Thursday, August 14, 2008

How to stop the evolution of an ecosystem

Twitter SMS mess
I thought of a good name for this post, because it just so happens I just read a few blogs talking about the Twitter SMS mess. Frankly, I feel sorry for Tweeter: not that they couldn't handle it better, it's just that I did the math a couple weeks ago:
Each MT SMS is between $0.04-$0.01 for high volumes. Add $1K-$2K "connectivity" and add the fun $500-$1,000/month for shortcodes.
Set your revenue at $5 CPM, maybe $0.1 CPC, and you'll get a nice little equation that in a visit depth of 2 (mobile) pages/visit, you may be loosing $0.03 per message.
So I'm sure there's plenty of ways for a web+mobile service to leverage web advertising or sales, however the above equation makes it tough for emerging mobile startups to enter this market, which is good if you're in, bad if you're not.
That's the startup side. what's the operator side? Operators are making $ every time an SMS is being sent by the subscriber, or to the subscriber, from the subscriber. Typically operators would charge subscribers $0.10 - $0.25 per SMS if you don't have it in your plan, or $5-$10 for a package of 200 messages. As mentioned above, operators also make money when a service sends an SMS to the subscriber (MT).
So let's see...the service pays the operator while really the service is a revenue generator for the operator.

To some degree I agree with people saying "kill the SMS" as the 160-chars economics make no sense compared to data plans that will be introduced to the sea of iPhone and Blackberries and the likes.
Give us Email-like economics (and richness) and the immediacy nature of SMS, please.

The good news for now, if you get to the messaging volume that Twitter generates, some operators will pay you to be in business. Until then, sweet dreams...

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