SMS threatened by social messaging

Ovum
Ovum’s Mobile Messaging Traffic and Revenue Forecast: 2012–17 estimates that mobile messaging traffic crossed the 7 trillion messages mark in 2012.
 
The figure of 7 trillion messages translates to approximately 21 billion messages per day; in August 2012 the social messaging service provider WhatsApp announced that it was processing 10 billion messages a day (6 billion of which were outbound messages). In 2012 WhatsApp recorded a 600% growth in traffic, and the numbers suggest that social messaging is quickly catching up with SMS traffic.
 
The 21 billion messages sent via SMS daily are not quite enough
 
Comparing Ovum’s estimated figures with those released by WhatsApp suggests that a single social messaging player on its own is now able to generate nearly a third as many outbound messages each day as all the providers of SMS services combined. Ovum calculates that during 2012, 21 billion SMS messages per day were generated from smartphones and feature phones; SMS has become ubiquitous for mobile phone users globally.
 
However, only approximately 24% of all mobile connections globally are mobile broadband enabled, allowing the use of social messaging applications. Applications such as WhatsApp (and there are many others) are therefore able to target only that 24% of the mobile population. Despite this, just one player is able account for a volume of messages that is equivalent to nearly one third of the total daily SMS traffic. Although this is a high proportion, we must keep in mind that the current users of social messaging services are early adopters. Such users tend to send more text messages than other mobile phone users generally, and will send even more when the service is available for free, as is the case with the majority of social messaging services.
 
High levels of use make social messaging brands stronger
 
Other social messaging players such as iMessage have reported that they are now processing over a billion messages per day, while Viber estimates that approximately 20 million picture messages are sent via its service each month. This indicates that the viral growth of such services has led to increased use, making brands such as WhatsApp and iMessage stronger. This in turn weakens mobile operator brands for messaging, as more consumers opt for social messaging over operator services.
 
Operators have recognized this dilution of their messaging brand value. Some are beginning to work with social messaging players: 3 Hong Kong and RCom have both partnered with WhatsApp, for example. Others have even come up with their own social messaging propositions, a key example being Telefonica’s TU Me.
 
 
These approaches aim to ensure that operators still have a foothold in the messaging industry, even if their SMS revenues are further cannibalized by the growth of social messaging. Further co-operation between operators and social messaging players will allow them to monetize these services, either through subscription plans or billing.
 
Operators are monetizing their OTT partnerships by charging for the use of OTT services on feature phones, and are also offering subscription-based packs for the unlimited use of OTT services while roaming. Early examples of this can be seen in WhatsApp’s partnerships with 3 Hong Kong and RCom.
 
SMS traffic and revenue growth are beginning to slow down
 
Ovum estimates that mobile messaging traffic, which includes MMS and SMS, crossed the 7 trillion messages mark in 2012. However, the growth in traffic has begun to slow down considerably.
 
Messaging traffic grew by only 10% between 2011 and 2012, and is expected to fall to 7% by 2013. Ovum estimates that the availability of SMS replacement services will cause mobile messaging traffic to plateau by 2015, and to begin to decline in 2016.
 
Unlike SMS, MMS traffic will continue to grow until 2017. However, its contribution to total messaging traffic is only approximately 3%, and its growth will not significantly impact total mobile messaging traffic. Like SMS traffic, operators’ messaging revenues have been hit by social messaging players, and Ovum estimates that $23 billion in revenues were lost in 2012 alone.
 
Messaging was once a key contributor to operators’ non-voice revenues, with 53% of non-voice revenues coming from messaging in 2010. This figure will fall to 37% by 2017, and operators must hope that the shortfall will be met by revenues from mobile broadband.
 
Neha Dharia is an analyst for consumer telecoms at Ovum. For more information, visit www.ovum.com/

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