With the full potential of multimedia messaging yet to be unleashed, operators still have a number of issues to tackle before the technology generates real revenue, writes Keith Dyer
Recent market surveys have predicted great things for MMS, despite a widespread realization that three years after the service’s introduction, it is still costly to provide and often offers an inconsistent user experience.
A study by Juniper Research suggests that the global Multimedia Messaging Service (MMS) market will reach $45.5 billion in 2005. In a report titled MMS Markets, Juniper estimates that “revenues gained from the Multimedia Messaging Service (MMS) market will reach $161.3bn in 2009, by which time it will be well-established as a day-to-day feature of the mobile mass market.” But the report also contrasts that future crock of gold against the present crock of, er, base metal. “So far, MMS has failed to deliver on promise for many of its users and its potential to enrich mobile communications has not been realized,” the reports authors write.
Juniper’s research found that although providers are seeing significant growth in MMS usage, MMS has so far failed to deliver on its revenue promise — specifically, due to problems of handset compatibility and interoperability.
Samuel Keret, vp of marketing and business development at multimedia adaptation company, Mobixell Networks, says that the interoperability picture is worse than hinted at in Juniper’s research. Mobixell’s findings indicate that companies not implementing media adaptation solutions stand to lose up to $6 billion in lost MMS revenues, Keret claims. Mobixell also estimates that up to 20% of MMS message delivery failure is due to interoperability problems.
In order to quantify the percentage of MMS revenues lost, Mobixell analysed terminal-to-terminal test results, weighted according to traffic behavior on several operator networks.
“Simply put,” says Keret, “if an MMS message is not delivered successfully, the mobile provider not only earns nothing — but also actually loses money in slower network infrastructure Return on Investment, increased calls from dissatisfied users to call centers, and overall lower customer satisfaction. The study we conducted definitively shows that about 20% of MMS messages are at risk of delivery failure — and thus 20% of potential MMS revenues are at risk.”
Not long ago, the operators themselves would not have disagreed with these figures. O2 Online’s ceo Laurence Alexander says that, in early 2003, only 50% of MMS were successfully delivered across O2’s network. Now, he claims, that number is more like 95%. “That’s a big increase in the number of messages just getting through.” Alexander says that O2 has seen phenomenal growth in MMS, with the number of active users up 10% a month since February 2004, which Alexander describes as an “inflexion point.”
Alexander puts the increase down to the amount of effort O2 has put into getting the technical aspects of service delivery worked out. “Device accreditation is a must,” he says, “as is full interoperability testing.” One of the things he credits with the increased performance is O2’s work with the MMS Forum, where it has shared key interoperability issues and experiences with other operators. “It has helped us work out how to talk to each other,” Alexander says.
Despite this relative success, the problem for operators, as Alexander acknowledges, is that customers don’t know and care less about how technically difficult it is to deliver an image captured in one format for one screen size and quality, across a network to another phone with different settings and configuration. To the customer, in part because of the runaway success of SMS, the business of sending and receiving an MMS should be no more difficult that an SMS.
LogicaCMG’s product marketing manager for MMS, Tom Veldman, says that unless and until MMS can offer the same ubiquity and ease of use as SMS, the high numbers that analysts are predicting for the technology will remain elusive. For Veldman, these two factors need to be supported by the integration of real-time pre-paid billing as well. Real time pre-paid billing had a big catalyzing effect in SMS usage, he says, and will do the same for MMS.
“The success rate of MMS has been disappointing,” he says. “Operators have put marketing effort into portraying MMS as picture messaging and handset penetration is OK, but usage is still at around 2-3 MMS per month. And clearly that’s not what people were expecting two years ago.”
So is it still too difficult to set up a phone and send and receive person to person MMS? Veldman, says, “To get MMS to work is challenging. I tried to copy my MMS settings from one phone to another and it took me three hours to work it out, and I’m technical. So what we need is in the shop at point of sale, or via a website, there should be more services where MMS configuration can be sent to the phone automatically. So I, as a user, don’t need to know something like what port number I need to enter in my settings.”
Alexander says that O2 is one operator that has had some success with such an approach. O2 calls it “Walk out working”, meaning that when a user leaves the shop he does so with a phone that has some battery life, and the settings configured to whatever the user wants to do.
