SMS To MMS Evolution Requires A More Convincing Value Proposition
In response to the increasing competition and market maturity in the short messaging services (SMS) space, mobile operators in Europe are shifting focus to multimedia messaging services (MMS) as a means to revive end-user enthusiasm, stabilise revenue generation, increase average revenue per user (ARPU) and reduce the customer churn rate.
While the price of sending basic SMS messages will continue to fall with increasing competition from mobile virtual network operators, a proportionate increase in network traffic is not likely. This could result in lost revenues for mobile operators.
“MMS is expected to step in as a value-added service that provides premium content and supplements the existing revenue stream. Additionally, while SMS will remain useful for simple and quick correspondence, MMS proves a much superior delivery mechanism for multimedia features,” explains Frost & Sullivan (http://www.frost.com) Research Analyst Ashish Maheshwari.
Frost & Sullivan expects a significant drop in the contribution of SMS toward mobile data revenues from 90 per cent in 2003 to 40 per cent in 2008. Nevertheless, mobile operators can expect to stay afloat and replace lost revenue given the large subscriber base in Europe and the opportunities it presents to new services such as MMS.
Availability of handsets with coloured screens and integrated cameras and the rollout of third-generation networks are major driving forces in the MMS market. In 2008, MMS is expected to achieve a 65 per cent penetration rate, creating 210 million active users and EUR 10 billion in revenue for mobile operators.
However, in the two years since its European launch in 2002, MMS has fallen drastically short of mobile operators’ expectations, and even while the future for MMS looks bright, operators need to tread carefully.
Confronted by various technical and commercial challenges such as network interoperability, MMS has struggled to reach the mass market. Fortunately, the Open Mobile Alliance (OMA) has released the version 1.2 to extend MMS capabilities through open standards and interoperable mobile services.
Since the positioning of MMS as a logical extension of SMS has not been completely successful, mobile operators need to rethink their value proposition, focus on providing superior end-user experience and promote the compelling new features offered by MMS.
“The target customer must be made aware that MMS is primarily a fun and personal content application that adds a rich visual feel compared to the services already offered by SMS,” emphasises Maheshwari.
Besides photo messaging, new services such as blogging, group messaging, dating services and competitions are likely to increase the application-to-person traffic and, in turn, drive MMS usage.
However, the marketing push provided by upgraded functionality in terms of colour, audio-visual quality and graphics is likely to have minimal effect due to the high price of MMS and MMS-compliant multimedia handsets.
In order to increase the MMS subscriber base and provide value-for-money services to users, mobile operators have devised upgrade and subsidisation programmes for MMS-enabled handsets. Special offers such as lower weekend prices and personalised services are also likely to propel MMS popularity.
Until prices are stabilised and MMS attains mass appeal, it is likely to take a backseat to SMS since the latter still scores well in terms of affordability, simplicity, accessibility and ease-of-use.
“Unlike MMS, SMS does not require packet-based networks, new wireless devices, sophisticated billing infrastructure and greater bandwidth to deliver a compelling and value-added user experience,” notes Maheshwari.
SMS has evolved into a viable, practical and profitable delivery channel and will continue to play a central role in the future, as a communication tool in the mid-term and a support for MMS in the long-term.
“Although SMS is here to stay, MMS can expect numerous growth opportunities owing to its more valuable and stimulating content and the new nature of the messaging service environment, technology and functionality,” concludes Maheshwari.