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Summary:

This week Apple unveiled iMessage, a feature that enables iOS users to exchange text messages and images without incurring carrier messaging charges. Despite headlines to the contrary, though, iMessage is not going to kill the cash cow that is SMS, for at least three reasons.

dagger

We’ve seen some eye-catching headlines in response to to Apple’s new iMessage, which enables iOS 5 users to send unlimited texts and other content to fellow users without incurring carrier charges. The biggest noise surrounding the service is that bloggers and industry insiders claim that SMS revenues “are going away” because iMessage “makes texting obsolete” and — for good measure — that “Apple has finally stuck a dagger into SMS.”

Don’t believe the hype. Let me be clear: I’d like to see SMS snuffed out, too, given the outrageous prices that carriers charge for transmissions that barely impact the network. (One blogger determined in a 2008 analysis that carriers charge roughly one cent for every byte of data in an SMS message when charged per message. At that rate, downloading a song would cost about $6,000.) And it appears there’s a lot to like about iMessage, from its integration with SMS (so messages are sent through the platform automatically and marked as such in the user interface) to the fact that it gives iPad and iPod touch owners another way of communicating on their devices. But iMessage won’t impact SMS usage and revenues much more than BlackBerry Messenger (which boasts 35 million users) has. With that in mind, let’s examine a few reasons why iMessage isn’t about to ring the death knell for SMS.

  1. It works only on iOS devices. Yes, there are more than 200 million iOS gadgets in use, but Apple’s mobile operating system accounts for a little less than one-fourth of the overall U.S. smartphone market, according to new data from ComScore. Smartphones are still outnumbered by feature phones in the U.S., so Apple’s share of the overall handset market is much smaller. And while smartphone users consume far more mobile data than their feature phone–toting counterparts, nearly everybody sends text messages.
  2. SMS is typically bundled. Service operators sell text messages to consumers in bulk or package them with voice services, so it’s highly unlikely that users who text often are paying 20 cents or so per message they send or receive. There are a few scenarios where iMessage could replace SMS — families or small businesses where everyone carries an iOS device, for example — but those cases are not as common. The vast majority of users will be highly unlikely to change their messaging plans.
  3. Carriers can tweak their SMS plans accordingly. As Sascha Segan at PCMag.com noted, carriers control the networks. So they could identify iMessage missives and count them as SMS if they choose to, or they could simply raise overall data charges for all users to offset any lost revenues.

For more thoughts on why iMessage doesn’t pose a mortal threat to the cash cow that is SMS, please see my weekly column at GigaOM Pro (subscription required).

Image courtesy Flickr user russeljsmith

  1. Here is 3 reasons why this article is a waste of space:

    1. No one said it is supposed to kill SMS
    2. SMS is *NOT* typically bundled. I know plenty of people (including iPhone users) who do not have SMS. At all.
    3. *WE* can tweak our SMS plans accordingly, and downgrade to lower number of allowed SMS messages.

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    1. 1) Actually, the first graph of this piece links to three posts that say iMessage will kill SMS.

      2) Both VZW and AT&T have consistently said that most customers buy SMS in bulk rather than pay per message.

      3) Carriers typically offer only two or three SMS plans, but yes, consumers can downgrade if they choose. But for the reasons cited here as well as in the longer piece at GigaOM Pro, I think very few will.

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      1. Your US-centric approach needs a reality check. A huge number of iOS users are not on an SMS bundle. Pay as you go plans or contracts with per-message pricing are more common internationally. Use the WWDC graph of iOS users who do not own a PC as a reminder about how different things are abroad.

        As for the argument about carriers identifying iMessages as SMS — baloney. The messages are encrypted and utilize the same communications channel as push notifications. In my opinion, any attempt at going down this route would be nothing less than a PR nightmare for carriers, plus the potential issues over their status as a plain carrier vs. technical/editorial/legal responsibility over network traffic once they start managing individual bits.

