We now know this for a fact, courtesy of analysts at Informa. As Europe’s digital chief, Neelie Kroes, greeted the news on Monday morning:

It's official: chat apps have overtaken SMS globally. The cash cow is dying. Time for telcos to wake up & smell the data coffee.—
Neelie Kroes (@NeelieKroesEU) April 29, 2013

Informa says 2012 saw nearly 19 billion messages sent over these apps each day around the world, versus 17.6 billion SMS messages. The analyst house reckons the contrast will be even starker in 2014, with 21 billion text messages projected, against almost 50 billion app-based messages.

As you will note, this suggests that SMS volumes will continue to increase, at least in the short term. Nonetheless, it is clear that the big growth is to be found in, er, the data coffee – spurred along by the likes of Nokia, which is now selling phones with dedicated WhatsApp keys.

However, things may not be as bleak for the mobile operators as they seem.

Hazy picture

First off, while the volumes of non-SMS messages has overtaken that of traditional texts, the user numbers remain significantly lower – although how much lower is a bit unclear.

According to Informa analyst Pamela Clark-Dickson, there were 3.5 billion SMS users in 2012. Regarding the chat apps, Clark-Dickson only took 6 into account, namely WhatsApp, BlackBerry Messenger, Viber, Nimbuzz, Apple’s iMessage and KakaoTalk. At the end of 2012, she said, there were 586.3 million users of these platforms, but that’s not taking into account other giants such as Facebook Messenger for Android (somewhere between 100-500 million installations) and China’s TenCent (around 300 million users).

Even if there were, let’s say, a billion chat app users, the disparity between message volume and user numbers shows that people who use these “over-the-top” (OTT) apps use them more frequently than those who use SMS – specifically, the average OTT app user sends 32.6 messages a day, and the average SMS user just 5 texts. This stands to reason because OTT apps are generally free to use, so we should therefore be wary of assuming that every OTT message represents a “lost” SMS from a revenue perspective, in much the same way as it’s illogical to claim that a free “pirated” song download represents a lost sale.

Those chat app users are probably also SMS users, because – for example – WhatsApp is of little use when you’re trying to message someone on a different platform (or someone with a basic dumbphone). There, SMS is and remains the great leveller: any mobile phone can use it. This is particularly important for some enterprises.

Whither Joyn?

And then we have a big unanswered question: even when SMS tails off, how big a chunk of the IP-based messaging market will the carriers themselves own?

Thing is, Informa’s analysis of the market does not include projections for Joyn, the industry-wide drive to create a common, interoperable messaging and file-sharing platform that works on all (or at least most) operators’ devices — Joyn has only just kicked off, so there are no real takeup figures from which to extrapolate. Precedent suggests that the mobile industry is incapable of acting in concert, but that doesn’t mean it can’t buck the trend when its back is against the wall.

“Mobile operators do have the opportunity to provide their own IP-based messaging applications,” Clark-Dickson noted.

And then we have services such as Telefonica’s Tu Go and Rogers’s One Number that extend traditional handset functionality onto the desktop. These services heavily blur the line between SMS and IP-based messaging – if the carriers can pull off this sort of thing while monetizing it in some way, what does it matter whether the medium used is technically SMS or something else?

Also don’t forget that carriers can build offerings around these third-party apps. For example, WhatsApp has partners with 3 Hong Kong and RCom, which sell flat-rate bundles specifically for WhatsApp use while at home or roaming. It may break the principle of net neutrality, but it’s a tactic some carriers are employing.

Either way, though, what’s clear is the speed at which all this is happening. The SMS is 20 years old and chat apps have only been around for around 5 years. Although we should take care when predicting the results, the trend of IP-based messaging replacing SMS certainly appears unstoppable.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Forecast: the converged mobile messaging market
• The future of mobile: a segment analysis by GigaOM Pro
• How carriers can fight “the death of SMS”

One thing that’s not clear is how many users are experiencing the problem — many times the status page will identify a percentage. Anecdotally, I know both me and some of my colleagues on the West Coast have had issues with iMessages sending as text messages and coming in out of order, and Twitter users from a variety of areas are complaining.

While some people may be moderately annoyed by a FaceTime outage, iMessage problems are another story. Messaging is one of the most popular and important features for mobile devices. Sure, text messages can be a backup, but people using iPad or an iPod touch without a data plan don’t have that option. And even for those with a cellular plan that comes with texting, some people are having those come in out of order (“it’s the worst,” a colleague informs me).

