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SMS revenue models and e-marketing legal compliance

CocaCola marketing in 1900
SMS voting has grown in Australia in synch with the transition of Sunday night television from big movies to big events.

The new TV formats include reality TV, docu-soaps, scripted games and talent quests. In Australia, Europe and the United States SMS voting provides for them interactivity with audiences, revenue, or both.

Television program producers and TV networks on the "television SMS money trail" have three key elements to their business models.

  1. They focus on clearly defined interconnect agreements between the operators to define how messages should be routed and when they should be billed. This ensures that subscribers are billed when their votes are counted in the terminating networ
  2. They ensure termination of messages in the network that owns the destination number. This host network receives all of the voting messages, the other networks simply route the messages to the host network.
  3. They agree on figures between those involved so that the cost of voting and the revenue share is specified.

SMS and shifting media revenue models

sms_revenues.gifThe rising revenue positon of SMS in telco revenues is caputured in US dollars as at November 2005 in the accompanying graphic. It appears in the August 2005 paper titled "The story of SMS global market development" parepared by telco consultancy, Ovum, for Huawei Technologies Co., Ltd of China.

That paper notes that "The worldwide revenues from music sales in 2002 are very much comparable to the total world SMS revenues, which were generated by mobile operators in 2004 (around US$33 billion." It positions SMS within the mobile messaging market, which contains three other applications - email, multimedia messaging service (MMS), and instant messaging (IM).

Revenue models are also shifting for television programs. Big Brother, Popstars and The Biggest Loser are an exercise in low-cost programming, a search for new revenue streams, and a bet on ratings in a globalising world and a new media business environment.

Commercial television revenue streams now include advertisers and sponsors, as well as product placement, event content licensing, and SMS voting.

While SMS voting on TV contestants is noticed more often, people are increasingly also voting with text messages to express their opinions on TV programming choices, radio DJ surveys and radio music playlist choices. Additionally, SMS is increasingly being used on its own to market goods and services.

SMS and e-marketing law

Where there is a money trail, law follows suit. SMS marketing messages are caught by law in Australia. In addition to ensuring clarity and certainty as regards the terms and conditions of competitions, there are many areas of law and compliance requiring review.

There's advertising standards to consider - useful here are the websites of two relevant Australian industry associations: AFA and AANA.

There's also relevant Internet, marketing and telecommunications industry codes in Australia eg Internet Industry Spam Code of Practice and The Australian eMarketing Code of Practice.

There's also a need for compliance with statutory law relevant to marketers, eg Australian privacy law and the Spam Act 2003 (Cth). The exposure to potential fines is real. Additionally trade practices law is regularly used in Australia by private litigants and the Australian Consumer and Competition Commission to take action against misleading or unlawful statements and business practices.

  • In late 2006 the Federal Court of Australia issued a decision fining an email marketing company and its director A$5.5 million dollars for breaches of the Spam Act.
  • In April 2005 Carsales.com.au was fined A$6,600 after members of the public complained to the Australian Communications Authority about the unwanted marketing messages. It had sent text messages to people after copying their mobile phone numbers from classified advertisements.

Breach of law also has obvious negative publicity consequences for those affected. All those with overlapping interests can potentially go down with the bad PR ship - including contestants, program makers, media network hosting the program, telecommunications carriers, advertising agencies and advertiser clients.

Therefore, for both good PR, legal compliance and secure revenues, if you want to be on the SMS money trail and are gathering phone numbers then among the many things you must do:

  • ensure recipients agree to opt in;
  • ensure there is an "unsubscribe" option;
  • provide clear and simple procedures for recipients to request applicable terms and conditions, eg for competitions and prize draws; and
  • when the targets are adults, take steps to ensure that messages are not sent to minors.

As regards that last bullet point, keep in mind that Australia like most other countries has strict content regulations affecting distribution of certain types of content and marketing messages, including adult content, marketing relating to alcoholic drinks, betting and gaming, and consumer contracts.

The fines in the cases cited above underline the wisdom of obtaining a legal sign-off for marketing campaigns marrying SMS messaging with other media.


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