SMS Revenue Not As Guaranteed As Death And Taxes
By Mike Masnick, Wed Jun 01 22:30:00 GMT 2005

While mobile operators try all sorts of new ventures to get more money out of people, it's worth noting that the old data standby of SMS might not be around forever as a revenue generator.

In the last year or so, it often seemed like mobile operators had started to take voice communication for granted -- despite being the core of the business for so many years. Instead, everything was about data, data and more data. Much of this, of course, was set off by the accidental success of SMS for widespread communications, leading to a surprise revenue source for operators.

With the continued focus on always growing ARPU, though, many operators are starting to take SMS for granted, and have moved onto newer sources of revenue such as the bubble-like ringtone market and the highly speculative mobile video market. SMS is acting as something of a "cash cow" for mobile data -- the old reliable source of revenue -- while operators go out and look for the next big thing. However, if they're not careful that SMS revenue could start to go away as well. New research is predicting that SMS revenue may have reached a plateau and could start trending downwards, as various instant messaging platforms make more serious moves into the mobile space -- at much cheaper prices.

Of course, there seems to be little to back up this prediction, other than the fact that the various IM platforms have been making more efforts to enter the mobile market. That's not new -- nor are the difficulties they've faced with incompatible systems and uncooperative operators. SMS is still quite entrenched, and it certainly seems unlikely to disappear anytime soon. However, operators still need to be aware that there are competitors and there are eventual risks that those offerings could be quite compelling.

One way to avoid this threat is to move further towards offering flat-rate pricing that includes messaging. In doing so, the messaging part is looked up on as being "free," and there's less incentive to look for messaging alternatives. Another, is to focus more on developing SMS as a platform for additional applications and services. This is already starting with various premium SMS offerings, but it needs to go further to differentiate SMS as a platform from basic text messaging. Either way, though, operators who think their SMS revenue is secure probably need to start thinking again.