SMS will dominate mobile messaging for years to come

In the blaze of light coming from smartphones in developed countries, it can often be easy to get carried away with new technologies. Mobile IM and mobile email, in particular, seem like scene-stealing services. But when GoMo News talked to Pamela Clark-Dickson, Senior analyst for Mobile Content and Applications at Informa Telecoms (and Editor for its Mobile Messaging Analyst newsletter), we got a very different picture – one in which SMS will remain the dominant force in mobile messaging for a long time yet.

Pamela spoke to us ahead of her presentation at the MACH Insights conference in Berlin this June, on the topic of Future Mobile Messaging Revenue and Service Opportunities. For a lot of people, “messaging” is just another way of saying “SMS” – so my first question was to find out exactly what Informa regards as falling under the messaging banner.

Pamela: Anything that does messaging on mobile! SMS is undoubtedly the largest player in terms of revenue and traffic, but we also include MMS, mobile email, mobile IM, voice messaging and any social networks that integrate mobile updates. Some of the most exciting new mobile messaging channels are those that apply the SMS model in a different way. There’s Whatsup, for example, which is like Blackberry Messenger for all devices – it allows Whatsup members to send SMS to other members for free. And “voice SMS” has become increasingly popular in developing markets, allowing users can record and send one another short audio messages. All of these technologies come under the “mobile messaging” banner.

Could this kind of convergence going to lead to a single messaging channel – somewhat like an all-IP network from an operator?

Pamela: This kind of convergence is already happening, but it’s happening on several different levels right now. On one level, there clients that provide a consolidated messaging services; you can download a single app that allows you to do SMS, IM, email and other types of messaging. But on another level, you’ve got SMS providers who are converging these other service into their existing technology; like emails and documents being broken down and sent via SMS, and IM-style communication being enabled through SMS.

Where’s the revenue potential for these services?

Pamela: This is where it gets interesting, because these are all very young companies. The revenue channels aren’t completely clear yet, and they’re trying a lot of different models. Some of them sell advertising space, some of them sell the services themselves. PINGR has a deal with TapJoy to push applications to their users, and the developers pay both companies for that.

Is acquisition a valid revenue model for them to chase?

Pamela: There are opportunities for acquisition for these companies, but it will mostly be from other companies in the same industry who have gotten big, or from social networks trying to become more mobile-friendly.

Where do the mobile operators fit into all this?

Pamela: Mobile operators have a serious challenge ahead of them. The SMS market is busier than ever – text traffic increases every year. Unfortunately, the revenue generated by those SMS drops every year. For the first time recently, Vodafone reported a greater revenue from data than from SMS. So the operators are trying to move into the messaging market in a way that will increase their revenue, but they’re finding that the market is pretty full. There are a lot of companies providing full messaging services to both consumers and enterprise.

Are they moving too late?

Pamela: They could have moved earlier, but never underestimate the operators. They’ve got a lot of advantages, and we’re already seeing some interesting moves. Telefonica began a very innovative program called BlueVia, which give developers access to some of its core SMS capabilities. This allows developers to create new applications to sell to enterprise and consumers, increases the use and reach of Telefonica’s SMS, and creates potential new revenue streams for everyone involved. Operators are also pursuing RCS (Rich Communications Suite) as a new way to attract customers back to network-centered messaging, but it’s not clear whether it’s actually going to work yet.

What does the future look like for mobile messaging?

Pamela: We need to make it clear that SMS is going to be the top dog for a long time yet. There may come a time when it is superseded by other technologies, but that will not be for many years. However, it’s also important to remember that SMS-based revenue is steadily dropping – even as traffic increases. But there is a serious opportunity in the realm of enterprise SMS. There is a vast number of uses that businesses can put SMS to; from inter-company and overseas communication, to B2C interaction. Again, there’s already an established value-chain here, with companies like Clickatell providing SMS to well over 10,000 businesses. But it’s an expanding area, and operators can offer core network functions that third party providers can’t, like integrated billing.

Finally, operators and businesses alike have to remember that despite the presence of mobile IM and email, consumers are not moving away from SMS. These technologies are only available on smartphones, which still have comparatively low market penetration; especially when you consider that every mobile phone in the world can send and receive SMS. It’s just that each individual SMS is now less profitable, and that’s something that operators and businesses alike will have to deal with.