Throughout the past few years, the mobile content industry has enjoyed strong market growth. Primarily fueled by the sale of master ringtones directly through the cell phone carriers, the market looked unstoppable.

Recent studies show, however, that the ringtone market appears to be peaking and is projected to decline in the coming years. So far, no other mobile content application has proven it is ready to take the ringtone’s place. Mobile video has yet to take off and full-track music downloads seem to be dead on arrival. Some project Ring Back Tones may be the one to break through although it’s growth has been slow to date.

As recently as last year, it was believed that the direct-to-consumer market, also known as “off portal” mobile content sales, would more than make up for any flattening sales at the carriers.

Foreign-based companies, which had been successful in their native markets, began entering the U.S. market. They launched multi-million-dollar TV and print advertising campaigns to quickly build brand and drive awareness. Many considered the ads misleading. They offered “free” ringtones without explaining clearly that the consumer would be signed up to a pricey subscription.

Many of these companies then moved to online marketing as the key subscriber acquisition tool. It was much easier to track consumers and they got a lot of personal information that allowed them to better market their services. But the misleading offer problems persisted. Over the past few months, lawsuits have been levied against the cell carriers for deceptive advertising practices by some of their off-portal mobile content retailers.

Each carrier is addressing the situation in a different way. Sprint Nextel announced last week that they will penalize content providers who break the marketing guidelines, possibly to the point of forcing the provider off the carrier’s network. On the other hand, they plan to incentivize companies to follow the rules by paying them bonus revenue share.

Other carriers have plans to insert themselves into the customer acquisition process to ensure the sale is valid.

On the online marketing front, Google continuously reviews and changes the offer guideline requirements for content companies advertising through the network. Recent changes demand advertisers clearly define the product or service offering and get the consumer to tick a checkbox on the offer page to show they agree and understand the offer.

The Mobile Marketing Association, a global organization with membership from agencies, advertisers, hand-held device manufacturers, carriers and operators, retailers, software providers and service providers has also offered up best practice and codes of conduct guidelines for the retailers and carriers to follow. They recently released guidelines on mobile advertising.

All of these factors are leading to lower conversion and sales rates.

Despite the market predictions and the increased regulations, a number of brave souls have decided to stake their reputations and financial resources that the future of this market will be bright.

Next week, we’ll hear from the CEO’s of Thumbplay and 9Squared/Zed and the VP of Marketing from Flycell, with their thoughts on this market and what they think will make them succeed in this ever changing market.

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