Carrier Desire for More Data Fees in Conflict with Consumer Price Sensitivity

In the regular torrent of data and reports streaming across my desk there were a number of interesting findings recently that indirectly addressed the issue of mobile consumer price sensitivity. The first came from Google's recent consumer study with Compete about how mobile phone buyers shop for handsets and what influences those purchase decisions. 

Google found that after carrier network quality/reliability the primary consumer considerations were the cost of data and voice plans and the price of handsets.

Source: Google-Compete (Q3 2011)

Then came Chetan Sharma's latest Global Mobile Market Update, which is trove of charts about a range of mobile issues: smartphone adoption, carrier revenues and mobile IP among others. He underscores the now familar point that carrier voice revenues are flat to declining while data is driving growth. Partly as a consequence, most carriers have moved away or are trying to retreat from unlimited data plans.

Sharma asserts that mobile phone plan fees now represent "50% of the [consumer] household IT budget." That was quite striking to me. Also in the "household IT" category are landlines, cable TV and Internet access. Carriers want to drive up fees; consumers want to hold them down. 

Another interesting, related piece of data from Sharma's slides is one that shows how most consumers that have bought iPads or other tablets have opted for WiFi only devices (63%) -- undoubtedly a cost saving move. Even a majority of those who've bought carrier-enabled devices have not activated those carrier plans. In other words, according to the data, only 12% of tablets are running on carrier networks. 

Source: Chetan Sharma April 2012

This choice is absolutely about minimizing fees that consumers are paying for Internet access. They're paying for access at home, they're paying for access on their smartphones -- and many families have multiple people on data plans. It thus makes sense that they'd say "no" to a third Internet access tariff for tablets. 

Verizon in the US is rumored to be readying a multiple device family data plan. We'll have to see how much data it allows and how much it costs. In theory it's a compelling solution. 

However the carrier imperative to extract more data charges and fees from consumers as other revenues decline will bump up against consumer price sensitivity and resistance to price increases. Market competition will also limit the carriers' ability to raise prices in the future. 

Report: Large Majority of Tablet Buyers Shun Carrier Data Plans

The iPad 4G may prove itself an exception, however Chetan Sharma's latest report on data consumption and carrier revenues shows that US consumers continue to shun carrier contracts when it comes to buying tablets. The reasons are very rational:

• Smartphone owners already pay high monthly carrier bills
• The lower prices of WiFi tablets (the iPad in particular) makes them more attractive to consumers
• Consumers don't want to have to worry about data-plan limits and rationing or throttling

Indeed, tablet data plans offered by the carriers are quickly used up -- in just a few hours -- by video consumption on the iPad in particular.

Consumers want to be free of carrier data plan restrictions and associated costs. However, as voice and text revenues decline, carriers will increasingly look to data plans for revenue growth. Carriers will need to be very creative because users will be seeking to escape their efforts to extract more data fees from consumers.

SingTel Buys Amobee for $321 Million

Singapore Telecommunications Ltd. (SingTel) announced earlier today that it will buy Amobee for $321 million. Amobee, which is based in Silicon Valley, will remain intact and headquartered there. The acquisition is a bid to become a global player in mobile advertising and generate new sources of revenue, at a time when traditional telco (even wireless) carrier revenues are flattening and even stagnating.

Rather than a mobile "ad network," Amobee is a mobile advertising marketplace not unlike Velti.

SingTel has an office in Silicon Valley and has been making investments in US companies for some time. 

Along with the acquisition, SingTel announced that the company would be reorganized into three groups, focused on consumers, "digital life" and communications technology. SingTel has mobile customers in 25 countries. It also has 36 offices in 19 countries throughout Asia Pacific, Europe and the United States. The company claims over 400 million subscribers globally. 

Mobile Payments News: ISIS, InMobi-Opera and PayPal Carrier Payment Network

ISIS, the as-yet-unlaunched US mobile payments inititative from T-Mobile, AT&T and Verizon has added new partners to its stable of credit card issuers and banks (BarclayCard, Capital One, and Chase), according to CNET. ISIS has been described as "Hulu for mobile payments."

