Billions of people text each other every day.  The CTIA says the average rate in the US is 75 billion messages per month.  In one evening alone– New Years Eve 2008– 55 billion text messages were sent.  And this number is only expected to grow as SMS becomes the primary means of staying in touch with friends on Twitter, Facebook and MySpace.

Mobile operators are the early commercial winners in the growth of SMS.  With voice service approaching saturation here in the US, SMS has been a revenue boon.  SMS now accounts for between 70% and 80% of the averge revenue per user (ARPU).  It was a $30 billion industry in 2008and is expected to grow to $224 billion by 2014.

But carriers aren’t the only winners.  Recognizing the opportunity to reach billions of consumers directly– especially the youth audience– advertisers are jumping on the mobile marketing bandwagon.  in 2008 $100 billion was spent on SMS-based advertising campaigns.  AdWeek estimates these ads reaches approximately 162 million “texters” during the fourth quarter alone.

Marketing executives drool over the idea of connecting with these billions of users in the name of brand building.  Many see SMS as an opportunity to ehance customer service (think:  Alaska Airlines), foster community building (think: NBA) and/or increasing sales (think: Coca Cola).  Status alerts, competitions, voting, subscription content, auctions and help desk support represent just some of the scenarios advertisers are using to engage customers in their brand.

With the growth of SMS also comes a completely new value chain.  Companies who lease the five-digit codesfor a fee and 3rd party service providers who manage outgoing messages, responses and analyze ROI represent new revenue channels that did not exist before the SMS explosion.

Three case studies demonstrate the breadth of opportunity associated with SMS marketing:

First, Pfizer.  Pfizer launched an advertising campaign to raise awareness for cardiovascular disase and their drug Lipitor.  Pfizer marketers decided to place posters adveristising Lipitor in physician offices that included a pointer to their mobile campaign.  Consumers who dialed the number on the poster (or included on other advertisements) received, via text message, a coupon for a free 30-day prescription of Lipitor.  Consumers could redeem their coupon with their pharmacist.  Although specific success metrics have not been made public, what’s most intersting about thsi campaign is its focus on a non-traditional mobile audience.  Generally speaking, SMS campaigns tent to assume a youth audience.  But Pfizer chose mobile to target boomers and seniors.

Second, Madison Square Garden.  MSG, the scene for many historic sporting events and concerts, was planning to air a new series 50 Greatest Moment at Madison Square Garden.  In and effort to beef up their traiditonal marketing program, they added an SMS campaign to their efforts.  The goals were to create awareness for the series, maximize viewership and increase their base of loyal customers.  Choosing the keyword MSG50 the campaign launched during the NY Rangers season.  Fans were invited to text MSG50 to a selected 5-digit number with the promise of winning prizes.  More than 300 joined MSG’s text messaging list during the first Rangers game.  This served as a foundation for further promotions.  According to Club Texting, the firm that designed and executing the MSG50 text campaign, Madison Square Garden’s 50 Greatest Moments was considered one of the most successful series in the network’s history.

Third, MGM Grand Hotel.  In an effort to stand out amongst the heavy competition for tourists in Las Vegas, the MGM Grand Hotel decided to initiate a mobile concierge service for its customers.  Messages are sent to guests pre-arrival to confirm reservations and offers a coupon to those that sign up for the service.  Subscribers subsequently recieve special offers and discounts during their stay, based on areas of interest.  Not only does this present special opportunities for guests such as VIP access and spa discounts but it also provides MGM Grand with better insight into their customers’ preferences.  As a result they can better target marketing campaigns.

Today most mobile customers read every text message they receive.  This provides significant opportunity for advertisers.  Yet it also increases their responsibility to not loose that opportunity by flooding the text-waves with meaningless advertising noise.  The nature of SMS requires a targeted approach.  Measurement methodologies are still developing for mobile marketing– let’s hope metrics focus as much on quality engagement as they have (historically) focused on quantity.

Sources:

Forrester Research

mobilestorm

Club Texting

The reason the service is qualified with “short” is because the messages have to fit into the existing signaling formats (160 character limit), which enables simultaneous exchange of short messages and voice calls.

The primary advantages of text messaging over voice calling are: cost, volume control, and store-and forward capability. The latter simply refers to the ability of your handset to receive and store messages sent to you whilst your handset may be off or out of the service area until otherwise.

Presently, SMS has become synonymous with “text message” even though the standardized communication protocol is in the GSM mobile communications system.

According to Forrester Research,  in 2007, 363 billion text messages were sent in the U.S.A.

According to Nielsen, in 2008, that figure nearly tripled to 900 billion mostly due to a minority of avid  users.  Specifically, teens with mobile phones sent an average of 2,272 text messages a month, compared to an average of only 203 calls.

According to the study Mobile Messaging Futures 2009-2013, in 2008, about 3.5 trillion SMS messages were sent worldwide, generating revenues of $89 billion.  The study forecasts that SMS will become a $100 billion business in 2010, and by 2011 worldwide SMS traffic will likely reach 5 trillion messages.

Additional online resources about SMS:
GSM World
The International Association for the Wireless Telecommunications
Textually Blog: All About Texting, SMS, MMS
Wikipedia on SMS