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Why Text Messaging Will Continue To Decline In India

While there is no specific data on India, it appears that text messaging (rather, SMS’) reported a decline in several parts of the world, reports the New York Times blog, with drops being reported in Finland, (via Forbes), Hong Kong, Australia, and slow growth in the United States. While there is no data available on India yet, our sense is that by the time we get earnings reports in the next month or so, we’ll see a year-on-year decline in SMS revenues, and the slide might continue. This should worry telecom operators, because SMS is essentially a low cost, high margin business. The changes over the last year that we think are contributing to the decline of SMS:

1. The Push For Mobile social networking: sites like Facebook and Twitter has received massive marketing support in India from almost all telecom operators trying to encourage subscribers to subscribe to data services. What’s particularly interesting is that Size Zero (no data consumption) partnerships have been inked with Facebook (with Reliance Communication, Videocon etc for 0.Facebook.com and with Airtel for Twitter, essentially using social networks as a gateway to more data consumption. With messaging moving to social networks, SMS loses out.

2. The Rise of  the mobile IM: The surprise from last year was the rise of the Blackberry Messenger and little known Whatsapp, both of which allow asynchronous instant messaging on the mobile, thus replacing SMS. Blackberry promoted its BBM services in India, and Whatsapp grew organically, almost entirely through word-of-mouth.

3. Known vs Unknown Networks: The spurt in spam messages on mobile, at least for me, made SMS almost redundant, because messages received were almost always spam, and hence I checked messages much less often, and preferred other modes of messaging over SMS for communication. What data based alternatives like BBM and Whatsapp did to SMS do, is offer messaging to known networks, which are more acceptable to users, because of little or no spam. You’re receiving messages largely from your known network, and a network that you’re more likely to exchange messages with, rather than random strangers.

4. The 100-200 SMS limit, and restriction on data packs: The TRAI, earlier in 2011, instituted a 100 SMS per SIM limit, and forced telecom operators to shelve existing SMS packs, which allowed users thousands of text messages for a comparatively low cost, which were modified once the TRAI mandated limits. For example, a Rs 89 pack on Vodafone allowed 20,000 SMS’ a month, but was reduced to 3000 messages following the 100 SMS per day limit was imposed. The TRAI subsequently increased the limit to 200 SMS per day, but it appears that Vodafone hasn’t increased the packs limit to 6000 messages per month.

What happened during the year is that alternatives on the mobile were presented to users in the form of social networks and IM, and then government policy pushed or forced consumers to look for alternatives. This would have fueled the growth of BBM and Whatsapp and other IM alternatives, apart from messaging via social networks like Facebook and Twitter.

But does this mean that SMS will die in 2012? I don’t think so. One problem I have noticed with Whatsapp, is that there have been a few occasions when messages have been delivered very late or not at all, and not everyone is logged on to Facebook and Twitter all the time. Unless data services become more pervasive and consistent – there are many areas of poor data coverage in India, even within major cities – the immediacy and relative consistency of SMS will save it. But not without a decline.

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