Search results matching tag 'SMS'

Micropayments open up new sources of online revenue

2598534 — Thu, 29 Oct 2009 16:45:00 GMT

Demand for micropayments is increasing fast as social networking and dating sites wake up to the benefits of taking small subscriptions via secure SMS or voice billing services. Adding to this and as part of the Digital Britain report, the Government's body for business innovation in technology, the Technology Strategy Board, has announced a £10M investment to work, at least in part, with industry partners to create and trial new models, including micropayments for online content and video on demand.

But with the organisations receiving only 66 pence in every £1 for micropayments due to network charges, compared with 96 pence for credit card transactions, there is a very real danger that the market for micropayments for a range of online goods and services could be severely constrained.

Given the lack of credit card penetration in many countries, including China, and within the younger demographic that still dominates the online customer base, the need for robust and commercially viable micropayments is pressing.

With the arrival of proven technology that can be delivered globally and rapidly integrated into core systems, online vendors now have seamless access to a whole new revenue stream - but just how many organisations will be deterred by the excessive network charges.

Payment Flexibility

Whilst providers of online goods and services continue to buck the economic downturn, it is clear that a significant proportion of potential online revenue is being lost due to the near reliance on credit cards for payment. Whilst a number of micropayment solutions have been introduced in recent years, a lack of global integration and the complexity of attempting to manage different mechanisms across different countries and networks have deterred the vast majority of organisations from supporting any payment option other than credit cards.

But as a growing number of organisations are now discovering, the arrival of viable, global micropayments technology is opening up a whole new revenue stream. The micropayments model works perfectly for sites operating a model of small, regular subscription, such as dating or social networking sites, especially in areas such as China, where credit card penetration is very low.

But the potential for micropayments is not limited simply to subscription services. A global micropayment service using SMS or voice billing as available across each continent provides organisations with a fantastic opportunity to achieve new revenue streams, and not just with products aimed at the younger demographic unlikely to hold a credit card. Whilst music downloads and gaming sites will obviously benefit from a flexible, robust and convenient payment method, there are very real opportunities to also offer micropayment facilities for additional services such as in hotels - reducing the need for late night reception staff to process payments, for example.

Grossing Up

Evidence is growing that the adoption of micropayments opens up a massive untapped market - with no upfront investment. However, one of the key concerns for many organisations assessing the pros and cons of micropayments is the network tariff. And for good reason: whilst organisations receive 96% of credit card based transactions, high network charges mean only 66% of the payment is received from a micropayment.

For any organisation with a low margin product or service offering, this approach could theoretically make micropayments unfeasible. Indeed, low levels of micropayment adoption to date, point to the fact that organisations are concerned about margin erosion created by these high network charges despite the proven access to new customers.

Early adopters of this payment method have demonstrated that consumers are actually happy to pay more to leverage the flexibility and ease of use of micropayments for the time being.

By offering the customer the option of making a micropayment but charging a little more (grossing up), the organisation can maintain its margin without cannibalising the existing customer base. With the right integration into the core product/service software, it is a simple process to offer two prices - one for credit card transactions and one for micropayments - enabling the customer to make the choice.

Secure, Simple

Key to user adoption of micropayments is the delivery of a completely seamless, flexible service irrespective of country or network. Micropayments must also be easy to use, secure and support a wide range of payment values - from the €1 ringtone download upwards.

Delivering this consistent service globally is a major challenge for many providers of micropayment solutions. The payment market is highly regulated - for obvious reasons. Organisations must comply not only with local, state and national regulations but also meet the demands of each network supplier in each country.

Furthermore, payment technologies need to be integrated with back-end customer service and web content management systems to deliver a complete, auditable solution.

To achieve this successfully and rapidly requires significant expertise and experience of different global markets. It demands strong integration skills and the ability to rapidly respond to organisational requirements to roll out into new markets to address customer opportunities. With the right technology, infrastructure and experience, micropayments technology can actually be deployed within days, with little or no upfront investment, allowing organisations to trial the technology in specific markets to assess its potential.

Global Opportunity

Indeed, those organisations that have opted to trial micropayments have all opted to extend the service across new geographies as a result of a significant increase in revenue. Customer feedback reveals that the process is simple to understand and extremely transparent; whilst there is strong anecdotal evidence that organisations are achieving higher conversion rates via micropayments than credit card payments.

As a result, growing numbers of social networking sites are now offering micropayments although, to date, this has been limited to sites in the UK, US and Australia. With the arrival of proven global solutions, organisations are looking to leverage the new market opportunities in China, Africa, the Caribbean and South America.

Furthermore, given the strong consumer response, the networks are showing increasing interest in introducing new micropayment tariffs to enable organisations to move beyond existing services towards a true mcommerce model. Indeed, as consumer awareness of the additional costs associated with micropayments grows, there will be growing pressure on networks to offer far more competitive rates.

