San Diego Business Journal

Mobile Phones Used as Tool to Target Youth Market
Text Messaging Eyed By Advertisers as Key to Gen Y

BY GRIFFITH DAVID
Special to the Business Journal

The rapid adoption and usage of mobile phones around the world has changed the way people communicate, interact and socialize with one another.

Despite the exponential growth in the number of mobile phone users in the past few years, competitive pricing pressures have steadily driven down the average revenue per user (ARPU) for carriers.

This ARPU erosion has put carriers under pressure to develop additional revenue like SMS. SMS (short messaging service , widely known as "text messaging") has become the killer application in the wireless revolution and is demonstrating unprecedented growth worldwide.

SMS has seen a drastic increase from 4 billion messages sent in January 2000 to 24 billion SMS messages sent in May 2002.

For wireless carriers in Europe, SMS has proven to be a major revenue windfall, as SMS messaging yields much higher margins than voice calls, because of its lower network capacity utilization. In fact, Vodafone, the British carrier, reported last year that 12 percent of its revenues came from SMS. Carriers in the United States have noted the success of SMS in Europe and recognize the potential of SMS as a major revenue generator. SMS traffic growth in the United States had been stifled as competing carriers adopted incompatible platforms that prevented users in one network from messaging to users on a competing network.

To overcome these interconnect obstacles, carriers engaged SMS brokers to translate messages between their varied platforms. In first quarter of 2002, major wireless carriers including AT & T; Wireless, Cingular, Sprint, Verizon and Voicestream, announced interoperability agreements that enabled users to send SMS from one carrier to another, causing a flood of SMS messages to be sent over their networks. As a result, SMS has shown massive adoption in the United States. A recent research study conducted in July 2002 by Jupiter reported that 1 billion messages are sent per month in the United States.

- Marketers Eye Gen Y Market

As mobile phones become ubiquitous devices, a trend starts to emerge. The widespread use of SMS has opened up a new channel for marketers to directly and continuously interact with their customers anywhere, anytime.

SMS as a marketing channel is already prevalent across European markets. European advertisers will spend approximately $53 million on mobile marketing campaigns in 2002.

Today, 21 percent of United Kingdom-based direct marketing companies use SMS as a marketing tool. Several high profile campaigns by major companies such as McDonald's, Cadbury, Coca-Cola, Pepsi, Guinness, Nokia and Warner Bros. have achieved remarkable success in Europe.

The most aggressive of these promotions was run by American brands. Today, brands such as Sony Pictures and New Line Cinema are beginning to use SMS as a marketing channel in the United States and wireless spending in the U.S. market is expected to reach parity with Europe in a few years.

The non-intrusive, yet instantaneous interaction offered by SMS messaging has resulted in rapid adoption among the 13- to 24-year-old group, also known as Generation 'Y'erless (Gen Y). In Europe, a Gen Y user sends on average more than 20 SMS messages per week, and likewise, Gen Y is the largest market segment to adopt SMS in the U.S.

This rapid adoption by Gen Y provides brands and advertising agencies with an opportunity to create a relationship with this segment in a personalized and targeted way. With $172 billion in spending power in 2001, Gen Y provides marketers in the United States with a significant opportunity.

Although advertisers are targeting the Gen Y segment, they are having a difficult time getting this group's attention. Gen Y is skeptical of mainstream media, and major brands have lost market share because they failed to address the needs of this new generation.

Brands that are able to communicate to Gen Y in their language will earn the respect of this segment, generate a loyal following and tap into their enormous spending power. Brands, advertising agencies, and media companies that target Generation Y have been looking at new ways to reach this segment and have tried to break into their "personal zones," but haven't had the right tools to do so.

For Gen Y users, the mobile phone is an essential personal device to which they feel emotionally attached. Mobile marketing enables a brand to communicate to this target audience through this highly personal device.

- How To Create A Successful Campaign

A successful mobile marketing campaign has the following key elements:

- Opt-In: Opt-in is the most important element of a mobile marketing campaign. The mobile phone is a highly personal device and an SMS message can be an intrusion into the users personal zone if sent without permission.

- Interaction: Establishing an interaction is critical to the brand-customer dialogue. The longer the dialogue, the deeper the relationship.

- Entertainment: A key part of any successful mobile campaign is entertainment. Thus, these marketing campaigns are "advertainment" that the user finds entertaining and non-intrusive. Thus, entertainment-oriented ring tones, icons and games are integral to a mobile marketing campaign.

- Challenging: Successful mobile campaigns are challenge-oriented and tend to test the user. The challenge keeps the campaign fresh and interesting and generates rapid user responses that in turn lead to further interaction.

- Rewarding: Users need to feel rewarded for interaction. Rewards may be hard rewards in the form of giveaways, discounts, prizes or soft rewards in the form of being judged "best player."

- Cross Media Integration: Wireless as a channel is even more powerful when combined with traditional media and should be used as the glue that runs across the marketing mix.

No other medium provides such personalized access to a consumer's "personal zone" and marketers must therefore wield this power with the greatest care and caution. Used carelessly, this medium could have unwanted effects. Used wisely, however, SMS messaging delivers powerful marketing results.

David is co-founder and vice president of business development for Adversoft Inc.