USA: Wireless Teens Ready for Prime Time?
By David Cotriss, Mon Jul 23 00:00:00 GMT 2001

Slowly but surely...


1 - A, 2 - C, 3 - B. Does this look strange? It's a message Johnny just sent to his friends in class during a high school midterm exam, made possible thanks to SMS wireless messaging on his cell phone. While this may seem silly, it's a scenario that's likely to become much more popular in the United States in the years ahead. Cheating issues aside, wireless messaging is finally gaining the attention of carriers in the United States as it already has in Europe. Carriers are stepping up their efforts now to not lose out on a market that has considerable lifetime value.

According to recent surveys by Cahners In-Stat Group, wireless youth subscribers will number more than 43 million in the United States in 2004, up from 11 million today. Messaging services will likely be a major draw as they have in Europe. A report by the Yankee Group indicates that SMS traffic in the U.K. alone has reached nearly 1 billion messages a month, encompassing uses such as dating and chat. However, that same report indicates that carriers in the United States have not done a good job thus far marketing Internet Messaging (IM) and SMS capabilities to teens, which begs the question - why?


Technology and other hurdles


Given the lucrative nature of the 'wireless generation,' as it's often called, you'd think carriers would have tapped it long ago, selling them everything under the sun. However, there are good reasons why the United States has some catching up to do, not the least of which is the nature of wireless technology today. "Most anyone in Europe can send text messages to each other using a phone number," explains Forrester United States analyst Charlie Golvin. "Here, however, messages can only be sent between the same carriers." Cahners wireless analyst Don Longueuil adds that reliability of SMS is bad here, where messages take longer to travel.

Another significant barrier is the lack of pre-paid plans in the United States. "Pre-paid cellular service is a non-starter here," says Senior Jupiter Analyst Seamus McAteer. "There's no infrastructure in place to support pre-paid here like there is overseas in GSM territories." The need for pre-paid makes sense considering teens generally lack credit and parents would like some control over family wireless usage. Indeed, Yankee Group analyst Knox Bricken says carriers need to leverage family plans using pre- and post-paid combinations to reach the younger set through parents.

Europe leads United States


For a great example of teens hooked on wireless services, one need look no further than Europe, where much of the uptake has been by word-of-mouth. In 1995 and 1996, smaller carriers such as Eplus gave away special services including SMS, causing a wave of viral adoption among teens. Forrester Netherlands analyst Carsten Schmidt says this lead to fee-based messaging services, and teens were key to SMS adoption in Europe. He says teens use it to save money over standard voice calls since they know the cost of each message.

"The marketing lead is actually being taken by the MVNO's (Mobile Virtual Network Operators) and mobile portals rather than the carriers themselves," explains Gartner U.K. chief analyst Adam Daum. MVNO's Virgin and Genie, for example, are offering icons, ring tones, SMS, and the like, which are clearly targeted to teens.

One of the benefits to carriers in Europe is not needing to spend excessive marketing dollars educating users due to the already-high wireless penetration. Schmidt points out that carriers are selling more premium services now but a relative increase in marketing spending has not been necessary.

United States gaining ground


If carriers here have been hesitant on the teen front in the past, that is quickly changing. Given the success of the Research In Motion (RIM) 957 BlackBerry wireless handheld and the AOL Mobile Communicator, a two-way paging device with messaging capabilities launched last December, messaging services and devices appear to have great potential. However, teens tend to want to talk in addition to sending short text messages, and carriers are making progress in offering messaging-capable handsets. In fact, AOL Instant Messenger is being added to cell phone services as we speak. Most analysts agree that messaging-specific devices will not be a significant draw for the teen market.

"It's a fine line to go after the teen segment directly," states Gartner United States analyst Mike McGuire. "The parents are concerned about how companies market to their kids. You don't want to alienate those who pay the bills. It takes a subtle approach." He says most ads today are in the context of a family offering, and that direct marketing to teens will start later. "Most carriers have not found a true creative strategy to reach teens in the United States," Bricken adds. "There's certainly a need for more viral marketing in schools and the like."

"One carrier that understands this well is Cingular, which recently partnered with Nokia on a high school advertising program, with on-campus posters promoting wireless plans and handsets. The carrier also has an ongoing relationship with iHigh.com, a company that builds high school Web sites, to sponsor basketball tournaments, reaching parents and kids at the same time. Cingular offers family plans along with SMS, email, wireless Internet, and ring tones, and plans to offer games in the next few months. "We have no concerns from a revenue standpoint, and we believe SMS will be just as successful here as in Europe," says Cingular spokesperson Greg Roberts. "We see teens as a key growth market."