“Mobile phones are getting more and more complicated and for operators that’s an issue to make sure they work. Customers don’t understand the complexity of what we do so they can send a picture, and why should they?” he asks.
Shailendra Jain, ceo at another media adaptation company, Adamind, says that the “key problem” in interoperability has been at the device level. Adamind now has about a 40% market share in media adaptation, he says, and its software is now used by many of the MMSC vendors which integrate it as a key part of their pitch, he claims, highlighting its current importance to operators. “Even in South East Asia where many interoperability problems have been worked out, handset device management means a process of 3-4 days per device to adapt and configure it to a service — but that’s good compared to the US and European market,” he says.
“Lack of device interoperability is a nightmare in peer-to-peer MMS communications. Different screen formats mean content needs transformation. Transcoding media adaptation software sits in or alongside the MMSC, intercepts a message, adapts it and sends it on,” Jain adds.
Although media adaptation solutions can help, there are still around 300 operators worldwide yet to deploy MMS, Jain claims, “which is bound to create MMS interoperability and roaming problems.”
Every MMSC that is installed in European networks tends to have media adaptation integrated, yet Jain says Tier One and Tier Two operators are starting work with a different approach, positioning their media adaptation engines as stand alone systems, typically for Application to Person (A2P) services. In this case media adaptation needs to be outside the MMSC, handling the delivery of one message at a bulk level to an array of differing handsets.
Not all doom and gloom
That said, not all is doom and gloom. LogicaCMG, which competes with the likes of Ericsson and Nokia in the provision of MMSCs for operators, has several systems in place which are sometimes dealing with 30-60 MMS per second, at peak flows, Veldman says. “Cost control needs to be good for operators,” he says. “Manageability needs to be good and the infrastructure needs to offer a measure of commonality between different systems. That is, that your back office systems are not completely separate for SMS and MMS, so each can share supporting functions between the different services — for example billing.”
He agrees that A2P messaging is one area showing great growth. Alexander says O2 has made non-P2P MMS a target market, and currently sends around 600,000 MMS alerts on a weekly basis.
The importance of A2P is not simply that it is an MMS on the network, he says, but that A2P can stimulate P2P messaging, as users share and forward messages. “Application to person is important because if you receive a message you will start sending them. Perhaps as forwards to your friends of a clip you like.” At present, Veldman says, A2P generates 30-40% of MMS volume in most networks, and also generates premium revenues.
So there is cause for what Declan Lonergan, director wireless research, Yankee Group, terms “legitimate optimism.” He says that, from the end of 2003 through 2004, there was a lowering of expectation and operators have offered a more pragmatic view. “So this year,” he says, “some of the early hype has gone away and been replacesd by some positive news on MMS traffic. That is still to be translated into revenues but as traffic increases revenues will follow.”
The Yankee Group has looked into the five main European markets, Lonergan says, and has found that “customer interest is relatively encouraging”.
“In general we believe there is more evidence of demand for picture messaging. And there will be for video messaging in time as well.”
One reason for Lonergan’s relative optimism is the experience of operators which have made a determined effort to really understand the marketing required to sell MMS.
“Telenor, we believe, has done more intelligent things around marketing, it has a very sophisticated approach to market segmentation.” Telenor was one operator which had to get past a mismatch between those it thought most likely to use SMS (female, late teens to early twenties) and those that actually had MMS capable phones (male, 25-35). So the solution faced was to get enough MMS phones into the hands of those likely to use the service.
Lonergan says that by October 2004 Telenor had 70% of its users equipped with MMS capable phones. And by August 2003 every 1% increase in phone penetration was leading to around a 2-3% increase in MMS traffic. This meant that, in 2004, there were 40-45 million MMS sent, compared to 16 million in 2003. The operator has pushed usage up to 5-10 MMS per user per month, well above the European average.
So Lonergan counsels more intensive marketing work — offering price bundles and being aware of peak times and events. He also advises against operators getting involved in “significant price reduction” to stimulate usage. Instead operators must encourage users to see the value of MMS, with some sort of offer to encourage it, perhaps free messages for a period or a free MMS phone.
“There are still many user issues to be overcome,” he cautions, “even getting MMS settings on a phone to begin with. Now is not the right time to set aggressive targets for MMS revenues — but operators should be doing so for traffic and then the revenue will follow.”