It’s the original and the best: SMSApr 2, 2009 1:00 PM MDT
Its demise was predicted as it struggled to compete with advanced and richer versions of its original form. Despite these charlatans attempting to chip away at SMS’ hegemony, the original remains the best and companies are now looking to exploit SMS’ ubiquity across the global marketplace to generate the next wave of growth. With consumer growth in developed markets waning, coupled with the global commoditisation of SMS pricing, phase 2 of its growth will come from not only developing markets, but the enterprise and brands which are forcing mobile operators to work more closely with their messaging vendors to exploit existing infrastructure to scale new heights of reliability.
The mobile industry has spent a considerable number of years looking to supersede SMS with more advanced, richer forms of messaging such as MMS, or migrating PC forms of messaging, such as email and IM, onto the mobile device. The fact that SMS is limited to 160 characters was originally seen as a constricting factor. If anything, this limitation has shaped the channel for concise communication. Mobile is, after all, an essentially “snacking-based” medium, and SMS is communication snacking.
There are two core forms of communication on the mobile: voice and messaging. These services are the oxygen and carbon dioxide upon which the mobile atmosphere flourishes. Remove one element form the equation and equilibrium is lost.
The global mobile marketplace has now finally accepted that SMS is here to stay. SMS has seamlessly worked its way into the suite of communication tools at mobile users’ disposal. Its ubiquity was never in doubt, but its simplicity was originally believed to be its long-term undoing has in fact had a liberating impact on its longevity.
Death of SMS
“I’ve been hearing the decline of SMS since the advent of MMS in 2002,” said Alan Pascoe, senior manager of product marketing at Tekelec. “SMS is an incredibly successful service and one of the few services that is under-forecasted and not over-forecasted.” He says that it’s not uncommon for analyst houses to underestimate the market by 25% year-on-year.
“We have a working technology, so why not exploit that,” Michael Kowalzik, CEO of TynTec told mobileSQUARED. “Voice worked for 100 years and no one ever talked about replacing voice. So why do the same with SMS?”
Especially when, according to Richard Harris, CEO at Fun Text, user confidence for SMS is higher than ever, and this has been supplemented by the reductions in pricing as operators move to bundled tariffs. That means that while global traffic is expected to increase by 10-15% in 2009, the commoditisation of SMS is increasing the pressure on pricing for operators. Damian Sazama, vice president, marketing and product development, Interop, believes the messaging market has now gone beyond simple bundling as operators look to generate a higher ARPU by including unlimited text and picture and video messaging as part of a premium rate package to stave off ARPU reductions.
“Time has passed and maybe it’s not as important as it once was, but operators are passionate about retaining messaging revenues,” Harris added.
Perhaps Harris’ comment is an obvious point, but it is one that appears often overlooked. Recent numbers released by Informa Telecoms & Media claim that the global peer-to-peer messaging market will increase from a little over US$102.75 billion this year to US$130.44 billion in 2013, with SMS rising from a just over US$90 million to US$108.2 billion during the same period.
Messaging is a proven market, yet the hype surrounding next-generation data services often seems somewhat misplaced. Throw in a little perspective and the simple fact is that SMS revenues alone will be worth more this year than the combined global revenues for mobile marketing and mobile entertainment for the next three years. So why aren’t a multitude of vendors and new entrants converging on the messaging space in the same way they have been attracted to the more (alleged) glamorous sectors of mobile advertising or mobile TV?
Simplicity
For those vendors already operating in the messaging environment, the fact that there has not been the Gold Rush associated with other mobile sectors is something of a boon. “SMS is considered to be a non-sexy service,” said Pascoe. “It’s difficult to gauge how interesting can 60 characters be, yet companies are now coming up with more interesting ideas.” But the fact is, operators now want to know what services can be launched using – for the most part at least – their existing messaging infrastructure.”
For a company like Anam extensions to existing messaging services require using SMS in a smarter way, such as out of office replies. “If it’s as simple as sending an SMS then consumers are turning to it and operators are interested in deploying,” said Bassi.
One notable example of how messaging has shaped society, as highlighted by Pascoe, was how US president Barack Obama disseminated updates to 3 million supporters using messaging during his successful campaign for The White House. But there are simpler services that operators are turning to.
“There is a clear demand from consumers to have the ability to personalise their messaging services,” said Steven van Zanen, vice president of product marketing at Acision. “It stands to reason because text is such an overriding part of people’s lives. So we’re not just making up technical features for the heck of it. We have got to be able to monetise it, or allow for new loyalty, or attract new subscribers.”
Messaging plus
In Asia, numerous operators have launched messaging “plus”-like services, offering services more commonly associated with the PC-based email experience, such as auto-reply, different font colours and sizes, pictorial backgrounds. What’s more, consumers are paying a monthly premium for the experience and this could potentially have an uplift on ARPU.
The consensus from research by mobileSQUARED among operators within the Western world is that consumers will not pay for these services and so they are exploring other areas to increase ARPU. Originally, this involved seeking an alternative, more advanced messaging solution. MMS, email and IM have all been launched with varying success in markets around the world. But as the market plays out, complementing, even supplementing SMS has proven to be the ideal strategy, especially MIM.
“To be quite honest SMS is a back and forth service, so the difference with IM is the presence showing the user who is logged in and who is online,” Sazama said. “Instead of just adding an IM client we’re going to see companies putting IM features such as presence and threaded messages into SMS.” By incorporating functionality from other services into the SMS ecosystem, this is a logical strategy given SMS’ ubiquity and IM’s own limitations. Furthermore, a number of operators have revealed that they do not intend to launch MIM because their messaging infrastructure provides MIM-like speeds delivering SMS.
Despite the original fear that MIM would cannibalise SMS, the latter has been thwarted by its own fragmentation. For instance, markets where MIM is experiencing strong growth, such as the US and China, there are yet to be any demonstrable cases of this having a direct impact on SMS.
“Until MIM and instant messaging overcome their fractured, mass of incompatible communities (e.g. AOL IM, MSN IM, Google Talk, ICQ, and of course the GSMA’s Personal Instant Messaging [PIM]), they will not have the same mass global appeal that SMS has enjoyed for the past few years,” said William Dudley, group director of messaging & GRX products at Sybase 365. “Any talk about the demise of SMS as a simple, non-voice medium is speculative at best and misleading at worst.”