Twitter SMS fees: Ev responds

Twitter SMS fees: Ev responds

Summary: Twitter founders Ev Williams and Biz Stone quickly quashed my suggestion last night that the service gets a cut from the fees users are charged for receiving text messages. Good for them. But that's a lot of money Twitter is leaving on the table.

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Evan Williams and Biz Stone of Obvious Corp very promptly and properly responded to my posting last night on How does Twitter not make money? in which I reported that some Twitter users had been surprised by big phone bills for their SMS messaging. I added that I'd be "astonished" if Twitter wasn't getting a cut of those SMS fees. In a posting Biz made to the Twitter blog, which Ev reposted here as a TalkBack comment, the Twitter duo firmly quashed that suggestion:

"Phil also floats the idea that Twitter somehow earns money from your texting while in fact the opposite is true. We've negotiated for good bulk rates but we still pay for this SMS traffic just like we pay for storage, hosting, employee salaries, Odwalla bars, tea, the occasional team lunch, and all the other parts of running Twitter at Obvious HQ."

It's great to have that confirmed so unambiguously, and I also applaud their commitment to "scour the site and see if there aren't some more prominent places we can make sure folks are aware" of the potential costs of Twitter texting. Even though Twitter isn't responsible for those costs and makes no money from them, there's still a moral duty to make sure users are fully aware of the charges they could incur.

Now that Twitter's innocence is established, the cellular networks can be seen as the clear villains of the piece. They are making handsome profits from Twitter's SMS users. Cellular subscribers typically pay 10 to 15c for any message beyond the monthly total included in their calling plan. Even if they sign up for a high-volume plan, at say $15 per month for 1500 texts, that's still 1c per message. With a maximum 140 characters per message, that grosses up to a $75 per megabyte charge [UPDATE: a 7314% markup, says The Consumerist].

One can only guess at how much Twitter is generating in revenues for the networks. Twitter is currently getting 70000 messages posted to its site a day, and many of them are distributed to large numbers of subscribers, so even if each message earns the networks 2c or less, that still adds up to thousands of dollars per day. We don't know how much of that usage is incremental and how much is already paid for on people's existing subscriber packages, but however you look at it, Twitter is leaving a lot of money on the table by not taking a cut of those fees.

So here's the interesting question: Will the networks see sense and cut a deal with Twitter to maximize SMS usage by, for example, letting Twitter sell plan upgrades to its users in return for a cut of the revenues? Twitter would look good to users by helping them minimize their texting costs, and the networks would get more income from subscribers as well as better returns on their investment in SMS circuits. They would also find a leap in innovation on the back of Twitter's newly extended API, which would lead to even more SMS takeup. Twitter's future would be assured with a solid revenue model established.

Or will the networks act defensively, interpreting Twitter's API as a threat to their existing shortcodes revenue streams (see yesterday's post for more on this)? Unfortunately, the telecoms industry doesn't have a good track record of encouraging innovation and new entrants, especially when it relates to the Internet.

Topic: Social Enterprise

Phil Wainewright

About Phil Wainewright

Since 1998, Phil Wainewright has been a thought leader in cloud computing as a blogger, analyst and consultant.

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11 comments
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  • Why are providers charging for SMS [i]at all?[/i]

    Text messages are miniscule -- and I mean [i]infinitessimal[/i] -- compared to the amount of data moved in a voice call. Every time a user sends a text message they're doing the provider a real favor by drastically reducing the bandwith they use. Service providers respond to this by charging a premium for the messages. Even a penny per SMS is outrageous considering that the users already paying for much more than that in terms of voice traffic.

    It's simply silly for users to pay this premium, and it's silly for them to use services that demand this premium.

    [b]SMS sucks.[/b] End of story. TALK, people.
    dave.leigh@...
    • sms for free

      Yes why not make voice free, txt message free, anything else you want to make for free

      What do you do for a living by the way that should be free too.

      Arun
      inamobile
      • Pay attention.

        (sarcasm)
        [b][i]Yes why not make voice free, txt message free, anything else you want to make for free[/i][/b]
        {/sarcasm)

        Next time try responding to what I actually said instead of what you [i]wish[/i] I said.

        You're already paying for the bandwidth. With text messaging charges, you're paying an [i]additional premium[/i] for using [i]less bandwith.[/i] It's like paying MacDonald's 50 cents extra [i]not[/i] to supersize your meal.

        If that sounds like an equitable deal to you then you're the mark every con man dreams of. No doubt you already owe someone $50 for not having sold you a bridge.
        dave.leigh@...
        • response

          I read what you said, there is a difference in being a con ie me buying a bridge that they did not sell, and charging a premium, on something that is actually real, if they charged you for an sms that the receipient did not receive then that is a con.

          They charge for it because they can, and that is what capitalism is about!SMS is a service not just the technology you are charging for the service! Sms service delivery currently is much improved even in the last twelve months, and amazingly this improvement was not free.


          br

          Arun
          inamobile
          • Ignorance is bliss.

            By the same token, I refuse to pay for it because I can, and because it's overpriced. They are charging you [i]more[/i] for [i]less.[/i] You can twist your brain into any shape you like to justify it, but that doesn't change the fact that you're being ripped off. But at least you're happy about it.
            dave.leigh@...
          • But is Less More?

            SMS defenders primarily argue using Text over voice for getting a message across concisely, esp. when a reply is not needed. "Meet you at Gate G". You can also 'get away' with texting at work/class more than you can a voice call. Many people hate long conversations when the communicator could have said something in two words but instead takes 4 minutes to tell a long story. So less is more sometimes.

            Albeit the practice gives us more of a reason to hide in shells and not congregate or have genuine fellowship and share experiences.

            It's 'cool' right now to text, and we all choose to follow or not to follow.

            BTW, http://twitter.com/jameshueston
            jameshueston@...
  • Welcome to Mobile Marketing

    "Even though Twitter isn't responsible for those costs and makes no money from them, there's still a moral duty to make sure users are fully aware of the charges they could incur."

    In some parts of Europe (where SMS is much more prevalent I understand) this is a legal obligation, not just a moral duty.

    I'm not sure if it's the same in the US, but SMS charges are always incurred for sending, not receiving. So Twitter would not make any money for sending thousands of messages out - it would in fact cost them thousands. I'd be interested to know how they intend paying for that. The ratio between users sending (i.e. they pay, and potential for revenue share) and receiving (i.e. Twitter pays - no potential for revenue share) must be quite low, so it is surely only a matter of time before they move to premium rate SMS.
    niallcook
  • twitter - hype

    Hi

    1.firstly have you analysed how many txt messages vs web uploads were done
    Do you realise web uploads are free
    2.The twitter concept has been around for years in europe

    Arun
    inamobile
  • RE: Twitter SMS fees: Ev responds

    Moral duty? Really? You think a company has a moral duty to inform someone that text messaging costs them money? Should car dealerships warn people that they're going to have to buy gas?

    That's a ridiculous notion.
    avitable
  • RE: Twitter SMS fees: Ev responds

    Hi,

    I thought you might be interested to know that myself (@PaulKinlan) and (@prawlings) have launched a twitter service called Twe2 (http://www.twe2.com) that gives Twitter users their DM's, @replies and custom searches via SMS for free. The free part is that the messages are advertising subsidised.

    Kind Regards,
    Paul Kinlan
    Kinlan
  • SMS from Twitter

    Hi,

    Great post! It is great to know this.

    You may also check how to send SMS from Twitter with Ozeki NG SMS Gateway:
    sms-integration.com/p_103-twitter-to-sms-sms.html

    BR
    WilsonLast