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Telcos lose $13.9B to social messaging in 2011

Popularity of social messaging causes decline in SMS, MMS and e-mail usage; operators should offer innovative messaging services, align revenue schemes and collaborate with their rivals, report states.
Written by Ellyne Phneah, Contributor

The increased usage of social messaging services on smartphones have cost telecom operators US$13.9 billion in lost SMS revenue last year, a report by Ovum reveals.

The research firm predicted that the decline, representing nearly 6 percent of total messaging revenue in 2010 and 9 percent in 2011, will continue as messaging apps continue to grow in popularity.

Social messaging is defined as messaging that occurs on platforms other than SMS, MMS or e-mail, and is either tied to a social network or has a social component attached. Players include mobile apps, mobile social networks and some mobile instant messaging platforms.

Neha Dharia, consumer analyst at Ovum and author of the report, explained in a statement that the increasing use of IP-based social messaging services had disrupted traditional models, and operator revenue in this market will continue to be under growing pressure.

Operators to view phenomenon as advantage
Despite the threats to messaging revenues, the research firm states that the strong presence of social messaging should be viewed as an opportunity.

Dharia remarked that this threat will drive telcos to consider alternative revenue sources, such as mobile broadband. Now that the market is tested, operators know the types of messaging services which work.

They are also in the stronger position because they control the whole messaging structure through their access to the user's phone number and usage data, she added. As such, the established billing relationship is an advantage because operators control the services users are exposed to a great extent. 

The analyst advised that operators must be open to partnering app developers to share end-user data with them and allow integration with the user's social connections. However, she added that offering innovative messaging services and aligning revenue schemes with models in the social world will not be enough against social messaging.

"The most important factor, will be co-operation between telcos. They are no longer competing merely among themselves, but must work together to face the challenge from the major Internet players," Dharia said.

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