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The tech industry attracts the worst kind of futurists, Clayton Christensen-quoting types who behold shifting paradigms, looming inflection points and disruptive innovations everywhere they look.

The futurism business is so competitive these days that technologies get declared dying at the very moment they are actually peaking. In monarchy terms, that’s like preparing to crown the boy prince when the reigning king is a hale and hearty 40-something.

So it goes with text messaging, aka SMS. Nobody disputes that SMS  is the king of mobile communications today. 7.8 trillion SMS messages were sent last year, according to Portio Research. Another firm, Informa, counted 5.9 trillion text messages worldwide last year, comprising 64% of mobile messaging traffic. You also have research showing that in developed countries, texting has just become more popular than voice calling.

Not only is SMS on top, but it’s still growing substantially. Portio predicted earlier this year that it will increase 23% this year to 9.6 trillion SMS messages.

According to Portio: “SMS is not dead. SMS is still the king and will remain so for some time to come.”

Yet, many experts have already declared the death of SMS. Consumers don’t care – they’re too busy texting. And some companies are reaping the marketing benefits (see Mobile Marketer for more North American case studies and Sybase 365 for the rest of the world).

But too many companies are being persuaded not to invest in SMS or its picture/video-enabled sibling, MMS, in favor of building native apps, or waiting to see what the mobile IM services or Twitter or even fast-rising ‘free’ Over-The-Top (OTT) services like WhatsApp.

I understand that there is a consumer desire for a cheaper alternative to SMS. But I think that companies waiting for the death of SMS will wait for a lot longer than they expect. In the meantime, there will be huge costs, in the form of blown opportunities to exploit the right-time, contextual marketing capabilities of mobile today.

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As much as I’m a champion of apps, they remain largely a first-world phenomenon. Globally, smartphones that can run apps were outsold by featurephones by 2:1 last year.

The research firm mobiThinking estimated earlier this year that based on the 6 billion mobile subscriptions and the roughly 1 billion smartphones sold in the last 3 years, at most only 16% of mobile phones in use worldwide today are app-enabled. AT MOST.

“The media tends to overegg the importance of smartphones and Apple in particular,” wrote MobiThinking. But “businesses that ignore featurephone customers do so at their peril.”

Put another way: “If you’re a major global brand and all you use are apps for marketing, you’ll miss out on 70-80% of your customers,” Howard Stevens, a senior vice-president at SAP division, Sybase 365, told me in a recent interview.

Stevens, of course, has a horse in this race. Sybase 365 is the largest independent carrier of mobile messaging, processing more than 2 billion messages, mostly SMS, per day. It also provides back-end services for enterprise marketing and communications, such as real-time alerts, interactive polls, banking and coupons – all via SMS. But I think his advice is solid:

– “Even those [consumers] who have smartphones, there’s no guarantee they have or will download your app.”

– “I don’t believe it’s apps versus SMS. You need to have all channels covered. You can’t do it all with in-app notifications. The only truly ubiquitous form of communication is voice or messaging, and SMS is the most prevalent.”

FaceBook, which is often touted as one of the OTT players that will kill SMS, evidently agrees with Stevens. Last week, it added the ability to send and receive text messages from its FaceBook Messenger app for iPhone and Android.

What Does The Future Hold?

Admittedly, there are a ton of OTT players that are vying to beat SMS, including: traditional instant messaging services like Yahoo Messenger or AOL, BlackBerry Messenger (BBM), VoIP services like Skype, Apple’s iMessage, FaceBook, Twitter and, most formidably today, WhatsApp.

The free WhatsApp, unlike BBM and iMessage, is not restricted to particular brands of devices. And its fast rise – it carries 10 billion+ messages a day, up from 1 billion 10 months ago – means it is nearly half the popularity of SMS today.  

There are several things, though, that should make you wonder how sustainable this growth is. For one, these services are all fragmented. I don’t see that changing anytime soon – can you imagine iMessage and Microsoft’s Skype suddenly interconnecting?

Also, OTT services generally rely on users having a smartphone with a pricey mobile data plan. For many consumers (though not readers of this blog), that all-you-can-text package may seem like a better option. And smartphones remain outnumbered by featurephones 5:1 worldwide.