Other carriers seem to be taking the viral approach as well, offering teen-centric products and services and relying largely on word-of-mouth penetration. Nokia, the first to market mobile messaging services in the United States beginning last August, has launched its 'Expression' category phones which include changeable front and back color covers, downloadable ring tones, a ring tone composer, picture messaging, and the like, all in a low-cost package. Nokia sees a future with multimedia messaging, where people will be sending photos, video clips, and other rich content along with text. The carrier supports its wireless youth-oriented offerings in part with a TV commercial featuring two twenty-somethings conversing over the cacophony of a party using text messaging.

Sprint has a wide variety of teen-centric offerings, including the Samsung Uproar M100 handset, the only phone in the United States with a built-in MP3 player. The Sprint PCS My Music service can be added to this phone and provides music storage space and other offerings. Sprint also offers wireless Web content aimed at teens, including nightclub happenings and information on fashion and celebrities, to name a few. Noting the pre-paid need, the carrier launched its Wireless Allowance program last fall, which charges a monthly amount to parents' credit cards, giving kids a $34.99 monthly spending limit. Sprint also launched messaging and gaming services last fall.

Voice Instant Messaging - a needed boost?


In June, Instant Messaging company Odigo announced plans to provide a voice-enabled instant messaging service that would allow members to send instant messages using voice via any wireless phone. The service aims to convert voice messages to text and then back to voice on the other end, although no carriers have yet adopted the service. If it comes to pass, it may address the difficulty of typing on a phone and teens' desire to talk rather than type. Many analysts are not so sure, however.

McAteer calls the concept stupid, saying one may as well make a regular phone call. Noted here is the recent failure of the inFLEXion service, which would deliver voicemail instead of pages. Longueuil agrees that Voice Instant Messaging would serve a tight niche, such as usage while driving, and often a phone call would simply be used instead. "You can't do it in class, where T9 text input is more practical," notes Schmidt. He says a more practical technology is predictive texting, where common words appear on screen after one or two letters are typed, which will become more widespread in the United States. McGuire adds that most voice interface technology will be used for dialing, as is starting to appear today.

Beyond the United States and Europe - to the future


Most seem to agree that wireless services, and messaging in particular, will ultimately become as widespread in the United States as in Europe. Given the buying power of the teen market, conditions will likely improve so the vast potential of young wireless users can be realized. McAteer notes that the United States is about three years behind Europe, and that while the teen wireless segment may become just as large here, one needs to remember that teens are not quite as mobile in America. After all, teens have had the desktop Internet for years. He points to the need for celebrity-endorsed services to fuel growth. To understand this, one only needs to look at the glossy pages of any teen magazine for how clothes are marketed, often worn by celebrities and the like.

Golvin says the interoperability problem across different carriers will be overcome in the next two years. Indeed, early efforts in this regard are underway. IM company MessageVine is already interoperable with Microsoft and ICQ. In April, Nokia, Ericsson, and Motorola announced a joint initiative called Wireless Village, where the companies will work together to help solve the interoperability problem. MobileSpring is developing a system that determines how to deliver messages across different carriers as they are sent and bill for them appropriately.

Longueuil believes presence (the ability to tell if someone is available to chat at a given time) will be a catalyst for adoption in the United States, but again, this will depend on technology catching up with theory. Schmidt adds that messaging services growth will likely level off in Europe in the next three years, and that the evolution of these services will not vary much between European countries in that time.

As we move forward, a segment of the messaging market may become more robust, with more messages including pictures, video, and sound. Much of this will depend on the widespread rollout of 3G networks. Early efforts are starting to appear, including messaging start-up FunMail, which automatically converts text messages into a related animated picture and has started penetrating the United States following an overseas launch.

"Members of the wireless generation are true pioneers," notes Bricken. Teens' early adoption of wireless services, similar to the wired Web, will likely lead to pots of gold for many carriers now that they're realizing the potential. Then wireless cheaters like Johnny could become a modern epidemic. But that's a discussion for a later time.

David Cotriss has published over 100 articles, mostly on wireless and new media topics. He has an advertising background and is originally from San Jose, CA. He now resides in sunny Los Angeles, CA. He can be reached at dcotriss@earthlink.net.