I have been openly skeptical of the carriers' ability to mount a successful mobile payments intiatitive. But ISIS may turn out to be the tortise to Google Wallet's hare. The latter has been met with carrier resistence (which may be anticompetitive), security problems and limited consumer availability.

Google has been ahead of the market somewhat. But there are now also rumors that Google is internally disappointed with its Wallet initaitive and may be putting less effort into it. If so, it would be premature to "give up" on Google Wallet. 

In two related mobile payents developments, PayPal (through its Zong acquisition) is launching what it calls PayPal Carrier Payment Network; and InMobi and Opera have joined for digital goods payments. The PayPal effort is designed to build on top of the Zong-carrier infrastructure (eBay acquired Zong last year) and expand carrier billing to encompass more types of transactions and larger dollar amounts:

Historically, carrier payment has been utilized primarily by online game developers and publishers to provide a fast and easy way for users to purchase goods directly in-app or in-game. While convenient for consumers, this method of payment has inherent challenges for other digital goods merchants – such as digital books, music, dating and content – to adopt as a primary payment method. Among the challenges is the cost of doing business – sometimes upwards of 40 percent – since transactions are processed through the carrier, merchants must share part of their revenue.

Similary InMobi and Opera announced that the latter will integrate InMobi's payments platform to enable virtual goods payments and purchases through Opera:

InMobi SmartPay will enable Opera users to pay seamlessly for digital goods in key markets around the globe, when they make purchases with some of the leading publishers that partner with InMobi. The two companies are committed to providing choice to consumers, mobile content developers and app developers, by building viable third-party monetization solutions in the mobile browsing and computing space.

Most US consumers have no experience with mobile payments and still need be educated about their benefits. However, large numbers of smartphone owners will eventually adopt mobile payments over time. Four tenents of success will be: simplicity, ubiquity, rewards and security.

The convenience of not having to sign credit card slips will be a welcome imrovement in the retail and restaurant worlds. The abandonment of signature requirements for transactions under $25 in many places has created demand and some experience with a simplified transaction experience. Merchants have incentives to adopt mobile payments as well for greater efficiency at the point of sale and, if don't correctly, greater security too. 

Almost all of these mobile payments systems and platforms back onto a credit card. However, it's still early to pick winners and losers. As I indicate above, Google could wind up a loser and ISIS a winner -- though that's a bit counter-intuitive (given the challenges carriers face in execution generally). There are still others (e.g., Apple) that could enter the race at any point.

Related posts:

• GoPago, Boku, LevelUp: The Mobile Payments Space Getting Terribly Noisy
• Carriers Blink, Invite Visa to Be Part of Payments Cabal 
• Will 2012 Be a 'Breakthrough' Year for Mobile Payments?
• PayPal Starts to Socialize In-Store Payments with Users

MWC: Mozilla's B2G Platform Emerges As 'More Open' Alternative to Android

Today the smartphone world is essentially divided up between Apple and Google, much like Spain and Portugal divided up the known world in 15th century Europe. Right now, it's not clear whether Nokia-Microsoft will become a viable third platform. Palm's WebOS, though it has been open-sourced, is effectively dead and one could convincingly argue that Blackberry is dying as an OS.

Now Mozilla has emerged to challenge Apple but more specifically Android, with a new "truly open" mobile platform: Boot to Gecko (B2G). In many ways not unlike Google's browser-based ChromeOS for PCs, it was formally announced in Barcelona at Mobile World Congress. Deutsche Telekom and Telefonica are on board:

This week Mozilla is previewing open Web apps and Mozilla Marketplace, enabling the creation and distribution of apps powered by open Web standards like HTML5, CSS and JavasScript. We are also previewing Persona, the first identity system truly of the Web, including Browser ID. Each offering represents the latest tools available to developers and users to take control of their online lives.

Since the beginning, it has been our mission as an organization to develop and bring about a completely open and standards-based Web as a platform for innovation. Mozilla’s latest innovations are being proposed to the W3C for standardization, helping us move the needle to advance the Web and make it a more people-centric experience for all.

There are lots of questions about whether Mozilla can make this a viable platform; however the support of two global carriers lends immediate credibility to the initiative. It also shows that there's an appetite for alternatives to Android, which was itself initially embraced as an alternative to the iPhone. 

