SMS Carrier Sales

Case Study 2.6.1: Pinpoint Networks Inc.

Pinpoint Networks, Inc. is an aggregator that provides wireless game developers a method for distributing, supporting, and generating revenue from their applications. Developers can join the Pinpoint Fuel Developer Program and register their applications. Pinpoint offers these applications to mobile operators seeking to provide fee-based applications to their subscribers. Developers define the method for pricing their applications such as on a per-download basis, subscription basis, and so forth. The developer also provides a suggested price for the applications. The Fuel platform is integrated into carriers' billing systems so that subscribers are charged for the applications they use. The subscriber remits payment to the carrier, which in turn remits payment to Pinpoint who pays the developer. The Fuel program provides a simple path for developers to derive revenue from their applications. The Fuel program supports SMS and WAP technologies.

Special Pinpoint developer tip: when developing mobile games, it is very important to provide intuitive functionality. It must be easy to play from any wireless device. Keep in mind that since the subscriber is paying for entertainment, there must be a compelling reason for the subscriber to want to play and continue to play over and over again!

Information on Pinpoint Networks, Inc. can be obtained at www.pinpoint.com, 1.800.746.7646 or <[e-mail]>.

In an ideal world, all SMS applications are sold directly to and through the carrier. The carrier has a vested interest in promoting SMS technology and has a consumer billing system in place. The application could be sold via a one-time fee to the carrier and the carrier would recoup its costs by charging subscribers on a perusage/per-message basis. The application must typically be custom-configured to inter-operate with the carrier's SMSC and underlying billing system.

The amount of network traffic that a carrier experiences is important, as carriers typically bill their users based on it. Specifically, most carriers bill their users for each SMS message that they send or receive. Increasing this type of traffic per user is important to the carrier as it can increase revenue. Carrier revenue is typically benchmarked in the wireless telecommunications industry as Average Revenue Per User, or ARPU. Carriers are always looking for ways to increase their ARPU. One way of enticing users to use more SMS messages is to provide enhanced services based on SMS such as games. Users can play SMS-based games against other opponents or a game server. The carrier might then bill the user for the number of SMS messages that were used to play these games.

Each carrier has its own way of billing for the SMS messages. The game developer who has developed an SMS-based game can earn revenue from this game by one of two methods through the carrier channel.

• The carrier can elect to purchase the game outright, providing a fixed one-time fee to the developer, or to license it for a fixed amount of time.

• The carrier can share the fees charged to the subscriber with the developer.

Use of your game should increase the amount of SMS traffic used by the subscribers. Generally, your best bet will be to target carriers who can recognize revenue from increased traffic and will enter into a revenue split relationship with you.

Content Aggregators

Although many wireless carriers are actively looking for enhanced services such as wireless games, carriers for the most part are large organizations, and finding the right contact to pitch your wireless game to can be time consuming and difficult. Further, some carriers prefer to enter into a relationship where they can obtain many games at once rather than negotiating for one or two games at a time with individual developers.

Service aggregators address these issues by facilitating business and technical relationships between the developer and carrier. Service aggregators are companies that represent many different types of enhanced services, including games. These aggregators often provide services that are of benefit to both the carrier and the developer. For example, they might provide safe but reliable access to the carrier's SMSC. This eliminates the need for the SMS developer to use the carrier's public SMS Internet gateways or third-party SMS distribution companies in order to send or receive messages. The aggregator also typically provides a consistent billing mechanism for developers and integrates into a carrier's billing platform. Billing is frequently performed on a per-message basis.

Some aggregators also provide certification for a game to ensure that it can be used with multiple mobile phones and will work under high use conditions, or provide a hosting service for the game with a guaranteed level of support for the server. Carriers are notoriously concerned with ensuring that the subscribers can receive service whenever they request it. Typically, this means that service must be available more than 99% of the time. To ensure this level of up-time requires redundant servers, as well as redundant connectivity to the carrier's network. Some game developers might have relationships with hosting providers that can ensure this level of support; others might opt to allow an aggregator to provide this service for them for a share of the revenue associated with the game. Aggregators also often provide marketing of the game, targeting it to providers to which they already have existing relationships. Whether you choose to use an aggregator or not will depend on the strength of your business development with respect to carriers as well as your service level agreement with your hosting firm.

Direct Sales

The final distribution option is to sell directly to the consumer. This is potentially the most lucrative in that developer revenue is typically not shared with the carrier or application aggregator. However, this technique also requires direct consumer marketing and sales efforts. The developer must also have a means for billing the customer, typically with credit cards. If the SMS service transmits a large quantity of SMS messages, then it might be necessary to broker a carrier or message distributor agreement to avoid having the carrier block your content as "spam." It also might be necessary to use a third-party SMS delivery agent to send SMS binary content. In this scenario, it is almost always required that the subscriber separately sign up for SMS service with the carrier. One drawback to this model is that consumers might feel that they are paying twice for a service, since they must pay the carrier for the SMS message and the application provider for the SMS application. Another drawback is that mobile-originated requests must typically be performed using mobile-originated SMS/e-mail services that are implemented differently across carriers. Consequently, the consumer experience is not consistent and can be difficult for the developer to support.

In summary, the SMS market can be serviced at both ends of the technical and business spectrums. On one extreme, a game developer can directly bill consumers for services that are provided through the carrier's public SMS e-mail gateway. On the other, a developer can write advanced SMS services that are sold to the carrier, which handles all subscriber billing. Service aggregators help to fill in the middle of this spectrum.