        Raising the price for data plans remains a possibility, but it is a very competitive market.

        I could see a number of US users taking stock of their bundle plans and deciding to go for per-message pricing instead of a bundle if it would fit them better. This should force carriers to reconsider their pricing.

        Speaking of pricing, few people are mentioning MMS. This is an example of a technology that is insanely overpriced, hard to configure, often impossible to read through other means than an idiotic web link (regardless of the capabilities of your handsets). It was effectively killed off by the carriers through sheer incompetence and has, in most markets, been replaced by email and mobile apps.

        Thanks for reinforcing my suspicion that subscribing to your “Pro” service would be a waste of money. This article was nothing more than a “you heard it here first” fart in a bathtub. Leave the analysis to somebody else.

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      2. 2) Both VZW and AT&T have consistently said that most customers buy SMS in bulk rather than pay per message.
        Any reference for this claim?
        3) Carriers can tweak their SMS plans accordingly. As Sascha Segan at PCMag.com noted, carriers control the networks. So they could identify iMessage missives and count them as SMS if they choose to, or they could simply raise overall data charges for all users to offset any lost revenues.
        This is crap. Carriers don’t and cannot do this. As long as you buy any kind of data plan you are pretty much free to choose the applications on it.

        Of all your reasons only the first has any sense. I guess even a kid could have come up with that.

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  2. Ralfy Papacino Wednesday, June 8, 2011

    Where’s the pic at the top of this article from?

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    1. We got the image from the Flickr account linked in the credit at the end of the piece, Ralfy. Looks like it was taken at the Berlin park Tiergarten.

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  3. Its not iMessage, but WhatsApp that will have a chance at killing off SMS. Its multi-platform (iOS, Blackberry, Android….), the app is free (iOS may cost $0.99) and it uses your existing data. I use it to communicate with my family/friends internationally. Installed base is fairly large in Asia at least and the best part is it uses your phone number as an ID so no need to create a new userid

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    1. Long-term maybe, but as was pointed out in the article feature phones still outnumber smartphones, so until smartphones are ubiquitous not even a multi-platform like WhatsApp could kills SMS.

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  4. Long distance texting is about to become ALOT cheaper. Currently Rogers charges .25/text for texts to the US.

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  5. I hope wireless carriers enjoyed their profit from years of extortion of their customers. They certainly didn’t improve network capacity as much as they lined their executives’ and shareholders’ wallets. iMessage is going over data, whether 3G or Wi-Fi, there’s no way they’re going to be counting that into that archaic text messaging infrastructure.

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  6. I like sms it’s cheap (unlimited txt with my contract) ubiquitous and just works. I’m not saying that I wouldn’t use iMessage but don’t think I want to get stuck in any more iSilos at the moment

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    1. You say: Sending SMS from your home to my home in Europe is free?? (for both: you AND me?) Cool ;-)

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  7. Gogle Voice allows its users to send text messages over data with no additional charge (other than the data useage), and it is cross platform. It has not seeemed to kill SMS, so I am not certain how much more successful iMessage will be at “killing” SMS.

    –Ken

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    1. Yep. I discuss Google Voice, WhatsApp (mentioned in a previous comment) and other third-party messaging offerings in the Pro piece. Thanks Ken.

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    2. Google Voice is U.S.-only… so nothing to talk about seriously.

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  8. It’s nice to read an article like this, which makes a lot more sense, after reading that fanboi B.S. known as MG at TechCrunch saying the exact opposite.

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  9. @Rorlig: From a 2009 Reuters piece: “From a 2009 Reuters piece: But the general counsels of both Verizon and AT&T argued that the price increases affected 1 percent of text messages sent because most consumers bought volume plans that lowered the per-message cost.” Here’s one of many links: http://gadgets.boingboing.net/2009/06/17/verizon-and-att-defe.html

    As for your other claim, identifying iMessage missives and counting them as texts would certainly be controversial and result in some consumer push-back. But it’s definitely possible and legal. Which is why there’s been so much talk lately about carriers adopting app-based pricing for data.

