Instant messaging is cutting into SMS revenue

As more and more people shift to using free messaging applications like WhatsApp and BBM to contact their friends and family, the now outdated SMS may be on its way out.

According to Ovum, a global technology research company, telecom operators across the world are expected to have lost more than R200 billion in SMS revenues by the end of the year because of free messaging services.

“Social messaging is becoming more pervasive and operators are coming under increased pressure to drive revenues from the messaging component of their communications business,” said Neha Dharia, an Ovum consumer telecoms analyst.

“Operators need to understand the impact of social messaging apps on consumer behaviour.”

She said the increase in the number of players offering social messaging services was not a short-term trend, but a sign of a shift in communication patterns.

According to the company, SMS contributed about 57 percent of non-voice revenues for global telecom companies in 2009, while this was expected to drop to 47 percent this year.

In South Africa, a recent cellphone internet study conducted by local technology market research company World Wide Worx, showed data (internet) use of the average South African phone user had grown by 4 percent in the past two years.

Actual phone calls dropped by four percent, while SMS remained steady at 12 percent.

Arthur Goldstuck, the company’s managing director, said the main reason SMS remained in the market was that businesses continued to use the platform to contact customers, for example, SMS banking.

“Instant [or free] messaging is a challenge to SMS, as it will eventually become pervasive, meaning most instant messaging apps will be cross-platform, resulting in the cost of data becoming negligible,” he said.

Vodacom’s head of media relations, Richard Boorman, said SMS made up about 5 percent of the group revenue, while data (Whatsapp and other internet usage) made up about 15 percent.

“When sending a WhatsApp message, people are still sending data. The message has to go via the internet, and Vodacom charges for that data,” he said. “It is obviously a lot cheaper than an SMS, but it does add up.”

He said SMS usage was continuing to grow, and was still an important part of the business, while WhatsApp and BBM had stimulated a new level of usage.