iMessage and others took a $13.9bn bite out of carrier profits

Mobile networks missed out on $13.9 (£8.8) billion worth of profits last year because of free messaging apps like iMessage and BlackBerry Messenger, if a study from Ovum Research is to be believed. According to CNet, the rising number of people using internet connected apps to communicate instead of traditional SMS (short message service) is growing, maybe even heralding the end of the good old SMS text message.

Smartphones may have essentially made SMS obsolete. Apps like iMessage look like SMS, act like SMS, but they aren't SMS. Rather than using a traditional cellular signal to transmit their messages, these new messenger apps send data over the internet. That's all well and good for the user, since it means they can do even more with their texts, but messaging plans have come to represent a relatively small (but far from negligible) source of revenue for carriers.

SMS does have some advantages over newer technologies; since it uses standardized protocols, different devices and devices on different networks have no problem reading the same message with the same formatting. iMessage and others tend to be restricted to one platform or carrier (think Samsung's ChatON), and require an internet connection to work. Still, assuming that you live in an area with a fairly good connection, and most of the people you talk to use the same kind of device as you do, there isn't much need to turn to SMS.
 

Another report on the same study comes courtesy of the BBC. Speaking to James Barford, a mobile analyst for Enders Analysis, their report suggests that most of the lost profits from SMS can be replaced by the charges that come from the data plans powering next generation messaging platforms. The problem is, that isn't taking into account the fact that networks have gotten used to its customers paying for both. Since iMessage and similar services didn't become available until very recently, SMS has been the standard form of communication, even between smartphones.

It's worth noting that the study also took social networking services like Facebook chat into account. We're sure that the mobile availability of such services probably has impacted SMS to some extent, but it's really not as comparable as, say, iMessage, which is basically an SMS stand-in.

The study is yet another example of how fast smartphones are changing the mobile business. As the market changes faster than ever, hopefully carriers will do a better job of adapting to new technologies than other industries have. Sadly, hope is often for naught.

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26 Comments

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looks like iam paying much much less here ...

I pay Rs. 250 which is less then 3 USD... for Unlimited calls to same network numbers and unlimited messeges to any network

yes it comes with fair usage policy for about 5000 messeges a day.. and 500 free mins a day on voice calls... !

I don't get this. I guess it's US users again.

"[apps] require an internet connection to work. Still, assuming that you live in an area with a fairly good connection, and most of the people you talk to use the same kind of device as you do, there isn't much need to turn to SMS."

But then this could eat well into those small data packages we all have. No way am I paying an extra £10 a month for 1GB of data when I can use Wifi at home. No need. I don't really understand those people who are desperate to be connected to the net all the time.

Most contacts in the UK come with free unlimited texts anyway, so it isn't really an issue.

All the carriers will make up there SMS loss by increasing the $ for the measly amount of data they provide in their plans. Just look at AT&T and their new data charges recently $20 for 300MB / $30 for 3GB.. that pricing structure doesn't sound right! But I'm sure it includes SMS income loss.

Wasn't there a news story a long while back that said texts don't even cost carriers money because it picky backs on some other data or something or other.

*googles*

they charge around 12p (19 cents ish) for text messages in the uk. it costs them 1000th's of a penny yet charge us a fortune.

Viber is a great SMS replacement app for android/blackberry/ios.

torrentthief said,
they charge around 12p (19 cents ish) for text messages in the uk. it costs them 1000th's of a penny yet charge us a fortune.

Unless you have a contract where unlimited texts are free.

The future in my opinion lies in Facebook Messenger. Cross platform and cross-"device type". You can chat with people who are on their PCs, on their Blackberry, WP7, Android and iOS smartphones or tablets without a hassle, and it even keeps your conversation history in sync and does not need you to be online. I have barely received an email from a close friend or used any other IM service for some months now.

The article also forgot to mention Whatsapp as a "killer" to SMS. I would bet it is used worldwide far more than iMessage due to it is cross platform nature...

mfra said,
The future in my opinion lies in Facebook Messenger. Cross platform and cross-"device type". You can chat with people who are on their PCs, on their Blackberry, WP7, Android and iOS smartphones or tablets without a hassle, and it even keeps your conversation history in sync and does not need you to be online. I have barely received an email from a close friend or used any other IM service for some months now.

