40% Drop in SMS revenue by 2015

Industry executives surveyed by Telco 2.0 believe it is possible that over the top messaging services will displace about 40 percent of text messagin revenue by 2015, at least in Europe and the Middle East.

In part, that might be a function of generally higher costs in such markets. Costs for consumers in North America tend to be lower than in Europe, for example.

The main cause is competitive pressure from Facebook, Skype, Google and BBM. Mobile voice isn’t that far behind, with a 20 percent decline foreseen by surveyed executives. 40% drop in SMS revenue by 2015

Mobile Data Revenue Drivers Continue to Change

Most mobile service providers in developed markets have moved past the point where text messaging revenue is the primary “data service” augmenting declining voice revenues. That was not the case in the late 1990s or most of the first decade of the 21st century. These days it is mobile data plans for smart phones that have taken that role. Messaging drove revenue in mid-2000s

Mobile data revenue trends

In 2007, for example,  more than $28 billion was generated by mobile short message service (SMS), multimedia message service (MMS), and instant messaging (IM) services

between Western Europe and the United States alone. 

If email is also included, more

than half of all mobile data revenue in these regions was derived from messaging. It was true that mobile messaging was the foundation of most data strategies.

These days, it is smart phone data plans, augmented by data services for other connected devices, which is more strategic. Worldwide mobile connections will reach 5.6 billion in 2011, up 11 percent from five billion connections in 2010, according to Gartner. 


Mobile data services revenue will total $314.7 billion in 2011, a 22.5 percent increase from 2010 revenue of $257 billion. “Mobile data traffic will increase significantly as more people will have access to mobile data networks, there is a migration toward smart phones and an increase in sales of media tablets,” said Jessica Ekholm, principal research analyst at Gartner. 

Early in 2011, for example, Vodafone Group hit a milestone. Vodafone's latest quarter data revenue exceeded messaging revenue for the first time. 

Mobile data forecast

Vodafone's emphasis on sales of smart phones and associated data plans seems to have been the driver. Mobile data tops SMS

Right behind that strategy is expected revenue from connected devices that will include sensor applications of various types. Connected device revenue forecast

Machina Research, for example, estimates that connected devices will grow from nine billion in 2011 to 24 billion in 2020. The lion’s share of the growth will come from machine-to-machine connections, which will grow from two billion at the end of 2011 to 12 billion at the end of 2020.

That doesn’t directly translate into mobile service connections, though. The majority of those devices are expected to be connected using  Wi-Fi, which really is an untethered use of a fixed broadband connection. Machina Research expects 2.3 billion of those device connections will use the mobile network in 2020, accounting for 19 percent of all cellular connections.

That implies M2M revenue will grow to EUR714 billion ($979 billion) in 2020.

PC and laptop mobile broadband will grow dramatically, from 215 million connections at the end of 2011 to 1.5 billion in 2020. By 2020 most PC/laptop broadband connections globally will be mobile, the firm suggests.

Wireless wide-area connected tablets and e-readers will grow from 66 million in 2011 to 230 million in 2020, as well.

Growth in handset data users will also be significant, with 3G+ devices set to grow from two billion at the end of 2011 to nine billion by 2020.

Machina Research forecasts that global mobile data traffic will increase from four

exabytes in 2011 to 42 exabytes in 2020, with 60 percent coming from PC/laptop connections and 37 percent from handsets.

Machina Research expects mobile network  operator data revenue to grow from EUR130 billion ($178 billion) in 2011 to almost EUR500 billion ($685 billion) in 2020.

The basic evolution is from data revenues based on text and email services to mobile data plans to support smart phones, to be followed by connected devices. Initially, connected devices will be tablets and similar devices such as e-readers, but sensor applications will grow over the longer term.

Facebook on a Mobile Without a Data Plan

Gemalto is offering feature phone users a way to use Facebook on their mobiles without buying a data plan. The service is not free. Instead, customers are charged a subscription of $1 for a day, $3 for a week, $9 for a month,  for unlimited access to "Facebook for SIM."

Millennials Most Responsive To Text Ads

GFK MRI has found that the Millennials (born between 1977 and 1994) are 57 percent more likely to recall seeing a text message ad on their mobile device, compared with the average mobile phone user. More importantly, they are 93 percent more likely to have responded to a text ad or made a purchase using text messaging.

