Why iMessage won’t kill SMS

Apple pulled a surprising card from its sleeve this week at WWDC with the introduction of iMessage, which enables users with an iPhone, iPad or iPod touch to exchange unlimited texts, photos and videos. The feature has made for some eye-catching headlines, with journalists and industry insiders claiming that SMS revenues “are going away” because iMessage “makes texting obsolete” and — for good measure — that “Apple has finally stuck a dagger into SMS.”

Don’t believe the hype. Let me be clear: I’d like to see SMS snuffed out, too, given the outrageous prices that carriers charge for transmissions that barely impact the network. (One blogger determined in a 2008 analysis that carriers charge roughly one cent for every byte of data in an SMS message when charged per message. At that rate, downloading a song would cost about $6,000.) And it appears there’s a lot to like about iMessage, from its integration with SMS (so messages are sent through the platform automatically and marked as such in the user interface) to the fact that it gives iPad and iPod touch owners a new way of communicating on their devices. But iMessage won’t impact SMS usage and revenues much more than BlackBerry Messenger (which boasts 35 million users) has. Here’s why:

  1. It works only on iOS devices. Yes, there are more than 200 million iOS devices in use, but Apple’s mobile operating system accounts for a little less than one-fourth of the overall U.S. smartphone market, according to new data from ComScore. And smartphone sales have only recently eclipsed feature phone sales in the U.S. — which means that feature phones are still dominant in the overall handset market. And while smartphone users consume far more mobile data than their feature phone–toting counterparts, almost everyone sends SMS texts — including both of my parents, who triple-tap their messages on 12-key handsets.
  2. SMS is typically bundled. Prepaid carriers generally include SMS usage in their voice plans, and AT&T and Verizon sell packages as add-ons to voice plans. So it’s highly unlikely that users who text often are paying 20 cents or so for every message they send or receive. There are a few scenarios where iMessage could replace SMS — families or small businesses where everyone carries an iOS device, for example — but those use cases are very rare. The vast majority of users would be highly unlikely to change their text messaging plans.
  3. Alternatives to SMS already exist. Google and Skype, among others, offer mobile instant messaging, and WhatsApp is getting attention as an attractive cross-platform messaging offering. Oh, and social apps like Twitter —which generates more than one billion messages per week and saw its mobile usage explode 182 percent last year —enable users to send messages directly to one another. iMessage is sure to be a very cool feature, but early adopters who want to exchange messages without getting hit with SMS fees already have some compelling options. Those options haven’t “killed” SMS, and the addition of a new one — even one as promising as iMessage — won’t be a deathblow either.
  4. SMS isn’t just user-to-user. Consumers receive SMS for everything from stock quotes to sports scores to celebrity news to horoscopes. Those offerings are a double-dipping gold mine for carriers, who charge users to receive them and continue to raise prices for companies who send them. But those kinds of messages can’t be delivered via iMessage.
  5. Carriers can tweak their SMS plans accordingly. As Sascha Segan at PCMag.com noted, carriers control the networks. They could identify iMessage missives on the network and count them as SMS if they choose to. Or they could simply raise overall data rates for all users. Such a move would draw some backlash, to be sure, but it would also leave those consumers with few choices, because not all carriers offer the iPhone.

Network operators have obviously ceded some control of the mobile world they dominated just a few years ago, and iMessage is another feature that exists partially outside their realm. But it isn’t going to threaten the cash cow that is SMS.

Question of the week

Will iMessage kill SMS?
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Colin Gibbs

Colin Gibbs

Mobile Curator Gigaom Network

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11 Comments Subscribers to comment
  1. Derek Kerton Thursday, June 9, 2011

    The main positive attribute of SMS is sheer scale. Just about every single phone on the planet is able to receive and send an SMS out of the box. Apple cannot compete with that.

    An important heuristic for how much value any communication network offers a user is know as Metcalfe’s Law. The law states that the value of a telecommunications network is proportional to the square of the number of connected users of the system.

    This is why the lowly 160 characters of text in SMS continues to beat out other much better, richer, cheaper, multimedia apps. The value of the ability to send or receive a message from a network of 2 billion phones is greater than the value the other ‘apps’ offer.

    SMS also has other, lesser advantages such as fast delivery, reliable delivery, dedicated SMSCs and capacity, prioritization, no travel over public Internet which boil down to good QoS.

    ^^^IP services may erode SMS revenues somewhat, some portion of messaging will continue to shift to apps, as it has done prior to iMessage. But SMS use will probably continue to rise anyway. SMS isn’t going away anytime soon.^^^

    1. Thanks for the comments, Derek. You’re absolutely right about scale — SMS simply works on almost every phone on the market.

      I think it’s interesting to contrast that with MMS, which still performs pretty inconsistently. Seems to me that carriers are leaving a lot of money on the table by not making it easier to send and receive photos and short videos between phones.

      1. True. SMS was a flop in the USA until the carriers got their act together, and implemented reliable interoperability around 2004.

        Our carriers were amazed at the success of SMS in the EU and wanted to take part in those revenues. What was the secret to their success? Oh, it needs to be interoperable? Follows Metcalfe’s Law, you say? Well, you can’t expect a communication company to have guessed that!!

  2. And released a couple of days later, here’s data to back up our points:

    http://www.portioresearch.com/MMF11-15_press.html

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