The article also forgot to mention Whatsapp as a "killer" to SMS. I would bet it is used worldwide far more than iMessage due to it is cross platform nature...

Too true, and with Windows Phone have this build in, why do you need to get anything else. I have a Windows Phone, and advised everyone i know to contact me though Facebook MSG cause its faster and cheaper! Im hoping MS will do the same for Skype!

mfra said,
The future in my opinion lies in Facebook Messenger. Cross platform and cross-"device type". You can chat with people who are on their PCs, on their Blackberry, WP7, Android and iOS smartphones or tablets without a hassle, and it even keeps your conversation history in sync and does not need you to be online. I have barely received an email from a close friend or used any other IM service for some months now.

The article also forgot to mention Whatsapp as a "killer" to SMS. I would bet it is used worldwide far more than iMessage due to it is cross platform nature...

Ye i have to agree with you about the FBM, it has a huge advantage over the others because you are able to talk with people that are using a computer and not only a mobile device.

One thing with Whatsapp, from what i heard they want to start charging money for their service sometime this year so i bet the use of it will be much lower when they wont be free anymore but i'm sure that some other company will create something like this for free.

V-Tech said,

Ye i have to agree with you about the FBM, it has a huge advantage over the others because you are able to talk with people that are using a computer and not only a mobile device.

One thing with Whatsapp, from what i heard they want to start charging money for their service sometime this year so i bet the use of it will be much lower when they wont be free anymore but i'm sure that some other company will create something like this for free.

http://blog.whatsapp.com/index.../it-is-a-hoax-really-it-is/.

It is a hoax.

Instead of being greedy and charge too much per SMS they could have been smart and charge A LOT less.

So instead of missing out on $13.9b they could have earned much less but still earn something!

It's for sure not going to get better for them. BBM will keep taking over SMS, iMessage will keep taking over SMS and the rest of free apps will keep working better than the SMS.

I'm sure they're quite upset that they're not cashing in on ripping us off by piggy backing packet data that's constantly being sent/received between the phone and cell tower.

If they actually charged something close to 1c to 5c per SMS then I may have a thought of pity on them. They have ripped us for too long and for too much.

wrack said,
If they actually charged something close to 1c to 5c per SMS then I may have a thought of pity on them. They have ripped us for too long and for too much.

I pay $5 for 250 messages a month which is 2c per message, but honestly $5 should be unlimited with the small amount of resources that sms' use.

Enron said,
If text messaging wasn't so blatantly overpriced, people wouldn't be actively seeking an alternative to it.

There was an article in The Netherlands a month ago (maybe 2) about text messaging. Its actually a FREE service for the providers here, yet they still want 10-25cents per message (depending on provider, prepaid etc.)

The number of iMessages sent is tiny compared to how many Faceboo chat messages were sent, round where I live FBM has completely cannabilzed SMS and BBM in the 16-25 age group.

Enron said,
Well the problem with iMessage and BBM is that they're closed systems.

and this, should IMO make these services second mention to platform agnostic apps/services as they get more use. The whole teens using bbm situation is down to cheap bb phones are (and I hate to say this, as I hate bb with a passion) cheaper and actually better than the lower end android devices (I'd like to include wp7 as that's my platform of choice, but there's not really a cheap enough option yet in the UK to tackle the cheap bb market).

Steve B said,
Ohh boo hoo. They lost some profit from ripping us off. Go cry me a river, build a bridge and get the f* over it.

i wonder if they're actually *losing* the profit. to me it looks like it just has shifted from SMS to data plans

Julius Caro said,

i wonder if they're actually *losing* the profit. to me it looks like it just has shifted from SMS to data plans


True, but, look at it on the surface then you can chuckle. ^_^

Steve B said,
Ohh boo hoo. They lost some profit from ripping us off. Go cry me a river, build a bridge and get the f* over it.

Right. On the other hand because all of the losers who were texting are now using more Data than ever, carriers are raising the Data prices to cover up the $13.9 billion. The same texters are making data pricey. Simple economics.

Jebadiah said,

Right. On the other hand because all of the losers who were texting are now using more Data than ever, carriers are raising the Data prices to cover up the $13.9 billion. The same texters are making data pricey. Simple economics.

Exactly, I only have 500MB of data, but unlimited texts.