Understanding the moneymatics on SMS and USSD mobile engagement

Mobile has become the choice channel for consumer engagement and this has driven interest from a wide spectrum of interested parties – government, large corporates , SME’s and individuals looking to best position themselves for highest return on investments made.

Having a grasp of the cost of engagement, expected returns and maximization strategies is therefore important.

SMS is currently the most used form of engagement on mobile. Shortcodes have the best form factor as they are memorable and can allow for processing of large volumes of messages. These codes are rented from the mobile operators at a fixed monthly fee. If operated on a premium band, the revenue accrued is shared between the mobile operator, the value added service or platform provider and yourself, less government taxes. Percentages to operators and platform providers are not cast in stone and offer a volume based cascading matrix – push more volume consistently, drive down their take-out percentage, calculated month on month. Retainers may be levied by platform providers to ensure that HR and admin costs are met if working with a low volume scenario.

USSD is fast gaining adoption for both service delivery and content discovery. The technology behind USSD differs slightly from that of SMS as it rides off user initiates sessions, where a consumer is connected to the service for a period and after the transaction is disconnected. USSD codes are also rented on a monthly basis from the operators but have additional setup and testing costs that are one off. The biggest challenge is that business models around USSD on local deployments only make sense if you are charging transaction fees to a client account of sorts or if the cost of the USSD interaction is offset in a different way – hence why biggest uptake is by banks and NGO’s. As there is no revenue share with mobile operators, platform providers fall back on a monthly retainer.

Mobile applications are commissioned in nature and it boils down to negotiation on cost with the return either measures by revenues from new business enabled or other such KPI.

It is clearly a numbers game and the faster you drive volumes up, the faster the returns are realized from a cost and business continuity perspective. There are smart ways to leverage mobile ad inventory as offered by networks or better still  hypertarget and pay only for interactions that end up as transactions using ad networks as provided by players such as Facebook and Google.

If you plug in your numbers here , [ KPI – (Consultancy+Code rental+Development+ Awareness+ Maintenance ), and are in the black, I would say you are good to go.

An Africa based entrepreneur in the pursuit of opportunities without regard to resources currently controlled striving to build services that have real-world value for my beloved continent and beyond while having fun along the way.
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