Is instant messaging still seductive enough?

Did you know that “naughty” texting (also known as “sexting”) has changed the way we flirt? Or that the idea of instant messaging was invented while eating a pizza?  These are two of ten astounding facts about the humble SMS whose technology has remained pretty much the same for the past 20 years.

But what has changed about instant messaging is the competition it faces in the form of free third-party social messaging apps like Skype Chat, WhatsApp, MSN Chat, Google Chat, Facebook Chat, and Blackberry Messenger.  Not surprisingly, free apps mean bad news for service providers keeping an eye on their profit margins:  according to analyst firm Ovum, social messaging apps cost mobile network operators $13.9 billion in lost SMS revenue in 2011 and it’s a trend that’s expected to continue.

Industry analysts suggest that service providers could offset potential future losses by rethinking their SMS plans. For example, last August AT&T ditched its 1,000-message plan at $10 per month, in favor of an unlimited plan for $20 per month (and users who don’t want a plan can pay 20 cents per SMS).  Service providers could also partner with third-party app developers, particularly those who control the most popular social messaging apps, and cooperate amongst themselves to take on the challenge from major Internet players.  But for now, they can take comfort in the fact that there may still be a market for the simple SMS for people who still aren’t using mobile broadband, or who like their privacy.

At the end of the day, the danger to future SMS-generated revenue may not be as bad as the research suggests. “I think it’s a growing threat which is manageable through the right tariffs and the right costing,” explains James Barford, a mobile analyst for Enders.  Barford also pointed out that social messaging still only represents a tiny part of overall mobile communication, and according to a You Gov survey, the majority of smartphone users – 81% – still view SMS as the preferred way to send messages on a mobile.

I can’t help wondering how many of those are “sexting”.

BLOGGER: GAYLE RINOT

7 Comments

  1. Posted March 21, 2012 at 2:47 am | Permalink

    Gayle,

    The threat to service providers is indeed a real one.
    To fight it they don’t only need to rethink the plans they offer to their customers, but also to freshen up the old SMS service itself.
    One of the ways of doing that is by not waiting for GSMA to finalize RCS (Rich Communication Suite) and deploy it, but rather go to a route that is less ubiquitous but provides them with the ability to innovate and differentiate.
    I have written about it here – http://bloggeek.me/interoperability-20/ – calling it Interoperability 2.0

    Tsahi

  2. Eric Danis
    Posted March 21, 2012 at 2:49 am | Permalink

    Gayle,

    Thanks for the informative blog post that I will NOT be showing my children for the next 20 years ;)

    Personally, I still use SMSs pretty regularly because I have a decent plan that I never exceed (there are advantages to being unpopular). Will be interesting to see how this evolves going forward…

  3. Gayle
    Posted March 21, 2012 at 4:04 am | Permalink

    You make a good point,Tsahi. Definitely something to consider.

    Eric, with the speed technology evolves, your children might not even know what an SMS is in 20 years!

    Gayle

  4. Jeff Barak
    Posted March 21, 2012 at 6:51 am | Permalink

    Texting certainly isn’t going out of fashion among American teens. According to a recent Pew Internet & American Life Project, 14-17 year-old American girls are sending or receiving a median of 100 texts a day, or four texts an hour.

  5. Eran Barak
    Posted March 21, 2012 at 7:21 am | Permalink

    SMS utilizes the signaling channel of the WLS voice network rather than the data network. In rural areas it is more reliable and is available on phone w/o a data plan.

    However while the overhead on carriers is smaller, the design is also flawed. I recall a period when one European carrier’s network would crash in the mornings due to SMS overload. It was later discovered the source was kids stepping out of their houses to go to school and SMS’ing their friends things like “where are you?”. The carrier’s network was not configured to handle millions of SMSs in a very short time. Carriers have since gone smarter obviously.

  6. Gayle
    Posted March 21, 2012 at 9:52 am | Permalink

    Jeff, the survey doesn’t say whether the teens are SMSing or using social messaging apps. It’s probably more of the latter. So it’s clearly a huge market to tap into.

    Eran, that’s really interesting.

    While service provider networks have gotten more sophisticated, one of their major challenges is to find a way to funnel the messaging revenues their way.

  7. Sumit Mittal
    Posted March 22, 2012 at 11:30 am | Permalink

    Tradional SMS is done over SS7 network (and agree it does not use data channel). Operators are slowly but steadily moving towards IP for messaging thereby using the data channel. However, operators cannot escape from the fact that OTT services such as chaton, IMs, Whatsapp, iMessage, etc are eating their lunch. And honestly they don’t have ways to save the downfall in SMS cash cow. In fact, operators are losing on both Voice and SMS revenues – for the first time, data revenue was bit higher than the voice revenue.

    I believe that operators will have to compensate for this shortfall in revenue by leveraging other verticals and connected devices in those verticals. Essentially, selling more data plans, making money on mobile payments (though it is still to be seen how), enterprise market, etc.

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