SMS- killing of Internet freebies

The difficulty of account fund by money owners has always been a fundamental problem in creation of any payment system. And this dilemma is not a result of technical imperfection of modern payment tools but the consequence of human mentality which is basically built on the habits of modern person. Civilization had accustomed today’s homo-media sapiens to pay the apartment, car service, communication and, finally, Internet bills by taking lifeless plastic and journey to ATM to cash the drawn salary. But the person who realized the necessity to remember PIN codes, passwords, secret words and other attributes of 21 century didn't get used to it; besides bank account, plastic card linked to this account and the swollen wallet with worn banknotes it is necessary to have electronic account and to look constantly after it by funding via terminals or currency depositing points. And exactly that’s why the technologies for a long time faced with a task to find such version of payment system that would meet all up-to-date requirements in processing of transactions and settlements. And at the same time this system should not require the promotion of new way of thinking and various habits that payment system is trying to impose on the others.

Solution was found quickly enough, right after mobile communication gained its critical mass. Technologists, psychologists and specialists have gambled on simplicity of mobile phone use and on the regular balance user's funding to remain available. In view of this in the beginning of 2000s SMS billing system has appeared. Our “thumb generation” remembers it as endless offers to send sms to the short number and to get phone content in exchange. But this approach to business initially involved the limited audience and had no chances to gain success among people little interested in pictures and melodies for their phones.

As time has shown - the appearance of sms billing was the start of count down of elimination of free content industry in Internet. And as it was discovered later the arm of this chronometer was irresistibly picking up higher and higher speed. According to the analysts estimates at the beginning of this century the correlation of paid and free content in Russia was considered as 20% to 80%. At the same time the figures abroad were quite opposite to the mentioned above. At that time the paid qualitative content was mainly of adult type and was available only on authoritative websites. Today the situation is considerably changed. It is very difficult to count the percentage of paid content in RUnet as this study can become out of date by the moment of its finalizing as billing operators appear with circular velocity, plus the volume of this niche can be hardly estimated. However, the picture of mobile payment user is known: young people aged from 15 to 28 actively using paid Internet services and spending in average 2-8 hours online daily.

Send three letters…

Technology and scheme of sms billing operations in Internet are created the way to satisfy anyone: those who type SMS, those whose servers receive all these typed words and mobile operators. Exactly in this way every SMS transaction taken place involve essential participation of 4 parties: owner of website selling the content, sender, SMS billing provider and mobile operator. The scheme of operation is as follows: user sends a definite code to the specified number, then mobile operator charges a fee to user in amount 10% - 40% and SMS billing operator in its term also charges 5% - 25% as a commission fee. It is not difficult to calculate what remains for account owner. Thereafter, website owner using SMS billing will get from 85% to 45% (that happens very rarely) of profit from the cost of sent sms. But sometimes it can be even lower.

But simplicity and convenience of SMS billing use has its limitations at work with many operators. The majority of service providers refuse in advance to serve the customers who build the business on adult-platform. It is related to the fact that distribution of any kinds of adult-content is deemed illegal in accordance with the legislation of Russian Federation. It’s worth saying that this situation results not a higher level of mass morality but chaotic distribution of adult-industry in Internet. There's no need to be an economist to count on fingers that VAT for 1 transaction through SMS to access the content with cost 10$ will be equal to 1.8$ for state budget. But it is a matter of state policy Russian business structures are aspired to follow, but at the same time they are guided by nation's demands. Also frequently operators limit service for those websites that are promoted by means of spam messages and websites that send SMS with harmful virus code.

Available online

The first experiments of SMS billing have showed that this system is so universal that can solve a great number of tasks, namely:

• Sell of any content in Internet;
• Any types of information (sending of information that can go into SMS volume);
• Holding of various quizzes and competitions ;
• Creation of bonus programs;
• Conduction of Gallup polls and market investigations;
• Creation of loyalty and topical distribution programs.

It’s necessary to say that such complex of services provided for the users is very popular and attracts the audience of electronic payment systems. The simplicity, convenience and functionality of SMS billing use make this payment tool much more popular than use of WebMoney in Russia for instance. According to the data prepared by leader of mobile payments in Russia “Mobilny platezh” (www.mobilefuture.ru), less than 15% of RUnet users use WebMoney. And as for the other payment systems of Russian segment in Internet one can say that the number of their users is even less, so Yandex.Money has more than 1,5 mln of registered wallets and RuPay has 200 thousands.

Taking into consideration the fact that more than 65% of Russian population is the subscribers of this or that mobile operator the potential audience of SMS billing services seems even more attractive than the audience of electronic payment systems in Internet as Internet audience itself is about 25% that is equal to 30-40 million people. The exact statistics of Mininformsvyaz for September 2007 is available at this picture in the form of bar graphs.

Such positive dynamics promises not to decrease the pace of growth and by the end of 2008 one can expect the increase of mobile payment market capacity up to $200 million and more. It is a significant growth of industry if we take into consideration that at the end of 2007 turnover of mobile payment market was $100 million and it is increasing monthly on 15%.

Meanwhile, with the development of mobile payment industry we can observe the appearance of the giants in this field. The leaders here are “Russian billing” (www.russianbilling.com) and “Mobilny platezh” (www.mobilefuture.ru). Let’s dwell on “Mobilny platezh” service as the span of their e-wings in the endless expenses of Internet is really amazing. Covered territory is the whole Russia and CIS countries, company deposit guaranteed payments is 500000$, number of client registrations to the moment of this article publishing is more than 1150000 and all of this should be considered in the fact that this business sphere exists less than 10 years.

Having passed the registration on website the client chooses prefix and short number with definite money value ($0.1, $1, $5 …) that will be a platform for receipt of users’ payments from the client’s website. After it the client installs a special console on its website where the client will trade the content and other services. Another important moment at collaboration with “Mobilny platezh” is client's support service.

Price policy of this leader of SMS billing is also interesting. “Mobilny platezh” charges only 5% of the profit. It is worth mentioning that depending on operator the profit of client may vary but www.mobilefuture.ru is the only billing operator in Russia that allows its clients to get up to 76% of the initial amount.

Digital defence line of the system is based on integrated ANTI-fraud and antispam. But “Mobilny platezh” guarantees that if the client’s business suffers due to service failure the company will reimburse the amount of losses resulted by idle time.

The appearance of such services as “Mobilny platezh” is a sign of healthy development of economic system in the country: as any payment system regardless to the platform it is based on is, first of all, an infrastructure for construction of complex of services to satisfy the demands of population. And exactly this demand for this type of services has created a favorable situation on content market- to process numerous transactions you need just to press several keys on the mobile phone and you will get a desired result without losing time. SMS billing technologies of “Mobilny platezh” made a great contribution into the development of virtual economy in 2007 and has sent this message into future, to a short number 2008. Delivery report has already been received. It's now to wait for the response message that will tell Russian SMS billing about the heights to be achieved in the present 2008!

Arthur Salnikov, Chief Editor of «Trainex Journal»

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