When Reuters decided to deliver European football fans live World Cup SMS updates with the goals and penalties as they happen, it chose a Geneva-based startup called Echovox to make sure it gets paid.
It takes four clicks to sign up on Reuters web site, a great improvement over earlier systems that had complicated online registration forms. Within seconds users get an SMS with a password to authorize the subscription.
Afterwards subscribers receive short text messages with the scores and updates. Each message is charged to the user's phone bill. Reuters splits the revenues with Echovox and the mobile network operators who terminate the messaging.
Some 320 million mobile phone users are eligible to receive SMS World Cup scores from Reuters, although this does not include pre-paid subscribers. Premium SMS or reverse billing is only available in about 50 per cent of Europe's mobile networks.
Finally a way to make content pay
The advent of reverse billing using premium priced SMS could mean that we finally have a micro billing system that is flexible and fast with low hurdles to use (no need for a credit card to sign up).
The same system can be used to pay for online content, a potentially strong alternative to the failed online advertising business model. It is costly to deploy reverse billing services for content owners, according to Christopher Tiensch, CEO of bmd wireless in Zug, Switzerland a company specialized in SMS technology. That is why companies like Echovox have a market opportunity.
There is a need to physically connect the content management system to each and every operator's network, which can cost between 30 and 50,000 francs, explains Tiensch. Plus each mobile network operator has its own billing protocols. Any micro billing solution must interconnect with these systems. These have proven to be significant hurdles in the past.
Technical hurdles being overcome
Echovox competes with a number of firms with varying degrees of geographic coverage. Tiensch says he has seen a number of startups in this space go bankrupt due to high costs and rapid expansion. "The effort to physically connect to every operator and negotiate revenue share deals is a very time consuming and expensive proposition," says Tiensch.
Echovox manages costs by developing its software in Pune, India. It only offers "push" services in four countries and "pull" services in ten. It built its network gradually. CEO David Marcus says he founded Echovox in November 2000, the "worst time to found a startup in Switzerland" because venture capital investors were not interested in messaging startups which forced the young company to grow with care.
Reuters chose Echovox because it has the most extensive network in place. Although Gregory Pasche, Head of Marketing & Future Business, Reuters, would have like to offer his service in France and Germany it just was not possible yet.
Tiensch's firm, bmd wireless, sells solutions that could overcome some of the hurdles still left by reducing the costs of interconnection. From a technical perspective it means that companies such as Echovox need to connect to only one operator services to reach a global audience of mobile subscribers. However, explains Tiensch, from a commercial perspective, content providers, or firms like Echovox, still need to negotiate revenue share deals.
Revenue sharing with sharks
And that is where the market will have to improve if it is to be a good microbilling solution. The telcos are taking too large a bite out of the 30 cents to 3 Euros that each Premium SMS generates. In Switzerland, mobile operators take up to 50 percent of the Premium SMS revenues. This is too large a proportion, says Strand Consult, a Danish consultancy that performs telecommunications market research. It recommends a model that enables the content provider to take home 90 percent of the revenues.
By Valerie Thompson