Understanding the Mobile Value Chain and Why 90% of Mobile Marketers Fail

The majority of marketing managers will not take the time to understand how the mobile value chain works and they will pay a price for their haste. Mobile Compass provides private consulting services to clients who are already established with a mobile vendor and need additional help with their campaign. Based on our experiences we have broken these types of marketers into three groups from the most common to the least common.

1. Mobile is not their core competency and it detracts from the work they do with the core aspect of their business.
2. Mobile is their core competency but they don’t have the bandwidth to manage the vendor relationships, or deal with the day to day campaign maintenance.
3. The marketer is managing the campaigns by themselves without issue, but is looking to optimize their product offering or add efficiencies into the way they do business.

The 3rd group of marketers are typically ultra successful in the mobile marketplace (the 10% that do succeed) and usually fit the mold of the classic over achiever.
In the first two instances, however, we generally find the opposite to be true. These are the guys that make up “the other 90%.” They didn’t spend the time to fully understand how the mobile value chain works, they went into business with a lot of assumptions and now they need help to stay afloat. Here are some statements that we commonly hear from “the other 90%” which may give an indication of why they now need our consulting services:

• “I chose my vendor because I heard they were the best” or “because so-and-so recommended them” or “because we already had a business relationship with them for other non-mobile services.”
• “I thought that my vendor would provide more services than they do.”
• “I didn’t think that the carriers would have an issue with my mobile product.”
• “I didn’t realize that the carriers would audit my program once it was live.”
• “We have been slow at adjusting our campaign to keep up with new carrier regulations.”

In all of the above statements it can be inferred that the company did not spend the time to either fully understand the components of the mobile value chain or fully understand the regulations which govern the mobile industry and therefore did not plan accordingly and allocate the proper resources. The rest of this blog is dedicated to providing you with a background on the industry and knowledge of how it is structured to ensure that you do not stumble upon the same pitfalls.
A Brief History of the Mobile Industry:

The advent of the common short code in late 2003 opened the gates to virtually limitless possibilities for content providers like you to market their products. Short codes are a five or six digit numbers that represent a unique business or service, and like mini telephone numbers, short codes allow for the delivery and receipt of messages between businesses and consumers. Short codes also offer more product options to the consumer base, and if used properly, can provide more valuable consumer feedback allowing providers to more accurately target their audience. Mobile commerce which utilizes a short code is known as “off portal” meaning that the content purchased by the consumer is stored on and delivered to the user from servers that are hosted outside of the carrier’s domain or portal.

”On-Portal” is a more traditional but limited means of getting your content to the user. Examples of on portal marketing are T-mobile’s “T-zones” and Verizon’s “Get It Now” platforms. Content offered to consumers through these channels is stored on servers which are owned and maintained by the carriers. Carriers own the user’s ability to access the content and therefore have control over how the content is marketed, often making it difficult for new companies to gain visibility. Content providers working on- portal also have to establish a direct relationship with each carrier they want to engage in business.

In the off portal world a content provider can access dozens or even hundreds of carriers via a single interface through the use of an SMS aggregator. Conversely, the aggregator is also a valuable player to the carriers who use the aggregator as a single point of contact to transfer data and pass commercial information to the content providers. The aggregator is seen by both parties as a means to simplify their networks and increase their ROI (return on investment).

The marketplace has grown in its technical requirements over the years, both from the advent of new regulation and as a natural course of product evolution. This has lead to an explosion of appeal to new market niches that were less likely to use mobile as a marketing channel in the past. The combination of inexperienced newcomers and a more technically complex environment has given rise to the mobile ASP (application service provider). ASPs are versatile members of the mobile value chain and can develop software, host content, host databases of active subscribers, and they can simplify aggregator connections.

