So you think SMS is dying? Think again…

In a world where technology is obsolete almost the moment it hits the shelves, we as consumers are always looking for the next best thing. We muse about HD-DVD vs. Blu-ray, wonder if we’ll soon be able to do everything but wash the dishes with our computers, buy a new cell phone every six months, and reflect with fondness on the “old” technology we used to find so fascinating (just ask anyone in my generation about Oregon Trail).

So it’s not surprising that the world of mobile communications has spent the last couple of weeks wondering if the ubiquitous SMS messaging we’ve grown to love is approaching antiquity, soon to be replaced with a newer service that costs less and allows even faster and more on-demand contact with our friends, families and coworkers. Enter the IM. Or MIM as it is known in the mobile world. Of course, who wants to just text someone and hope they check their phone when you could instead see if your “buddy” is online, contact him directly if he is or see his away message is he isn’t, and then communicate via IM instead of SMS, which hypothetically means you are communicating over your data connection rather than paying per message with the SMS model.

Sounds great right? See you later SMS, we’re moving on to IM on the handset. But not so fast! There are many questions around this move that must be answered. What does this switch really mean? Is a move to IM really all that different from SMS? Is it really possible to make this transition, now or in the foreseeable future? Before we say goodbye to our good friend SMS, maybe we should think about whether this switch is possible, what barriers exist to its widespread implementation and how likely we are to see adoption across all carriers and users anytime soon.

Problem 1: Not everyone can get an IM on their phone, and not everyone uses the same service!

What made SMS so attractive at its advent, and what continues to fuel the billions of dollars in growth of the SMS market every year, is that it is universally available on pretty much every handset and carrier. Which means when you text you friend in the UK from your Verizon phone, they are guaranteed to get that exact message delivered to their Vodaphone handset. In contrast, only a very small number of handsets in use globally today actually support IM services, and in developing countries we are not likely to see IM capability built in for many years. In addition, IM relies on users having the same IM client. Despite recent moves to consolidate compatible IM services, for the most part users need to be on AIM to contact an AIM user, MSN to reach MSN users, etc. So while you might love your running yellow man and your network of friends on the AOL-based service, your friends in the UK do not. We take it for granted that when you make a call to someone or send a text you don’t have to worry if they use a Motorola or a Samsung phone, if they have a smartphone or a featurephone, or if they use Vodafone, Orange, T-Mobile or O2. An average of around 50 percent adoption is necessary to reach a critical mass of users high enough to warrant universal adoption of an application, and while 49% of mobile customers in the US sent a text message in February 2008, only 7.9% of users sent an IM.

Problem 2: Using IM isn’t necessarily cheaper than SMS

You’d love to think that delivering an IM from your phone would stream over your data connection and not use your limited SMS cache. But if you are a user in the states, you would be wrong! Both T-Mobile and AT&T deliver your IMs by basically texting. Each IM counts as a message, both outgoing and incoming, so that chat you just had with your friend for 15 minutes about Miley Cyrus just cost you 30 text messages.

Take it a step further and note that carriers have in the last month moved to pricing plans that offer unlimited text, as well as plans for only data and text delivery, making SMS and IM costs basically equal. With 80 percent of all non-voice revenue coming from SMS, carriers are increasingly competing to provide lower prices, driving traffic across SMS networks higher and higher. This much adoption is a major barrier to widespread adoption of IM use, which as we note above is not compatible with most phones and not any more cost effective than text.

One argument many make for IM use is that people are using IM services to communicate with contacts who are on personal computers, so the IM is a bridge between the mobile user and the desktop. Again, most of these messages at least in the states, are delivered through traditional text services anyway, despite using an IM client as the platform for composition, thereby necessitating the reliance on SMS technology even when using an IM client.

Problem 3: IM is not any easier to use than SMS

IM clients on the handset are clumsy and difficult to use. Even on a data network your list of available buddies does not update in real-time, so you still need to manually refresh just to see who you can and cannot contact on your network. SMS of course allows you to contact anyone at any time, with the message delivered when the user checks his or her phone, not when he or she happens to sign in to the IM client.

The problem here lies in usability, not as a standalone service, but as compared to alternative services available. If an IM client is not substantially easier to use, there will be no reason for that critical mass of users to switch from the familiar SMS format to this new method of communication. In addition, if a user has a negative experience with a new platform, that person is unlikely to try the service again for a least a few months, leading to another barrier to widespread adoption.

Conclusion

So let’s recap. SMS represents $50-$60 billion in revenue to network operators. It is globally pervasive and included in even the most basic of handsets. It is compatible across any network or device, is available at all times, is cost effective and east to use. IM is minimally available on handsets, and is usually only available in high-end markets. It is not compatible across networks, requires subscription to a particular IM client, and is no less expensive than its SMS cousin.

Will new messaging techniques be implemented? Absolutely. Messaging revenue continues to grow, and it is widely agreed that mobile advertising will rely heavily on messaging formats, both SMS and MMS, to deliver targeted ads to the handset. Consumer reliance on messaging continues to grow and operators strive to create newer and better messaging platforms and plans to foster growth. One thing is for certain, SMS is here to stay at least for the foreseeable future, and even has incredible growth potential as developing countries embrace the mobile device. Will IM continue to be used? Yes. Will it take over from SMS? Not anytime soon. In the world of constantly changing technology, some things do stay constant, and for now SMS is here to stay.