Now Android is on its way to becoming the dominant smartphone platform. It was quickly embraced by carriers and handset OEMs who had no immediate response to the iPhone when it launched. Android became the de facto alternative, driving huge penetration and adoption. Now that Android is the dominant smartphone platform, demand is emerging for alternatives. 

B2G is one potential alternative, especially for lower-end handsets. There are, however, many questions about whether Mozilla will be able to make B2G a viable, alternate smartphone platform. Microsoft sees Windows Phone as the true third alternative; however there's evidence of only modest Windows Phone success thus far (including the Nokia handsets). 

While there's enormous momentum around iOS and Android the smartphone race is far from over and, especially at the lower end of the market, B2G could become an attractive alternative to Android.

Report: Amazon Sold 3.9M Kindle Fires in Q4

IHS iSuppli released estimates for tablet market share (using shipments as the operative metric). However in the case of Apple and Amazon shipments is the same as sales to consumers.

Apple previously announced that in Q4 it had sold 15.4 million iPads and a total of 55 million to date. But we didn't know the number of Kindle Fire devices that had sold. Some analysts estimated it was between 4 and 4.5 million. Now iSuppli estimates it was 3.9 million.

With strong Kindle Fire sales in Q4, Amazon zoomed past Samsung to become the number two player in the tablet market. Overall in 2011 Samsung "shipped" more tablets; however shipments does not equal sales to end users. Below are iSuppli's global tablet estimates, showing Amazon with 6% of the market at the end of Q4. 

I simply don't believe that Samsung has actually "outsold" Amazon. It may have "shipped" more devices but those devices have largely sat on retailer shelves. Furthermore, Samsung's recent announcement of the Galaxy Tab 2 (7"), with Android 4.0, may be another miscalculation. While it appears to be a nice device, a reported $400+ price tag all but guarantees it won't sell. At that price people will opt for iPads.

As I've repeatedly argued in the past no 7" tablet maker can charge more than about $250 now and expect to compete with Kindle Fire. Samsung would likely be taking a loss if it were to do so. Another way to potentially compete and still preserve margins is to get carriers to subsidize tablets. However this strategy has not worked and consumers have largely shunned carrier-subsidized tablets in favor of WiFi-powered devices. (People simply don't want to give any more money to carriers.)

One of the interesting observations that iSuppli makes is that in Q4 people may have been choosing between the iPhone 4S and iPad. In other words, more iPads would have sold if the 4S hadn't just been released. If that's correct some number of people who actually wanted to buy an iPad may have opted instead for the Kindle Fire because of price sensitivity. Indeed, the Kindle Fire is a vastly inferior device but that inferiority is masked to a degree by Amazon's content ecosystem. 

In a related piece of news, Nielsen released some survey data on how parents and kids use tablets: games, education, entertainment in that order. 

Groupon in Local + Mobile EU Distribution Deal with Deutsche Telekom

This morning Groupon and Deutsche Telekom announced a "strategic partnership" that will deliver Groupon deals to Deutsche Telekom customers throughout Europe. The deal is significant for both parties. Deutsche Telekom has a presence in 10 European countries. 

According to the release: 

The partnership marks the first time Groupon will partner with a multi-national service provider to distribute its products and services across a wide international network. It is also significantly enhances Deutsche Telekom's position as a leading provider of the latest applications for its customers.

Using a wide range of marketing and sales tools, varying from promotion activities to deeply integrating Groupon services in selected fixed and mobile services, Deutsche Telekom will offer Groupon services directly to its customers. Scheduled to be available in the first half of 2012 Deutsche Telekom mobile customers will enjoy Groupon's mobile services on their devices without the need for a separate download providing easy access to the best local deals in their area.

To those who dismiss Groupon as a business without a future, this deal is a powerful reminder of the strength of the Groupon brand and its near-global footprint.

The key to success will involve two things: deal coverage and execution. How much inventory is offered and how well presented are the deals?

Groupon Now, the company's mobile offering, in the US has so far not been a success. Accordingly that experience raises questions about how this might play out in a mobile context with Deutsche Telekom's subscribers. However it will not be limited to mobile. 