Aggregators run a high volume/ low margin business and are typically fairly rigid in their ability to conform to the custom needs of a content provider. ASP’s on the other hand are typically lower volume/ higher margin and may provide the customization necessary to get the content provider’s product to market quickly and without bending the product to conform to the capabilities of the vendor. Many providers in the market place today combine these services, blurring aggregation and ASP services to provide a one stop shop. In the early “wild west” years of off-portal marketing many content providers took advantage of the loose industry regulations and engaged in some unscrupulous business practices offering products to the consumer which were of low value, and had a high and often misleadingly marketed cost. To protect their brand new revenue stream from being tarnished and, under threat of suit, the US wireless carriers quickly and sporadically assembled guidelines to which the content providers and aggregators must adhere. Guidelines were created on a per-carrier basis but were often dissimilar and even sometimes contradictory to one another making it difficult for content providers to market their products in one homogeneous fashion. Understanding these rules and regulations became paramount and content providers who didn’t take the time to learn them failed, a fact that still holds true today.

Several years ago the MMA (Mobile Marketing Association) established the consumer best practices committee comprised of executives from carriers, aggregators, ASPs and content providers to work toward the creation of a more congruent set of guidelines. Today, these guidelines have been adopted by all major carriers and have become the foundation by which off-portal campaigns are regulated. Carriers still retain many of their own regulations but there are certainly signs of unification, especially in terms of regulating the actual message flow between the application and the consumer. The MMA Guidelines and Codes of Conduct should be a first read for anyone wanting to develop a mobile product. These can be downloaded from the MMA website at http://www.mmaglobal.com/policies.

Carriers still maintain significantly differing regulations in terms of how a campaign can be marketed and, though they’ve made great strides toward homogenizing message flow regulations, small nuances still remain that, if left unaddressed, can result in major setbacks if a carrier should reject your campaign. Obtaining the individual carrier regulations can be a bit trickier. Oftentimes, ASPs or Aggregators will give the regulations to you while still in the negotiation phase recognizing that the sooner you have them the sooner you’ll have a campaign up and running. The best aggregators will take the individual carrier regulations and combine them into a single, easy to understand document. These aggregators will typically be a bit more reluctant about letting their hard work out into the public before they have a contract in place making it a challenge to obtain carrier regulations without significant monetary investment…

This article will be continued next month when we look at how the industry works today and how the mobile vendor you choose may make or break your campaign. In the mean time visit www.mobilecompassinc.com or contact us through the email below for more information.

Mobile Compass
Cri Boratenski
Co - Founder / Mobile Advisor
http://www.mobilecompassinc.com/
cri@mobilecompassinc.com

Groundbreaking Technology Unleashed as AT&T Looks to Femtocell and Satellite for Extending Their Network

While our friends across the pond enjoy relatively good reception throughout most of Europe, the US, with its comparatively sparse population density and mishmash of wireless technologies has made the proliferation of consistent wireless signal difficult. Poor reception may soon be a thing of the past though. A groundbreaking new product developed by TerreStar and distributed by AT&T provides a glimpse into what the future will likely have in store for the wireless phone. A joint effort between the two companies has resulted in the GENUSTM, a mobile satellite phone that is the first to ever combine both satellite and cellular capabilities into a single device. The phone’s slim, sleek design resembles a modern smart phone and, most notably, removes the massive antenna typical of satellite phones.



TerreStar will build and launch the satellite that will provide service across the United States, Puerto Rico, and the U.S. Virgin Islands and will also service the coastal waters offshore from the US. Users will also have access to AT&T’s 3G mobile network for typical communications needs within existing wireless coverage areas and will have the ability to switch over to satellite service when they leave cellular coverage. It appears, from early photos, that the switch from cellular to satellite will be a manual process requiring the user to press a button. The device is therefore unlikely to reduce the frequency of dropped calls while on the cellular network.

AT&T and TerreStar plan to have satellite service available in Q4 of this year. At least initially the two companies plan to appeal to the communications needs of enterprise customers such as long haul truckers who frequently travel through poorly covered regions. They also envision use of the satellite service as a backup communications system if terrestrial networks should become unavailable in the event of natural disaster or other such event.

One of the biggest costs for wireless carriers is maintaining the infrastructure of their geographically vast networks. This is an issue that seems logically combated through the use of satellites which can increase network scalability by reducing the number of physical points required for data transmission. So, while the GENUSTM device will target a niche customer in the near term, as adoption increases it may pave the way for devices and service contracts that will one day be priced for the Average Joe and provide coverage to every corner of the globe.

