New estimates from Ovum indicate that consumers’ increasing use of IP-based social messaging services on their smartphones cost telecom operators $8.7bn in lost SMS revenues in 2010, and $13.9bn in 2011.
In a new report, the independent technology analyst reveals that it expects the decline, representing nearly 6% of total messaging revenue in 2010 and 9% in 2011, to continue as the popularity of messaging apps continues to grow. Ovum warns operators to rework their legacy services if they want to secure their future position in the messaging market.
“Social messaging has disrupted traditional services, and operators’ revenues in this area will come under increasing pressure,” says Neha Dharia, consumer analyst at Ovum and author of the report. “Tapping into the creativity of app developers, forming industry-wide collaborations, and leveraging their usage data and strong relationships with subscribers are the key ways for operators to ensure that they hold their ground in the messaging market.”
However, despite the threat to messaging revenues, Ovum believes that the strong presence of social messaging should be looked upon as an opportunity. “This threat will drive telcos to consider alternative sources of revenue, such as mobile broadband. And now the market has been tested, operators know what types of messaging services work,” comments Dharia.
“In addition, operators are in a position of strength because they control the entire messaging structure through their access to the user’s phone number and usage data. The established billing relationship is a great advantage, as is the fact that operators control to a great extent the services to which the user is exposed.”
However, offering innovative messaging services and aligning revenue schemes with models in the social world will not be enough to win the battle against social messaging. Industry-wide collaboration and co-operation will be the key to growth in the messaging realm.
“Operators must remain open to partnering with app developers, sharing end-user data with them and allowing integration with the user’s social connections. Working closely with handset vendors will also be important; they control some of the most popular social messaging apps, and can also provide preloaded applications. The most important factor, however, will be co-operation between telcos. They are no longer competing merely among themselves, but must work together to face the challenge from the major Internet players,” concludes Dharia.