On the death of the SMS…

It seems that it is part of my job to get regularly asked how long our company can survive as long as we mainly rely on selling SMS. Not one week is passing by without getting this questioned by either journalists, market players or even friends. Next to mobile e-mail, mobile instant messaging, social networking on Facebook or Twitter, or smartphone applications people tend to think that SMS is an outdated means of communication. While this may be true for some individuals, I fully disagree for the overall market. Here’s why:

  • Consumer Acceptance:
    Thanks to the huge success of text messaging across all different forms of phones SMS has become widely accepted among consumers. Statistics vary between 80% and 90% of phone owners across all age groups who use the SMS functionality. To compare, the same percentage is somewhere around 40%-50% for Social Networks (Facebook) and 50% for mobile e-mail.
    If you now think that younger generations grow up with Facebook and their smartphone and therefore don’t need SMS you’re wrong. Typically teenagers use SMS much more than older age groups.
  • Device support & interoperability:
    Every phone or SIM-enabled device supports SMS. But not every phone does automatically support social networks, mobile e-mail or mobile instant messaging. The more consumers have a phone number, the higher is the value to everybody else to also use text messaging, thus a typical network effect is created. This network effect is strongest for phone numbers, because for the time being, our phone contacts may be the most complete collection of our social contacts (to compare with social networks: only 2/3 of the people I sent a text message in the last 3 months are also connected with myself on FB, 5% on Twitter…)
  • Reliability:
    The very high reliability of SMS compared to other means of communication is a combination of consumer acceptance and interoperability. The delivery of a text message can optionally be confirmed by CODs, but even more important is the behavior of the message’s recipient. For mobile e-mail, you usually don’t expect an immediate reply, neither for direct messages on social networks. Mobile IM probably comes closest and is also made for very short discussions with immediate feedback.
  • Operator pricing:
    Throughout the past 10 years SMS cost has gone down dramatically. Today, in most european markets operators are selling SMS bundles together with voice at fixed fees, which leads to 1000 SMS included or even unlimited pricing plans. From a consumer perspective this has lead to the fact that SMS has become the preferred mobile instant messaging service, thereby circumventing classical mobile IM services like Skype, Nimbuzz etc. This is exactly what today’s teenagers are doing – send & reply very short messages via SMS like chatting.

Though text messaging may not be better than all the other means of communication in every single area or for every individual, on average it does. There is nothing comparable yet available that provides the same characteristics and satisfies consumer demands.
Today, text messaging is still a growing business, and it has become huge in the last years (globally, SMS are predicted by ABI research for 2011). We’ve learned from the past that mobile e-mail won’t push aside SMS. According to a survey done by Telekom Austria in 2010 23% of respondents said that they send less SMS since they joined a social network. This means that 77% send equal or even more SMS! So social networking won’t push aside SMS either. This only leaves behind mobile IM. My personal opinion is that mobile IM and SMS have already merged from a consumer behavior perspective and are also going to merge product wise (I can use one app for SMS & IM), especially on smart phones.

Finally, besides all the hype around smartphones, apps and mobile internet, this post should tell you that SMS is not going to die any time soon. This is also why we shouldn’t look at SMS as an outdated technology in Europe and therefore lack awareness (the image of SMS is different in the US). SMS still has lots of opportunities to offer, especially in the M2M (machine-to-machine) and M2P (machine-to-person) field. If we miss to go for them, Americans will do, as happened with smartphone OS platforms.

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