AT&T has also launched a new website dedicated to their new MicroCell, a 3G femtocell device that acts like a mini in-home cell tower that connects to AT&T’s network via an internet connection. Manufactured by Cisco, the MicroCell allows users with AT&T 3G handsets to seamlessly transfer between cell tower communication and MicroCell communication. Verizon, Sprint and T-mobile have also launched similar devices intended for network extension into poor coverage areas but Verizon and Sprint’s implementations work off of 2G and do not offer data services. T-mobile’s solution operates off of Wi-Fi offering similar functionality to the MicroCell. The MicroCell is currently being tested in Charlotte and Raleigh North Carolina and is full launch is rumored for early 2010. For more information about the MicroCell’s performance see Engadget’s online review.


As the number 2 carrier since Verizon’s acquisition of Alltel, it appears that AT&T is making some major strides to be the top innovator in the industry. These moves may be in response to Verizon’s plans for rollout of their GSM based 4G LTE network in 2010. By rolling out satellite and femtocell services, AT&T may be looking for less expensive and more scalable means of extending their network to compete the more extensive rural coverage offered by Verizon.

Mobile Compass
Cri Boratenski
Co - Founder / Mobile Advisor
www.mobilecompassinc.com
cri@mobilecompassinc.com

Why the $1.5M Verizon Wireless Settlement Will NOT Have an Affect on the Mobile Industry

There has been a lot of press around Florida Attorney General Bill McCollum’s announcement on June 24 of a $1.5 million settlement with Verizon Wireless and Alltel over “free” ringtone offers. I feel that a lot of the opinions on how the industry will be affected by the ruling are very much over blown. According to Adam Solomon’s article in the Mobile Marketer Daily, the “settlements require the wireless carriers to contractually cause its content providers and advertisers to adhere to certain requirements.” Solomon is correct in his assessment that Verizon and Alltel will hold the Aggregators who connect to them contractually responsible for their marketing practices, but this has been in place for quite some time already. Verizon has actually been a leader in this area, going so far as to require content providers to submit every web URL on which they advertise to Verizon for regular auditing.

Solomon continues to state that Verizon is prohibited to use "the terms ‘free,’ ‘complimentary,’ ‘no charge,’ ‘without charge,’ or any other term that reasonably causes a consumer to believe that he or she may receive something of value entirely or in part without a requirement of compensation, unless the initial advertisement (sponsored links, organic links, email subject lines, banner ads and pop-ups) that reaches the consumer clearly and conspicuously states that the free item will be received pursuant to the consumer’s authorization of billing for a paid subscription."

The MMA guidelines have been adopted by all major carriers as the foundation by which mobile campaigns are reviewed and approved. Page 26 of the MMA best practices guidelines, available at http://www.mmaglobal.com/bestpractices.pdf addresses this very issue point blank under the section “Use of ‘Free’ and ‘Bonus’ Terminology". These guidelines were just released on July 1st, but the predecessors to the current release contained the exact same wording. In fact the MMA guidelines go one step further then the Verizon ruling, stating that a program cannot be promoted as “free” when premium fees are associated with the program.

Solomon touches on several other items in his article such as font requirements for web based call to actions and the requirement that pricing on the web page must not require scrolling to view. But the fact is that these regulations have all been in place for some. If the regulations are not addressed specifically by the MMA guidelines they will be covered under carrier specific regulations from one or more of the major carriers. Since it is not profitable to run a mobile campaign that does not include all major carriers, content providers are already abiding by these regulations. In most circumstances the regulations that are in place today are as stringent or more stringent then the requirements placed on Verizon and Alltel by the Florida court ruling.

The bottom line is that this is old news. The vast majority of the misleading billing which led to these lawsuits occurred back in 2005-2006 when there was little regulation in the industry, but the mobile world has changed drastically since then. Carriers have always held the members of the mobile value chain who operate beneath them contractually responsible for the messages they deliver through the carrier platform, but today the guidelines around what are acceptable marketing practices have gotten far stricter and all major carriers audit programs on a regular basis to ensure that the regulations are adhered to. I’m sorry Adam Solomon, but I must respectfully disagree with your statement that “the Verizon Wireless settlement will likely have a significant effect on the marketing of mobile content” as the effects have already occurred.

Cri Boratenski
Co-Founder, Mobile Compass LLC.
http://www.mobilecompassinc.com/