Is it impending curtains for traditional SMS?
Mobile data including chat apps is soon set to overtake traditional SMS as the largest contributor to non-voice revenues for operators. According to analysts, the increase in popularity of social messaging apps such as WhatsApp, Facebook chat and other services are eroding SMS revenues while simultaneously allowing data services to become the largest non-voice revenue generator. However, analysts also point out that SMS will continue to hit its strides in the enterprise mobile messaging market.
Rise of social messaging apps
The latest findings from Informa Research point out that almost 19 billion messages were sent per day on chat apps in 2012, compared to 17.6 billion SMSs, and by 2014, the number is expected to touch 50 billion for apps and just over 21 billion for SMS. Pamela Clark-Dickson, an analyst with Informa points out that social messaging apps are used more frequently, with an average of 32.6 messages daily for the average user, compared with just five SMS texts. “A key reason for the discrepancy could be that carriers often charge for texts, while social messaging apps are free for users,” she says.
Analyst firm Ovum forecasts social messaging apps will cost operators $32 billion in lost SMS revenues in 2013, which is expected to reach $80 billion by 2020. It also predicts mobile data services will grow in popularity, contributing 43 per cent of non-voice revenue in 2014, with SMS contributing down to 40 per cent. Analysts believe this will be the first year SMS revenues have not contributed the highest percentage of worldwide operators’ non-voice revenues.Neha Dharia, an Ovum analyst points out the rise of social messaging players is a key factor for the erosion of messaging revenues. “The bundling of SMS with calling minutes and mobile broadband plans have also contributed to the decline of messaging revenues,” says Dharia.
Taking the example of India alone, like its global counterparts, the Indian telecom operators are also expected to lose a significant amount in SMS revenues by 2016 due to the emergence of social messaging apps, says Dharia. The fall in SMS revenue in India is simultaneously giving rise to mobile Internet opportunity that is steadily growing as a key revenue generator. According to a TRAI report, in 2012, the Indian telecom industry lost close to $781 million in SMS revenues (both CDMA and GSM operators) as mobile subscribers reportedly used social messaging apps for faster and more interactive communication. Dharia says that operators will need to address the challenge in converting the falling SMS revenue into a broadband revenue opportunity.
Telcos-OTT players partnership
Dharia states that period 2013-15 will be crucial in terms of the relationship between telcos and OTT players in the communication space and a number of partnerships in this area are likely to intensify in 2013 and thereafter both globally and in India. According to her, operators should start partnering with social messaging partners to get a share of messaging providers’ subscription costs in return for giving them greater reach.
In this regard, Reliance Communications partnered with Facebook and WhatsApp to give unlimited access to its GSM users for only Rs. 16 per month in October 2012. Moreover, Facebook has always tied up with operators, and its recent partnership with 18 global operators will allow free or discounted data access to the social network’s messaging platform. “Such operator partnerships will help OTT players to broaden their reach, while the operators benefit from the sale of subscription plans,” says Dharia.
SMS: All’s not lost
Informa research shows that flexibility and interoperability of SMS enterprises to use this medium in a number of innovative ways across a wide range of business systems and internal processes, including corporate communications, workforce management, sales and marketing, customer experience, and security. Drawing a comparison between the two, Clark-Dickson states that chat apps are most often used on smartphones in the developed countries, while there are fewer smartphones and a greater use of SMS in developing countries, where data plans and Wi-Fi are not as ubiquitous. Because of these factors, she expects SMS revenue to grow to about $127 billion by 2016, from about $115 billion in 2012.
Clark-Dickson believes “there is a lot of life still in SMS” for marketers, SMS is the number one method for organizations, companies and brands to engage with large numbers of people in a way that is intuitive, familiar and affordable. It can also bring about innovation in organizations. Therefore, SMS in its true sense may not die out soon.
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