Operators need not fear auto-cannibalisation

As we’ve mentioned previously, mobile operators are facing a threat to profitability caused by changing demands from mobile users, but there are still ways to offset losses by monetizing unused network resources. Specifically, SMS offers virtually unlimited opportunities for increasing revenue from messaging traffic, as A2P (application-to-person) SMS keeps growing to become perhaps the best-utilized mobile marketing channel.

Person-to-person SMS traffic is on a steady decline as data-hungry smartphones and OTT apps become more widespread, lowering margins on SMS and reducing its uncontested profitability. However, A2P traffic, also often derisively called bulk SMS, is seeing a steady increase and resulting revenue is expected to level with P2P revenues by 2015. What is fascinating is that this revenue is to be derived from somewhere 15-20% of total SMS traffic!

Operators were once afraid of SMS commoditization. Their fears were justified as we now see SMS being bundled in prepaid and post-paid plans, given away practically for free as consumers turn to mobile data for their content consumption. But, people still love to text, as the meteoric rise of OTT players shows.

Joyn, the GSMA rich communications initiative, is the operators’ response to OTT players. But is it too late? If the adoption is widespread and the user experience uniform and satisfactory across platforms, then there is a fighting chance. The issue of auto-cannibalization, further eroding P2P SMS, is here a moot point. Joyn will eventually bring in revenue, albeit at the expense of P2P SMS, but otherwise, without Joyn, that revenue will go straight to OTTs, while SMS slips further down.

And then we get back to monetizing SMS. By relaxing their networks to accommodate more A2P SMS traffic, operators could see a significant increase in revenues. P2P SMS will never return to levels of either traffic or profitability it has enjoyed in the past, but SMS remains popular as a channel for delivering targeted information, just what marketers or brands are after. This is an opportunity for operators to cash in on the ubiquity and ease of use of SMS.

Not all operators are lucky enough to get Google to pay for its mobile data traffic – and that is more of an anomaly than an indicator of how things will be developing. Monetizing SMS is painless, simple and profitable, definitely requiring fewer resources than deploying Joyn and fighting for users’ mindshare.

With thanks to the Infobip Operator Partnerships Department for their invaluable assistance

Mar 28th, 2013
2 min read