Any company can have a services or cloud outage — many do. But for Apple, a company with a history of problems with services and its cloud-based platform in general, today’s outage is yet another reminder of how much work it has to do.

Update: Apple’s systems status page shows that the issues with iMessage and FaceTime were resolved after just over five hours, at 5:20 p.m. PT.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Podcast: Mobile winners and losers in 2012 and what to expect in 2013
• Analyzing the wearable computing market
• A look back at mobile in Q1

On Wednesday, Apple revealed that it’s signed up 250 million users of its consumer cloud service in its first 15 months. That’s up from 190 million users announced during the previous quarter — Apple added more new users to iCloud (60 million) between October and December, than it sold iPhones (about 48 million). Whether everyone knows how to use iCloud and understands exactly what it does is mostly up in the air. But the iCloud is critical to Apple’s future: it handles more than a dozen core services for Apple devices, from email, Reminders, photo syncing, Documents in the Cloud, iTunes Match and much more.

Apple’s problems with its services are well-known. But CEO Tim Cook did his best to talk up their successes. He dropped a few numbers about the usage of these services across Apple’s iPad, iPhone, iPod and Mac lines:

• More than 2 billion iMessages sent per day
• 6 billion notifications sent per day
• GameCenter has more than 200 million users
• “Usage in maps is significantly higher than it was prior to iOS 6.” (Is he trying to say Apple Maps is more popular than Google Maps ever was? Seems hard to believe.)

Cook added that he “felt fantastic about how we’re doing” with these services.

That may come as a surprise to users affected by outages. But it’s a good sign that the company is also planning to build out capacity for these services. Apple said it would spend a rather astounding $10 billion in capital expenditures in 2013. Besides retail stores and manufacturing equipment, CFO Peter Oppenheimer said part of that spending would go toward “adding to our datacenter capabilities” to support the company’s online services: that means iCloud — which Apple built its $1 billion datacenter in North Carolina to handle — and also Apple’s current, and possibly future, software capabilities.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• The evolution of consumer-media cloud storage
• Controversy, courtrooms and the cloud in Q1
• CES 2012: a recap and analysis

Apple isn’t new to outages with its cloud products. Just last week a partial iCloud email outage affected just a little over 1 percent of Apple’s users, for which Apple apologized. There was another in late June that specifically concerned iMessage, and yet another in November 2011.

Even if the outages are brief and fixed relatively quickly, they can begin to pile up. iCloud is the centerpiece of Apple’s overall strategy — all of its devices are supposed to work together seamlessly and iCloud is a huge part of that pitch. Every time there’s an outage, the impression that Apple isn’t really on its game when it comes to cloud stuff persists. And that’s too bad, since one of the main points of spending so much on iCloud and building a credible cloud solution was to make people forget about MobileMe.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• The future of mobile: a segment analysis by GigaOM Pro
• How tomorrow’s mobile-centric data centers will look
• Analyzing the wearable computing market

Here’s a list of all the issues the update address:

It also appears the update may address battery life problems that cropped up for some MacBook owners after installing Mountain Lion.

Mountain Lion went on sale for $19.99 in late July, and is Apple’s first attempt to sell desktop software entirely through the Mac App Store. So far, it’s working well. The company announced that it had sold 3 million copies in the first 4 days. And likely because of the ease of downloading directly from the App Store, it was one of the fastest desktop software uptakes in Apple’s history: after two days it was already on 3.2 percent of Macs.

Users will be prompted to update automatically or you can find the update in the Mac App Store under Updates.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Siri: Say hello to the coming “invisible interface”
• Forecast: Tablet App Sales To Hit $8B by 2015
• How consumer media will change in 2013