Overall, the study found that about 6.2 percent of adults with a mobile phone had looked at an ad sent by SMS. In terms of response, 2.65 percent had used SMS to respond to an ad or make a purchase during the last 30 days.

Millennial Generation Is The Most Responsive To Text Ads

SMS and Email Marketing: Complementary Rather than Substitutes

There is some truth to the notion that text messaging campaigns are substitutes for email campaigns. There also is some truth to the notion that they are complementary.

The "personal" nature of text messaging and the high need for user opt in are key reasons why the channels mostly appeal to different types of retailer relationships. Text messages require some sort of pre-existing relationship. Perhaps email messages are supposed to require opt in as well, but frequently permission is more tacit than formally acknowledged.

A user that has opted in to receive SMS messages presumably already has significant interest in a particular product or retailer. Email messages can cover a wider range of consumers.

A Look at Teen Texting Behavior

Heavy Texters are Heavy Callers, Study Finds

Want a clue about which consumers, of whatever age, will be heavy text message users? Just look for users who are heavy voice users, a new study by the Pew Internet & American Life Project.

Heavy adult texters who send and receive more than 50 texts a day also tend to be heavy users of voice calling. Light texters, who exchange one to 10 texts a day, do not make up for less texting by calling more. Instead, they are light users of both calling and texting.

Texting by adults has increased over the past nine months from 65 percent of adults sending and receiving texts in September 2009 to 72 percent texting in May 2010. Still, adults do not send nearly the same number of texts per day as teens ages 12-17, who send and receive, on average, five times more texts per day than adult texters.

Adults who text typically send and receive a median of 10 texts a day; teens who text send and receive a median of 50 texts per day.

About five percent of all adult texters send more than 200 text messages a day or more than 6,000 texts a month. Fully 15 percent of teens ages 12 to 17, and 18 percent of adults ages 18 to 24 text message more than 200 messages a day, while just three percent of adults ages 25 to 29 do the same.

The average adult cell phone owner makes and receives around five voice calls a day. Women tend to make slightly fewer calls with their cell phones than men.

Men and women are equally likely to be represented at the extreme high end of callers, with eight percent of men and six percent of women making and taking more than 30 calls a day.

link to study

Facebook Message Congestion?

As is the case with Twitter, mobile users tend to receive many more Facebook, than text messages, in a month's time.

That might suggest more reliance on Facebook and Twitter for communication programs is a reasonable decision.

But it might also indicate the odds of getting noticed are much lower for Facebook or Twitter campaigns.

Twitter or Text? Clutter Might be a Factor

Twitter has emerged a huge generator of mobile messages, dwarfing text messages, for example.

That should convince some mobile marketers that Twitter is a channel they ought to be using.

Others will see too much "clutter" and might prefer text messaging as a channel.

But SMS remains a highly-personal medium where the risk of end user irritation is quite high.

Twitter might be a more congested channel, but the risk of end user irritation is far lower.

Orange UK Study: Women Send More Pictures; Men Watch More Video

Women send more multimedia messaging service (pictures) messages than men, as much as 48 percent more than men in some age groups, says Orange UK.

But 71 percent of all mobile TV clips have been purchased by men, Orange UK says.  Likewise,
75 percent of all mobile videos have been purchased by men.

Also, some 64 percent of customers using Orange social networking sites were men and 36 percent were women.

On average, iPhone customers use 165 megabytes of data per month. This compares to an average of 115 megabytes of data for other smartphone customers, says Orange UK.

Of these data points, the one which strikes me as being most important is the statistic about data consumption. Where a fixed broadband connection might represent scores of gigabytes worth of usage each month, a mobile broadband connection might represent perhaps a gigabyte or two.

The fact that iPhone users average about 165 megabytes is interesting in that it suggests smartphone devices, though far more numerous than PC dongles, represent an order of magnitude less bandwidth demand on the mobile networks than PC devices.

That could have implications for the marketing of mobile connections to replace landline connections, given that some fixed connections represent an order of magnitude greater load on a network than a mobile PC connection.

On the other hand, the spatial distribution of PC devices, compared to mobile phones, during peak hours of use, likely is quite different. It might also be the case that mobile PC connections get used much the same way as fixed connections, with peaks in the evening.

Since most mobile networks have spare capacity in the evenings, and since evening use is likely to be distributed over a much-wider area than rush-hour traffic, mobile dongle services might mesh relatively well with smartphone usage, in the same way that business use and consumer use of broadband tends to complement, rather than compete.

