8.

Short messaging services versus instant messaging: value versus volume

Telecommunications

Deloitte predicts that in 2014 Instant Messaging (IM) services on mobile phones will carry more than twice the volume (50 billion versus 21 billion per day) of messages sent via SMS globally. In UK, approximately 300 billion IMs are expected to be sent in 2014, more than double the volume of SMSs expected to be sent (140 billion). It might be supposed that the growth in IM is at the expense of SMS. However despite the burgeoning volumes of messages carried over IM platforms, we expect SMS to generate more than £60 billion in 2014 globally, approximately 50 times all revenues from mobile IM services.

Text messaging’s global heyday is approaching, but in 2014 it should still generate significant margin for the mobile industry, and its importance should not be underestimated.

MIM services may win the battle for volume in 2014, but SMS should be victorious in revenue terms, even in the UK, where SMS volumes peaked in 2012. We note that MIM services on mobile phones are not just a substitute for SMS, but also for other forms of communication, from e-mail to phone calls to face-to-face person conversations.

Text messaging’s superior revenue-generating ability should endure, for three main reasons: ubiquity, infrequency and price.

SMS is the one messaging standard common to almost every mobile phone. There are 3.2 billion unique mobile subscribers globally that can send and receive SMS. MIM is popular, but it requires a smartphone, tablet or MP4 player. It also needs a mobile data plan, or a connection to a Wi-Fi network.

Further, many over-the-top (OTT) providers are incompatible with each other. Communication via an OTT service requires all parties to have the same app. Some MIM services only work with a single brand of phone. When sending a message to someone using a different manufacturer’s phone, SMS is the choice by default.

Operators, rather than competing head on with MIM services, should encourage their adoption, so as to bolster the take-up and usage of mobile data.

For example, operators may consider exposing network and data assets to OTT players via APIs (Application Programming Interfaces): these allow third parties to integrate their applications and services more closely with the mobile device, the SIM card and elements of the network.

A final option for carriers would be to encourage the usage of SMS as a bearer for application to person messages (A2P), which are used to send personalized messages to individuals, from advice of bank balance, to warning of a delay to a flight, to a reminder for a medical appointment.

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