Alan Pascoe, Senior Product Manager at Tekelec, explains why SMS is set to fulfil its potential as a mobile advertising medium

Last December, marketing and media information firm The Nielsen Company succinctly stated why SMS-based advertising campaigns will flourish, saying: Where there's an audience, marketers are not far behind.
Industry analyst Informa has estimated that the mobile advertising market will be worth $11 billion (6.8 billion) globally by 2011. The key to that forecasted growth is the fact that mobile advertising offers brands an unprecedented ability to build highly targeted, personal relationships with consumers. Mobile is unique because of the sheer number of devices, outstripping the number of televisions or personal computers. Match this with the mobile operators control over their networks, and you have a very exciting proposition for brand advertisers and marketers. 

Consumer reach
In-message SMS advertising provides the widest possible consumer reach of any mobile channel. This method enables operators to insert advertising content – such as commercial text for sponsored SMS or voicemail enrichment – into the unused portion of text messages.
Its growth in the UK and other mature markets has, until now, been slowed due to several factors. For one, many mobile marketing channels, such as mobile browser banner ads, have limited the uptake of sponsored text messages. In addition, the 2007 GSMA Mobile Advertising Programme (MAP) focused on non-SMS channels, driving initial attention to other communication methods.
SMS is practically a ubiquitous service globally, with more than 3.5 trillion messages sent in 2008 according to Portio Research. Or as Juniper Research said in its report, Mobile Messaging & IP Evolution: Players, Strategies & Forecasts 2009-2014: The ubiquity of SMS in terms of being supported by almost every mobile phone model creates a large addressable market for SMS-based advertising campaigns.
Also, in-message advertising is particularly suited to ad-funded SMS business models, where subscribers opt in to receive commercial content in exchange for reduced rates.

Operators redefine targeting
The characteristics that make SMS a great tool for personal communication –  pervasiveness, immediacy and relevance – make it an ideal tool for advertisers and a great source of revenue for operators. 
Operators own three unique assets that make text advertising an ideal money maker:

• Real-time demographic and behavioral data – Subscriber information, coupled with presence and location awareness, enables operators to offer distinct, personalised and relevant communication. The result is higher open rates; a Direct Marketing Association survey in August 2008 revealed that almost 70% of respondents reacted to SMS messages sent from suppliers, compared to only a 30% success rate for email.
• The white space remaining when text messages contains fewer than 160 characters, providing the real estate to send targeted communications – The average text message comprises about 80 of the 160-character allotment.
• A direct link to recipients of advertising campaigns, providing granular measurability for advertisers and subscribers.

Advertisers and operators, of course, have to tread carefully on consumers privacy and be diligent to not send unsolicited advertising. A win-win situation requires that mobile advertising offers consumers something in return, in the form of rebates, coupons, prizes, or extremely relevant and targeted advertising that is perceived as valuable and original information.

SMS ad potential
Operators can create time- and location-based advertising programs and, by using subscriber profiles, target content to match individual preferences. Examples of text feeds that subscribers would value in incoming SMS messages include:

• Commercial text, such as an advertisement based on the recipients city or even block or based on a keyword in the message.
• Text ads for operators new service offerings
• News and sports flashes linking subscribers with their favourite topics and teams, and giving local, national and international media organisations an opportunity to identify new consumers.
• Voicemail enrichment when operators send SMS voicemail notifications. This type of application-to-person message makes voicemail more engaging to customers. Operators can include a variety of text with the notification, such as holiday greetings, trivia questions and the above-mentioned examples. In addition to revenue opportunities through sponsored ads, this service also strengthens subscriber loyalty by providing voicemail differentiation from other operators.

Operator benefits
The benefits to operators go well beyond the success of any singular campaign. Most importantly, in-message SMS advertising increases operator revenue from SMS.  Service providers are seeking to extend SMS value, as message volume is outpacing revenue. According to Frost & Sullivan, the number of text messages is forecasted to expand at a compound annual growth rate (CAGR) of 15.6% from 2007 to 2011, while SMS revenues are only expected to grow at a CAGR of 5.9% over that same period.
In-message SMS advertising also reduces subscriber churn by offering incentives to take part in mobile advertising programs. In addition, the service generates accurate sponsor charging and ROI calculations by recording successful delivery, and enabling customized responses, such as calling or texting a number, or visiting a website through a mobile browser. Also, operators can offer advertisers the ability to send timely and relevant content, based on recipient profiles, the latest news or new products and services.
With sizeable subscriber bases and the unique ability to track those subscribers behaviour and personal preferences, operators can tap into the growing and potentially lucrative mobile advertising market with in-message SMS advertising.  It has the potential to be the largest advertising opportunity in the mobile world, and one that operators can tap today using their existing SMS networks to generate new revenue and deliver attractively priced services and programs that create subscriber loyalty.