This post was first published on my SAP blog on November 22, 2016.
Over the past few years interesting phenomena has been occurring in the United States as well as Canada. Consumers continue to text each other (called Person-to-Person or P2P); however, unlike in many other regions such as Asia-Pacific and Europe, they continue to use SMS at rates not enjoyed in these other regions for several years.
Yes, there is substantial usage of WhatsApp, WeChat, Facebook Messenger, and Snapchat in this region; however, for “normal” P2P conversations, consumers continue to leverage their default messaging apps on their devices.
North American SMS has only declined slightly in the past 34 months (from Jan 2014 – Oct 2016). As the graphic shows, over the last, almost 3 years, North American traffic is relatively flat, showing a marginal decline with a CAGR of just –0.128%:
Why is this so? We can cite a few reasons:
- Non-SMS-based messaging apps (e.g. WhatsApp or WeChat in particular, as well as Facebook Messenger) have not heavily cannibalized US SMS traffic, like in other regions.
- Users of non-SMS alternatives such as Facebook Messenger and Snapchat continue to use SMS-based options which are essentially, the default browsers for “normal” texting.
- Over the last 8 or so years, there have been IP-based OTT alternatives that do interwork with SMS. Companies such as Pinger, TextMe, TextPlus, TextNow, and Google Voice interwork with Verizon, AT&T, T-Mobile, Sprint, as well as Canadian operators such as Bell Mobility, Rogers and Telus. These offer free-to-use options that have the same reach as traditional mobile operators for messaging. In fact, Pinger, in terms of volume, has been ranked as high as #6 in the United States. Back in the late 2000’s, we coined the term “NUVO” (Network Unaffiliated Virtual Operators) to describe these service providers – similar to an MVNO; however, they do not resell a mobile operator’s network.
- Years ago, the mobile operators agreed to interwork with these players as if they were another “operator.” Some also provide VoIP services as well as SMS. This interworking was guided by the CTIA Inter-carrier Working Group – a still active group that is finalizing the newest generation of best practices for Person to Person interworking for the United States.
- The ability for the IP-based SMS-interworking service providers (e.g. NUVOs) to obtain geographic telephone numbers was a key benefit. In the US and Canada, there is no difference between texting a geographic number or a mobile number. Mobile telephone number have no distinction in North America unlike many other countries.
- The ability to acquire inexpensive phone numbers gave rise to companies such as Twilio, who help businesses of all kinds easily leverage the SMS (and voice) channel to engage their consumers – both for P2P and A2P.
The US market has also continued to evolve. Now US subscribers pay very little for SMS – many times with “unlimited texting” bundles as part of a data plan purchase or a greatly reduced prices for unlimited SMS.
The biggest decline to US and Canadian volumes occurred in 2012 and into 2013, after iMessage was released. That cost the volumes about 20% from their peak in Q4 2011. Since 2012/2013, the overall messaging traffic has dropped only slightly. In fact, it actually rose slightly in 2015. Much of this had to do with the ebb and flow of Android vs. iOS market share. Today, SMS is used in two of the three primary cross-platform scenarios:
- iOS <–> Android: SMS
- Android <–> Android: SMS
- iOS <–> iOS: iMessage
When iOS is strong, we see a more pronounced decline as there is more iMessage to iMessage traffic (not using SMS) verses, as when Android has a higher market share – SMS based texting prevails. This accounted for the actual 2015 rise in SMS volumes. As of September 2016, comScore indicated that Android had a 54.7% market share vs. 42.8% for iOS with iOS down 0.5% from June 2016.
What worked and continues to work for the mobile operators?
- Bundled SMS pricing – either bundled as part of data plans or very low cost messaging bundles for post-paid (and even pre-paid) subscribers. US and Canadian operators focus more on providing innovative mobile data plans and lumping in SMS/MMS into those plans.
- No difference in pricing between SMS and MMS. A message is a message, regardless if it contains rich media or not. This is how subscribers see messaging and the operator obliged.
- Ability of SMS-interworking OTTs to operate in the country. Provided alternatives to non-SMS OTTs such as WhatsApp, etc.
That said, North American subscribers are heavy users of Facebook Messenger, Snapchat, and yes, WhatsApp, WeChat (especially popular among Asian-communities) as well as many others. But, somehow, that usage doesn’t displace mobile consumers’ usage of their devices default texting apps.
Anecdotal evidence of the continuous usage of SMS could be seen in the early morning hours, immediately after the 2016 US Presidential election. As it became clear that Donald Trump would defeat Hillary Clinton, US SMS volumes surged over 100% of normal volumes, as subscribers texted and discussed the news.
Going forward, we still expect Person-to-Person texting to continue its slow decline in this market, but nothing radial is expected. However, SMS-based enterprise (or A2P) messaging is forecast to surge, well into the 2020’s. It is easy, still inexpensive, and options for business deployment will increase. There will be other channels, but expect to see SMS-based chatbots; “Call or Text” for customer service (including text-enabled toll-free numbers), more SMS-based 2FA, more SMS-based notifications and marketing campaigns.