Send SMS Messages to Multiple Recipients Using Google Voice

One of the differences between email and texting, aside from the SMS character limitation, is sending a single message to multiple recipients. Google Voice now allows such multi-party text messages.

Users just click on the SMS button at the top of their Google Voice inboxes, enter names or numbers (separated by commas) in the "To" field, write messages and click "send."

Replies from each recipient are threaded into separate conversations, so users can keep track of them in their Google Voice inboxes. To prevent spam, Google sets a maximum of five recipients per message.

It's useful.

What Does Text Message Actually Cost a Heavy Teen User?

The frivolous answer to the question "what does text messaging cost a teenager" is "nothing," because a parent is paying. Perhaps a better way to phrase the question is "what does text messaging cost the parental unit paying for the service?"

Nielsen might have an answer. The research firm analyzes more than 40,000 mobile bills every month to determine what consumers actually are spending. The results suggest "staggering" levels of usage.

American teenagers are consuming 3,146 messages a month, which translates into more than 10 messages every hour of the month that they are not sleeping or in school.

Even the under-12 users aer sending 1,146 messages per month, which is almost four text messages per waking hour that they are not at school.

One thought you already should be having is that there is no way usage at that level is occurring on an "a la carte" basis. And you are right. Only a very small percentage of people who text message are doing so on a pay-as-you-go basis, which typically means a 20-cent per message rate.

Most users have buckets of usage. Because of that, most users are paying about one cent for each message.

From the first quarter of 2008 to the third quarter 2009, the effective price of a text message has decreased by 47 percent, in large part because so many users now are on unlimited or heavy texting plans.

Text Rules, Even for Older Users

A survey by Tekelec shows that text messaging, once seen as the main communications tool for teenagers and young adults, has become prevalent among older generations. The 500-person survey shows that 60 percent of users older than 45 are just as likely to use SMS as they were to make voice calls from their mobile.

That's perhaps not good news for voice usage but shows the value of text messaging plans. About 40 percent of female users say they "mainly text," rather than talk. About 30 percent of male respondents reported they are likely to text rather than call.

Text messaging also is catching up to e-mail as the preferred means of daily international communication, with 32 percent of responses across all ages preferring SMS, compared to 33 percent who prefer to use email.

So is the fact that text messaging is displacing some amount of voice a good thing for mobile service providers? Not entirely. More than 80 percent of mobile service provider revenue still is derived directly from voice, says Alan Pascoe, Tekelec senior manager.

"Of the remaining data piece, SMS has the largest chunk of revenue and the highest profitability," he says.  "Texting is particularly appealing for operators because nearly every subscriber can do it and networks have sufficient signaling bandwidth."

"Still, profitability isn’t quite keeping up with usage, thanks to all-you-can-eat plans, but operators can reduce costs with a more efficient SMS network infrastructure," Pascoe says.

Pascoe says Tekelec is not sure how much email volume is being displaced by texting. But as a general rule younger users are more comfortable with texting than older users and businesses still prefer email.

"A key reason is that an SMS message implies an urgent request, whereas email is typically less urgent," he says. "Personal communication often revolves around an immediate need, like making plans, so texting is the more natural approach outside of the office."

But email is also more conducive for business tasks like sending attachments, he adds.

So will text messaging ultimately be as "archivable" as email? Certainly operators are looking at a number of ways to "add value and stickiness to SMS offerings, including archiving," Pascoe says.

"The most common ideas we hear discussed are email-like functionalities: archiving, copying, forwarding, black and white lists and group distribution," says Pascoe. "The wild card for text message archiving demand is Google Voice, which allows subscribers to store SMS in Gmail instead of on their phones, keeping messages indefinitely."

"With Google providing this for free, it may be difficult for operators to generate revenue from it," Pascoe notes.

Person-to-person messages are the foundation of SMS, and will dominate for the foreseeable future, he thinks. "But the model is evolving so that growth is strongest for person-to-application, application-to-person and machine-to-machine communications."

40% Will Increase Email, Text Message Marketing Campaigns, Survey Finds

About 40 percent of email marketers surveyed in November 2009 by Silverpop say they will increase their email marketing budgets in 2010, while 47 percent said their budgets would stay the same.

In the coming year, more than half of survey respondents (52 percent) said increasing customer loyalty was a top email marketing goal.

