Premium Billing for Text Alerts: Not the best deal for bloggers/websites

TechCrunch recently wrote about a new product from TextMarks that allows publishers to charge readers to receive breaking news, newly published content and other information via text messages. I wanted to add my thoughts on this premium model to the discussion in the Techcrunch comments and elsewhere. My conclusion? Publishers have better options for making text alerts available to their readers, and other methods for getting revenue from those alerts.

There are 3 primary reasons why I think the premium billing model (at least in this instance) is flawed:

1) Consumers have not shown a willingness to pay for content on a cell phone (outside of ringtones and games). Adoption and retention of consumers on free services are much better.

2) Carriers take too large a percentage of the premium plan to make this a viable business model. In the end, this ends up hurting the consumer because they get charged extra-ordinary fees because everyone involved needs to make their cut.

3) The free ad-supported model has been proven online and is already being proven out in SMS (text messaging) and WAP (browser) ads. When CPMs for SMS ads are $40-60 ($0.04-$0.06) a message why is there a need to charge consumers?

The biggest problem that exists for mobile premium billing is as follows: Publishers can’t get a fair cut when the carriers take upwards of 50% of premium revenue off the top. After the mobilization company takes their cut, the remaining pickings are slim indeed for the publisher. Even, the basic assumption that many readers are willing to pay for premium text alerts from multiple publishers is questionable. 

Text alerts do more than create revenue for publishers. They drive the user or reader back to the web site, and create an instant and ongoing bond between the publisher and the reader. Users are more likely to indulge in their desire for instant notifications, if those notifications are free. As subscriptions to free text alerts grow, the volume and frequency of visitors to the site will grow. And with that, other revenue streams for websites, such as AdSense and affiliate programs increase. The result is a win for publishers at multiple levels.

Let’s take a look at how the free ad-supported model might work with a fictional example. Assume website X sends out just 1 new post alert to a user daily; and a third party sells advertising on those alerts at a conservative $40 CPM. The gross monthly revenue is $1.20 per month (30 alerts x $0.04 revenue a message). Let’s also assume that the website is getting 50% of the gross. If this was a premium billing model, that would be the gross after the carrier share. So, in this imaginary scenario a website would have to be charging its users $2.40 a month for this service just to make the same amount of money. That’s not even taking into account the fact that we can safely assume a much larger percentage of a website’s user base will sign up for free alerts rather than premium. Of course, to do this, you need to tap into an SMS ad network, and there are relatively few of those around. More on that in another post.

Free, ad supported text alerts are the better option to quickly build that user base of readers interested in instant access to your content, and bring in revenue at the same time. If you’re interested in being part of a whole new wave of mobile content delivery and advertising, I encourage you to check out the 4INFO jobs page here: http://www.jobscore.com/jobs/4info.