`Second-generation’ mobile phones introduced early in 2001 offer faster connection speeds and are starting to carry advertising. High response rates are currently enjoyed by advertisers (perhaps owing to the novelty factor!), and the most successful campaigns have been run by companies such as the Sun newspaper, which has used the mobile channel to advertise competitions being run in the paper itself. In other words, the Sun is using online advertising to drive its traditional core business — which is offline newspaper sales. Mobile advertising still represents a very small percentage of company promotional spend in comparison with more traditional media such as radio and television, but the figure is increasing. Business services via mobile channels are currently few and far between, but early experiments are under way with order placing, stock-checking availability and order tracking to facilitate supply chain integration.
The much-hyped but still awaited third generation of mobile communications (3G) is expected to deliver sound and images and be ‘always on’. Auctions held in 2000 for the licences to operate 3G services netted the UK government over £20 billion, but since then the share prices of the ’successful’ telecommunication firms that purchased them have been severely dented.
The technology competing with WAP is called Short Message Systems (SMS), and it is currently by far the more successful in terms of user numbers. SMS is a derivative of numeric paging technology, which has been in existence for many years, updated for two-way communication. To illustrate the rapid growth of SMS, consider the following figures:
In 1998, mobile phones had a 20 per cent market penetration in the UK and some 1 million text messages were sent.
In 2001, market penetration increased to 60 per cent and 1.4 billion text messages were sent.
Although business applications of SMS are growing, the service has particular appeal in the B2C sector to children and students. According to research by the Yankee Group (www.yankeegroup.com) the European SMS market is expected to be worth £31 billion by 2006. The success of SMS relative to WAP indicates that customers currently regard one-to-one communication services as more important than the ability to download information from Web-based content providers. So in order to make money, mobile operators will need to focus on increasing revenues from mobile traffic by enhancing communications services such as email rather than relying on charging for content provision or mobile commerce. Of potential here is group-based text messaging, which allows individuals to communicate with a group of people via a single message. If operators offer a reduced fee for such services, the increase in volume of messages sent can more than offset the lower per-message fees charged.
Enhanced Messaging Services (EMS), which integrate logos, ring tones and text in a single message, are starting to come onto the market at the time of writing (early 2002). Such capabilities offer increased scope for advertisers to make an impact with their brands. Multimedia Messaging Services (MMS), which incorporate pictures and sound, are promised for the summer of 2002 in Europe, but such services are already big business in Japan. MMS is also likely to boost voice traffic, as according to research by Nokia (as reported in The Economist, in October 2001), seven out of ten picture messages sent actually generate a phone call in response (The Economist 2001a).
On the business side, PDAs, which incorporate diary, word-processing and email facilities, are developing into a valuable communication tool. The market leader is Palm, which now provides Internet connection software as standard in all its PDAs. A recent survey by Motient (www.motient.com), an Internet communications and mobile provider, reveals that ‘always on’ wireless two-way email is quickly becoming a top-priority requirement among PDA users. New features are emerging on a regular basis, and it is clear that mobile phones and PDAs are rapidly converging. By summer 2002, colour screens will be standard in all new devices as will the capability to display, and transmit digital pictures.
In summary, the rate of growth of the mobile Internet has been far quicker than that of earlier technologies. Current opportunities for marketers presented by recent mobile developments centre upon:
- interacting with customers through personalized content provision and associated advertising;
- online shopping and the processing of transactions (m-Commerce);
- internal communications such as distribution of information to a remote workforce.
As with the growth of the PC-based Internet, it seems that communications with staff and customers are currently adding most value at this early stage, while the widespread acceptance of mobile transactions is still some way away. One must also bear in mind. That not all these applications will be relevant to all companies all the time, and in most cases they will complement rather than replace existing channels. The key skill for marketers is to focus on the particular aspects of mobile marketing that will add value to customers in their specific industry contexts. We will now examine each of these areas in turn, drawing upon a number of examples to illustrate this important point.
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