But incremental revenue clearly is the top driver. Overall, 51 percent of respondents want to drive incremental revenue with their email program, while 65 percent of those with larger email budgets say that's their top goal in 2010.

"Inbox clutter" remains an issue for 37percent of respondents. That's an issue, but nothing like the opt in issues faced by users of text messaging campaigns, whose users often must pay "by the message" to receive them. Cluttering up an inbox is one thing, charging someone to receive your marketing message is far worse.

And social media is growing in important. About 84 percent or marketers plan to include social media into their email programs in the coming year, while 38 percent will add text messaging.

Marketers enjoying budget increases are even more likely to add these to their programs; About 89 percent of marketers will growing budgets say they will incorporate social media,  while 44 percent of respondents with growing budgets say they will add text message campaigns.

Email linked to popular social networks will work fine for PC-based users, but text messaging will be needed to reach mobile users on the go.

Is Twitter Traffic Falling?

More than one recent study has suggested that Twitter traffic is declining, after leveling off in the summer of 2009. But is it really? The answer is complicated.

According to Nielsen, traffic to Twitter.com was down a dramatic 27.8 percent between September and October 2009, falling to 18.9 million unique visitors.

Research firm comScore also noted that unique visitors were down 8.1 percent in October, while Compete reported a 2.1 percent decline.

Some might suggest the traffic decline is caused by falling interest in Twitter, while others suggest the traffic simply is caused by Twitter third-party applications and mobile access.

Crowd Science, for example, in August studied traffic patterns and found 43 percent of Twitter users accessed the service through third-party applications, and 19 percent using text messaging.

Personally, I'd bet on the use of third party apps and mobility as the explanation. Nielsen says the third quarter of 2009 was the first quarter in which more than half of mobile Internet users were accessing the Web using a smartphone, and since social network updates are a huge driver of smartphone usage, it stands to reason that traffic sources are changing.

Quick Messaging Phones Gain Favor Fast

While smartphones like Apple’s iPhone, the BlackBerry Storm, and T-Mobile’s Android-based MyTouch get all the attention, another category of mobile phones has quietly been accelerating its market share, says Forrester Research.

The quick messaging device offers a keyboard and, or touchscreen, providing much of the functionality of a smartphone but lacking the high-level operating system. Where a smartphone user likely is interested in email or mobile Web, a quick messaging user is text message centric.

At the start of 2008, seven percent of U.S. adult mobile subscribers owned a smartphone, while just one in 20 subscribers used a quick messaging device. A year later, more than one in 10 adult subscribers was using a smartphone, an impressive growth rate of 57 percent, but quick messaging devices grew nearly twice as fast and almost doubled their market share to nine percent.

In other words, quick messaging devices have nearly reached the level of smartphone penetration.

With all major operators expanding their quick messaging lineup and prices declining, these numbers are likely to continue in 2009, Forrester Research predicts.

For example, AT&T today offers more than 10 phones in this category, beginning at just $9.99
for the Motorola Karma when purchased online with a two-year contract. Verizon Wireless goes even further with the Samsung Intensity. Iit’s free with a two-year commitment, says Charles S. Golvin, Forrester Research analyst.

As you might guess, mobile subscribers ages 18 to 24 are nearly 50 percent more likely to own a quick messaging device than a smartphone.

Smartphones are most prevalent among subscribers ages 25 to 34, yet quick messaging devices are nearly as popular in this segment, and more than doubled their share in this group last year, says Golvin.

Quick messaging devices also appeal to a more mainstream audience. In terms of demographics and psychographics, quick messaging device users more closely resemble other mainstream mobile subscribers than do smartphone users.

While smartphone owners are overwhelmingly the male, well educated technology optimists that personify the early adopter, quick messaging device owners earn slightly less than the average subscriber and are more likely to be female.

More importantly for mobile operators, the quick messaging device owners spend a much higher percentage of their monthly income on mobile services than does the average subscriber.

Ttext messaging (SMS) is the driver. Some 70 percent of quick messaging device owners say they use SMS daily.

From a mobile operator's point of view, quick messaging customers are important because they are "mobile centric." Their traffic is much more likely to remain on the mobile network than to terminate on a landline and their communication is more likely to end up on another phone than on a PC.

More than 60 percent of quick messaging device owners use multimedia messaging (MMS), which most often exploits the phone’s camera and terminates on another mobile phone. For large operators like Verizon Wireless and AT&T in particular, this traffic is more likely to be “on-net,” which reduces their fees from interconnections with other operators.

