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SMS Marketing Industry News

Unlimited Text Message Marketing Provider Shuts Down

Mar 17, 2014

Frextr Logo

Since starting Tatango in 2007, we’ve seen dozens of text message marketing providers launch with the vision of offering brands unlimited text messaging to their customers. One of these unlimited text message marketing providers was Frextr, and as of January 8, 2014, the company has been shut down. This is not at all uncommon, as the problem with offering unlimited text message marketing is that the goals of the SMS provider and a business using the text message marketing provider are completely opposite, which never makes for a good or sustainable business. Why? Let me explain.

For an SMS provider to send a text message to a mobile phone, it costs money. The SMS provider has to pay a per-message fee to both an SMS aggregator, and to the wireless carriers that have what we in the industry call a pass-through fee. SMS providers like Frextr re-sell these text messages at a markup to brands looking to text message their customers. The problem with an SMS provider offering unlimited text message marketing, is that as the number of text messages a brand sends increases, the profit margin for the SMS provider decreases, until it hits zero, then the SMS provider starts losing money. This means that as a text message marketing campaign becomes more successful, in-turn sending more text messages, the SMS provider becomes less successful, which leads to the goals of the SMS provider and the brand running the text message marketing campaign to be completely opposite.

So how is it possible for an SMS provider to offer unlimited text messaging? What they’re doing is betting on your text messaging campaign to be unsuccessful, which means that you’ll be sending a low volumes of messages, which hopefully will make up for the losses sustained by the successful campaigns, which send a high volume of messages. Check out the math here.

When a text messaging campaign becomes extremely successful, so successful that all of the unsuccessful text messaging campaigns can’t absorb the losses created by the successful text messaging campaign, the following usually happens. The SMS provider will go to the brand running the successful text messaging campaign and say that due to the volume of text messages they’re sending, the SMS provider is now going to have to start charging them more. The brand usually pays this higher price, which I would consider more of a ransom than a price increase. Why? The SMS provider is able to hold the brand’s text messaging campaign ransom, as they’re most likely using the SMS provider’s shared short code. With the brand using the SMS provider’s shared short code, the SMS provider controls the SMS keyword and short code that the text messaging campaign is running on, so if the brand leaves, they lose access to their SMS keyword and short code, which most brands just can’t accept.

So what happens when a text message marketing provider can’t make unlimited text message marketing work as a business? The unlimited text message marketing provider closes their doors, and another provider will offer to “service their clients”. Unfortunately this usually means a new platform, new pricing, new short code, etc. for the text messaging campaign. What a pain in the ass!

What I find hilarious about Frextr shutting down is the fact that Mobivity has agreed to service their clients. Why is this hilarious? Mobivity is one of the only text message marketing providers still hanging onto the concept of offering businesses unlimited text messaging. This reminds me of an Albert Einstein quote, in which he defines insanity as “doing the same thing over and over again and expecting different results”.

 


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