NeoMedia Technologies, Inc (NEOM)

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DD Carriers try to wring cash from text games
Movie, TV tie-ins lead customers to other downloads, content buys

By Eric Benderoff
Tribune staff reporter
Published July 3, 2006

http://www.chicagotribune.com/technology/local/chi-0607030089jul03,1,6400615.story?coll=chi-technolo...

R U 1 of the 44% of US ppl who txt msg?

If not, Verizon Wireless and Chicago's Vibes Media want that to change.

Building on the strong gains of text messaging in the United States, which nearly doubled in the last two years, Verizon has launched a text-based adventure game to entice customers to buy more-pricey content, such as ring tones and songs.

It's the latest experiment in mobile-phone tie-ins that have proven to be a successful ways to engage viewers of shows like "American Idol" and "Deal or No Deal."

Cingular Wireless recorded 64.5 million text messages sent during the most recent season of "American Idol." Those totals include votes, trivia and sweepstakes offers. In 2005, 41.5 million texts were recorded for the hit talent show, up from 13.5 million in 2004 and 7.5 million in 2003.

It's a language younger people know how to speak.

"I religiously send text messages," said Ross Mash, a 26-year-old Chicago entrepreneur. He uses texts to chat with his 14-year-old twin sisters, business associates, friends and even to flirt.

"You don't have to have a complete conversation with texting," added Gina Glembin, 21, a student at the University of Wisconsin/Milwaukee. "You can just get what you want to know. If I need to have a conversation, I use my house phone."

Like Mash and Glembin, 44 percent of Americans with mobile phones use text-messaging services, with the vast majority being young adults and teenagers.

But far fewer buy other content, like songs.

Carriers get roughly 10 percent of their revenue from data services, said Julie Ask, an analyst with JupiterResearch. Ask said nearly half of mobile-phone users send text messages, but only 5 percent of wireless customers have downloaded a game or a ring tone.

Data services contributed $1.13 billion in additional revenue in 2005 for Verizon, with the bulk of activity coming from text messaging. In 2004, Verizon customers received 10 billion text messages, jumping to 21.5 billion last year.

On the other hand, the number of mobile downloads, such as songs or ring tones, didn't grow nearly as much, reaching 139 million last year, up from 100 million in 2004. Yet songs and ring tones, which can cost $1.99, are more profitable than text messages, which cost 10 cents to send.

Hence, carriers are turning to companies like Vibes to extract additional data revenue from customers in new ways.

Verizon is using the tie-in strategy to help promote the new Disney movie "Pirates of the Caribbean: Dead Man's Chest," which opens Friday, and to see if customers will opt for pricier content.

With the "Pirates 2 Text-Ur-Adventure" game, developed by Vibes, the messages players receive include "rich" media content--songs, pictures, wallpaper or ring tones--embedded into the text.

With a click, customers can download that content directly to their phones, bypassing the cumbersome and not very effective method of going to the carrier's online store.

"If you reach a certain level in the game, you will receive a piece of content automatically," said Dave Oberholzer, Verizon's associate director for content programming. "There's complementary and premium content available through the game."

Verizon is encouraged that text-based promotions can draw new users. In a recent promotion tied to the prime-time game show "Deal or No Deal," Oberholzer said, a different set of its customers interacted with the game. "We got a lot of subscribers to participate who didn't do so before," he said.

For Vibes, the game promotion is the latest in a series of significant deals. It also provides text services for radio stations, concert venues and television shows.
"The idea for the game was hatched from old adventure novels," said Alex Campbell, co-founder and chief executive. More than a year in development, the game includes 562 unique messages. "It's practically a novel-worth of content," he said.

But because the game was designed for users to make decisions for the characters, there are 20,736 different paths a user potentially could take.

Each user will be offered a chance to buy other content along the way, as well as get free prizes when they get to certain levels in the game. Additionally, each message a user sends during the game automatically enters him or her into a sweepstakes for a larger prize.

Vibes' fortunes have mirrored the growth of text-messaging trends. Campbell and Jack Philbin, Vibes president, started the company in 1998 and struggled as few people understood what text messaging could do.

Now, however, the privately held company has more than 40 employees and revenue has doubled each of the last three years. For 2006, the company is on pace to generate $6 million in revenue, which Campbell called a "conservative" estimate. He said Vibes has been profitable for the last four years.

In 1998, the company used pagers for its messaging services, and did its first promotion in 1999 with Pizza Hut.

But Campbell and Philbin realized the real value was in the two-way dialogue that was beginning to emerge among European mobile-phone users.

"That was the painful part for us," Campbell said. "We knew it was coming here, but we were ahead of our time."

Vibes' breakthrough came in 2002, when carriers allowed users to send text messages to anyone, rather than, for example, a Verizon customer only being able to receive a message from another Verizon user. That put the U.S. market on par with Europe, which years earlier allowed such interoperability.

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