Quick Numerical Ponderings on SMS Driven Distribution

I’ve been thinking a decent amount recently about using SMS or other forms of messaging to drive mobile web usage. My overall question being can you drive mobile web usage with SMS and monetize your site with advertising? My gut feeling was no. And I think that’s what the number say. I figured I would share a bit of what I’ve been playing around with so that maybe we can work toward a shared understanding of SMS and mobile web interplay. My “model” of SMS/WAP usage has a few different variables:

  • number of users
  • number of SMS messages per user per day
  • message response rate, what percentage of the time do users click on some message you send them
  • average session length (number of pageviews) once a user does click through
  • what’s your effective CPM on your site, how much do you make per thousand pageviews on average
  • what do you pay to send a message

Relatively simple. Your daily cost is the (number of users) x (the number of messages per day) x (the cost per message). And your number of SMS driven pageviews is your (number of users) x (number of messages) x (response rate) x (pages per session). Divide that by 1000 and multiply by ECPM and you have your revenue.

Lets plug in some numbers and check it out, assume we have 1000 users. Lets assume that we’ve been ultra effective at figuring out what a user will really be interested in, so we send just one message per day and the user ends up clicking on that message and visiting the site 40% of the time. Take a session length of 6 pages, an ECPM of $5, and a cost per message of .02.

With a thousand users and one message per day that means we pay $20 to send out SMS messages every day. With a 40% click rate that means 400 responses at 6 pageviews per session, or 2400 pages. At $5 ECPM that means $12 in income from those pages. $20 spent and $12 made, not great.

Of course my numbers could just be completely off base. The one I’m really not sure about at all is the 6 pageviews per session number. I have a gut feeling that’s about right for mobile usage, especially in response to an asynchronous message. As far as the others, 40% click rate I think is extremely high, and 1 message per day is low. $5 ECPM for mobile pages is fantastic, I think most sites are way lower. And 2 cents for international SMS delivery is pretty cheap. I think if anything most people would see a bigger loss if they took a look at their site and plugged numbers in there.

Which isn’t to say that SMS is unusable for all services, just that if you’re looking at SMS and mobile web from the straight up media angle it’s not a great way to drive distribution. Lots of times I’ve said and heard people say “well if you had folks sign up and give you their phone number you could notify them of changes and drive users back to the site.” Technically true, but I don’t think the financials work out for the common case I’m seeing out there.

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4 Responses to Quick Numerical Ponderings on SMS Driven Distribution

  1. PanMan says:

    In my calculations I usually use about 10 cents a message (altho I know that’s on the high end of the scale). Off course it all depends on volumes and so, but where could you get close to 2 cents? I know my country is more expensive, but even for pretty high volumes on sites like clickatell, I’m more in the 5 cents than 2. Do you know any cheaper place?

  2. miker says:

    I hear two cents is possible, but I’ve never tried to find out where. Mostly because even at two cents, the economics don’t work out for the stuff I’m looking at.

  3. Pingback: Mike Rowehl: This is Mobility » Blog Archive » Reach != Grasp

  4. Rick says:

    Mike,

    We are very interested in getting mass SMS’ out.

    Please contact me at the shrouded email.

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