SMS Comes of Age | TeleSign
London, United Kingdom

Put on a silly hat. Blow out a few candles. Make a wish. Open your presents. As of 3rd December 2013, SMS – the Short Message Service – or ‘texting’ to a lot of us – is officially 21 years old.

Today, in 1992, the message “Merry Christmas” was sent by engineer Neil Papworth from a PC to Richard Jarvis’s 2.1kg Orbitel 901 ‘transportable’ cellphone, via Vodafone’s UK network.

Initial barriers to its greater adoption included insufficient native support for SMS in handsets, difficulties with setting up a fraud-proof billing system, and a lack of interoperability between mobile operators. But once these problems had been ironed out, SMS took off, especially among the value-conscious youth market, and ten years later more than 250 billion messages were sent around the world.

Despite fears that free OTT (Over-the-Top) messaging apps will spoil the party for SMS, Portio Research confidently predicts that in 2013 worldwide SMS messages will top 8.16 trillion for the year. According to the Guardian, more than 4 billion people send text messages – that’s more users than Facebook, Twitter and LinkedIn combined. And the trend is set to continue. SMS clocked up 40 trillion messages in its first 20 years. And it’s due to notch up its second 40 trillion by 2017, by which time it’ll be 25.

Admittedly, markets like the Netherlands, Spain, China, South Korea and the Philippines have all seen a decline in SMS traffic and revenues. Back in April, Informa Telecoms & Media announced that instant messaging on chat apps had overtaken the traditional SMS text message for the very first time. In 2012 almost 19 billion messages per day had been sent by OTT apps, compared with 17.6 billion daily SMS texts. One research firm estimated that operators had lost more than $23 billion in SMS revenue in 2012 as a result.

But that’s far from the big picture. On a global scale, Portio Research estimates that smartphones account for just 1 in 6 of handsets in use. On the year that SMS reaches its majority, the majority still use feature phones. Even in North America, these still account for half the subscriber base, especially as starter phones among young people aged 13-24, the very people that text the most. Throughout the Asia Pacific region, Africa, the Middle East and Latin America, SMS traffic and revenues are forecast to continue growing, year after year, to the end of 2016, even if globally they are expected to start declining after that. By using SMS, WAP (Wireless Application Protocol), XHTML (Extensible Hypertext Markup Language), or USSD (Unstructured Supplementary Service Data), mobile operators can ensure that feature phone users can still connect to the web, access social media, and enjoy the extra services they would normally only get with OTT messaging apps.

Like a wayward teenager, once distracted by friends, fun and chat, now that it’s 21, SMS is having to settle down, grow up, and get more business-minded. And that’s the point. Even though in mature markets, P2P (Person-to-Person) SMS traffic is expected to start “slowly rolling down a hill” – in one analyst’s words (as opposed to “dropping off a cliff”) – enterprise or A2P (Application-to-Person) SMS is just getting started.

Ovum predicts a ‘golden age’ for A2P SMS from 2013 to 2017, with a growth rate of 6% CAGR (Compound Annual Growth Rate). In fact, ABI Research estimates that in just four years total enterprise messaging will nearly double. From 345 billion messages sent in 2011, to more than 643 billion in 2015. The most important sectors they identify are, from the top, social networking, retail & brands, business services, travel & hospitality, and retail banking & financial services. Especially in North America, Asia Pacific and Latin America. A market estimated to be worth $70.1 billion by 2016.

In all these areas, the importance of mobile identity has never been greater. As we’ve often quoted, Coca-Cola’s Tom Daly famously declared that for mobile SMS was still “job #1…the workhorse of the mobile marketing campaign”. Well, in our view, SMS is just as essential a channel for mission-critical verification and alert messaging. (In fact, the importance of alerts has recently been demonstrated by research estimating that, on average, 31% of appointments and deliveries are missed, at a cost of £238 per failure.) When message delivery counts, the ubiquitous cross-platform nature of SMS wins over the fragmented coverage of OTT messaging apps every time.

If SMS is to survive into adulthood, operators need to protect the value of enterprise messaging by not allowing channels to be filled up with low-quality traffic. We expect to see greater use of firewalls and sophisticated filtering by operators to block this type of messaging, closing down gray routes and only allowing enterprise messaging traffic through, for which they are properly compensated. This also protects the end user by minimising the transmission of spam and fraud, which only serve to devalue the whole SMS channel.

Instead of adopting the ‘dumb pipes’ role, and allowing the OTT players to cannibalise their revenue, operators need to take advantage of their superior infrastructure and coverage, especially in developed markets. They have a number of options to choose from. They can adopt the GSMA’s RCS-e (Rich Communications Suite) platform, joyn, even though some commentators are of the opinion this is a case of too little, too late. They can look at offering free IP-based messaging services of their own. They can partner with OTT players on a revenue sharing model. Or they can add value to basic SMS by incorporating features that presently make the OTT offerings so attractive to the user, like MMS (Multimedia Messaging Service), IM (Instant Messsaging), file transfer, status sharing, group chat and video share.

This way, in 2022, we’ll be celebrating as SMS reaches its 30th birthday. Not mourning the passing of a youngster that promised so much, but ultimately failed to deliver. This is the time for SMS to do as Mohammed Ali once did, and “Rumble, Young Man, Rumble”.

GET STARTED WITH TELESIGN

Integrate our products seamlessly into your user experience.
TALK TO AN EXPERT