The second annual ‘Phone-paid services: current conditions and future trends’ report shows the market has declined in size due to a general lack of trust amongst consumers and fears of continued economic hardship. The report also identifies potential areas for growth in the market and calls for greater price transparency.

Despite prediction of a downturn, figures show public use of phone-paid services to be robust, with almost one in two (48 per cent) consumers having used a phone-paid service in the last six months.

Key findings of the report include:

-          Directory Enquiries is the most popular service, with 30 per cent of consumers having used such a service in the past six months. 22 per cent of consumers have either voted on a television show or entered a competition using the phone-paid medium;

-          The 18-34 age-group is the most likely to use phone-paid services, with 63 per cent having done so in the last six months. This compares to similarly positive figures of 48 per cent of 35-54 year olds, 47 per cent of 11-17 year olds and 34 per cent of those over 55;

-          Although 48 per cent of consumers have used a phone-paid service in the past six months, over half said they had ‘little or no trust at all’ in any given service. 20 per cent felt services are ‘trustworthy’ or ‘very trustworthy’;

-          25 per cent of non-users of phone-paid services cite lack of trust as the key reason for staying away;

-          Close to 40 per cent said accurate pricing information is the key factor that would rebuild trust;

-          61 per cent of consumers claim to have seen advertising material about phone-paid services. However, 50 per cent of non-users currently claim to have seen advertising but chosen not to buy, suggesting a requirement for it to be more compelling; and

-          Advertising of services currently contributes to lack of trust with 46 per cent of consumers claiming they find advertising to be misleading, poorly described or lacking in contact information.

The market
The size of the phone-paid services market in 2008 is predicted as GBP920 million compared to GBP1.08 billion in 2007; representing a reduction of some 15 per cent in the total market.

Directory Enquiries is still the largest single segment of the market, with over 30 per cent of respondents having used such a service, representing a market value of just over GBP198 million this year. Its popularity continued despite the availability of free online directories; largely because many such calls will be placed by business users who value the convenience offered by phone-paid services. However, the service has experienced a 4.4 per cent decline year-on-year, with 2007’s usage representing GBP207 million.

Competition voting is the closest in popularity to Directory Enquiries with 13 per cent of consumers having called or text messaged such a service. Adult content is the closest in terms of revenue generation, with a market value of GBP153 million followed by SMS music downloads and news alerts, both worth GBP76 million.

Premium rate Mobile Messaging Services, such as the sharing of video clips and services, is currently relatively low in popularity, with 5.5 per cent of respondents having used these services. However, these services are significantly more popular among younger people, with 10 per cent of those in the under-35 age group using the services compared to 4 per cent of those aged 35-54 and just one per cent of over 55s.

It is here that the report identifies the largest opportunity for growth, as mobile handsets increase in sophistication and the applications available to them multiply as a result.

The Future

The report confirms the need to build trust amongst consumers in order to realise growth opportunities in the phone-paid services market, with accuracy of pricing information identified as the key factor that could help improve trust.

It suggests most premium rate services will experience declining revenues in the next twelve months and in general, the phone-paid services market is predicted to continue its decline in 2009.

This is mainly due to a perceived lack of innovation in the marketplace, coupled with increased competition from alternate, and often free, services. For example, 50 per cent of consumers who plan to discontinue their use of directory enquiries services will do so because of the ease with which they can access similar services for free.  

At the same time, the impact of the economic downturn is expected to become more severe as fears of a global recession grow and consumer spending contracts as a result. Some services are expected to be more vulnerable to lower disposable income than others.35 per cent of respondents said they would be less likely to place calls to television voting or competition lines in the current economic climate compared to 20 per cent of those who use phone-paid services to access adult content, for example video or photos.

That said, the report highlights the impulsive nature of participation in phone-paid services such as television voting or competition entry. Therefore, it is difficult to predict consumer take-up of such services based on premeditated answers to questions. The report also identifies a need for more effective and accurate marketing of phone-paid services to non-users as one in two claim to have seen advertising material and, of these, 15 per cent read advertising ‘most of the time’ or ‘always’.

46 per cent of consumers found advertising about a given service to be misleading, poorly described or lacking in contact details.The research polled 3000 consumers and carried out in-depth interviews with 25 companies from across the phone-paid industry. In addition to polling consumers in the 18+ age bracket the report, for the first time, assessed usage and views from users aged 11-17.  - ends -NOTES TO EDITORS:
PhonepayPlus is the organisation that regulates phone-paid services - the goods and services that you can buy by charging the cost to your phone bills and mobile pre-pay accounts. Further details of its work can be found at www.PhonePayPlus.org.uk