ITEM: You cellcos who are losing SMS revenues to OTT messaging apps? Good news: Portio Research says you’re actually not.
Despite a number of reports that SMS revenues are being cannibalized by the growing popularity of OTT social media apps like Facebook, WhatsApp, WeChat and Viber, a new report from Portio says that’s simply not the case.
To be sure, clarifies Portio founder and MD Karl Whitfield in a blog post, SMS traffic has peaked in many markets and is now on the decline, and OTT apps are one reason for that. But operators are not losing billions in revenue because of it, Whitfield says.
On the contrary, he insists, if anything, SMS revenues are going up, and will top $133 billion this year alone:
Since the early days of SMS in the 1990s to today, in mid-2013, SMS revenue worldwide has gone UP every single year. So far, the MNO community has not “lost” anything. From 2013 to 2017 inclusive, SMS revenue worldwide will remain above 2010 levels, hardly an industry ravaged by new threats and killer competition. SMS will continue to generate over USD 100 billion per annum for at least the next five years.
Portio also says that while SMS traffic is slowing and even declining in some markets, it’s unfair to blame OTT apps for that when there are many other contributing factors, a major one being the sheer saturation of a medium that had peaked naturally as far back as 2008 for some markets:
OTT messaging apps brought a new version of text to people, something that is a hybrid, part desktop IM, part social networking, and part mobile SMS. Many people like this new hybrid and are using it…and the fact that it’s mostly free is a major bonus. Just because people use the newly created OTT options, it does not logically follow that if OTT messaging apps had never been invented, SMS would now be carrying vast amounts more average-traffic-per-user.
Portio doesn’t name names in terms of other reports concluding that OTT messaging is costing operators “billions” in lost revenues, but claims such findings are calculated against where SMS revenues would be if they followed a steady growth line.
Earlier this year, Ovum forecast that social messaging cannibalization of SMS revenues will grow from $32.6 billion this year to over $86 billion in 2020, but didn’t say what methodology it used to calculate that number.
Still, every analyst firm has its own way of crunching numbers and calculating forecasts, which is why every firm comes up with different projection figures for the same technology or telecoms service sector.
Also, I imagine some operators – such as KT – will certainly be surprised to hear they’re not actually losing SMS revenue. It's a common refrain from operator keynote speakers at mobile trade shows. According to Informa Telecoms & Media, SMS revenues in Spain declined from €1.1 billion ($1.4 billion) in 2007 to €758.5 million in 2011. That’s not “billions”, but it’s not pocket change, either.
That said, it’s worth noting that Portio is speaking in generalities – at least in its blog, if not the full report (which I haven't read). On a global level, it’s forecasting SMS revenues to grow and stay above 2010 levels for the next four years. By that same benchmark, Informa has reached similar conclusions, forecasting global SMS revenues and traffic to keep rising through 2016.
Anyway, you can read Portio’s argument here and decide for yourself. Rebuttals from other analysts are more than welcome.