mGinger paid SMS advertising: effectiveness and reality check
Shrinidhi Hande presents you with yet another case study, this time our own new Indian startup, mGinger.com a new venture which pays you to receive SMS advertisements on your cell.
Last month, I got over 50 invites from several contacts to sign up for a website under their referral. I ignored all those invitations and have been studying mGinger for sometime now. This post is to share my thoughts and analysis on this very new concept and business model of SMS advertising, its feasibility and sustainability.
mGinger: The mediating company which hunts advertisers willing to advertise through SMS and dispatches such ads to its members charging advertisers for the service and passing a part of income to members for receiving ads.
Advertiser: An enterprise willing to pay mGinger for giving publicity to its products and services via SMS
Members: Mobile users who have registered themselves with mGinger by giving their personal details, preferences etc and have opted to receive SMS ads in consideration for money.
The scheme is something like this:
Mginger pays you to receive contextual ads by SMS and all you have to do is register yourself, select the types of ads you want to receive, refer your friends for the program, sit back and enjoy. Ads will flow into your inbox, and you’ll be paid 20 paise per ad SMS that you receive directly and 5 paise for each SMS your friends receive. Per day a maximum of 10 SMS will be sent and the potential is that you may make thousands of rupees every month just for receiving SMS. mGinger would get this money from advertisers who will be paying for the publicity given.
Though this concept is new in India, it already does exist in UK (by a company called mindMatics) and some other countries. The promoters of mGinger are ISB graduates so it wouldn’t be fair to suspect their vision and only time will tell if mGinger will be a hit or a miss. The idea seems extremely innovative and exciting at the first glance but this author’s eyes and brain easily penetrate behind the superficial layer and I have following observation:
Conventional advertising: When an advertiser advertises in TV or newspaper or internet, the end user (viewer/reader/surfer) is not at all paid to see the ad and is often forced to see the commercial and the commodity/service being promoted gets registered in his mind when he sees it embedded in between other content (TV program or news article) that he is interested in viewing/reading.
SMS advertising: Recipient receives ads with sole reason of making money. He may or may not choose to even read the ads, let alone making use of it.
If I’m an entrepreneur and wish to advertise my product/service, what counts for me is how many people out of all those who received my advertisement eventually come to my shop and make some purchase. How many SMS ads get converted into business enquiries and subsequently into sales is something yet to be seen. In conventional medium, at least the product/service gets registered in the mind of target audience as they see the ad but in SMS ads, if everyone deletes the SMS without even reading it, my entire expenditure goes down the drain. Say as a businessman I spend Rs 1 lakh for advertising and say mGinger sends one ad each to 1 lakh people. mGinger is happy, its members are happy, but unless some of them come to by shop, do some business and I get a profit which exceeds what I spent its not useful for me. In order to ensure positive ROI, mGinger needs to send SMS only to those selective members who are likely to make use of the information given.
mGinger is very much aware of this and is categorizing its user profiles. If you do not understand what I mean by customized advertising, read below examples:
*If a bank wants to send SMS promoting personal loans, such SMS needs to be sent only to salaried or professionals who have proven income and may need a loan. Sending home loan ad to college student will be waste of money as they’re not eligible for a loan.
*If a restaurant in a particular area of a city has some new schemes and wants to promote it, people living in surrounding areas are prime targets. If that SMS is sent to someone living in other part of town, chances are less that he’ll travel all the way to this hotel.
*If advertisers have information that I have not gone on a vacation for quite a long time now, I become easy target for any holiday plans and schemes, because chances of me considering one are more if I get a good deal. On the other hand if I’ve just returned from a vacation, I may not consider another for near future, irrespective of how tempting the offer is.
*If I'm trying to sell an expensive item, say a Mercedez Car, I would want to target only those who earn high income, say Rs 1 lakh or more per month and not everyone on the street.
In order to achieve this kind of personalization, mGinger will need huge member base to meet any combination of profile an advertiser may demand, and they need advertisers to send ads for various kinds of users they have. Building this database will take time.
Note: None of the advertising medium gives guaranteed results (i.e. just because you advertise on leading news paper or TV channel there's no assurance that people will line up in front of your shop next day and buy what ever you offer, the ads just help to get the message across (that you're offering something) to the masses). While conventional medium like TV and print have been time tested and proven to be effective, we'll need to wait for sometime for some businessman to try this relatively new concept of SMS advertising and declare if he's happy/not happy with the overall outcome and effectiveness.
