Last month Logica’s shares fell 14% on the day it announced revenue in its mobile unit would be “modest” while overall growth was cut from 40% to 30%. The company whose software processes half the planet’s text messages had finally seen the end of the five year boom in mobiles, it seems.
Yet at the same time ordinary punters are being puzzled by a series of mysterious ads from Nokia that point to what could be the next big thing in messaging. You know the ones – the girl on the bus being scared by the horror movie on her mobile and the lab assistant bopping away to the funky reggae track his flatmate’s sent him over his MP3 player. What that campaign is really all about is prepping us for the next wave in messaging technology – MMS (multimedia messaging service).
The mobile is thus not putting all the wood in its arrow behind 3G alone, but on new messaging services it hopes will boost demand for its products. Soon, say industry watchers and mobile operators, we’ll be using our mobiles as combined PDAs and cameras, taking snaps of our chums on the beach spontaneous-like, and sending them round the world to our mates back home. The possibilities in an Ibiza context are too ghastly to think about, but let’s not try and stop progress.
Actually, this being the technology industry, there are two competing and incompatible next generation offerings, MMS and its rival EMS (see box). Both will allow users to send ring tones, sounds, pictures, tunes, animations and text as a single message, with MMS promising richer interaction, such as the ability to send a snapshot via mobile to a server or even another mobile directly.
“Nokia introduced Smart Messaging in late 1998. It lets users download ring tones and icons, but only works between Nokia phone users,” says Bernt Ostergaard, the director of European telecoms research at Giga Information Group. “Nokia sees its product advantage slipping with EMS, and therefore pushes MMS. The other manufacturers have also endorsed MMS, but believe it’s two to three years away yet. The major mobile carriers are all backing EMS, as it needs no network upgrade.”
We’re all so burnt by the dotcom and 3G hype that the last thing we want to hear is how cool and transformative the next hyped technology will be. Nonetheless, XMS (shorthand for both systems) is worth looking into as it may offer a richer platform for mobile-based fee-generating services.
Application developers and marketeers especially need to take note, as they are soon likely to be bidding for work from the mobile firms: “For handset vendors, MMS will also deliver important direct benefits, by stimulating handset upgrade decisions, and therefore helping to arrest the slide in handset sales that we witnessed during 2001,” says Declan Lonergan, director of wireless research and consulting at the Yankee Group.
So expect building out of new messaging networks. But XMS won’t replace SMS for a long while yet, of course. SMS (short message service), originally designed as a business-to-business medium but now the primary teenage mobile application, is bigger than the Beatles at the moment.
Last year Andersen produced market research for Nokia predicting SMS’s share of all mobile data transmissions would grow from 2000’s 53% to 63% by 2004. In October, the Mobile Data Association estimated 1.2 billion SMS messages were sent across all UK GSM networks, a 100% growth from the same month a year prior. And IDC, in a recent report on Mobile Data Services, estimated that SMS traffic in Europe will continue to grow by nearly 19% a year to 2004.
Still, Nokia believes there is pent-up demand for new types of customer services based on MMS. A global 2001 survey of 100,000 respondents found that over half those with access to a messaging device expressed interest in being able to send a photograph, video or music clip. When asked if they would be interested in sending a message with a photo attached 21% said they were “very interested” and 27% “quite interested”.
There are many enthusiasts who say that’s the tip of the iceberg. “There’s still a future for humble plain text, but as a mix along with voice, video and enhanced graphics such as those already seen in Japan, where Coca Cola, Kirin Beer, Toyota and McDonalds are currently using SMS on 3G, along with new mobile technology in their mobile marketing campaigns. Consumers in the UK and Europe will soon be experiencing quicker and more interactive SMS, video and Internet downloads using 3G mobiles, as the mobile phone becomes increasingly a multi-media platform,” says Cyriac Roeding, European chair of the Mobile Marketing Association, which represents 150 global organisations including Ogilvy and Unilever.
Others are similarly enthusiastic, but caution that costing is still problematic. “If, for example, you sent a message to a friend saying, ‘Meet me at the station at 10am’, and you added a picture and a tone to the message, each part of the message would be considered to be separate. So, you could be charged three times as much. However, text messages are not astronomically expensive, and therefore a market for EMS definitely exists, especially among 18-25 year-olds, who can afford to pay a little bit extra and are more open to innovation. Our experience tells me that these people will be prepared to pay for it, but for those who don’t have time to incorporate pictures and tones, plain text messages will still fit the bill perfectly,” says Anders Holst, product development director at UK-based telecoms service provider Telecom One.
Yet XMS has to work – or the whole pack of cards could come down. “The phone manufacturers need to come up with a good reason why we should get a new phone, and they will therefore strongly support EMS/MMS. If they don’t make a success out of it there is not much prospect for growth for them,” adds Holst. “With declining (albeit slowly) cost of voice calls and lower average revenue per user mobile operators need other streams of income and they will also support EMS/MMS. XMS is also an important forerunner for 3G services, and if the operators wish to recover the billions they have spent on licences they need to get EMS/MMS right from the start.”