By contrast UK carrier (Telefonica) O2's opt-in "O2 More" partnership with Placecast to deliver local coupons/deals has proven to be very successful. So there is a precedent that shows this could play out in a very successful way for both companies if well executed. 

Verizon Stuffs Google Wallet, Starbucks Proclaims Itself the Mobile Payments Leader

Starbucks issued a press release this morning that proclaimed the company the "mobile payments leader," which is probably not incorrect. Here are some of the numbers exposed in the statement:

• Mobile payments available at 9,000 US Starbucks locations (7K Starbucks, 1K Target stores, 1K Safeway locations)
• 26 million mobile transactions at Starbucks to date
• $2.4 billion in value loaded into various payment cards during 2011 (Starbucks payment cards are used for 25% of all US transactions)
• $110.5 million reloaded onto Starbucks Cards directly through the mobile app

These are impressive numbers and Starbucks is likely doing more to popularize and educate people about mobile payments than any other entity in the US. The company plans to expand its apps/mobile payments program internationally as well.

In a related story, VentureBeat reported this morning that US carrier Verizon, the first to gain access to an Android 4.0 handset (Galaxy Nexus), is effectively blocking Google Wallet. The Galaxy Nexus is the second US Android handset to include NFC capability. The blog received a statement from a Google representative confirming that “Verizon asked [Google] not to include this functionality in the product."

The motivation for the carrier's move is obvious: it has a competing mobile wallet/payments offering in ISIS, a joint venture with AT&T and T-Mobile. It's not clear how much "outrage" this will generate among consumers, given that most have not tried mobile wallets and are conceptually ambivalent about them according to several surveys.

According to a Retrevo survey, carriers are less trusted than Google or Apple to provide mobile payments functionality:

I'm very skeptical that carriers will be able to provide a good and highly functional mobile payments experience. Google is in a much stronger position to do so than the carriers (in the US or internationally). I've got a note in to Google and will update this post if I'm able to talk to them.

Nuance Pays $100M for Swype, but Why Exactly?

I'm not a big fan of the Swype keyboard but many people are. Yesterday Nuance agreed to acquire Swype for $102 million, $77 million of which is up front. The rest will apparently be paid 18 months later:

The aggregate consideration payable to the former shareholders of Swype consists of $102,500,000, of which $77,500,000 was paid at the closing and the remaining $25,000,000 (the “Contingent Consideration”) is payable on the eighteen month anniversary of the closing. 

Numerous people have now reported on the deal but almost no one has penetrated the rationale except to say, in effect, "Swype is popular." (Read my colleague Dan Miller's interesting and somewhat different take on the acquisition.)

When I first read about the deal on Mike Arrington's new blog Uncrunched I was puzzled. Why would Nuance be spending $102 million for technology it already owns. The Nuance Flex T9 Android keyboard does speech and Swype-like tracing, among other things. It's the most complete Android replacement keyboard in the market.

In fact Nuance often favorably compared itself to Swype, saying that it effectively out-swyped Swype itself. As mentioned Flex T9 does more than Swype; it's more flexible (hence the "flex" part). So why would Nuance buy Swype? There are a few potential reasons:

• Swype had a patent or patents that Nuance wanted or felt it would ultimately confront
• Swype has stronger mobile carrier relationships than Nuance 
• Swype has a stronger consumer brand than "Flex T9"
• Swype offers a more accelerated path to a wireless consumer business
• Nuance wanted the team behind Swype
• Some or all of the above

Stil it doesn't entirely add up for me. I'll be curious to get Nuance's perspective and see where they're going to try and take their keyboard business.

Flex T9 costs users $4.99; so maybe there's a revenue aspiration in the acquisition as well (bolster the offering). It's not clear whether that $4.99 pricing will be extended to the otherwise free Swype or whether Nuance will will rebrand the Flex T9 as Swype and make it all free. 