Also, the use of mainstream IP networks by OTT players can leave them more vulnerable to outages and delayed messages than SMS.

Finally, while these services are free, some – namely Twitter and WhatsApp – will need to figure out a way to make money. Starting to charge consumers could cause a sudden halt or reversal in their popularity.

Even if SMS is no longer dominant half a decade from now, it will still probably the largest player. Informa, for instance, thinks SMS traffic will grow 60% between 2011-2016, and hold 42% of the market.

Bottom line: Companies thinking about their marketing and communications strategies should consider SMS an important part of the mix for many years to come.

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5 Comments

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  1. Stephen Johannes

    Eric,

    Great article, however do you know if SAP ever plans on utilizing the deep technical expertise of sybase365 to allow the Netweaver Stack to talk SMPP or utilize via SOA the services of sybase365.  Right now if I’m a traditional SAP ERP/CRM customer that would want to build a m-commerce solution that allows for SMS there is no way beyond pure custom development through the Netweaver stack to even connect this data via SMS.  I was hoping that the sybase acquistion would allow SAP to fix the blaring gap in the Netweaver stack when it comes to SMS.  I don’t think Netweaver Stack needs full fledge SMS management tools, but interfacing with sybase365 would require a lot of technical work from the traditional SAP backend systems based on Netweaver.

    The other problem that you did not mention is that part of the reason why SMS did not take off like mobile application is the process surrounding short code provisioning.  This process is expensive and painful to get a shortcode provision that will reach all carriers even within the same country.  It would be interesting to see how someone could utilize sybase365 and their existing SAP CRM solutions to handle mobile marketing campaigns.

    Take care,

    Stephen

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    1. Eric Lai Post author

      Stephen – those are great, focused questions. Broadly speaking, I know our roadmap is to connect our back-end systems like ERP or Hana to the Mobiliser platform. In fact, there will be an announcement early next week in the retail space that I think brings these elements together.

      On your specific question re: Netweaver, I don’t know. I’m going to ping some people to see if they can weigh in and also on the short code provisioning ?…cheers

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      1. Stephen Johannes

        That sounds great, as companies like amazon and Papa Johns experimented with SMS ordering but I don’t think it really caught on in the US.  I personally think a lot of the issues with SMS surrounds the short code provision and the carriers and thus platforms where the carriers have far less control(mobile apps) tend to thrive better.

        I understand why the carriers are so stringent when it comes to premium SMS services, but they seem to still have death grip on non-premium SMS due to the fact they charge an arm and leg in many cases per SMS message sent under non-bulk plans.

        Take care,

        Stepehn

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  2. William Dudley

    First Off, Eric — great blog post!.  I fully agree with everything you say.

    Short code provisioning is independent of any system – front end or backend – especially for the USA.   Each Tier 1 operator must “approve” each campaign – whether premium or not – but I will say that premium is becoming less and less relevant.  Each MNO has its own capability for submitting short codes – and I agree – it is not cheap or easy; however, once past this difficult step, the ability to leverage that short code for your brand / enterprise is unparalleled.   

    Regarding OTT apps – especially those that do not inter-work with SMS – do not have the ability to interact with short codes.  In fact, most SMS-compatible OTT providers also don’t have this capability (yet) – so for now, that is one for the operator-provided SMS service.  Other OTT apps are simply “closed communities” and I include WhatsApp in that community.  WhatsApp is appallingly unsecure.

    SMS is simply a channel and, in fact, when used with other mobile channels (including apps with push notifications), that provides the best of all worlds for brands & enterprises. 

    SMS via short codes is, in fact, very prevalent, with tens of thousands of short codes in use for every subject, imaginable.  They are consumer-friendly and quite easy to get approved.  Yes, there are rules and best practices (set by the Mobile Marketing Association or MMA) that are rigorously enforced by carriers, by 365 — not only in the USA — but around the world.  And yes, there are those that will abuse the SMS channel with SPAM — something that we at 365 are actively combating as well as enforcing MMA regulations.  Integrating SMS is more than just backend connection – it should be part of a comprehensive mobile campaign that should include multiple channels to reach today’s consumer. 

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