Users with a quick messaging device are more likely to be primarily motivated by entertainment than the average mobile subscriber. Therefore, it’s no surprise that these subscribers are among the most avid purchasers of content for their mobile phone, says Golvin.

Nearly half of quick messaging device owners say they bought at least one form of content in the past six months, versus only one quarter of all subscribers.

"Heavy Texters" are a fast-growing mobile end user segment.

EU Caps International Text, Mobile Internet Access Rates

As expected, the European Union has mandated price caps for international text messages, Reuters reports. Charges will be capped at rates as much as 60 percent lower for travelers in the European Union. The caps take effect in July

Operators will be allowed to charge customers a maximum of 11 euro cents (14 U.S. cents) for each text message, excluding sales tax, compared with current prices of about 28 cents, when customers use their mobiles outside their home countries.

Buying a song using a mobile phone or using a laptop with a dongle or GSM card to access the Internet will cost a maximum of 1 euro per megabyte at the wholesale level, from about 1.68 euros today.

Price caps that were introduced in 2007 on roaming voice calls.

The rule has to be ratified by each member state.

Building an Ad-Supported Text Messaging Business

Many observers think communication service providers have got to create new revenue streams in partnership with business partners, rather than basing 100 percent of revenue on end users who pay for communication capabilities.

As always is the case for a developing business based on partnerships, partners will differ about the relative values they are bringing to the relationships, as well as relative revenue splits. Ad-supported text messaging campaigns are no different.

“For advertising-supported SMS, the net revenue per message is $0.004, and the carriers dispute this, but that’s the reality of the business,” says David Oberholzer, Limbo VP. “The model isn’t completely solid, and it’s unrealistic to think the CPMs (cost per thousand) we’ll be able to charge will go up dramatically, so it’s unrealistic for carriers trying to impose these types of per-message fees.

“Even relatively small carrier fees will drive out innovation to other platforms, and that’s already happening—look at all the advertising in iPhone apps,” he says. “If carriers raise costs, then that will be exacerbated.”

All of this will get worked out over time, but the issue illustrates the problem: a new and somewhat experimental new business requires nurturing and some degree of give and take between ecosystem partners.

at&t to Raise Text Messaging Rates

It appears at&t Wireless will be raising the prices it charges for casual sending and receiving of tex messages, though "bucket" prices remain unchanged. Effective at the end of March, the charge for text messages not part of a messaging bucket will be 20 cents.

For most of us, that means the buckets make even more sense. For light users, the move just shows how data services are becoming the revenue model for mobile services, with voice gradually declining in importance.

T-Mobile USA: Strong Quarter

Of the four largest U.S. mobile carriers, all but Sprint seem to be posting strong gains. T-Mobile USA says it had added 857,000 net new customers during its most-recent quarter. Average revenue per user also was up to $53 in the quarter, rom $52 in the third quarter of 2006.

Operating income was up 15.1 percent compared to the same quarter of 2006, while churn was down to 2.0 percent from 2.3 percent in the third quarter of 2006.

Contract customer net additions in the third quarter of 2007 made up 65 percent of customer growth, down from 80 percent in the second quarter of 2007 and 96 percent in the third quarter of 2006. Prepaid additions are the reason.

Contract customers represented 84 percent of T-Mobile USA's installed base.

Blended churn, including both contract and prepaid customers, was 2.9 percent in the third quarter of 2007, up from 2.7 percent in the second quarter of 2007 and down from three percent in the third quarter of 2006.

Blended ARPU was $53 in the third quarter of 2007, the same as the second quarter of 2007 and up from $52 in the third quarter of 2006.

Contract ARPU was $57 in the third quarter of 2007, the same as in the second quarter of 2007 and up from $56 in the third quarter of 2006, driven by increasing data services revenues.

Data services revenues were $666 million in the third quarter of 2007, representing 15.4 percent of blended ARPU, or $8.10 per customer, compared to 14.7 percent of blended ARPU, or $7.80 per customer in the second quarter of 2007, and 11.3 percent of blended ARPU, or $5.90 per customer in third quarter of 2006.

Text messaging still is the most significant driver increasing data ARPU. The total number of short message service and multimedia messaging service messages increased to almost 21 billion in the third quarter of 2007, compared to 18 billion in the second quarter of 2007 and 10 billion in the third quarter of 2006.