You can see Flex T9's Swype-like capabilities in the video below.

iPhone Satisfaction, Sprint Unlimited Data

It's all but 100% certain that the iPhone will be coming to Sprint -- and maybe T-Mobile as well -- as soon as next month. The rumor is that Sprint will offer unlimited data on the iPhone as a differentiator vs. AT&T and Verizon. The pricing would probably be $99 (plus a $10 data supplement) in all likelihood.

By offering unlimited data Sprint believes it can lure customers from AT&T and Verizon. I initially thought that was a correct assumption but at $100 per month it may not be. With more aggressive pricing it would work. But probably not at $100 a pop; there's too much "inertia" against switching. 

There are also those who believe that Sprint would have to move to tiered pricing once really heavy iPhone data usage kicked in. I don't agree; Sprint has lots of Android customers (including me) whose data usage patterns are not substantially different than iPhone owners. And Sprint's network has considerably more capacity than AT&T for example. 

Sprint would probably see upgrading by many of its customers, from feature phones or potential switching from Android devices. I would qualify as one in the intended latter category. I've been reasonably satisfied with my Android EVO but have had pent up demand for an iPhone for about five years. I just haven't wanted to switch carriers. 

In a related bit of news, yesterday JD Power and Associates released its smartphone customer satisfaction rankings and found that the iPhone was on top for the sixth straight time:

Apple ranks highest among manufacturers of smartphones in customer satisfaction. Apple achieves a score of 838 and performs well in all factors, particularly in ease of operation and features. HTC (801) follows Apple in the smartphone rankings.

Samsung ranks highest in overall customer satisfaction with traditional handsets with a score of 718. Samsung performs well in three factors: performance, ease of operation and features. LG (717), Sanyo (716) and Sony Ericsson (709) follow Samsung in the traditional handset rankings.

US Seeks to Block AT&T-Mobile: What Will Happen Now?

As is being widely reported, and in a move that frankly surpised me, the US has filed an action to prevent AT&T's takeover of the US business of T-Mobile, worth roughly $39 billion. The government cites diminished competition and potentially increased prices for consumers. 

Here's an excerpt from the complaint, quoted by the NY Times:

“AT&T’s elimination of T-Mobile as an independent, low-priced rival would remove a significant competitive force from the market,” the complaint said. “Thus, unless this acquisition is enjoined, customers of mobile wireless telecommunications services likely will face higher prices, less product variety and innovation, and poorer quality services due to reduced incentives to invest than would exist absent the merger.”

AT&T wants the spectrum that T-Mobile now owns. The company has been trying to argue that consolidation of the number one and number four carriers in the US won't hurt competition. However the US obviously didn't buy it.

Bloomberg reports that should the transaction not take place AT&T will have to pay T-Mobile the equivalent of $7 billion in spectrum and fees: 

Should regulators reject the deal, which would create the biggest U.S. wireless carrier, AT&T would have to pay Deutsche Telekom $3 billion in cash. It would also provide T-Mobile USA with wireless spectrum in some regions and reduced charges for calls into AT&T’s network, for a total package valued at as much as $7 billion, Deutsche Telekom said this month. 

This suggests that AT&T will fight the suit, though a negotiated settlement may still be possible. Earlier AT&T was trying to sweeten the pot for the US saying that it would return 5,000 call center jobs, currently offshore, to the US if the deal were approved. 

Shares of AT&T were down and Sprint was up after the news came out. 

When I first heard of the intended AT&T-Mobile merger I wrote that there was a 50% chance that the deal would get blocked. That's because despite the obvious anti-competitive dimensions, the US doesn't have the moxie to oppose "too big to fail" transactions like this. This time apparently they do. 

Millennial: Windows Phones a Rowboat on the Android Sea

The iPhone vs. Android meme is getting very tired yet it persists. That's the thrust of the coverage surrounding Millennial Media's "Mobile Mix" report for July 2011. Among other data, it ranks handsets and market share on the Millennial network by device type and operating system. Here are the "quick facts":

• iOS and RIM impressions were relatively flat month-over-month
• Android impressions grew 31% month-over-month
• Symbian impressions grew 11% month-over-month
• Windows Phone 7 impressions grew 71% month-over-month

The Windows Phone growth is noteworthy for the fact that that there is growth/life. By contrast comScore shows Windows/Microsoft losing share month over month. However high percentage growth from a very small base is, in actual handset numbers, not particularly meaningful. Several months of such growth would be significant however. We'll need to wait for the first Nokisoft phones to appear to see whether Windows will "make it" as an OS.