The twin obstacles standing in the way are the technical issues about integrating all these offerings between different networks and suppliers, and getting the consumer angle right. Certainly, there’s gold in them there hills integration wise. “The real killer application for 2002 won’t be a game, corporate data access or even MMS, but the service delivery systems operators need to deliver them,” thinks Bruce Jackson, chief technical officer at UK mobile data software specialist Elata.
As for the second, there’s much still to sort out too. The dread phrase 3G (let no-one whisper “WAP”) may be enough to warn you that not everyone’s as convinced as the mobile operators. Mark Blowers, senior analyst at the Butler Group, is one. “Teenagers use SMS and the Internet for chat: there is no existing requirement to send pictures and other graphics to each other. Until someone comes up with an innovative service based on MMS there will be no compelling reason for the consumer to upgrade to a new mobile device.”
The fuzziness of where the cost models are is a concern even to insiders. Mike Ohajuru is the UK sales and marketing director for white label SMS supplier Materna, a 20 year-old German company behind sending 400 million text messages a day. “From the user’s perspective, how much is going to cost? I’m happy to pay my son’s SMS bill but I’m not sure about his MMS one.”
At the same time, mobile marketeers say there’s much scope for this kind of solution. Pamir Gelenbe is director of London marketing services company Flytxt. The company was behind two recent successful SMS campaigns, including the Men’s Health magazine “belly off club” promotion.
“We’re opening a new channel for marketing here, and the new technology will create richer interactions between consumers,” he says. “For example, there’s little incentive to forward an SMS to a friend today, unlike e-mail. More complex messages that are more like e-mail with attachments would change that. This could really help viral marketing, and will allow not just discount messages but brand messages to be distributed.”
Steve Wunker, co-chair of the Mobile Marketing Association says: “Multimedia will be interesting from an advertiser’s point of view, because this platform starts becoming a richer media option, but in some ways it won’t be a quantum difference from what we have today. There are certainly questions as well. It’s unproven people really will want to pass picture messages one to another, it certainly won’t get off the ground as long as there is no single standard, and clearly pricing is a potential issue. But it doesn’t matter if you’re talking about 160 characters on a grey screen or something more complex; it’s still all about establishing the right sort of dialogue with the consumer.”
That could involve a cross-platform dialogue – and creating that interoperability could also be an opportunity. Telecom One owns Sky Digital’s Dating Channel. In Japan, says MD Patrick Naughton, 3G-based dating services are highly profitable. A way of combining a digital TV and MMS-based ancillary service could be highly popular, he notes.
The message – sorry, pun intended but still unforgivable – is clear. Like it or not EMS and MMS will be big this year and next for you as a consumer and payer of bills. As a practitioner, the smart move for anyone in the middleware or e-mail marketing space is to figure out how to make these extended services into usable applications for companies. The ubiquitous advertising hoarding may now have slipped into the tiny screen on the mobile phone. Maybe that’s what’s scaring the girl in the ad more than the cheesy horror flick.
WHAT’S EMS & MMS?
In the middle of last year Alcatel, Ericsson, Motorola and Siemens introduced plans for EMS (Extended or Enhanced Messaging Services) phones. EMS will require new handsets, but can run over existing infrastructure. A related system comes from Philips spin-off Magic4, which is based on a back-end server and embedded client that can bundle up to 17 SMS messages as one enhanced message, and which features extensions to straightforward EMS such as “iconimations”, downloadable menus and operator logos. Magic4, Ericsson, Motorola, Siemens and Alcatel are the main sponsors of EMS, while other manufacturers such as Mitsubishi Trium, NEC, Panasonic and Sagem are also showing interest. EMS has also received the backing of the important 3GPP (Third Generation Partnership Project) body.
At the same time Nokia is pushing MMS (Multimedia Messaging Services), with phones due to be launched commercially in the summer, and a full service slated for year end: expect a lot of CeBit coverage on this. Nokia dismisses EMS as a version of its own smart messaging, launched in 1998 with its 7110, and this is just an attempt at a catch-up. Its version, MMS, will offer the ability to send and receive text, sound, image and video in one burst: images could be snapshots, screensavers, or moving images such as cartoons or video, at least potentially over 3G. In December Logica completed the world’s first live multimedia messaging demonstration at a conference in Rome, and announced the start of a live UK trial implementation of MMS in the UK with Orange.
MMS: HERE’S THE HYPE
According to the Yankee Group, the next-generation multimedia messaging services (MMS) market will be worth $10bn in Europe by 2006, while person-to-person messaging will itself be a $44bn market, 24% of all mobile revenues. “Though MMS implementation will require new investment in infrastructure, applications, terminals, and systems integration, it is underpinned by a solid business case. For mobile operators, MMS will deliver significant ARPU (average revenue per user) uplift, improved customer retention, and partial justification for their heavy 3G investments,” said the research group.
In terms of products, the recently-announced Sony Ericsson joint venture last year launched two MMS handsets, with Nokia about to unveil its new 7650 handset shortly. Nokia says half of its handsets will be MMS-ready by next year. Last October Ericsson released MMS-capable handsets, the T65 and T68. Siemens is making similar noises.
This will only be of any use if the company can get such phones out to consumers at prices they want to pay – and also charge them the right price for message sending to increase the all-important ARPU monthly fee. Mobile operators are at the moment estimated to enjoy as much as 95% margin on SMS, with about 10% of all ARPU revenues coming from messaging.