By Kathleen Joyce

Last month, PROMO took an overview look at marketing that leverages mobile phone communications. To date, the most cutting-edge SMS (short message service) campaigns have been staged outside the U.S. What's inhibited SMS marketing in North America? In this issue, the second in our three-part series, we look at the technical and regulatory issues facing mobile phone-based marketing. In our November issue, we'll get a preview of some SMS campaigns scheduled for launch in early 2005.

This past summer, Verizon Wireless filed the first anti-spam lawsuit against 51 people who allegedly sent millions of unsolicited text promotions to cell phones. A lawsuit filed in the U.S. District Court for the District of New Jersey, Trenton, charged violation of the 2003 federal CAN-SPAM Act and the Computer Fraud and Abuse Act, among other state and federal statues. The suit called for unspecified damages and injunctive relief.

According to the filing, Jacob Brown of Pawtucket, RI, and 50 of his cohorts initiated 4.5 million unsolicited text messages offering mortgages, herbal supplements, software and porn Web site content. Brown and company managed to rig the messages so they appeared to come from nonexistent e-mail accounts.

Verizon charged that the messages, including some sent to children, clogged its computer systems. The company took speedy action, it says, to protect its systems and ultimately its customers.

?That's why e-mail spam will get nipped in the bud,? says Roman Bodnarchuk, president and CEO of Toronto-based mobile marketing firm N5R. ?The telcos just won't stand for it. E-mail spam isn't free and the carriers can shut it down much faster than spam on the Internet.?

John Agnew, associate director of marketing for Verizon Wireless, agrees. ?We run velocity checks on our users [to identify high-volume messaging]. We also allow our customers to each block up to 15 domain names, URLs or nicknames, much like the ?rules? filters they have on their e-mail accounts.?

In all of its own SMS marketing, Agnew says, Schaumberg, IL-based Verizon Wireless follows anti-spam regulations; it also highlights opt-out wording for would-be participants in SMS sweepstakes or games.

What about concerns that children may receive unsolicited messages? Teenagers and tweens have been the most avid adopters of texting, and popular games are easily transmitted from friend to friend. The law protectiong kids is clear when it comes to other marketing communication, but is still untested in the context of cell phone-based marketing.

?When we've run viral SMS campaigns, we tend to stage them at specific events, on-premise or at concerts, where patrons tend to be over 18,? Agnew says. ?And we always encourage parents to exercise the blocking capability of their phones.?

As SMS gains ground in the U.S., the recently founded Mobile Marketing Association is encouraging adopters to follow its code of conduct for wireless marketing campaigns. The code covers choice, control, customization, consideration and confidentiality. Among MMA requirements, consumers must opt-in to all marketing programs and an easy opt-out mechanism must be provided. Consumers must get a value-add for participating (i.e., product or service enhancement, sweepstakes, contest or discount). Programs must be limited to a reasonable number of transmissions.

The code was developed by the association's Privacy Advisory Committee, whose members include Procter & Gamble, The Weather Channel, Cingular Wireless, PocketReach, Carat Interactive and VeriSign.

Not all marketers are tuning in to the standards set by the MMA. In August, Sophos, an Internet/wireless security company reported that a marketing campaign to promote the latest version of the ?Resident Evil? video game had backfired, as mobile phone users believed they have been infected by a virus. Sophos tech support was flooded with calls from clients who got unsolicited SMS text messages on their mobile phones telling them they are infected by the so-called T-Virus.

It turned out the messages were a hoax to promote a new version of the game, called ?Resident Evil: Outbreak.? A Web site established by CE Europe, the company behind the campaign, allowed unsolicited text messages to be sent to mobile phones claiming that the phone is infected, without the permission of the phone's owner. A typical message read:

?Outbreak: I'm infecting you with t-virus, my code is ******. Forward this to 60022 to get your own code and chance to win prizes. More at t-virus.co.uk.?

?Some people panicked that they might have received a real mobile phone virus,? said Graham Cluley, senior technology consultant for Sophos. ?This marketing campaign seems particularly ill-conceived, as there is so much genuine interest in the mobile virus threat at present.?

The answer to these concerns is to enforce strict guidelines for SMS marketing so the value of the medium isn't destroyed in its infancy, says Jack Philbin, president of Vibes Media.

?We're all about interaction. The power of SMS is in the opportunity for dialogue with consumers,? Philbin says. His Chicago-based firm encourages such clients as McDonald's, Hershey's and Anheuser-Busch to implement an ?instant-response platform.?

?We don't believe our clients should fall back on the direct marketing model of building databases of cell phone numbers. Opt-in or not, that just tends to tick people off. Instead, we build SMS and MMS programs that get customers to initiate the call each time.? A trivia program Vibes built for the Chicago White Sox baseball franchise generated an average of 80 calls per consumer. The White Sox have never built a database via the calls.

While the U.S. market has privacy and spam regulations that are unique from those in Europe and other SMS hotbeds, there is also a marked lack of cooperation among carriers in the U.S. This incompatibility has significantly inhibited marketers from rolling out campaigns across all provider platforms.

Until recently, that is. Earlier this year, Verizon Wireless, Cingular, T-Mobile and other carriers agreed to allow transmission all their platforms of simple 5-character codes. Tipped off by in-store signage, consumers can text in the codes to enter instant-win games and sweeps, or even download coupons for instant redemption.

?We've already used the five-digit codes option for a texted $10-off coupon program for Staples,? Bodnarchuk says. The program, a first in North America, generated a 26% response rate. ?The coding was relatively easy. The harder part was training in-store staff how to redeem the coupons.?

Bodnarchuk admits redemption would have been higher if more time had been invested in training store personnel. ?But we rolled this out in 45 days for the client. Next time, we'll all know more, and build on that first success.?