Unfortunately Millennial doesn't put much historical context into its individual reports. So I always like to take a look at the data from several months or a year ago to compare the figures. Accordingly here are several charts from this month's report and July 2010:

Top handsets on the network (7/10 then 7/11):

The iPhone has maintained its top position and RIM is holding on with three handsets in the top 20 vs. four a year ago. But otherwise it's all Android.

Operating system share (7/10 then 7/11):

As you can see smartphones have grown from 49% to 68% on the network. In the US market smartphones are about 40% of all handsets now according to Nielsen. As you can also see, the relationship between iOS and Android has flipped in a year with Android handsets now representing 61% of all impressions. 

In terms of monetization and revenue, however, Android continues to underperform its share while Apple devices outperform their relative share. 

Finally, as PaidContent has pointed out, one of the more interesting pieces of data surrounds "carrier" usage. Over the past year WiFi access has grown from 26% to 33%. This is probably a direct result of the use of "connected devices" (e.g., the iPad) more than any other variable. 

However as carriers eliminate unlimited data and throttle speeds on their networks, on the go users will increasingly seek alternatives that offer cheaper and/or faster access to their applications and the mobile Internet.

Are Carrier 4G Claims Setting Up Users for Disappointment?

All the confusing, and even deceptive, carrier marketing around data network speeds and "4G" may be setting mobile users up for disappointment. Earlier this month Retrevo found that there was considerable consumer confusion about 4G.

More than one third of iPhone owners and almost 30% of Android owners thought they already owned a 4G handset (in the case of Android some of them may be right). Of course there is no 4G iPhone available yet. 

Expectations of increasing mobile data speeds may be responsible for growing user expectations about mobile Internet page-load times.

A company called Compuware commissioned research to study mobile user expectations in several countries: US, UK, Germany, France, China, India and Australia. There were 4,014 survey respondents who had used a mobile handset to go online in the past year.

According to the survey, most people expect websites on their handsets to load quickly and, in some cases, even faster than on their PCs at home. They'd like to wait no more than 3 seconds but are willing to wait not much longer than about 5 seconds.

If mobile websites fail to meet these expectations -- if pages take more than 5 seconds to load -- users are likely to abandon. Beyond this there could be other fallout. Users may visit competitors' mobile sites or they might not try using the mobile site in question again. In the extreme, there could be some negative associations with the brand.

Publishers don't control network speeds of course. But it's up to them to build the fastest-loading sites they can that will work on 3G and even 2G networks to avoid some of the inevitable backlash that comes with being a slow site on the mobile Internet. 

Placecast Opens Up Geofenced Marketing to Self-Service

Placecast has introduced a self-service version of its SMS and MMS ShopAlerts marketing platform. The platform enables template-driven campaign creation, with extensive control over the radius of geofenced areas as well as the time and dates of message delivery.

This means that any merchant, franchisee or small businesses could potentially utilize the Placecast platform to deliver geographic-based push messages and promotions to opt-in consumers. It's going to be challenging for small businesses as a practical matter. But it's particularly well-suited to franchise businesses and can handle multiple locations with ease. Distribution is up to the business or entity, which would need to capture the opt-ins (similar to follow us on Twitter or Like us on Facebook).

Messages or promotions can be built around deals and offers but don't have to be; there are many other types of content that can populate these messages.  

Placecast works with O2 in the UK and AT&T in the US, as well as individual retailers. The O2 program has seen great success in the UK; the AT&T program is still in very early stages. Unless carriers are going to buy ad networks, the ShopAlerts/O2program is the model for carrier-based advertising -- although it's not apparent that the carriers see that clearly.

The original beta version of the ShopAlerts program, tested with selected retailers in the US in late 2009 and early 2010, yielded impressive results:

• 60% of participants found the location-triggered messages to be cool & innovative
• 79% said it increased their likelihood to visit a store
• 65% made a purchase as a result of a ShopAlerts message (though not necessarily in real time after receiving the SMS)
• 73% of participants would definitely or probably use the service in the future

Agencies and companies often neglect SMS as a marketing medium and CRM tool. Even with smartphone penetration nearing 40% in the US that still means that 60% of users don't have them. SMS penetration and usage are nearly 100%. 

