Home Management Matters Ovum’s short message: Bye bye SMS, hello social messaging

Ovum’s short message: Bye bye SMS, hello social messaging

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What’s 20 and already gasping for breath?

That would be the SMS – or short messaging system, in many parts of the world it’s the poor man’s email. It is still used by over two billion people on the planet, double the number of email users.

But, that’s all changing rapidly. Why, the SMS could even die – or probably metamorphose into an avatar of social messaging.

That is the short message, or SMS if you will, from Ovum. In its Consumer Insights Survey, the global telecoms analyst firm says a large number of customers are migrating to free or cost-effective social messaging apps, dumping the SMS.

The trend is particularly strong in Australia, Brazil, China and France. Countries such as Germany, Russia and the U.S., an SMS laggard, buck the trend. In these countries, SMS use is actually increasing. Still, overall, the writing might be on the wall for the simple phone messaging system.

It’s social, social, social

Nearly a third (31%) of respondents in Ovum’s survey said they had cut SMS usage while raising use of social messaging services. Also, 34% of Skype users and 51% of WhatsApp users indicated that their SMS usage has decreased due to their use of social messaging. To get an idea of the numbers involved, consider WhatsApp’s impact. Its users get 8 billion inbound messages per day, while receiving over 12 billion. Together, the social messaging services are giving the good old SMS a run.

“Based on Ovum’s research, there is a clear substitution effect in the early stages of social messaging adoption,” says Neha Dharia, a consumer analyst at Ovum and co-author of the report.

“This will increase as more social messaging players come into the market, mobile broadband becomes more affordable, and smart devices become even more popular.”

The trend could be dire for telecom operators already earning little or nothing on voice calls. Ovum believes this is dampening SMS revenue growth. But it says all is not lost. Smart operators can reinvent the messaging business by building a service around social messaging.

“…the fact that social messaging does not always infringe on SMS suggests that services with stronger operator relationships can even grow SMS traffic, creating opportunities for operators and OTT (over-the-top, or third party content) players to bridge the gap between online and offline users through paid SMS,” says Dharia.

Micro opportunities ahead

Dharia also suggests operators can find ways to “promote the use of SMS to bridge the gap between offline and online services,” leading to a revenue-generating opportunity.

Mark Ranson, a co-author with Dharia of the report and a consumer analyst at Ovum, points out that the sticky nature of messaging drives high engagement and increases customer retention.

“This stable foundation can form the basis of a range of monetizable services, including games, utility payments, personalization, and communication,” he says, adding that operators will need dynamic, multifaceted business models to capture new opportunities in the rapidly evolving social messaging market.

Ranson cites the experience of a South Korean social messaging service called Line. On the back of numerous “micro-transactions” it apparently generated a significant amount of revenue – US$30 million in revenues in 2H2012 – from sale of premium emoticons.

“The trick is to continue to find micro-opportunities, because allied to other forms of revenues such as advertising and more premium services and multiplied by a huge scale they can be extremely lucrative,” Ranson says.

“In a nutshell, social messaging can be monetized, and achieving scale and creating loyalty are the keys to unlocking services’ potential,” he concludes.

(Image source: Bigstock)

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