The opportunity for off-deck, or direct-to consumer, mobile content market growth in the United States is enormous with current revenue projections estimated to more than double in the next few years. Although the current market is expected to grow to $2.1 billion by 2011, growth has recently stalled.

Macilveen: Need to reduce current 20% chargeback rate to 5% of charges.

However, now that voice and data access are going to an all-you-can-eat flat-rate pricing model, mobile content should be a top growth area for service providers. Off-deck specifically has major growth potential because of its "open access" which gives it a much better chance of reaching consumers via the Internet, through TV, radio or print promotions and ads, and via WAP browsing. Third party media companies also have the budget to market themselves.

So what’s holding the market back? The off-deck mobile commerce market is at a major breaking point with numerous challenges that need to be addressed for it to fully expand. There are major factors affecting all market participants – consumers, service providers and media companies. For instance, service providers have yet to become profitable in the off-deck mobile content space despite reaching a 30%-40% revenue share.

Service providers also are fighting legal issues that are arising mainly due to the youth of the space. In addition, high customer care costs, refund rates, audit and monitoring costs continue to plague service provider profit margins.

As for content providers, they are not generating enough profit to innovate and market their services. This group is not focused on innovation due to low margins and a lack of industry standards or rules that would monitor transaction flow. Other problems include high transaction failure rates, high chargeback rates, customer acquisition costs and royalty fees. Overall, there is a disconnect between content providers’ expectations of revenues and what they are actually getting from service providers in the end.

The ultimate result affects consumers as well. Consumers have fewer choices and value-added services from content providers and media companies. Also, since the service innovation and variety of content isn't visible, there’s a misconception and lack of understanding of the entire third party billing process. This hampers demand and eliminates the possibility for changes to occur.

There’s an urgent need for a new financial payment processing foundation to help drive the type and scale of innovation that the mobile channel should have already achieved. Below are seven key success factors for a new approach to the growth of off-deck mobile commerce.

1. Replacing Legacy SMS – For years, SMS has been the de facto transaction platform, but it was not designed to be a payment network for off-deck. Mobile service providers must build a new financial processing foundation to make the mobile commerce market thrive with increased efficiency and dependability. SMS is a fine delivery mechanism, which is now complemented by other delivery and purchase mechanisms including multimedia messaging service (MMS) and WAP (wireless application protocol), but beyond all of the delivery capabilities, the market still requires a financial class payment processing framework that is separate from the content delivery.  That’s what’s lacking today in premium SMS.
2. Customer Care/Refund Rates – Mobile commerce needs to move toward a credit card class payment model.  If consumers are unhappy with a purchase at the Gap, they know to first contact the Gap and not their credit card company for resolution. However, most customers are calling their service provider for off-deck purchasing issues rather than reaching out to the off-deck media companies. Too many of these customer calls are resulting in service providers reversing the charges without knowing the full details of the sale. New standards for mobile commerce must be set that enable media companies to provide care directly to their consumers and assume primary responsibility and legal liability for consumer marketing practices.  Instead of the current 20% chargeback rate, the industry should see less than 5% of charges are being reversed.
3. Revenue Model – Even though service providers are currently taking 30%-40% of off-deck revenue share, the customer care and legal issues are preventing their profitability. The business model needs to move toward one where the service provider can generate more profit but at a lower revenue-share, by addressing some fundamental issues around care responsibility and legal liability. More media companies will enter the market and invest in its future if they can get a more significant piece of the pie.
4. Enhanced Time-to-Market Capabilities – It currently takes anywhere from 30 days to 8 weeks for media companies to launch a campaign on service provider networks. The need for more campaign flexibility from mobile service providers is crucial. Growth will result when a program launch takes days - not weeks - and there are new standards to manage the process.
5. Detailed Reporting and Visibility – Both media companies and service providers need direct visibility to their businesses in order to forecast future revenues. Real-time and reliable reporting that provides detail transaction activity is a critical component for tracking key business metrics like revenue, refund and chargeback information.
6. More Pricing Options – Much of the off-deck mobile content market to date has been based on $9.99 per-month flat-rate subscriptions for a monthly allotment of content. This model is popular because its one of the only way for media companies to make money in the current environment. Content sales will grow with more choices at different price points, just like with Web content. Consumers want a diverse ecosystem where they can purchase content a la carte and even take advantage of ad-supported content. 
7. Adherence to Industry Guidelines – The Mobile Marketing Association (MMA) has developed detailed guidelines for off-deck mobile commerce. Media companies must see these as industry standards that must be strictly adhered to.  Service providers should implement revenue-share incentives for adherence to the guidelines and penalties for non-compliance. It must also be clear that consumer marketing practices are the responsibility of the merchant.

With a brand new approach that includes the above factors; mobile commerce will have a chance to thrive. However, a new model based on proven success such as the credit card industry must establish a clear focus on standardized payment processing framework. With these defined responsibilities and liabilities, the off-deck industry can move forward to foster growth.

For example, there is the ability to strictly enforce new revenue-share incentives and penalties for media companies based on compliance with the MMA guidelines. In addition, some SMS aggregators are now offering off-deck media companies more detailed reporting so they can more accurately forecast their sales.

Finally, just like in any other market, the entrance of more Tier 1 off-deck players will naturally produce a more competitive environment where new business models emerge and all can profit. Consumers will have more choices and prefer to pay by mobile invoice, more media companies will consider mobile a major distribution channel and service providers will be able to get a piece of the pie. The sooner these challenges are addressed, the more likely analysts’ projections will come true.

Macilveen is senior director of carrier and industry relations for OpenMarket.