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February 22, 2012

Popularity of Social Messaging Rather Than Legacy Services Has Led to Operators Losing Billions of Dollars: Study

By Ed Silverstein, TMCnet Contributor

Consumers are favoring social messaging rather than legacy services, which has led to losses of over $22 billion in two years for telecom operators, according to a new industry study. To remain competitive in this changing landscape operators will need to cooperate much more.

In their report, analysts from Ovum (News - Alert) have estimated that in 2011 alone operators lost $13.9 billion from consumers selecting social messaging on their smartphones.  In 2010, the amount lost in SMS revenue was $8.7 billion, Ovum adds. In fact, the decline was close to six percent of total messaging revenue in 2010, Ovum estimated. It was valued at about nine percent of total messaging revenue in 2011, Ovum adds.

The trend is likely to continue given consumer preference for messaging apps, Ovum said. “Social messaging has disrupted traditional services, and operators’ revenues in this area will come under increasing pressure,” Neha Dharia, an analyst at Ovum, who wrote the new report, predicts in a statement from the firm.

Operators have to take action to remain competitive in the market, given the trends, Ovum warns. “Tapping into the creativity of app developers, forming industry-wide collaborations, and leveraging their usage data and strong relationships with subscribers are the key ways for operators to ensure that they hold their ground in the messaging market,” Dharia said in the statement.

On the other hand, the popularity of social messaging can also be seen as an “opportunity” for operators, according to Ovum. “This threat will drive telcos to consider alternative sources of revenue, such as mobile broadband,” Dharia predicts. “And now the market has been tested, operators know what types of messaging services work.”  

“In addition, operators are in a position of strength because they control the entire messaging structure through their access to the user’s phone number and usage data,” Dharia adds. “The established billing relationship is a great advantage, as is the fact that operators control to a great extent the services to which the user is exposed.”

For success, operators are going to have to collaborate and cooperate among themselves, and with app developers and vendors, Ovum says. “Operators must remain open to partnering with app developers, sharing end-user data with them and allowing integration with the user’s social connections,” Dharia said. “Working closely with handset vendors will also be important. They control some of the most popular social messaging apps, and can also provide preloaded applications. The most important factor, however, 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.”

Ovum is an independent research firm, according to TMCnet. It undertakes some 400,000 interviews a year with businesses, technology companies, telecoms, and others, according to a company statement.

Edited by Rich Steeves
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