The hype and fall of SMS ads – Substitutes and Alternatives
Back in 2007-08 we saw a lot of SMS related startups mushrooming. Some of them still manage to survive and the rest have short circuited. The general belief that prevailed was that if you can get enough SMSes out you can as well earn from it through footer ads. Their were all kinds of startups around that idea. Some wanted you to forward funny SMSes to your friends and some tried paying you for every SMS you send.
The dust has settled and we see very few survivors but interestingly none of them seem to be sending footer ads in the SMS. To put it better, none of them are getting sponsors for the SMSes. Even if they are, the quantity is negligible.
So what really went wrong? What happened to all those always on medium, personal device, targeting etc.? Was all this just a hype?
The main problem here was the confusion between alternatives and substitutes. You need to realise what solution you are providing and then find who else is providing the same product and the same solution as well. The solution that you are providing can be broadly termed as “SMS advertising”. The substitutes to your product are SMS advertisements in the footer of SMSes sent by your competitors. And alternative would be advertisement through use of other mediums such as TVC, Print, banner ads etc.
When you decide the pricing of your solution you not only need to note what prices your competitors are quoting but also what prices other media forms are quoting. Of course, you might argue that advertising is more of a 360 degree thing and SMS advertising is part of that 360 degree, without which the circle does not complete and you have not reached the customer by all possible media. But you also need to realise that the advertising budget are limited and advertisers look for best RoI.
Lets take a quick look at what advertisers could possibly think of this medium at this price.
1. Big advertisers with budgets running into millions will calculate price as cost per reach. Typically, a 10 second spot in India-Pakistan match will cost you Rs. 2 lakh, with atleast 2 crore people watching. So the cost per reach is 1 paisa. One might argue that these ads are not targeted, which of course is true. But when you are building a brand you need to understand that the brand should appeal not only to target audience but also to people who influence his decisions and who appreciate his decisions. The cheapest SMS advertising that you get is around 10 paise. Now is the targeting 10 times better? Also, is the appeal of both the mediums same? A video ad on TV and 60 characters of text, can they have the same effect.
2. The smaller advertisers for whom the targeting actually matters like the neighborhood mom and pop store were never allowed to get in. The minimum budget that any of the SMS services ask for runs in 100 thousand, which is absolutely insane for such advertisers. Although the medium would have been effective for them but they never got a taste of the blood before they could get addicted to it. There were no trial packs like the shampoo sachet they sold. A major reason that Google Adsense Adwords is widely accepted is because they let you set budget as low as $1 and there is variable pricing that works on bidding system.
The services that manage to survive are making money through monetisaton of web traffic mostly. SMSgupshup is trying different ways to lure advertisers and is quite successful till date but they are also missing out on the majority of the advertisers. Given the amount of unsold inventory that these services have they could really make it big if they set their pricing right.
Whats your take on this?
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- Mobile Advertising standing up to its hype?
Naman, your writing is really interesting and thanks for sharing the finding. But I see a little mistake at the end. I think you wanted to refer to Google Adwords not the Google Adsense.
Thank You Krishan!
Yes, I did want to refer to Google Adwords. Thanks for the correction.
@Naman
Excellent analysis. My take on why sms ad. didnt work out:
1. 2 many smses in the users inbox. sms clutter.
2. 2 much of spammy smses from this kind of sites.
3. same user getting the same ad/tag line multiple times a day.
SMSgupshup IMHO has turned into another bulk sms supplier in an already hyper competetive bulk sms market.
Pricing is not the issue. Business logic is the issue.
IMHO… SMS ad should not be visualized as hand-out ads, TV ads, radio ads,… where reach to max number is the target.
If you know the behavior of a cell number and then send targeted ad … and it makes sense to spend even 20-paise per targeted cell.
Where and How to get the Cell-Behavior is the issue.
And by the way adword and adsense works on Push-On-Pull logic. Here it is just Push…
It is a pity that multi-million dollar has been spent on this.
Kasi
Interesting Analysis. Some of the things I learnt over a couple of years for Pull SMS
1. Masses are not comfortable with command line based request for a couple of reasons:
– Lesser recall rate for strict format specification.
– Highly prone to spelling mistakes.
– Every transaction is paid (Errors included).
– Unreliability in the duration of response.
2. Footer ads are actually good for following reasons:
– It doesn’t look like an Ad but considered as part of the content.
– Contextual relevance is higher than most other channels.
– If call to action is on Voice/SMS for advertiser, it works best.
3. Absence of Toll-Free SMS service (for consumers) – Situation could have been completely different, if consumer could get a chance to SMS absolutely for free (irrespective of their plan).
Today, mini-cost for trying the service itself is perhaps the biggest roadblock.
Hi
Interesting article.
Just a thing : link on “alternatives and substitutes” is not working…
2/3 things to share :
- SMS has a cost
- SMS is more private than other channel because in mobile device
- SMS could be more segmented but often advertiser to not use the tool as the best
And there is so much to tell and to do about this topic.
Thanks Hunold.
The link is fixed now.
Yeah.. that link isnt working yet
Sms advertising was just sprouting and then it was cluttered all over!
Advertisers were just thinking of spending money to woo ‘targeted audience’ but then ‘context’ was actually dead!
“Bade miyan” – the target advertiser for a start up thought its too little. and
‘Chhote miyan” – was hardly taken care of!
If contextual advertising could be really contextual.. who will avoid paying even a rupee per ad on SMS!