Low Costs Stimulate Business

As early as December 1992, the Vodafone Group (PLC) sent the first short message or SMS in the world from a computer to a mobile phone via its GSM network. But it was not until 1998 that mobile telecom operators in Europe began to realize the business value of SMS. The price of each SM was only 15 cents while its costs were almost nil (since these messages cost the phone companies almost nothing to manage -- it was the user who created and sent the content most of the time), resulting in a high profit margin. The SMS craze swept through Europe with customers making up 82 percent of mobile phone users in Europe while the function of SMS changed profoundly over the years.

With the rapid increase of mobile phone users in China, Chinese operators started to pay attention to SMS. From 2000, China Mobile and China Union, one after another, developed SMS, and soon they were surrounded by many content providers. SMS evolved into a big industry as it has covered a wide range of content from news, games, jokes to graphs, bells, instant chat and traffic services. Some people even think the first profit of China's "Dot Com" (network company) companies was due to SMS.

Wang Jianjun, vice general-manager of Sohu.com, said that the development of SMS contributes a great deal to Sohu.com's profit surplus for it accounted for about 60 percent of its revenue last quarter. "SMS will serve as one of the main profit models of Sohu.com in the coming years," he added.

Meanwhile, the position of SMS is also proved by information from the so-called short-message champion: Netease.com. Sun Deli, both the CEO and trustees, expressed a similar point of view that SMS plays a big role in Netease.com's profits. In addition, according to one senior staff member from Netease.com, the wireless-data service (mainly refers to SMS) makes up at least 50 percent of the profit last quarter for Netease.com.

It has been suggested that by the end of 2002, China had more than 200 million mobile phone customers who keep expanding at the rate of 4 million per month. China Mobile claimed that all together its mobile phone customers sent 80 billion short messages in 2002, 15.9 billion more than in 2001.

Some experts pointed out why SMS is seen by websites as "pillar" in its profit making. Among many short message content providers, websites serve as a base or center. In general practice, for each short message, after excluding 0.05 yuan (transportation) fee, remaining profit is divided in two: 15 percent for the operator and 85 percent for the websites. Compared with other profit models of "high invest and low profit", profit from SMS is amazingly high.

Customer-friendly Service

SMS on mobile phones combine the advantages of connection, speed, efficiency, cheapness, while being easy to save and easy to play.

Being a sort of wireless communication facility, mobile phones are getting smaller and smaller in size while more and more powerful in function with new technological developments. SMS can store messages and attempt to deliver when available. So the customers can send messages as they like without caring whether the recipients are in service or not.

Although charges for the sound service are declining, the fees for mobile phones are not cheap for most customers. So the price of each short message appeals to customers at a cost of 10 fen in China no matter how big the distance. What's more, the recipient is free from charge. Compared with the sound service, which costs 0.40 yuan per minute, short messages are economical. Statistics show, half of the customers spend more than 5 yuan on short messages per month.

The contents of short messages are rich and colorful. From hottest news, to fancy ads, jokes and street gossip, everything can be included on a short message. Moreover, customers can order information for their own needs, which enables different customers to also find their own social circles.

The short message that originated from wireless networks has some characteristics of Internet Media. Among these, the most outstanding is interaction. Customers can participate in many activities depending on their own interests. The activities range from polls, games to lotteries and riddles. For example, at the end of 2001, on Channel V, a popular music TV program, "List of Top Chinese Pop Music" conducted SMS voting through Monternet.com. In addition, SMS offers traffic service and stock news.

Easiest Way to Reach the World

Back to the Sept. 11 incident, many people came to know the news first via SMS from news websites. No doubt, short messages have incomparable advantages in terms of spreading news. News is generally concise and develops quickly, so the media need to broadcast it quickly and widely, which is to the advantages of mobile phones. It is this function of mobile phones, which enables many people to transfer the news to many others, that serves a chain of "N communication." So, some media experts have estimated that SMS will turn out to be the fifth media after Internet Media.

(China.org.cn by Zheng Guihong, June 22, 2003)