Apple's iMessage won't kill SMS

10 Jun 2011

Earlier this week at its WorldWide Developers Conference, Apple announced iCloud, which freaked out the music industry. Apple also announced something else: iMessage, a free IM service for iOS 5 devices which could end up freaking out the mobile industry.

Or not.

In essence, iMessage (not to be confused with I-Message) allows users to send unlimited text messages, photos, and videos over Wi-Fi and 3G, as well as send contact info and even transition IM conversations between different devices (so you can start a IM session on your iPad and continue it over your iPhone, for example).

The BlogScape has been subsequently filled with all sorts of dithering: iMessage will kill SMSdead, and Nokia and Android will help it kill SMS when they launch their own free IM services, and while they’re at it they’ll kill BlackBerry Messenger, at least as far as Wall Street is concerned, all of which makes iMessage Apple’s latest attempt to kick operatorsin the teeth.

And so on.

So ... should operators worry that Apple is threatening to kill off their most reliable non-voice cash cow?

Not really. Or rather, not exactly.

For a start, iMessage has one important limitation: it only works with other iOS 5 devices. The Nokia and Android versions are also expected to only work exclusively on their respective platforms.

And if cellcos know anything about messaging, it’s this: it won’t really take off as long as it’s siloed. SMS had limited appeal when you could only send messages to people on the same mobile network as you. It was only after cellcos agreed to support cross-platform SMS that monthly messaging levels started skyrocketing.

Web-based IM service providers like Google, Yahoo and Microsoft went through a similar epiphany in the mid-00s, but interoperability deals have been slow in coming (Google and AIM only reached such an agreement last month). Apple, Google, Nokia and RIM have based their mobile strategies primarily on the ability to lock OTT content and services to the device OS, and that won’t change with free messaging services.

Which means users who need to send messages to off-platform users will need another medium – and the SMS bucket included in their service plan will probably do nicely.

That’s not to say iMessage and similar services won’t have any impact at all on SMS growth. The thing is, SMS is already facing a decline anyway. Many cellcos are expecting an SMS slowdown in the next year or two, particularly in markets where more people are turning to Twitter, Facebook and Skype for their messaging needs.

For those that already bundle SMS bucket plans in their service packages, that decline is unlikely to make a huge difference from an ARPU perspective. Meanwhile, if predictions about growth in A2P (application to person) SMS revenue growth pan out, SMS could still be pulling its weight in the service portfolio for some time.

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