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Summary:

[qi:006] Yesterday, the guys from eBuddy sent me a press release (pdf link) that made me wonder: With the rise of flat-rate data plans for feature-packed mobiles and the high-speed 3G network becoming commonplace, will mobile IM start to eat into the lucrative SMS business? The […]

[qi:006] Yesterday, the guys from eBuddy sent me a press release (pdf link) that made me wonder: With the rise of flat-rate data plans for feature-packed mobiles and the high-speed 3G network becoming commonplace, will mobile IM start to eat into the lucrative SMS business?

The data from eBuddy would suggest as much. The company claims that 5 million copies of their mobile IM client were downloaded in the first year the company made the software available. The company is processing a billion messages every month from two million unique monthly users. I am still not clear how it translates into big business, given mobile advertising is still in the early development phase.

eBuddy is quite popular in Europe, where 3G has become pervasive. This explains to some extent the heavy messaging reported by eBuddy. It is also an area where SMS charges are quite high, so it’s cheaper to use mobile IM than sending text messages. Mobile IM is a pretty hot market, with a bunch of players, such as OZ, trying to grab the brass ring. Nimbuzz is another recent entrant. Research analysts at Informa estimate the global market for mobile IM will hit $11 billion by 2011.

  1. Mobile IM and SMS are essentially the same thing from the point of view of the user – short messages that are delivered instantly. I think mobile IM would win because you can keep your identity even if you switch clients or even your phone numbers (carrier). Additionally the cost of IM’ing some one half way across the globe is same as IM’ing some one in the same city.

    Since mobile IM is just plain data to the mobile operator, I don’t see how you would be able to decide how much money it is making for the operator..

    Mobile IM just needs better and even built-in clients to increase adoption.

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  2. Mobile IM clients are already pretty good on blackberries. Google Talk and Blackberry Messenger are indispensible in my daily life. Also, IM is 1000x better than SMS because of its faster response and the benefit of knowing when someone is typing, etc. Frankly, it’s the reason I’m waiting to get an iPhone (well, that an that Opera Mini recreates the mobile web in a similar way to iPhone Safari).

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  3. Unless SMS begins to get cheaper, mobile IM will win. It is ridiculous that we are charged $20+ for unlimited SMS ,if available. With the rise of phones with browsers, mobile IM will be a more cost effective choice. Also – as mobile phone users get more comfortable with mobile email, short messages will just be delivered over email.

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  4. SMS has two things mobile IM doesn’t, interoperability and ubiquity.

    SMS is on essentially every cell phone. Mobile IM clients, not so much. If I want to send an sms to a friend, it doesn’t matter what handset they have or what software they’ve installed, I don’t need to know what carrier they use, I don’t need to know any of that. I send it to their cell number and they get it.

    Also; Data plan penetration in the US mainstream population (as opposed to the readers of GigaOm) is still very low.

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  5. but consider the price of SMS. the last time i did a back of an envelope calculation it costs over 750 bucks per MEGA BYTE for SMS.

    This is just obscene after all SMS is still JUST DATA.

    Id be very interested to hear how this cost can be justified.

    Regards,

    Jason

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  6. i don’t really see mobile IM eating it up, the carriers are also launching unlimited SMS bundles alongside their data plans and so these apps will live in harmony…a slew of mobile services are SMS-centric (e.g. twitter et al) and mobile im clients are not yet perfectly unified (e.g. like an adium or trillian including facebook IM integration)…perhaps a meebo for mobile (all clients, including blackberry)…?

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  7. Thought-provoking post Om. At EQO, we’re also seeing rapid adoption of mobile IM in our user base (~2 million in 200 countries). At the moment, it doesn’t seem like mobile IM is eating into the SMS business. While SMS is entirely mobile to mobile, most of our mobile IM users are chatting with their buddies on their PCs. This might just be a critical mass issue since mobile IM is still pretty early in its adoption and most IM users are accessing it via the PC.

    Just to share some of our own stats though on the popularity of mobile IM:
    - Worldwide, MSN is the most accessed IM network, leading by a margin of 2:1 over Yahoo
    - Accessing Yahoo from the mobile is big in markets like South Africa, Japan, India, Indonesia and Saudi Arabia. In the US, AIM leads with about 35%, Yahoo and MSN each have 25% and GTalk has 15%
    - Peak usage for mobile IM occurs in the day time (between 11am and 4pm) with a secondary peak during “bar hours” between 8 and 11pm.

    As an interesting parallel, I recall a study that BT did many, many years ago where they measured the impact of IM on their voice business, fearing that IM could eventually erode voice. In fact, what they found was that one in every three IM conversations resulted in a phone call. While it’s not exactly the same, I anticipate that IM will prove to be complementary to SMS rather than cannibalistic. After all, they are very different forms of communicating.

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  8. “Obscene” is the right word for the cost of sms in the US. Carriers in the US are competing to see who can deliver the most expensive sms. It is cheaper to call and talk, than to send an sms. It’s almost like they are asking for a class-action suit. Who would want to use sms if they have the choice of using IM? Not me!

    In the short term sms and IM will co-exist. As data phones get cheaper and more ubiquitous, less and less people will use sms. Eventually, sms will fade away.

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  9. There are so many things that frustrate me about SMS; mostly the fact that U.S. mobile providers gauge us all to use it. SMS has become & continues to be such a profitable service for U.S. mobile operators. Not to mention the regulation surrounding running an actual service over SMS. The costs for a business to lease a SMS short code & find a SMS aggregator/gateway to service that short code are ridiculously expensive too.

    I ran some pricing a few months ago across three major SMS aggregators/gateways & it was going to cost $40K to $50K a year for us to run at a minimum 5,000 messages a month. Then you have to cross your fingers that the mobile providers will even allow you to run your application over their network & you are at the mercy of them cutting your short code off for service at any moment. Remember when PayPal was cut-off from AT&T’s over a year ago?

    I downloaded eBuddy for the first time 6 months ago & for the 15 to 30 minutes I was online I did enjoy chatting & not paying the ridiculous costs for an SMS message. At the same time, I realized very quickly that IMing on the mobile phone required me to keep eBuddy open & unless I was actively using eBuddy my IM contact couldn’t reach me. That’s one advantage that SMS does have over IM chat for the mobile. Another is that even if I turn my phone off or go out of range my SMS messages are queued & delivered to me when I turn my mobile back on or come back into range. Lastly, when you log into IM chat (unless you login as “invisible”) you risk receiving multiple chats from multiple IM contacts & that’s tough to keep up with on a mobile phone’s interface.

    The long & short of my thoughts are that SMS is over priced & until interfaces are cleaned up for mobile IM chat I’m going to continue using SMS & continue making the point that mobile operators *need* to reduce the costs associated with SMS for both consumers & businesses.

    BK

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  10. Agree with Bill from EQO. There is a fundamental difference between SMS and Mobile IM:

    1. You can’t send and SMS to a computer

    2. You can’t send an IM to a phone (in general)

    I think mobile IM primarily provide access to your IM friend from a mobile device and I think everyone with insight knows that this usage can be very high. At Heysan we’re seeing consistent session times of about half an hour/session from a mobile device – across our hundreds of thousands of users. There is a real need for simple accessible mobile im services.

    What will happen with SMS? In my opinion it will become a notification channel for other mobile services, just like email became for facebook or SMS is for facebook/myspace today. That takes the real advantage of SMS but leave the rest for better technologies.

    Gustaf

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