Premium SMS, aka D2C (for “direct to consumer) is fairly new entrant to the world of mobile telephony and mobile entertainment. Yet it’s an increasingly important system for delivering content to mobile device users. To learn more about what, exactly, premium SMS is and why it matters, TMCnet asked Dave Oberholzer, vice president of corporate development at Limbo, to share his knowledge and perspective.

 

DO: Premium SMS is fundamentally a system that uses short messaging interaction to apply premium charges—charges beyond the carriers’ standard text messaging rates—to a consumer’s wireless bill. These charges can be for almost anything that the carriers will allow. More broadly, the industry that uses this billing mechanism to charge for content has become known as the premium SMS industry.

 

TMCnet: When did premium SMS (aka direct-to-consumer, D2C) first emerge, and how has it changed since that time? 

 

DO: The first significant U.S. premium SMS program was launched in late 2003/early 2004. The initial focus was on participation television, since that is what was driving the most revenue in other markets. Initially, iTV was less successful in the U.S., so premium SMS shifted toward content (ringtone & wallpaper) delivery, then to subscription services for content. Recently, iTV has been making a comeback, however.

 

TMCnet: In what ways have carriers succeeded in using D2C to better serve their customers?  

 

DO: Carriers have become much more sophisticated about protecting their customers. While abusive services are still in the market, they are getting weeded out, which is best for the industry as a whole.

 

TMCnet: What are some of the complaints customers have about D2C as it now exists, and how can carriers and content providers address these concerns?

 

DO: The biggest issue for consumers is the complexity of the premium SMS model. With multiple companies involved in providing premium SMS services (carrier, messaging aggregators, content providers), many times no one company owns a problem to get it resolved.

 

TMCnet: What are some of the challenges carriers and content providers face in trying to improve premium SMS?  

 

DO: Two things… First, the complexity is there for a reason, it will take a long time to simplify things—especially when it comes to billing. Second, from a risk/reward perspective, carriers are keeping too large of a revenue share for the industry to thrive. Many content providers cannot make any money in the current environment, so they are exiting the business.

 

 

DO: If the environment doesn’t improve for consumers, they will walk away from it, and find their mobile entertainment via other channels. This means lower revenue for everyone.

 

TMCnet: If carriers and content providers do not work on improving premium SMS, what do you think will happen?  

 

DO: Other channels will emerge. It does not mean that consumers will necessarily run back to the walled garden; instead, channels will exist that will completely bypass the current premium SMS ecosystem, including the carriers.

 

TMCnet: When implemented effectively, how does premium SMS benefit customers?  

 

DO: It provides a fun and engaging experience for a consumer on the mobile device. When done well, consumers love it!

 

TMCnet: When implemented effectively, how does premium SMS benefit carriers and content providers?  

 

DO: It drives data adoption for carriers, along with the revenue share they receive. For content providers, it provides a relatively open channel to distribute content.

 

 

DO: Limbo is all about providing free, engaging and entertaining experiences for customers. Unfortunately, many other premium SMS/D2C companies are only focused on quick revenue hits rather than whether the consumer actually enjoys the service or trusts the service provider.

 

 

DO: The D2C model is the one that will drive the bulk of mobile entertainment revenue in the future. The underlying infrastructure is still to be determined, but the model will eventually become predominant. At Limbo, we feel that our success is contingent on building a strong, beloved consumer brand that stands for fun, free mobile entertainment.