A major shift is on the way: micropayments not only offer unprecedented ease of use for the consumer, overcoming the resistance to buy online via credit card, but also provide the opportunity to leverage the billions of mobile owning individuals globally to add revenue consistently and easily for a range of online goods and services.

By agreeing to operate on smaller margins, it is likely that the networks could precipitate a massive adoption of micropayments that would generate significant additional revenue. Without that change in policy, the real micropayment opportunity could remain untapped.

Give It A Push

2619528 — Mon, 10 Aug 2009 14:03:00 GMT

The early days of mobile marketing were mainly dominated by Push style advertising alerts, although more latterly the industry has evolved to Pull. As an example, many campaigns in the early part of this century involved consumers signing up to recieve special offers and alerts (usually via sms). Now, I would argue the emphasis is on banners ads served in mobile web pages and mobile applications that consumers can click on if they decide to interact.

There's probably a few people who would disagree with this analysis, especially those wedded to the old school technology and there's frequently a flurry of claims that advertising messages embedded in the sms that we send to each other as peer-to-peer messaging is "going to be huge". However, the only rationale for these ideas seem to be that there are an awful lot of them (probably 1000 Billion per annum). This is like saying that putting ads on the wings of the 17 quadrillion flies in the world is a great idea - "just look at the numbers!". In reality P2P sms doesn't offer advertisers much to create engaging marketing campaigns, being merely a small part of a text message, even if consumers would ever accept advertising highjacking their intimate or private moments.

However, where sms alerts make a great deal of sense today, and for the foreseeable future too, is in CRM types of activity. Visa Europe recently announced that they were launching a trial for this type of service for their customers where they get automated alerts about recent transactions by sms, which is the lowest common denominator for all phones, as well as via mobile email and via Android and iPhone Apps for the technorati.

While pioneers like First Direct have been doing this of years already, the huge scale that can be levereraged by Visa shows that suddenly the idea of CRM via phone has gone mainstream.

Other examples of companies using this type of medium is the airline industry for confirmation of flights and announcement of delays, recruitment companies and even our friends the mobile operators themselves, suggesting better tarriffs when we've busted through our bandwidth agreements.

The beauty of many of these ongoing initiatives are that they actually save the companies real money and improve customer service, which sounds a perfect solution in these troubled times.

Twitter cancels SMS and points the way

693284 — Mon, 18 Aug 2008 17:15:00 GMT

The costs of sending text messages to thousands of users who receive them by SMS has forced Twitter, the micro-blogging site to drop the service.

Users can still update their own Twitter stream using SMS but, to get updates on their mobiles, they now have to turn to one of the many Twitter-tastic applications that have been developed around the service - or the company's own mobile web site at m.twitter.com.

I say Twitter-tastic because that's not far off the names of the applications that now orbit in the Twitter-verse. Twitteriffic, for example, is one of the desktop tools users use to update their streams. It's the one that works with the Apple Mac operating system and is thus the one also used - appositely - by iPhone users.

What's interesting about the move is the reasons cited by Twitter's co-founder Biz Stone (no, really) for having to do it. In the US, Canada and India, he says, Twitter managed to reach agreements with the mobile operators to continue to be able to offer the service for free to users. That means the operators agreed to cut costs for SMS's sent by Twitter by enough for Twitter to deem it worthwhile. Elsewhere such discussions have failed. Is that because operators have been less flexible or because Twitter doesn't have the relationships outside those markets to secure deals?

Anyway, the success of the SMS service for Twitter has been a new signal that, even as mobile technologies continue to evolve, this stopgap, basic texting thing that no-one developed with any view of it proving a commercial success is still a hit. There was some research recently that comms applications like Messenger, social networks and even email were usurping SMS as our mobile communication platform of choice, but most every mobile marketing campaign you'll see involves some form of SMS mechanic and we still turn to it far more often than its developers ever thought we would.

But, what the Twitter development suggests is that, while it understood the power of SMS for users, there are enough other reliable and usable mechanics out there nowadays that, where the costs of sustaining SMS are too high, it can look elsewhere. This is the first demonstration I've seen of the old operator cash cows of voice and text carriage being completely bypassed in favour of IP-enabled platforms like desktop apps (such as Twitterific) and mobile sites. That is a trend that will only continue and it's one the operators have been manoevring to protect - while building alternative revenue streams - for a long time. In all honesty they don't look to have made it. Data use is soaring but charges have had to come down to make that happen. Thus, operators still make a fraction of their money from data carriage. They've always feared becoming 'dumb pipes' - the utility providers who have to dig up the road and lay the pipes but make little money from the stuff going through them. It seems to me that, while they fought to protect their revenues while they could, the digital technology world moved on. Twitter - for the moment - has decided to live without them