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Aug. 11, 2009

While overall demand for mobile broadband is still growing at a fast clip, SMS text messaging still remains the mobile data services cash generator.

Overall, for 2009, global SMS traffic and associated revenues is estimated to be close to 3 trillion and $75 billion, respectively.

Today, SMS messaging offers even richer capabilities, and at a lower cost or can even be had for free on the back of a fast data connection.

However, is SMS saturating from other messaging services and with price competition as mobile users switch to flat rates or with service bundles with unlimited offerings by so many wireless carriers?

Overall, universality and network simplicity also ensure greater market potential in significantly untapped opportunities beyond peer-to-peer (P2P). The primary phone number taken down when ordering goods for delivery is still the residential landline, but even this default is changing.

If you order a new residential phone line for delivery in the U.K. and submit your mobile phone number when placing the order, it will likely be text alerts that inform and update you on when house calls will be made. This kind of usage is embryonic in the United States, where a voice call is still the default for B2C outreach.

But in Britain and many other countries, it's clear from the area code whether a phone is a landline or a mobile number. You still can't tell that when looking from a phone number in the U.S. or in Canada.

As more and more middle aged people succumb to giving out their wireless numbers, they will be dragged into the mobile messaging world with SMS. Teens typically don’t like to be heard speaking on the phone with Mom and Dad in the presence of their friends, but texting apparently is ok.

While there were unanimous expectations for continuing SMS volume growth at the Global Messaging 2009 conference in London recently, there was no consensus at all on whether SMS revenues will continue to deliver significant growth.

IDC research predicts a 20 percent decline in Western Europe over the five years from 2008 to 2013, for instance.

Most wireless industry analysts say text messaging still has a large potential for volume growth, whereas person-to-person SMS is widely embraced by youngsters.

Still, some have hardly ever or never texted according to IDC. Additionally, the threat of instant messaging and e-mail cannibalizing SMS is overblown.

Only SMS is available on 100 percent of all mobile handsets. No other messaging service reaches more than a small proportion of these. Rather than being cannibalized by other messaging methods, interoperability with SMS will for many years be the most effective means of extending the reach of other messaging systems.

IDC agrees.

Revenue declines from SMS aren't inevitable. There’s sufficient volume and new segment growth to counter price compression in other categories. European price controls for international SMS roaming and give-away pricing strategies by some wireless carriers is eroding the average revenue yield on each SMS.

But it’s still down to mobile service carriers and their partners to apply some marketing expertise to maintain or even boost the high value of emotion-driven messages including text voting, alerts and personal messages.

If average ROE are stabilized, revenues will grow with increasing volumes, asserts IDC.

It is increasingly difficult to assess text messaging or any other single service in isolation. If unlimited texts are offered in a bundle with voice and mobile Internet, how does one calculate the revenue share or yield per message on SMS?

3UK looks at things differently. Not only does it bundle unlimited texts and Internet with voice buckets in many of its pricing plans, it promotes the adoption of free services Windows Live Messenger, Skype and Facebook.

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    This article was featured on Business 5.0 and on Tech Blog.

Source: IDC.