Tuesday, May 10, 2011

Is Premium Rate SMS on its deathbed?

This post is dedicated to @kenyangetter. It's always nice when your ramblings are appreciated.

10 years is a short time in technology. When I got my first Airtel line (it used to be called KenCell those days young ones) the provider did not even have SMS as a service. They did launch it a few months later by the (very clever) name YesMS (for those who don't know the slogan for Kencell was Yes!). However you could not send an SMS from Kencell to Safaricom for a long time after its launch but on the bright side an SMS only cost Kes. 5.00. This was way cheaper than the appx. Kes. 30 per minute (billed per minute!) call charges one would incur for calling at that time.



With Kenyan's peculiar calling habits under attack, SMS became the preferred mobile communication means. Millions of text messages were transmitted across providers' networks and the providers milked this revenue source by keeping the rates virtually unchanged over the years.

It was not long before a small firm called Bernsoft popularized Premium Rate SMS (PRSMS) through SMS polls onKenya's leading (at the time) TV station KTN prime time news. It soon became commonplace for media houses to have a PRSMS short code through which one could comment on, vote, or answer questions for a prize. With about 50% gross margins on each PRSMS, this became a favoured way to shore up revenues while also gauging audience response by the media houses.

One unfortunate recipient of this new surge in PRSMS however was premium rate calls. Most notably used by Radio Africa's Kiss 100 FM station, premium rate numbers were prefixed with 0900 and a caller got charged a premium rate over and above the normal rate. This was a very useful way to bill for services, and even SoftLaw had it's own number which we used to automatically sell credits to people using our Laws of Kenya website. But with the prohibitive cost of calls, vis-a-vis the ease and completeness of SMS, premium rate calling quickly fizzled out and died.

PRSMS however continued to grow, and it was most famously taken to its zenith by PRSMS based lotteries that captured the greed of an entire nation and made hundreds of millions for a few wheeler dealers.

However, as I look at the current landscape I feel that we have seen the crest of this business especially as a means of content delivery. It is now moving from a de facto communication model to a niche, specialised means of communication (and commerce) for only those who have original and unique content. I have a few reasons for saying so:

  1. The reason PRSMS grew so much is simple. It was making money for the content owners, and where money is growth will follow. Content such as breaking news, entertainment alerts, ring tones to quotes on love, health and God was big business.Information hungry users would subscribe to up to 5 daily alerts. That was until people discovered mobile internet. Before bundles became popular only early adopters would be glued to their tiny screens to browse the web. But as soon as mobile phone service providers started providing cheap bundles to access the internet, the content providers started feeling the heat. Ringtones were were especially hard hit as their main consumers were young, net-savvy, and would prefer freebies. Websites such as waptrick.com gave these consumers access to free music, ringtone, and screen saver content they would otherwise have had to pay for. Soon the full page adverts for PRSMS ringtones started disappearing from the dailies.
  2. The next nail in the coffin came in the form of twitter. With twitter, one could follow media stations, breaking news channels, and individual journalists and bloggers to get real-time updates on news or just receive quotes of their liking. If one had a smartphone you could configure this so that you'd receive a notification every time a tweet came in or every time a mention or direct message came in. Considering the cost of viewing your twitter timeline was a few cents of data as compared to the KSh.5 or more cost of a PRSMS, users once again followed their wallets.
  3. As if having twitter supplement PRSMS updates was not bad enough, the mobile phone service providers took it a step further when they allowed tweets to be received through SMS. This was the final blow which I doubt content providers relying on PRSMS can ever recover from. Now you did not even need a smart phone to enjoy getting tweets. Consider this: Capital FM have a PRSMS service where they send you four English Premier League PRSMS per day from the Mirror Football website. This service probably costs KSh. 5 per SMS totalling KSh. 20 per day. Alternatively you can choose to subscribe to Safaricom's unlimited SMS offer that gives you access to unlimited tweets and SMS at KShs. 10 per day. You can then follow the MirrorFootball twitter handle and receive ALL their tweets daily at no extra cost. And without spending a shilling more, you can also follow and receive twitter updates from Bundesliga, Spanish League, NBA, Formula 1 or any other sports franchise you are interested in. The only person who would still subscribe to Capital FM's PRSMS is completely ignorant.
Right now you might be reading this and saying oh well, but that is only for content delivery. What about other uses for PRSMS? I'd say take a look at this:
  1. PRSMS for Lotteries - after the 6969 fiasco of last year, its' highly unlikely that the existing regulatory regime will survive to allow another similar lottery. It's likely that some form of gambling through SMS will continue but it will be most likely highly regulated.
  2. PRSMS for Giving Comments - this is also on the decline for two reasons: 1.) Kenyan's no longer have peculiar calling habits, thanks to the very cheap cost of making calls. They now have no problem calling in the media houses to air their views. 2.) Media houses are starting to adopt twitter and facebook as a main way to receive comments from their audience. As net penetration goes, just as SMS supplanted calling in, so will twitter and facebook supplant SMS (mainly because of their social nature). In addition to media houses, other organisations that had tentatively adopted PRSMS as a way of collecting views (and revenue) are also dropping this in favour of social media. A great example is KPLC who have adopted an aggressive twitter strategy for customer support.
So is there any uptick to this?

Yes there is, Premium Rate Calls might make a come-back (that is until VOIP billing alternatives gain ground). With the low normal calling rates, it will be easier to add a premium on the call charges and use premium rate numbers for specialized professional support such as therapy sessions, IT support, legal aid. 

If there's any entrepreneur interested in an idea of how to use Premium Rate calls, send me an email at harrykaranja at yahoo dot com

UPDATE Feb 20, 2012
Interested in validating my convictions that Premium Rate SMS is on its deathbed, I started trawling the online market to see what was out there. What I found out more than shocked me, it made me see the SMS business in a totally different light. To understand why I've changed my mind so, check out http://marketing.genius.co.ke/landing/viva 

7 comments:

Warlock said...

Everything that can be invented has been invented.
Charles H. Duell, Commissioner, U.S. patent office, 1899 (attributed)

Mwirigi said...

Thats a great analysis of the PRSMS market over the years.
With SMS rates as low as Ksh.1/= Premium rates of up to Kshs 60/= are really a hard sell.
I think Premium Rate texts would still be useful for collecting votes in any number of the reality shows we're forced to consume these days. (Texts are easier to audit than Facebook posts/Twitter mentions)

startupkenya said...

@Warlock, ....ok?

@Mwirigi thanks. I think that PRSMS still has a future, albeit significantly reduced. I also agree about auditing for votes. Email never worked and neither can twitter/facebook.

Wangui said...

@startupkenya this is a very insightful piece. Amazing understanding of the workings of the sector asante sana!

startupkenya said...

@Wangui. Thanks and you're welcome

premium rate services said...

I work out religiously and am always looking for new ways to challenge myself.

Anonymous said...

Hi,

I think you have a point. ICT is a dynamic sector where the life of any invention is not longer than 9 months and therefore difficult to keep up with. However, the key to PRSMS is the value of the information being provided.. I am currently trying to get a license as a content service provider because all the companies that i had approached to provide me with the short codes want to get a full proposal on the service I want to provide and am not so sure if it is good since they are likely to grab my service even before I get anything from it... any idea where I can get the service without such details being requested for? xyzkaboom at yahoo dot com