SMS: The gateway to mobile advertising

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The theory that SMS usage would decline with the advent of more sophisticated messaging technologies associated with smartphones has become popular over the last few years. But this simple, robust technology refuses to lie down, continuing to drive revenues for operators and spurring innovative ways for advertisers to reach their targeted audiences.

Plain and simple, SMS is enabled on nearly 100 percent of the world's phones. While smartphones receive much of the attention because of their rich graphics and browsing capabilities, they still only represent a minority of users worldwide said Jeff Hasen, chief marketing officer with mobile marketing firm HipCricket. At the same time, the number of text messages sent in the US in 2009 reached 1.56 trillion, according to the Cellular Telecommunications & Internet Association (CTIA). In 2008, Americans sent just over 1 trillion.

"The average age of a mobile customer engaging in text messaging is now 38 and it's getting older each year," said  Hasen.

Meanwhile, SMS advertising has matured since short codes came on the scene in a big way in 2004. HipCricket now has some 50,000 SMS advertising campaigns under its belt since that time.

"SMS advertising has advanced to a point that brands are not seeing SMS as a one-off anymore, but a strategy to build engagement," Hasen said.

Six years ago, consumers didn't know what a short code was, which was evident when one candy company tried putting them in 1 million candy wrappers with very little response. Today, short codes are now an integrated piece of any traditional advertisement, and consumers are responding to them, Hasen said.

A recent report from Local Media Search indicated that "SMS marketing is more versatile and effective than the traditional Internet with response rates that are often two times to 10 times higher." JP Morgan put the total U.S. mobile advertising for 2009 at $2.6 billion, an increase of 62 percent. About $2.3 billion of that was from text messaging. This year, the firm forecasts mobile advertising to grow 45 percent to $3.8 billion, with $3.2 billion attributable to SMS advertising.

A survey from Forrester Research says marketers rely on text messaging in various forms, with 56 percent using text for sweepstakes, voting or trivia contests. Mobile coupons also resonate, with 44 percent of marketers using them as a direct-response method that can be measured for effectiveness.

For instance, SMS users may send text messages for a chance to win certain prizes. In exchange, the advertiser receives a slew of new opted-in users who can be remarketed to. Jiffy Lube in Iowa offered radio listeners a chance to win free oil changes for a year along with a mobile coupon for discounts on various services. Of those who redeemed the mobile coupon, about 50 percent were new customers.

Jeff Hasen hipcricketHasen said some brands have now amassed databases of up to 200,000 consumers who are interested in occasionally receiving new text messages for the brand.

ABI Research urges marketers not to ignore text messaging as it pertains to the desire of consumers to obtain information about schedule activities, their finances and other personal concerns.

"They are willing to give up their mobile phone numbers in exchange for relevant information," ABI Research said. "This is an ongoing and sometimes overlooked opportunity for marketers to either provide these alerts directory or sponsor ones that media companies already offer ... Smart marketers will see text message alerts as an effective method for engaging with their customers on a regular basis. The must be careful to respect these customers, of course, by avoiding bombarding them with spam. But relevant text alerts can become a key tool in a successful mobile marketer's tool box."

SMS is quickly becoming a launch pad for more sophisticated and branded experiences on the mobile device. Hasen said many of HipCricket's SMS campaigns now link to a richer experience on a mobile web site. "Advertisers can can make the reach through SMS but want to deliver a more branded experience," Hasen said. "A brand will use SMS as a foundation piece and add an app, mobile web or display ad. The key thing is that we started with SMS to initiate the whole thing."

Thomas Labarthe, vice president of mobile advertising with Alcatel-Lucent, suggests brands will take that concept even further. He said brands have an opportunity to tie SMS advertising with more lucrative mobile web actions such as mobile payments, web browsing, apps calls to action and location-based services. Alcatel-Lucent recently introduced its Optism Mobile Advertising Solution that links operators and their customers to advertising partners uses and SMS and MMS to reach audiences with permission and preference mechanisms.

"Although messaging may seem a bit old fashioned at first sight, advertisers now understand the potential of adding creative call-to-actions to this type of marketing format, leveraging the rich features of mobile phones," Labarthe said. "The volumes of people who use messaging is enormous. SMS might be their first introduction to more complex mobile services."

In February, French operator SFR launched on offering it calls "mobile street marketing," that enables retailers brands to send text messages to 3 million opt-in SFR subscribers in a 200 meter radius around their retail locations. The advertisement SMS can then be linked to a mobile website the gives more detail about the retail offer. SFR said its experiments of the service last year showed click-through rates of more than 8 percent. Initially, the service is available in Paris but will be extended nationwide by the end of 2010, SFR said.

With the ability to continually glean more detailed information about subscribers, Labarthe said operators and marketers can begin crafting more complex mobile services that are highly targeted and relate to a subscriber's preferences.