TEXT MESSAGING HAS BECOME A CASH COW for mobile operators desperate to generate revenues in mobile data. But instant messaging may be poised to change that.
Mobile instant messaging, or MIM, is used by only 8% of mobile consumers worldwide, according to a recent study of 17,000 users in 30 countries by TNS Global Telecoms. But once mobile users adopt MIM, TNS said, it “cannibalizes” other messaging tools to become the primary non-voice method of interacting with others. More than one-third of mobile messages sent by MIM users are instant messages, and MIM users send about 40% fewer text messages than their non-MIM counterparts.
“Where mobile operators have profited heavily from SMS these findings present a real challenge for their business,” noted Matthew Froggatt, managing director of global technology for TNS. “Do they try and keep customers focused on SMS to maintain their revenue base, or offer consumers more choice in messaging? With increasing Internet functionality on new mobile phones, and MIM’s strong mass-market appeal, operators may have no choice but to promote this feature more widely.”
Fiscal challenge
That may be particularly bad news for U.S. carriers, who have steadily ramped up SMS prices in the last two years. Sprint Nextel Corp. and Verizon Wireless have doubled their text-messaging rates in the last two years, moving from 10 cents to 20 cents per missive, using the hikes to try to push messaging bundles.
Those price increases have done little to slow the growth of SMS, which accounts for roughly 70% to 80% of non-voice mobile revenues worldwide. Text-message activity has increased steadily over the last year, according to M:Metrics, with 48.6% of mobile users sending an SMS in a February poll – up dramatically from 39.2% the previous year.
Room to grow
MIM, meanwhile, has yet to approach anything near a tipping point. M:Metrics figures indicate the application has grown 19% in the last year, with 7.9% of U.S. mobile consumers sending instant messages from their handsets. That figure mirrors European uptake of MIM, according to Forrester Research, who predicts the MIM market there will triple in the next six years.
But while U.S. consumers have been notoriously slow to embrace text messaging, they may not be so slow to move to instant messaging. The installed base of online IM fans – low-hanging fruit for MIM vendors – is already 1.2 billion, according to The Radicati Group Inc., and is expected to grow to 1.9 billion in the next four years.
Ease of use
More than just sheer numbers, though, instant messaging provides some user-friendly features SMS can’t offer, according to Michel Besner, SVP of marketing for OZ Communications Inc.
While MIM can be accessed through a browser or through text, the application often employs on-device software, extending PC-centric features like presence and contacts to mobile. And handsets increasingly are sold with embedded applications that allow IM fans to use their favorite service out of the box with just a few clicks.
“Right now, SMS is very much a techie application,” Besner said. “When people move to instant messaging from SMS, it’s all about the user experience. . It’s the same thing for the difference between doing a WAP-enabled application vs. a well-integrated client. If you have an embedded client you get a lot more usage from customers. It’s a richer experience; it’s more integrated into the handset.”
An early player on the MIM field, OZ is looking to tap the white-hot mobile social networking market, adding MIM to existing communities. And while the company has expanded into mobile e-mail, Besner claims MIM “will supersede SMS” as handsets are better equipped to support the medium and users look for a more sophisticated messaging application. But while MIM remains a niche service in most Western markets, carriers may need to get creative to find ways to monetize the service if uptake surges, Besner warned.
“I think as people move from SMS to instant messaging, carriers need to make some important investments,” Besner said. “In the long-term it’s going to be highly profitable to do this, but in the first years it will not be as profitable (for them). They definitely need to make sure they have the right billing models around IM solutions.”
