“Messaging services are killing SMS” – Beta News
“There are more WhatsApps than texts sent each day. A lot more” – TechRadar
“Texting is in decline” – Business Insider
“How WhatsApp is killing off text messaging” – ITProPortal
These are just a few of the recent headlines accompanying the ascent of over-the-top messaging applications. Their fatal tone sounds like a collective death knell for text messaging as it shuffles off to join the telegraph, rotary telephones and cassette tapes on the trash heap of antiquated technologies from yesteryear. However, it turns out that reports of text messaging’s demise have been greatly exaggerated.
In fact, considering the meteoric rise of the technology – from lightly regarded novelty to cultural phenomenon in less than 15 years – it would be surprising if innovators hadn’t worked to build the next step in messaging evolution. So to better understand the current mobile messaging landscape and make predictions on the future role of text messaging in an all IP world, let’s take a trip down messaging memory lane.
You’re going to do what?
The origins of text messaging are well documented: In 1984 two GSM engineers had an idea to send short-form text messages between cellphones. However, cellular technology didn’t catch up to their vision until 1992, when the first text message – sent from a personal computer to a cell phone – read “Merry Christmas.” Initially, text messaging was merely a way for carriers to test phones, as well as deliver voicemail and network notifications. Early text message ambitions were limited as many in the industry thought that no one would bother to stop and type a message on their mobile phone. This sentiment did not last long.
Seeing a greater opportunity in person-to-person messaging, handset manufacturers started to build devices to support user-sent text messages – Nokia being the first in 1993. Initially slow to catch on, functionality and reliability improvements led to increased popularity. And once messages could be exchanged between different networks in 1999, mainstream adoption exploded.
Unstoppable momentum
In no time, text messaging began replacing traditional voice calls as the primary communication medium, eventually becoming entrenched as a cultural mainstay. Hit-show “American Idol” partnered with AT&T in 2003 to enable text voting for the show’s contestants. The result? More than 7.5 million texts sent in the second season alone. And there was no going back. The first text-to-donate campaign was put on by the United Way during the 2008 Super Bowl, and future President Barack Obama announced his running mate for his historic campaign via text.
Corporations began to realize the engagement opportunities with text messages around this time as well, in the form of application-to-person messaging. A wide variety of use cases for text messaging emerged across consumer-facing organizations including account updates, appointment reminders, new deals or coupons, confirmation of one-time passwords, etc. At its peak, text message traffic reached 7.8 trillion messages sent in 2012, 1.3 trillion of which were A2P, according to Portio Research.
Irresistible force vs. immovable object?
Text messaging supremacy appeared absolute until BlackBerry Messenger launched in 2007. The so-called “crackberry-era” ensued as BBM made mobile messaging borderline addictive, helping BlackBerry’s popularity skyrocket. The first OTT messenger was a hit, inspiring other OTT apps like WhatsApp (2009), Viber (2010) and iMessage and Facebook messenger (2011).
During this time, text messaging growth started to taper and ultimately plateau. In 2013, text messaging departed on its downward slope. Simultaneously, operators experienced a steady decline in text messaging traffic and revenue. In an effort to salvage their messaging business and block the OTT threat, the GSMA announced the RCS Joyn initiative to promote standardization and simplify interconnection between carriers.
The intent was to help operators develop enhanced messaging capabilities to compete with OTT messaging services. RCS was designed to offer a significant advantage because of its ability to work across networks and devices, unlike OTT services where use is typically limited to the app’s subscribers. But because the initiative was slow to get off the ground, few operators have integrated Joyn and many view the entire project a failure today.
Change is the only constant
The year 2014 invited more OTT momentum with record-setting funding and valuations for messaging apps, further validating the market opportunity and threatening operator value proposition.
• Tango received $1.5 billion in funding;
• Kik received $38 million in funding and acquired mobile messaging network Relay;
• Japanese Internet Giant Rakuten acquired Viber for $900 million; and
• Facebook acquired WhatsApp for $19 billion.
A standout moment occurred on Jan. 6, 2014, when WhatsApp’s CEO boasted over Facebook that “WhatsApp has more than 700 million monthly active users. Additionally, every day our users now send over 30 billion messages.” Those figures represent 50% more messages sent via WhatsApp than traditional text messaging and many believed the news to be the final nail in the text messaging coffin. Another 2014 market outlook report estimated that over the next three years, 2.1 billion users will communicate through OTT services.
An operational remodel
This brings us to present day. While the outlook is ostensibly dismal for carriers’ text messaging business, key adaptations have provided renewed optimism in the new communication ecosystem. Once they accepted the OTT reality, operators looked to couple their carrier-grade connectivity and subscriber data with OTT’s expansive subscriber base and user experience, spawning potentially lucrative partnerships – the WhatsApp/E-Plus and T-Mobile US/Pandora unions serve as two of the most prominent examples. Their text messaging business also has the opportunity to shine when Internet access isn’t available. For instance, OTT service quality benefits from text messaging when it can be used as a fallback message delivery mechanism when Internet connection isn’t available – similar to how Apple’s iMessage app functions.
Additionally, text messaging ubiquity is proving valuable in the enterprise and government channels. According to a recent Mobilesquared survey, one in three operators reported at least a 6% increase in A2P messaging in 2014, and its revenue is expected to reach $60 billion by 2018 as more companies see the benefit in text messaging engagement.
Evolving with the times
Consumer preferences have bred alternate text messaging use cases in the private sector too, examples include companies like TD Bank providing customer service via text. Enterprises are also increasingly adopting text messaging-based two-factor authentication to improve security and protect consumer identity, citing reductions in implementation cost and complexity as key factors. A 2014 study found that cyber crime costs each U.S. company an average of $12.7 million annually, and in response to the threat, many turned to two-factor authentication to tighten up security.
Many suspect two-factor authentication will become mandatory for online transactions, similar to what the European Banking Authority announced in December 2014. With their new set of guidelines, all online transactions are to have at least two-factor authentication by August. And while many options will comply with the new standards, Gartner recently indicated that they see authentication preferences shifting to phone-as-a-token methods, the most preferred of which was text messaging.
Recognizing the ubiquitous, reliable access and immediacy of text alerts, government entities are also starting to leverage text messaging to bring critical information to citizens during times of emergency or extreme weather/natural disasters. Many on the East Coast received alerts and updates on this year’s blizzards.
Long-term prospects of short-form messaging
Looking ahead, no one can argue the downward trajectory of consumer text messaging traffic is due to the growth and adoption of OTT messaging apps. But despite the tough competitive landscape and elusive revenue, the prognosis for text messaging is far from terminal. Strategic partnerships and repurposing have created alternate use cases to ensure its survival – in one form or another – for years to come. Truth be told, OTT apps have created a new messaging standard, one that is seamless and more social. Moving forward, carriers will leverage this innovation and work alongside OTT players to bring to market more innovative communication experiences. As a prevailing communication mainstay, text messaging will fill its new role in business, government and emerging markets and live happily ever after.
Thorsten Trapp is the co-founder and CTO of Tyntec.
Editor’s Note: The RCR Wireless News Reality Check section is where C-level executives and advisory firms from across the mobile industry share unique insights and experiences.