• Apple became has been the most valuable public company by market capitalization for months. But, as MacRumors, noted today, it now has the distinction of being the most valuable publicly traded company of all time (not counting inflation) when its market cap hit $619.37 on Monday.
• In response to a security report last week that text messages aren’t completely secure, Apple tells Engadget that yes, SMS in general can be spoofed, and that for better security, users should please use iMessage instead.
• Asymco looks at the numbers and how the iPad is ramping up way quicker than the iPhone: “At the same point in time, and adjusting for seasonality the iPad is outselling the iPhone by a factor of 3 and the iPod touch by a factor of about 5.”
• AdvertisingAge examines what brought on the “hysterically negative reactions” to Apple’s “Genius” TV ads — and defends the intent of the ads.
• Is Apple readying for direct sales of Macs, iPhones and iPads in Russia? Russia Today reports on the signs that Apple is getting ready for such a move in 2013.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• A look back at mobile in Q1
• Defining the mobile wallet: what it is, why it matters
• Mobile Q2: Smartphone growth surges; iPad’s rule continues

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• 2012: Data, spectrum and the race to LTE
• Takeaways from mobile’s second quarter
• CES 2012: a recap and analysis

Let’s face it: SMS is a dinosaur. Except for the addition of basic multimedia through MMS, it’s hardly evolved in a decade. A rash of new mobile IP services have emerged to profit from SMS’s shortcomings: iMessage, BlackBerry Messenger, Google Chat and countless other IM and social networking apps. Not only do they offer more features and functions than SMS, they have the ultimate benefit of being free. Ovum estimated that, globally, operators missed out on $22.6 billion in SMS revenues in 2010 and 2011 as IP social messaging apps took over their traditional texting traffic.

The ironic thing is that operators could have lost much, much more. SMS traffic is still increasing despite the move to smartphones, and the reason is SMS has one ace in the hole: it works. I can send a text message to almost any mobile phone number in the world, and I’m virtually assured my intended recipient will receive it. Platforms like iMessage and Messenger require you to have an iOS or BlackBerry device. IM and social messaging services require you and your friends to have an account and their apps installed on your phones.

SMS has the added benefit of using the signaling channel of an operator’s network to transmit its payload, ensuring the message will go through no matter what network and what network conditions it traverses. IP services depend on having a decent data connection, which is hardly a given, no matter how far we’ve come with 3G and 4G.

Bridging the IP and SMS worlds

What Mavenir proposes is to combine the universality of SMS with the IP messaging features that SMS technology can’t support: live chat, group messaging, multimedia sharing, and network storage for shared files. But rather than tie the service to a particular device ecosystem like Apple or a particular account like Google, Mavenir’s Mobile Cloud Messenging (MCM) is tied to a phone number, just like SMS.

Mavenir’s platform isn’t standards based, which would normally be a big problem. It depends on operators running Mavenir’s network equipment and pre-installing Mavenir’s client on all devices. If your operator isn’t a Mavenir customer, then those richer features won’t work for you. At first glance, it seems Mavenir is asking us to substitute Apple’s proprietary solution for its own. But the beauty of Mavenir’s implementation is that it simply defaults to SMS and MMS if it doesn’t find its client or server at the other end of the message.

“We have enabled this whole interoperability with MMS and SMS on the backend,” VP of marketing Shubh Agarwal said. “You’re not restricted to talking to other customers on the carrier’s networks or phones with the MCM client. … It will simply use the SMS channel rather than the IP channel.”

Of course, all of those extra features go away if the message is forced onto the SMS channel, but the point is that MCM acts as a bridge between today’s new richer IP services and old reliable text messaging. Except for SMS forwarding and other gimmicky approaches to the technology, the two camps have always been isolated. MCM probably won’t stop the flood of users to free IM platforms, but by offering more features, operators could at least try to justify the SMS rates they’re charging.

Ideally, a platform like MCM becomes part of a standard, not a proprietary and closed system, and Shubh claimed that Mavenir has the exact same aim. The problem is the standards process is slow and unwieldy. The GSMA and many of the operators have backed a technology called Rich Communications Suite, which promises all of the features of MCM plus video chat and instant file sharing. RCS, however, requires a lot of network ingredients that will take operators years to find: LTE, moving voice and SMS over to LTE (or VoLTE), an overhaul of their core service delivery architectures (know as IMS), and the replacement of billions of phones’ SMS clients with RCS clients.

Shubh said Mavenir plans to integrate MCM with RCS standards as they emerge, and is already working heavily within the VoLTE standards space. But operators need to start moving SMS forward while waiting for those standard to become commercially viable, Shubh said. Otherwise, they’ll watch all of their SMS traffic disappear into the IP ether.

