Research Notes

Premium SMS revenue will drop from 74% – to 7%!

A historical era in the mobile evolution will be over.
For a number of years, SMS has been the only available type of mobile service that service providers and the mobile operators have been able to offer mobile consumers as Premium Services.

This has understandably made the Premium Services market quite easy to operate in for the different players in the mobile value chain:

-the service providers and content owners have only had to develop one type of mobile service
-the mobile operators have been able to focus on making their systems and revenue sharing models work for SMS
-the end users have had only one type of service to understand and buy – SMS services!

Those days where SMS almost completely has dominated the premium mobile services market are however now numbered. Very soon, SMS will start getting real competition from WAP- and MMS services and also Mobile Applications. (Mobile Applications are downloadable applications that reside on the mobile phone and then can be used without having to connect to the network).

That this competition will not go unnoticed, is very apparent indeed when looking at Strand Consults new report “How to make money on mobile services” Facts & Figures – a comprehensive report about the development and value of all types of mobile services in 16 mobile markets in Europe from 2002 to 2005. This report was compiled as part of the work on the primary report “How to make money on mobile services” a picture of the current & future Market for Mobile Services in Europe.

In 2002, SMS services generated 1.2 billion Euro – 74% of the total value of the mobile services market. But this monopoly on the services market will change drastically up to 2005. Even though revenue from SMS services will increase in 2003 to over 2.8 million Euro, it will already have lost 25% of its market share. And from then it is downhill all the way to 2005 – when SMS services will only be able to pull in a meagre 1.5 million Euro – just 7% of the total mobile services revenue in Western Europe!

WAP has been well known for a number of years, but has not had its breakthrough as a medium for premium mobile services. The main reasons are well known. Asides from the fact that WAP does not run optimally on 2G GSM (circuit switched data) networks, it has not helped that the mobile operators did not offer revenue sharing opportunities to service creators and content owners. Strand Consult believes that we will now soon see revenue sharing models from the mobile operators for WAP – and now, with GPRS up and running, WAP will be a much more user-friendly and attractive proposition for the mobile consumers. Based on the information and data traffic figures we have today, our report “How to make money on mobile services” Facts & Figures – predicts a total market value for WAP mobile services in Europe in 2005 at 5.3 billion Euro.

MMS is being introduced at the moment to the mobile users in Western Europe, the first MMS offerings are simply that users can send Person to Person MMS’s to each other. But very soon most of the European mobile operators will start to offer actual MMS premium services. These MMS services will – in a manner of speaking – be similar to an SMS service that has been upgraded with sound and pictures. But as with SMS, the big volume and range of MMS services will not turn up before the mobile operators offer the content owners and service providers suitable revenue sharing models. These models will most certainly be in place during the first 6 months of 2003 and our predictions for the value of MMS services in 2005 therefore amount to 5.9 billion Euro in Western Europe.

Mobile Applications are however expected to the type of mobile service that will see the biggest growth up to 2005. Mobile Applications are different from what we have seen so far, in that services can be downloaded to the mobile phone and then be used as often as the user wishes – without having to connect to the network. Of course, if the service is for example an e-mail application, a network connection will be needed, but with the new technologies, users will only pay for the data traffic used – not the time connected – so those types of Mobile Applications do not have to be expensive to use. Mobile Applications will radically change the opportunities for service creators and providers to develop new, innovative and diversified types of mobile services, resulting in a total value in 2005 of over 9,9 billion Euro for mobile services based on Mobile Applications.

As there is no doubt that the days of SMS services are drawing to an end, both mobile operators and service creators and providers will have to take a very serious look at what types of services will be most suited to the different new service technologies that will be available, thereby optimising the revenue potential, ease of creation and user interface for each type of service. The challenges and obstacles that lie ahead in the creation of new types of mobile services are examined, analysed and explained in detail in Strand Consults two new reports: “How to make money on mobile services” a picture of the current & future Market for Mobile Services in Europe and “How to make money on mobile services” Facts & Figures.
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