profitable business.



The costs for supplying IVR and SMS services are fairly basic.  Both services have a monthly fee; in the case of IVR the monthly fee acts as a monthly minimum until a certain number of minutes are used, and if they are exceeded additional costs are incurred.  On top of the monthly fees for having an SMS service, each message that is sent has an additional cost associated with it.  Depending on the hosting companies and aggregators that are used for these services the fees will vary, for the purpose of this blog post lets say the fixed costs are ~$2,000 per month.  This number will be low if the volume/usage is high, as the numbers of minutes and text messages accumulated all play a role in the overall cost to maintain the system.  In order to make back the money spent on making the IVR and SMS services available on an ongoing basis, someone has to pay for these services.

 

There are two types of information services the way I see it: those that have a high value and benefit to users of the system, and those that work in the favour of advertisers.  From this we can deduce that we either have to charge the user of the services -- that's you, with your cell phone -- or we have to charge the advertiser. Or do we? Perhaps the answer lies in a combination of having the user and the advertiser pay for the services that apply to them.  One of the findings that emerged during the user studies conducted for the Vancouver Sculpture Biennale was that users are willing to pay for information/content that is deemed useful to them. They talked about things like being directed to the best Greek restaurant, a popular nightclub having a Hallowe'en party, finding out whether or not the 9:20 pm showing of a movie was sold out on a Saturday night.



If users were not interested in paying for certain things then the advertiser would have to cover those costs.  So far it has been extremely easy to come up with a list of expenses related to IVR and SMS services (and content creation; although community-created content is another option to consider), and it has been considerably harder to come up with a good way to recoup those costs.  It appears the fairest model would be one that works on a sliding scale.  Advertisers or users would be charged for the amount of minutes they rack up using the service, and the same would go for text messages.  It's a good thing we can keep track of all the usage for each particular advertiser and user... now we just have to find out if people are willing to pay for things when April 1st rolls around.  It is pretty easy to see that if advertisers and users are unwilling to at least cover the costs of the service, we have a real challenge on our hands.



In order to make this work it looks like mass usage is going to have to happen and small fees are going to have to be acceptable.  Here's hoping that the general population is ready to use their cell phone for content-based services!