It Never Works

There’s two great sounding business models that never seem to work in mobile. That doesn’t stop a steady stream of companies, ranging from start-ups to large corporates trying them again and again.

The first is location based sms offers from shops in the area. I’ve been there and done that one – ask me for my free white paper if you haven’t read it already.

I was reminded of the second idea today with the news that ITV (the UK’s leading commercial terrestrial TV station) was cancelling their sms voucher project, having signed up no (that’s right, zero) advertisers after a year.

As I say, it sounds like a great idea. Offer advertisers the opportunity to send mobile vouchers redeemable in the High Street to people who see their TV ads and who text in a short code. This makes the ad interactive – essentially loading the gun and firing the bullet all in one integrated marketing campaign.

Except it never works.

Now, I’m not suggesting that enabling advertising with a short code doesn’t work. Far from it and we’re fast approaching the day when an ad without a shortcode will look as naked as a shaved badger. The last information I saw from my friends at M:Metrics showed that a remarkable 18% of UK adults had responded via an sms to an ad, rising to nearly 30% in Spain. So I don’t think that the problem is user-related, necessarily.

So I conclude that it’s the business model itself. In the case where it’s the media company launching this kind of initiative, such as the ITV scenario above, I believe that it fails executionally for some or all these reasons:

– The client/brand doesn’t want to hand over control of the new channel to the media company. Arguably, it makes more sense for the brand to own the short code and run it across all their advertising and promotional channels.

– The personnel who buy media are often not the same people as the ones who sort out promotional couponing. Thus the sales process is more complex and buying cycles lengthen.

– Vouchers on mobiles represent a potential nightmare for the Operations Director of a store. Visions of some harassed mum holding up a busy store on a Saturday, as she frantically searches her text message in-box for 50 cents off coupon on a pack of Huggies, is the stuff of nightmares for an Ops Director and they’d certainly put the kibosh on anything that merely threatened to slow down throughput.

Until there’s a seamless EPOS solution that’s readily integrated with the legacy system in place, this kind of idea will constantly be turned down. Such a solution could be just round the corner, incidentally.

The other scenario is where a startup tries to go into the space, sometimes in partnership with a media brand. I don’t know, but maybe this was also the case with ITV. In these instances, not only are many of the problems the same as I wrote about above, but really they’re entering little more than a commodity based business. Anyone can get hold of a shortcode, after all and the backend processing doesn’t create protectable or lasting value.

So my advice to aspiring entrepreneurs in either of these cases is to think very carefully, read my white paper and then go and open a less risky business. Maybe a restaurant perhaps – after all only about 60% of these businesses fail in the first 3 years.

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