Mobile Messaging and Location-Based Services - A $7.4 Billion Market by 2017

A few weeks ago we strongly suggested that mobile commerce is set to take off. We've also noted that NFC-driven mobile device technology will also drive mobile commerce. Today, we can add another component to that view, good old-fashioned text messaging driven ad spend.

As the world continues to transition from feature phones to smartphones, one might consider it a no brainer that SMS-based text messaging - which saw a heady boom time during the feature phone's heyday - might finally begin to decline. No such thing has happened, and though text messaging seems like the dullest and least inspired way to communicate, it offers one simple set of things that cannot be beat: simplicity, convenience, ease of use, speed of message delivery, and literally 100 percent communication reliability. Amongst all the glitz and glamour of smartphone apps, basic texting services hold their own.

Adding to this basic SMS profile, one can now also include SMS as a key driver of mobile ad-based spending. A recent Juniper Research study goes so far as to state that mobile messaging driven ad spend will reach $7.4 billion over the next five years, a significant jump, and clearly one that no retailer can afford to ignore.

Mobile-messaging driven advertising will be driven forward by the wireless carriers, who are best positioned to offer marketers highly cost effective texting bundles that have widespread reach. The key to success, however, will not depend on that widespread reach - it will, rather, depend on the ability of carriers to marry that widespread reach with location-based services (LBS) that will allow marketers to tightly focus on specific users in specific locations with well-targeted "local" advertising. The ability to "pinpoint" users through LBS within that widespread reach of mobile messaging is the fundamental differentiator that the wireless carriers can offer.

It will be an Opt-in World

Historically, text messages have a well-known high rate of opens - the odds are in the deliver's favor that a text message will be viewed by the recipient. Retailers from every walk of life can participate, and given that users - and in particular, younger users - are not averse to being pinged by such mobile advertising, the approach should prove effective. Juniper Research certainly thinks so.

To ensure that LBS-driven text advertising doesn't create end user security issues - which the wireless carriers need to be highly sensitive to - such LBS-based capabilities will likely only be offered on an opt-in basis for the types of offer they would like to receive. Opt-in approaches remove the nuisance factor as well, and help to create better targeted user profiles.

For retailers, SMS ads also offer an additional benefit - very low cost. Per Juniper, in the UK for example a bundle of 1,000 text messages will cost about $0.08 per message, and will fall to $0.05 per message or less with much larger bundles. When combined with LBS capabilities that drive significantly improved audience targeting, it becomes a compelling proposition.

The Juniper Research report is available for purchase.

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