Tipping Point

A New Medium’s Tipping Point

To our Valued Investors:

It’s a safe bet that if you received this newsletter in your inbox at 3 PM EDT on a Wednesday, it’s not your first email of the day. More likely, you’ve probably already sent or received dozens of emails, not even including the ones that were diverted to your spam folder. The average person, in fact, has about 120 incoming and outgoing messages daily. Many of these go unopened. It happens. The ever-increasing abundance of emails naturally causes a greater number to fall through the cracks, which has significantly diminished the effectiveness of email marketing over the years.

Unless you’ve elevated your type “A” personality to absurd heights, you can probably acknowledge that your own account is home to hundreds, if not thousands, of neglected messages. By comparison, how many unread text messages are on your phone, waiting for your attention? That number is almost certain to be much, much lower, or probably zero. Studies indicate that the number of Short Message Service (SMS) messages that go unopened is only 2% of messages received. As far as response time goes, consumers answer texts in under ten minutes, while most people take up to an hour to reply to an email (if at all). Now, knowing this, here is your “final exam”. If you are the head of a growing or established company’s marketing department, would your best move involve initiating an email campaign with a predicted 20% open rate, or an SMS campaign with a nearly 100% probability that individual messages will be read?

SMS marketing is the latest advancement in an evolutionary process that saw products and services promoted on the radio or television, on billboards and in newspapers, and in postal and email campaigns. The new medium has a significant leg up on all of its predecessors, though. SMS marketing is the first form of promotion that thrives on two-way conversation. A coupon in the mail can tell you where you may redeem a 10% discount on car detailing. A television ad can tell you that four out of five dentists recommend a certain brand of chewing gum. A billboard alongside the highway can tell you which lawyers will make you fabulously wealthy after you trip on a crack in the sidewalk. What do these three examples have in common? It’s the word “tell”. Conventional advertisements tell you things, and they have no way to solicit input from you. Until recently there had been no way to create a two-sided dialogue between businesses and their customers, and apparently the consuming public has long ago lost its tolerance for ad campaigns that talk at potential customers. Attentive Mobile has ushered in a new era for pitching products and services, and it has a much friendlier and more engaging profile. The SMS experience has a feel that’s more like chatting with a personal friend than having a stranger bark facts at you. Look at this example:

A New Medium S Tipping Point

If you don’t immediately see the meaningful difference between this and a magazine ad, and if you can’t perceive how this makes consumers feel better about loosening their purse strings, you’re not paying attention. The personalized nature of a “chat” like this, even though it’s AI-generated, promotes a level of intimacy that’s invaluable to advertisers. Better still, well-executed SMS campaigns go far beyond assisting customers with dress sizes. They drive website traffic, they generate sales leads, and they increase sales with highly targeted branding. When an SMS campaign elicits action from the consumer (like participating in the conversation), we are truly in next-level territory. Also, whereas conventional email promotions (and the items in your physical mailbox, and billboards, and so on) are unsolicited in nature, 91% of customers will actively “opt in” for text messages from their favorite brands, according to Attentive’s Mobile Consumer Report. When a person actively chooses to receive and interact with messages, they are presumably open to the content of the messages. In comparison to conventional marketing approaches, this one is substantially more likely to end with the consumer opening their wallet.

About 80% of marketers still employ email campaigns, but the practice is increasingly difficult to justify. Half of their messages are banished to spam folders, and only one in five overall is even opened. None involve a two-way dialogue. The return on investment from doing things this suddenly “old-fashioned” way is quickly heading towards a breakeven scenario. On the other hand, about 40% of businesses used SMS marketing last year, and that number is on the rise. Currently, 60% of business owners plan to increase their SMS marketing budget. The SMS marketing market across all industry types is expected to grow to $83.03 billion over the next two years. Why are the email statistics and the SMS statistics moving in opposite directions? That’s an easy one. The same way fishing boats tend to gather around spots where the fish are hitting the lines, marketing professionals are drawn toward the techniques that attract consumer dollars. Which companies are already boosting revenue with SMS marketing? Colossal enterprises like CNN, Express, IKEA, Reebok, Petco, Tommy Hilfiger, Facebook, and many others. And yes, Facebook is on board even though they have their own highly touted marketing service. They know where to go to really put some butter on the bread. In 2021, brands using Attentive collectively earned upwards of $12.5 billion in revenue through SMS marketing alone. That’s right, $12.5 billion in revenue that is directly attributable to Attentive’s text message marketing, almost tripling the $4.5 billion in revenue generated the same way in 2020. More than 4,000 brands work with Attentive, engaging over 200 million consumers, with billions of text messages sent thus far, and yet the practice is still very much in its infancy.

At Iron Edge VC, we have had great success with investing in companies and technologies before the idea seems like an obvious choice to the rest of the world. SMS marketing represents the next level — and a huge step up — in the big business of helping companies attract and retain customers. Attentive Mobile is by far the biggest player in this particular arena. The massive potential stored in this brilliant company has been noticed by the best of the best in the venture funding business. The roster of Attentive’s investors is a veritable “who’s who” of the most consistently successful VC names on the planet. IVP, Bain Capital, Coatue, Sequoia, and Tiger Global have all placed their chips on this one. Iron Edge is extremely proud to join this distinguished group with its own recent investment.

Amazingly, Attentive Mobile’s revenue from 2017 to 2020 grew by 49,155%. The number is so impressive that it sounds like an absurd exaggeration or perhaps even a typo, but it is in fact Deloitte-certified. Numbers like these would prompt any shrewd investor to look into scooping up a few Attentive shares in their Merrill Lynch brokerage account, but that simply cannot be done at the moment. Attentive Mobile is a private company, and as such its shares cannot be bought on any public stock exchange. Iron Edge VC can, nonetheless, provide you with access to our Fund that has ownership interests in this company that applies cutting-edge AI and machine learning to the very business of creating commerce. If you would like to learn more, or if you know anybody else who would, please don’t hesitate to contact us by clicking “Get in Touch” below.

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All the Best,

Paul Maguire

Founder & Managing Partner

A New Medium S Tipping Point

Paul Maguire

Founder And Managing Partner