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One afternoon spent watching teenagers beam short text messages to one another's mobile phones is enough to convince even the most cynical observer that wireless technology has transformed the way we communicate.

Now Europe's mobile operators are hoping to turn a fad into a cash cow with a new short messaging service, or person-to-person messaging, format: "pull marketing," in which customers request specific information through their phones and are willing to pay for it.

So far, aside from sending and receiving individual messages, SMS has "pushed" information such as sports scores, stock quotes, and weather. Customers sign up for the alerts they are interested in at a mobile portal; the alerts either come free with an obligatory ad or are paid for by credit card. Operators make money each time the portal company sends an SMS message.

The problem with push technology, mobile operators and content providers say, is that it's all one-way traffic.

Push and Pull

"Pushing is no big deal; pulling is the future," says Stanislas Chesnais, chair and chief operating officer of Netsize, a French start-up that offers SMS technology to link content providers and mobile operators.

Here's how pull works: Imagine you'd like to see the movie Shrek. With a pull service, the theater operates two phone numbers that mobile users can call to send text messages--one for show times and one for film reviews. You send the message "Shrek" to the first number and receive the show times for the day via SMS. This costs about 25 cents. If you want to learn more about the film, you send another message saying "Shrek" to the second number and receive a short review of the film. This service costs about 43 cents. The charges show up on your mobile phone bill; the operator and the movie theater get a cut.

SMS can be used to deliver any kind of content or service adapted to the text format, including price-comparison services, real-time traffic information, and financial news. But users could also send SMS messages to certain numbers to purchase digital music downloads, ring tones, and personalized phone logos.

Making Money

Premium SMS services, including push and pull models, are already in use in Belgium, Finland, the Netherlands, Norway, Spain, and the United Kingdom, and will soon launch in Denmark, France, Germany, Italy, and Sweden. "Every operator is doing it. They need the money," says Netsize's Chesnais. Pull services represent about 5 percent of Netsize's business today, but could make up 80 percent of overall revenues by the end of the year, he says.

"Operators are trying to move away from plain-vanilla SMS," says Amrish Kacker, an analyst at Analysys Consulting. "First you could get news alerts; now operators are offering personalized services at different cost levels." People may be willing to pay a premium for pull services, the theory goes, for information they need immediately and only once--directory assistance, for instance.

Pull marketing is already catching on. Proximus, the number-one Belgian mobile operator, has 800,000 users after a year in service for its SMS information services, including both push and pull systems. But services adapted to the pull format, such as the purchase of new ring tones, are by far the most popular, says Proximus spokesperson Jean-Luc Van Kerckhoven. Proximus charges 25 Belgian francs (about 54 cents) for each SMS sent to purchase a new ring tone, while it charges just six Belgian francs (13 cents) for each regular SMS message.

Waiting for the Revolution

But SMS, and pull marketing in particular, are hardly the answers to Europe's severe wireless headache. Just a couple of years ago, a similar form of pull marketing for the Web was poised to turn the world of advertising on its head. That revolution never materialized.

Then there are the long-term prospects of SMS to consider. SMS traffic contributes 10 percent to 12 percent of European mobile revenues, with the highest usage in Scandinavia and the lowest in France.

The use of SMS information services will increase until 2003, when revenues from the services will top $88 million. But by 2004, revenues will begin to drop off, according to IDC, leveling out at just over $65 million in 2005. That's when graphic-rich third-generation phone services are expected to usurp their text-based predecessors.

In the meantime, person-to-person messaging will account for the lion's share of SMS revenue--some $6.5 billion in 2003--says IDC. Maybe the world is full of silly love notes. And what's wrong with that, mobile operators want to know.

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