Messaging apps killing SMS revenue

Ovum forecasts that, by 2016, operators will have lost US$54 billion in SMS revenues due to the increasing popularity of social messaging services on smartphones – more than double the US$23 billion they are expected to have lost by the end of 2012.

The technology analysts believe that collaboration with handset manufacturers is imperative if operators are to remain relevant and competitive in the messaging industry.

Ovum defines social messaging as messaging that occurs through platforms other than SMS, MMS, or email, and which is either tied to a social network or has a social component attached.

In a new report addressing how operators can counteract the social messaging threat from over-the-top (OTT) players, Ovum highlighted the rapid increase in the number of OTT players, and demonstrated that social messaging is not a short-term trend, but a shift in communication patterns.

Operators in Europe and Asia-Pacific will be affected the most, Ovum said, and they should be vigilant with respect to OTT messaging activity.

“Social messaging is becoming more pervasive, and operators are coming under increased pressure to drive revenues from the messaging component of their communications businesses,” said Neha Dharia, consumer telecoms analyst at Ovum.

“Operators need to understand the impact of social messaging apps on consumer behaviour, both in terms of changing communication patterns and the impact on SMS revenues, and offer services to suit.”

WhatsApp, one of the more prominent social messaging brands, has seen its levels of penetration increase in markets such as Singapore and the Netherlands.  Ovum believes this level of growth will continue as smartphone and mobile broadband penetration increases, and expects smaller players – such as textPlus, Pinterest, and fring – to cause further disruption in the messaging space.

“OTT players are changing consumers’ messaging preferences, and the pressure they are exerting on operators’ messaging services is forcing them to offer increased SMS bundles and to experiment with messaging pricing models, further dampening revenue growth,” said Dharia.

According to Ovum, the importance of industry-wide collaboration cannot be underestimated as operators look to a Rich Communication Suite (RCS) platform to provide consumers with features such as file sharing, video calls, and IP-based messaging.

However, RCS is not expected to reach the mass market before 2014 so, for the time being, operators will have to rely on innovative pricing strategies, partnerships, and launching operator-branded IP messaging services to keep up with the changing demand.

“In order to take advantage of RCS when the time comes, operators will have to have a strong market presence. This means that they need to move to social messaging now in order to make sure OTT players are not in a better position to take advantage of future opportunities,” said Dharia.

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Messaging apps killing SMS revenue