Related posts on Placecast: 

• UK Carrier O2 Seeing Success with LBS Offers
• AT&T Launches First ‘Scalable’ LBS Marketing Program with Placecast
• Placecast: SMS Alerts Made 27% Buy in Store
• Placecast Launches Geo-SMS 'ShopAlerts'
• UK Carrier O2 Teams with Placecast for LBS Opt-In Marketing to a Million Consumers

UK Carrier O2 Seeing Success with LBS Offers

UK carrier O2 (owned by Spain's Telefonica) is seeing great success with its opt-in SMS marketing program O2 More. The location-based service is powered by Placecast, which also supports a similar but more nascent program in the US for AT&T. (It's not clear how much promotional effort AT&T is putting behind it.)

O2 not long ago announced it had more than two million subscribers for More. Consumers sign up for the O2 program, specifiy interest categories and recieve no more than a single text per day. The program sees very low churn. 

Earlier this month the UK carrier touted the success of a More campaign for gym Fitness First:

Fitness First targeted O2 customers with location-based messages offering a free two-day pass and details of the nearest club. This resulted over 1,100 recipients signing up as new members of Fitness First on four month and 12 month contracts.

With average membership costing just under £300 per year, this uptake generated increased revenue around £400,000.

The best responding target audience was 18 to 35-year-old smart phone using single Londoners, who enjoy engaging through social media.

US carrier T-Mobile recently got into the daily deals market with the launch of an app called "more for me." But with much larger competitors -- and so many competitors -- it's unlikely that T-Mobile will see great success with the program.

However daily deals could be converted into SMS messages for broader distribution and differentiation. Indeed, the O2-Placecast model is a stronger bet than an app strategy for carrier advertising, and can reach 100% of the carrier's customers potentially.

Many marketers and companies tend to look "beyond" SMS to in-app ads and mobile Web advertising because SMS isn't sexy. (Just like text ads in search aren't sexy.) However the reach of SMS is 100% and the response rates to opt-in text messaging programs can be huge. 

For example, in early 2010 Placecast found the following in its US beta test of ShopAlerts (the same kind of program run by O2): 

• 60% of participants found the location-triggered messages to be cool & innovative
• 79% said it increased their likelihood to visit a store
• 65% made a purchase as a result of a ShopAlerts message (this sometimes occurred on the same day and sometimes later)
• 73% of participants would definitely or probably use the service in the future

Will LightSquared and Sprint Save Us from Usage-Based Pricing?

As I listened to the Facebook-Skype video chat announcement earlier this week -- and the discussion about how it would move into mobile -- I was struck by the fact that consumers and services are moving in the opposite direction of carriers. Consumers don't want to have to ration their data usage and publishers are increasingly delivering services (e.g., Neflix) that are bandwidth heavy and data intensive.

As you saw earlier Verizon is the latest US carrier to end "unlimited" data pricing. Following AT&T and T-Mobile's leads, the company is moving to usage-based pricing. This is often sold as a consumer benefit. But carriers see increasing data usage and want more revenue. And at a time when voice minutes are declining carriers need to gain more profit from their data networks.

As an aside the AT&T-Mobile deal is now likely to approved with conditions. This will provide better coverage and service to AT&T subscribers but result in higher prices for consumers down the line. Higher prices will also come with usage-based pricing as consumers exceed data limits. Indeed, consumers have no idea what 2GB or 5GB or 10GB all mean, as a practical matter. To that end Verizon is introducing a number of tools and apps that will help consumers monitor and manage data usage. While this will be helpful tiered-based pricing is fundamentally not what consumers want.

Among the four major US post-paid carriers Sprint alone has true unlimited plans now. This creates a rare opening and opportunity for Sprint to seize upon, especially if Sprint gets the iPhone (as suggested by many) in the fall. Many of the pre-paid carrier plans will also continue to offer unlimited data but users will only gain access to "tier two" Android handsets, many of which are getting better. Rumor also suggests a pre-paid version of the iPhone may be on the way. 

