Will the huge success of SMS be eclipsed by later generation services? Not exactly, says Prisicilla Awde
Virtually everybody does it every day because it’s a cheap, fast and an easy way to keep in touch and do business. No, we are not talking about making phone calls but sending SMS messages, which, after telephony, is the most successful and ubiquitous communications service ever. The big question is: is it threatened by next generation mobile instant messaging (IM), e-mail or multimedia messaging (MMS)? The consensus is that it is not, at least not for several years.
SMS may even have a negative impact on the success of advanced messaging services simply because it is integrated into all phones, is known, liked and used by millions who see little advantage in switching to more expensive, if media rich alternatives. Mobile phones are automatically set up for SMS, it works without data connections, is interoperable across networks/devices, is international and reliable.
In Western Europe alone, Gartner estimates that over 180 billion SMS messages were sent in 2006 and expects growth of over 20 per cent, reaching 210 billion in 2011. In developing countries where low incomes and high poverty levels favour cheap, easy to use devices/services, SMS is booming. In the last year India added six million mobile subscribers each month and growth in China is similar. In Africa roughly three per cent of the population have bank accounts but around 20 per cent have mobile phones.
SMS traffic is used for secure micro-payments and to share information in all sectors from agribusiness to health care, from fishing to financial services and political/entertainment elections. Expats use voice SMS for cheap international connections and it overcomes literacy/keypad barriers by providing a ‘talk/listen’ alternative to ‘type/read’.
Deepak Natarajan, Head of Marketing, Roamware predicts that over 2.3 trillion text messages will be sent in 2010: “SMS is alive, kicking and thriving and the vast majority of the global population is interested in it. Operators have a huge incentive to continue supporting SMS because many organisations use it as a communications channel. New sticky applications/features make people reluctant to change.
“Low cost handsets have produced a revolution in communications, but the next step needs cheap, available, easy to use next generation devices. Within ten years there will be a big growth in MMS and mobile IM but prices are not being lowered sufficiently across the board to motivate users to move away from SMS.”
The situation is not helped by innovative value added SMS features (storage, divert, print and filtering), which encourage usage, increase margins and reduce churn. “The original SMS infrastructure was store/forward but now it is direct deliver, texts can be used for transactional services,” explains Jeff Wilson, Chairman, Telsis.
Growth in advanced messaging has been inhibited by complicated set up; relatively expensive smart phones/tariffs and slow 3G roll out. Flat rate pricing and bundling accelerates take up but the choice of messaging service depends on circumstances - each is applicable to different situations. “Price; interoperability; ubiquity and user familiarity always inhibit new services but different messaging services will co-habit - growth in one increases traffic in others,” says Jay Seaton, Chief Marketing Officer at Airwide Solutions. “Operators’ revenues from SMS exceed all other messaging types combined. Carriers can add sticky enhanced SMS services over existing infrastructure fast/cost effectively and are increasing SMS revenues from personalised services.”
Andrew Moran, Head of Enterprise, Symbian agrees that take up is slowed by the lack of compelling consumer price plans: “If operators get the pricing right users will flock to new services driving up ARPU. Applications are available and the magic ingredients are there for a whole suite of messaging services if operators can hit on the right model.”
Mobile IM is perhaps the natural successor to SMS and some analysts estimate the market will be worth $1billion in 2011. It may find applications in customer service and could be useful for cross and up-selling.
“Although it is a different type of communication, an on-going chat, personal IM complements SMS although it won’t be a substitute,” believes Gabriel Solomon, Senior VP at the GSM Association. “SMS will co-habit with new services – the top 20 per cent of consumers using multimedia services still want to talk to the rest of the population via SMS. One shot, fast SMS messaging will continue to be used for more and more applications as a secure system where pre-paid accounts limit fraud.”
Extending computer IM and e-mail functionality into the mobile environment is a natural progression suggests Doug Brackbill, CMO at Visto. “The desktop and mobile environments will merge to allow seamless communications: people will move between systems. Messaging services are not competitive but meet different needs.”
Although MMS is mainly used to send informal and impromptu photographs, it may merge with SMS as graphics or ‘emoticons’ are automatically added by servers.
MMS is important for mobile advertising where subsidies will change the whole messaging market. Although mobile spam is less acceptable than on PCs, tariffs will drop for people willing to accept non-intrusive, relevant, useful, multimedia adverts. The subsequent lower costs will likely drive advanced messaging take-up. SMS will however still play a big part in advertising because of the huge addressable audience - some companies see it as the most economical way of reaching millions.
“MMS has been disappointing, but we are starting to see more recent growth especially for providers to deliver content rather than for personal messages,” says Stephanie Pittet, Principal Analyst for Gartner. “Mobile IM and e-mail will become more important especially in mature countries with high-end devices. It’s a slow start but operators are striking deals with IM providers and flat fee e-mails will be important for consumers. All are niche markets now. MMS won’t ever reach the levels of SMS which has high margins and users expect it to be central to all offerings.”
Mike Short, VP R&D for the O2 Group believes text based SMS will be popular until 2010 because of its convenience, familiarity, ubiquity, easy availability and the number of promotions relying on it. After then he expects other capabilities will be integrated into handsets especially e-mail, which makes the work environment mobile. “This is an evolution not revolution: there will be higher adoption in some places over others. Convenience and reach will drive new services,” says Short. “Customers do what’s most applicable. We need to make it easy and give them the widest range of services possible.”
Hilmar Gunnarsson, VP corporate development at Oz asks why operators launched MMS instead of just adding a picture facility to SMS. “Rather than marketing new services, carriers should evolve the underlying architecture to enhance and add new capabilities, giving users richer messaging experiences under the SMS umbrella. We need to think of things from users’ perspectives, keep things simple and easy to use. E-mail should be embedded into all phones and applications pre-integrated.”
The market is moving towards a situation in which people will not care which messaging system they use but will choose the most convenient/appropriate. Mobile unified messaging will give users a single in-box, address book and number accessible via any device. “When 4G networks become available in 2015/16, IP will be the prime network connection and there will no longer be a clear split between MMS, IM or SMS – messaging will be converged,” believes Aram Krol, market development manager, Acision.”
Priscilla Awde is a freelance communications journalist