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    1. …so you are using this PR smoke & mirrors article to prove your point, when it’s a well known fact that telcos push SMS bundles on customers because they prefer to get a fixed monthly bill rather than one based on actual usage. The carriers are making a killing out of these plans, and use individual SMS pricing/usage scenarios to sell them.

      A sizable percentage of customers will start questioning their $20/mo plans when they realize they “never seem to send any SMS messages these days”.

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    2. > Which is why there’s been so much talk lately about carriers adopting app
      > based pricing for data.

      Could you provide a link to an article (such as the WSJ or NYT) about this topic that has allegedly generated “so much talk lately”? App-based pricing for data, really? You mean invasion of privacy (the carriers are soon going to be tracking what apps you are using on your smart phone)? I doubt the EU or U.S. governments would go for that. You seem to underestimate the role of governments as regulators in all of this and come across in your article and responses herein as if the carriers can do anything they want willy nilly.

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      1. Yes, Eddie. App-based pricing for data. Really.

        See this piece that my colleague Stacey Higginbotham wrote last December: http://gigaom.com/2010/12/14/mobile-operators-want-to-charge-based-on-time-and-apps/

        Dean Bubley has also written several pieces on the topic.

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  10. iMessage is a waste. I get the purpose of it, but it’s ridiculous to expect me to keep up with which brand of phone my friends use before choosing an information channel. I have an iPhone, but I’ll continue using SMS until a more open platform gets some adoption.

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    1. Right. You obviously haven’t tried iMessage. Read this this article:

      http://www.macrumors.com/2011/06/07/walkthrough-of-apples-imessages-in-ios-5/

      Some points:
      - The iOS Messages app will *automatically* send messages as data if both users have a capable device.
      - It comes factory installed, unlike WhatsApp/Skype/Google Voice etc. (And is actually easy to set up and use, unlike some other services.)
      - iPod touch and iPad users can message freely with iPhone users. Many iPod touch users are aspiring iPhone users.
      - It will almost certainly be available on the Mac, and if Apple’s work with FaceTime is anything to go by, it could be based on open standards and free to implement on other platforms. I read one article today that claimed iMessage is based on XMPP, which is the foundation of Jabber.

      Remember that the Apple Worldwide Developer Conference is still underway, and every detail of what’s going on there (apart from the keynote) is still secret. There is more information to come.

      Of course SMS isn’t going to die in the short term. Nobody, I repeat nobody, has claimed that. What people are commenting on is where the industry is headed, and this is a move I suspect will diminish the revenue from, and importance of, SMS over time.

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      1. Of course iMessage (like Google Voice, WhatsApp, Twitter, Facebook and countless other messaging options) “will diminish the revenue from, and importance of, SMS over time.” But that scenario is a very far cry from claims of iMessage sticking a dagger into SMS or rendering it obsolete, don’t you think?

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      2. I don’t know what’s worse:

        A) Writing a sensationalist clickbait headline claiming SMS is dead.
        B) Taking such headlines at face value in a shallow piece, imagining this will drive traffic to one’s own paid content service.
        C) Wasting time by posting to a forum where people haven’t tried the software, don’t see the major implications of removing the UI difference between an SMS and a chat message and know little about the industry — yet are never short on opinion.

        I guess I am the bigger idiot here.

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      3. Nicely articulated Snorre, thank you. I also agree with one of your previous comments herein, Snorre, about the author of this article having inherent deep U.S. bias.

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    2. Interestingly my SMS charges came down to exact 0€ after services like PingChat and WhatsApp started (although these are 3rd party apps).

      Inclusion/Merge of iMessage in the iOS is exactly the opposite of waste! You’d better start reading about the backgrounds of iMessage NOW….

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