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Friday, 20 December 2013

Is SMS already dead?

Today it's a snap to save money that was getting poured down the drain as phone calls and texts. And its easier than ever before to stay in touch with friends and colleagues in foreign countries.

The slew of OTT (Over the Top) messaging applications which deliver text, audio and video content independent of the operator, have empowered consumers with even basic 2G data access to communicate without incurring heavy call/SMS charges. We are talking not just about the ubiquitous WhatsApp but a host of other Asia-based cross-platform applications like Line, WeChat, Hike and Kakao Talk which have quickly racked up millions of users. 

Among these players, WhatsApp remains the one to beat, boasting of an unrivalled 400 million active users a month (registered users mean nothing if people download the app but do not use it).  However, the newer OTT applications are extremely feature rich, offering calls (like Viber), emoticon-type 'stickers' which can be earned, gifted or purchased and downloadable games. These are clearly targetted at the youth market - youngsters are known to be heavy texters. Even Google has entered into the market with the revamped Google Hangouts, which becomes a messaging centre from where you can send out SMS, chat or video call using your data connection.

And in India, mobile messaging application Hike showed a hot growth trend in the middle of the year, channeling almost a billion messages a month among a 5 million use base. By end 2013, the volume of mobile messaging will be double that of SMS messaging.

The moot question is - is SMS already dead? At first glance, the answer might seem 'obviously, yes' but that is not quite true. It is a fact that OTT applications will cost Indian telcos an estimated $1.2 billion in 2013. Internationally, there are some markets including USA, where growth has already peaked and started to decline. The giant Asian markets, India and China, are currently showing a plataeuing growth - usage is not increasing, but as both markets are still adding subscribers a slow growth trend is expected.

However, the key to decline of SMS in India will be the rate of smartphone penetration and the rates of data usage - both are key factors. Have you experienced a low network scenario where no data works, but it is still possible to send an SMS? This connectivity issue persists in large parts of the country, making SMS a still indispensable tool. Banks, e-commerce sites, direct marketers still need to send out SMS. Even operators still use it to communicate with customers.

Mobile operators do not stand to lose out entirely - if they lose SMS revenue, they will still get data revenue - however, to further capitalise on the new trends, they are showing openness to align with messaging companies. This can be a fruitful space - the user base will increase, this will facilitate targetted advertising and promotion, on a revenue sharing model beneficial to both parties. 

However, given the sheer number of mobile messaging applications, it is unlikely that any one will emerge as a dominant player. We are more likely to see a fragmentation of the market. WhatsApp is betting on the fact that a segment of its hugely loyal user base will be ready to pay a small sum annually to keep out ads and promotions. On the other hand, Line, WeChat and others will be ready to monetise through advertising and marketing.

Marketers may need to be prepared to tailor their approach accordingly. Some things are clear - SMS is no longer the king of the hill. The market is in a state of transition. And active, highly engaged, small groups are forming on mobile messaging apps, in an alternative social media scenario. As marketers, this is food for thought when we plan to create conversations, engage with customers and be a daily part of their lives.