Disclosure: Mavenir Systems is backed by Alloy Ventures, which also backs GigaOmni Media, the parent company of GigaOM. Alloy’s Ammar Hanafi is on the board of both companies.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• How carriers can fight “the death of SMS”
• How social discovery is transforming entertainment
• Forecast: the converged mobile messaging market

If you’re not familiar with iChat, it’s Apple’s multiprotocol IM client that comes preinstalled on every new OS X computer. Users can enter AIM, me.com, Yahoo, Google Talk and Jabber account credentials to use those services, and they can sign in to more than one account at a time. Like Mail for OS X, it’s a flexible tool that can centralize much of a user’s IM-based communication needs.

Code discovered by developer John Heaton (via TUAW) in the most recent iOS update includes mentions to those services that iChat works with out of the box. Of course, Apple doesn’t yet let you sign in to IM services from AIM or Jabber natively on iOS devices, though there are a wealth of third-party options that do in the App Store.

Still, if Messages continues to grow into something that allows access to multiple IM services in one central location, in addition to text messaging and iMessage services, that will expand its usefulness quite a bit. Of course, I’m still hoping iMessage makes it to the desktop first, but this would be a nice small feature update for iOS sometime down the road.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• The evolution of consumer-media cloud storage
• Research In Motion: future scenarios for its fate
• A look back at mobile in Q1

According to OPTA, the total number of SMS sent in the Netherlands stood at 5.7 billion for the first six months of the year, down 2.5 percent from 5.9 billion in 2H 2010, even though total SMS revenue rose slightly (0.6 percent) to EUR378 million during the period.

This means that, for the first time, non-SMS data is now a more important segment for local operators than traditional messaging — in terms of both revenue and volume. Total data revenue grew 16 percent over the period to EUR405 million ($555.13 million USD), surpassing SMS revenue. In terms of volume (using a base measure of 1MB of data versus one SMS), data is now also larger than SMS, growing 24 percent to 5.9 billion (megabytes) in 1H 2011.

The loss of 200 million text messages by OPTA shouldn’t come as a surprise to carriers, as the proliferation of smartphones makes it far easier for customers to bypass text messages in favor of in-app communications with friends. It doesn’t help that the folks who are most likely to embrace texting are also those that are most likely to have a smartphone. According to Nielsen’s third quarter data, 62 percent of the 25-34 year old U.S. population have a smartphone and 50 percent of users in groups younger than that also have one.

The trend may be shaping up in Europe and Japan, but even in the U.S. the threat of losing the high margin texting revenue has prompted some changes. This year, AT&T changed its messaging plans to push new subscribers into an all-or-nothing price plan where they pay per text or pay up for unlimited. The bet is most people who weren’t on unlimited plans will find themselves paying more or getting stuck with insanely high bills for sending a few too many texts.

That’s how AT&T is squeezing out the last bit of value from its cash cow, but it’s undoubtedly aware that such draconian measures or too-high-rates on the unlimited side might push people over to the third-party apps even faster. The downside to most of those apps is that users have to make sure their friends are also on the service, which can be complicated. For carriers, the downside is they are trading high-margin texting revenue for barely profitable data use.

So expect more texting and data plan changes, and a continued focus on machine-to-machine communications, as well as more apps that try to make third-party messaging across different platforms easier. The irony is that carriers could implement a text messaging service easily in their new LTE networks, for a fee. The question is if that fee will be low enough (or the service valuable enough) to keep users from defecting to third-party “free” options that they get through their data plans.

Finally, as the future of SMS changes, it’s worth considering who might stick with paying for it a decade from now. Martin Sauter over at WirelessMoves says there may still be a market in his excellent post on the topic.

Perhaps SMS will become or remain an alternative for people who like privacy and services that don’t store and analyze messages for targeted advertising, building social graphs, etc. After all, unlike for web-based services for which users don’t pay anything and are in fact NOT the customer but only a source of information that can be monetized and on top give up some of their privacy, for the SMS service they might still be that: The customer, who pays for the service of sending and receiving messages, free from other needs of monetization such as selling information gained to third parties.

Ironically, as the world moves closer to free, carriers may find themselves marketing to an ever shrinking group of privacy-conscious people. Maybe that will make them think twice about becoming accomplices in government wiretapping?

Image courtesy of Flickr user bixentro.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Forecast: the converged mobile messaging market
• A look back at mobile in Q1
• Why iMessage won’t kill SMS