Risks for advertisers: If recipients install SMS spam filtering software and get all mginger ads deleted outright the very purpose of reaching the target audience gets defeated. (Such feature already exists in emails as all of us know and it is only a matter of time before they appear in mobiles)
Currently mGinger doesn’t have enough inventories of ads to serve all its members, which has resulted in members listing for all possible categories they can (hoping to get more ads), this dilutes quality of target audience.
SMS traffic: Let us assume one fine day mGinger gathers enough advertisers willing to pay for SMS ads and starts sending SMS to members in full scale. This means lakhs of outgoing SMS daily. Are our cell phone infrastructure prepared to handle this much volume? Already we are facing congestions during festival season when everyone sends festival greetings to all his/her contacts. Soon they (mobile service providers like Airtel and Hutch) will start demanding a share in profits, either from subscribers or from mGinger or both.
What does TRAI (Telecom Regulatory Authority of India) has to say about this? This is purely a commercial activity on a mobile network meant by and large for personal usage. Commercial SMSs (SMSs sent to 4 digit numbers like the ones you send to download ringtones, to cast your vote for Indian Idol) are charged at a premium (Rs 3,5 or 7 as the case may be) and a fraction of this goes to government as tax. Will not the government love to have a share from mGinger’s business? If you’re starting a hotel you need to keep price of commercial LPG in mind. Profitability will be hit if you print your menu thinking you’ll be able to cook with domestic LPG. Probably mGinger team has some way to counter this.
It is possible to show highly interactive/creative ads in print/TV media and grab attention but only plain text messages can be sent as SMS, which will be boring for people to read. (Well, mGinger can surely consider MMS advertising if SMS ads succeed!!!)
mGinger has managed to gather subscribers base of few lakhs (I don’t have exact number, 4.5 lakh and growing is the available number) . This appears ineffective compared to millions of viewers TV channels or internet websites claim to have and is not a tempting enough number for an advertiser to choose this as a medium. Existing members who are expecting mGinger to generate enough revenue at least to foot their monthly telephone bill, are getting disappointed that they’re not getting much (if any) ads. For mGinger, it is like egg first or hen-they need huge member base to convince advertisers and members need advertisements flowing into their inbox right away.
Some analysts compare mGinger with Google adsense and say mGinger will be more successful than adsense. I disagree. Google had huge list of advertisers and they didn’t have enough web pages of their own to display all these ads and eventually they came up with idea of adsense, showing their ads on other websites with a revenue sharing model. mGinger yet to build up its database.
How will mGinger protect its members from unsolicited spam messages? Advertisers may ask all details of members (like show me to who all you sent my SMS?) and if mGinger shows your details (see Boss I sent your SMS to these 10000 people), the advertiser now has your name, phone number, preference and other details. Next time, he may choose to approach you directly instead of coming through mGinger, which will increase unsolicited SPAM messages. So mGinger will have to prevent its database from getting into wrong hands and need a mechanism to prove that right ads have been delivered to right members without compromising on member data.
This post is not to criticize mGinger or to discourage you from becoming a member. Any new start up will face several hurdlers like these and we hope mGinger will overcome all of them and will prove to be beneficial to everyone involved. mGinger team has been very honest in their statements and they have evaded most of the myths surrounding the concept (like everyone thought they’ll become rich overnight, but it is not so)
mGinger is spreading like wildfire among students and professionals alike but advertisers will take their own time to analyze this new concept before they can trust this and choose to spend on it. Several competitions have also come up promising more lucrative returns than mGinger. While there’s no guaranteed return, sharing all personal information in order to get target ads is something one needs to be a bit cautious about.
The biggest challenge for mGinger now is to convince advertisers to spend on SMS ads by assuring them of a positive ROI. Obviously they can't approach advertisers saying "We've half million SMS hungry members,please do charity". They have managed to lure ordinary people into registering with the temptation of free money, but a seasoned businessman will not succumb to any hype or temptation and will use rely on his own instincts and judgement to decide if he should spend on this. Members may soon get frustrated if they dont make even a minimum of say Rs 50-100 per month and pressure from other sides (from Govt, competitor, telecom operators etc) may creep in as well. I wish mGinger all the best.
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