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Apple opens SMS door for third parties

A chink in the revenue armour

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A tiny feature in Apple's new iPhone OS could allow third parties to make money from iPhone users, without handing over 30 per cent to Cupertino.

Last week Apple announced version 4 of the iPhone OS, adding a lot of stuff which makes the iPhone harder to insult, but also adding the ability to send SMS messages from within an application. That might seem a minor addition, but if it lasts into the final release it could open the way to a host of applications which draw their revenue direct from the customer without having to go through iTunes, or Apple.

Premium SMS messages aren't such a big deal in America, but in Europe the humble text message is serious business. Last year's X-Factor final pulled in £8m from phone votes - not the series, just the final: one episode of one TV show generated that much revenue by asking punters to call and text in votes for specific acts.

Premium-rate texting is what created the original boom in ringtones, graphics and all sorts of downloadable content. While the network operators couldn't (and sometimes still can't) see beyond voice revenue, faster-moving entrepreneurs realised they could quickly rent a premium-rate number and start selling bleeps and blips for real money, and even now the UK industry is dominated by third parties while the network operators spend their time searching for "the next ring tone".

An independent regulator now requires that customers be informed about the cost of the call, and a scandal or two tightened up procedures, but there's still an awful lot of money in text messaging and late-night TV is awash with adverts asking punters to send in a text in exchange for content.

Which is why the ability to send a text from inside an application is so important. Today an iPhone application can trigger the SMS app to load, but it's a bodged experience at best. Right now the only X-Factor app in iTunes is a £2.99 music-matcher, but that's just brand extension. iPhone OS 4 will enable an application that allows the user to vote for their preferred act with a tap on the face.

We don't know exactly how Apple's send-SMS API will work, but it should allow the creation of an application that creates a suitable SMS when the user taps on a performer - and if £8m can be generated by asking users to dial a number, simplifying that process can only increase the revenue generated.

It's not just about voting either - one can imagine an application distributed for free that requires the sending of a premium SMS to enable a full feature set, or a game that unlocks levels through premium SMS - with the user's permission of course.

Blocking applications that seek to use such an alternative in-app billing system will open Apple to the accusation that it's exploiting its monopoly; an accusation the company will have a hard time shaking off.

Perhaps we'll see the in-app SMS quietly dropped before iPhone OS 4 goes live later this year, otherwise Apple might find that what looks like a minor tweak is more of a Pandora's box that could open a host of Cupertino-bypassing opportunities. ®

The smart choice: opportunity from uncertainty

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