Wholesale 4G-LTE provider LightSquared may also be a kind of white knight in the battle against unfriendly carrier pricing. Sprint has done a long-term deal with LightSquared and other secondary carriers or perhaps even new MVNOs could potentially emerge, using a LightSquared network, to challenge AT&T and Verizon's control of the market. That would be welcome. 

There are real differences in the quality of the carrier networks as well as customer service differences. But at the end of the day they're commodity providers of bandwidth. What most consumers really want is a good handset selection, reasonable network coverage and, perhaps most importantly, value-pricing.

PayPal Buying Zong for $240 Million to Bolster Carrier Billing, Digital Goods

The deal makes sense for both parties: eBay will buy Zong to strengthen and support mobile PayPal, gain access to a global set of carrier relationships and get deeper into virtual goods. Zong gets an exit as much bigger and more powerful companies threaten to marginalize them over time in the mobile payments space. 

The deal is worth a reported $240 million in cash. 

Zong has relationships with carriers around the world (approx. 250). PayPal launched a digital goods business at the end of last year. This will dramatically accelerate that effort.

Until very recently Zong's entire business was about paying for online virtual goods (e.g., gaming credits) with your phone and carrier billing. Transaction limits are small, sub-$10. The company moved last year credit-card based mobile payments. 

Here's what eBay said about the deal in its release: 

With Zong, PayPal will have greater ability to offer consumers even more choices in how they want to pay – virtually anytime, anywhere. Both Zong and PayPal help to enable digital goods merchants to increase conversion, because they offer a faster, easier way for consumers to pay without leaving the merchant’s site. 

Some stats on PayPal:

• PayPal claims 100 million active accounts globally
• 8 million customers are making purchases on their mobile phones through PayPal; $10 million in mobile payments per day
• PayPal processed $3.4 billion in payments for digital goods in 2010  

Recently eBay has been on a bit of a buying binge and Zong is a very logical acquisition for the company's PayPal unit; its most dynamic division. It will need all the assets it can bring to bear on mobile payments as the market becomes increasingly competitive. However PayPay asserts that the digital goods market (via gaming) is already worth $10 billion -- an amazing stat. 

In that context $240 million looks like pocket change. 

See past posts on Zong: 

• Zong Turns the Mobile Phone into a Credit Card
• Zong Gains $15M in New Funding
• Zong Expands into Subscription Payments
• Two Mobile Payments Efforts: One Good, the Other Not
• Boku Raises Beaucoup Funds, Becoming 'Paymo'

T-Mobile Becomes Daily Deals Aggregator

T-Mobile USA is becoming a deals aggregator, with a new Android app called "More for Me." It's available today for any Android smartphone running OS 1.6 or higher. LivingSocial is the only deal source mentioned although the word "aggregator" implies a broader array of sources. 

T-Mobile claims that the app is the first of its kind from any US mobile carrier. AT&T (the would-be owner of T-Mobile) similarly aspires to be a major player in the deals space and has a existing relationship with Placecast to deliver geo-fenced "shop alerts." That's not the same as "daily deals," but it's location-based discounts and offers nonetheless. 

According to the T-Mobile press release:

The T-Mobile More for Me application is customizable, enabling consumers to find the most relevant deals, closest to their exact location. Users have the opportunity to see deals from a variety of retailers, in nearly any city, with many deals tailored to meet their specific interests and preferences.

“LivingSocial works directly with merchants in all of our 260+ global markets to craft great deals that drive our valuable members through their door,” said Jake Maas, senior vice president, corporate and business development, LivingSocial. “We are excited to bring our handpicked experiences to the millions of consumers who will enjoy T-Mobile’s new More for Me app.”

What's unique here is not that T-Mobile has built a deals app or even that it's created by a carrier. Rather it's the idea that a carrier is creating an app extending beyond the borders of its own subscriber network. Given the availability of branded deal apps from Groupon, LivingSocial and others, however, it's very unlikely that More for Me will see much adoption beyond T-Mobile subscribers.