Increased consumer usage of IP-based social messaging services on smartphones has cost telecommunication operators $8.7 billion in lost SMS revenues in 2010, and $13.9 billion in 2011.
The SMS revenue stream drew in just under $153 billion in 2011.
The results were reflected in a new report, The Casualties of Social Messaging, by independent research firm, Ovum. It found the decline represented nearly six per cent of total messaging revenue in 2010 and nine per cent in 2011.
Ovum expects the trend to continue with the popularity of messaging apps.
It warns operators to rework their legacy services if they want to secure their future position in the messaging market.
Ovum consumer analyst and author of the report, Neha Dharia, said social messaging has disrupted traditional services and operators’ revenues within this space will be increasingly pressured.
“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,” she said.
On the other hand, the firm believes that the strong presence of social messaging should be looked upon as an opportunity regardless of its threat to messaging revenues.
Dharia said the threat will motivate telcos to adopt substitute sources of revenue, such as mobile broadband.
“Operators control the entire messaging structure through their access to the user's phone number and usage data. The established billing relationship is a great advantage, as is the fact that operators control the services to which the user is exposed,” she said.
Dharia also mentioned that offering innovative messaging services and aligning revenue schemes with models in the social world is insufficient in winning the battle against social messaging. Instead, she encouraged industry-wide collaboration and co-operation as the key to growth.
Dharia said operators open up to partnering with app developers, share end-user data with them, allow integration with the user's social connections, work closely with handset vendors, and most importantly, co-operate with telcos.
“They are no longer competing merely among themselves, but must work together to face the challenge from the major Internet players,” Dharia added.