The mobile industry has shifted from simplistic cell phones to essentially pocket-sized computers, and that transition is clear today more than ever.
Last month, traditional SMS-based text messaging saw a decline for the first time in the American wireless market. A report published by mobile analyst and consultant Chetan Sharma indicated that the average number of text messages sent in the third quarter of 2012 shrunk to 678 texts per month.
This is a drop from the 696 messages per month recorded in the previous quarter -- although the drop is small, it’s still a significant one. For the past several years, text messaging has been growing at a steady pace in the U.S. And now, just as the technology turns 20 years old, people could be changing the way they communicate through their mobile devices.
“I think it’s definitely a trend that’s pretty much started,” said Wayne Lam, senior analyst of wireless communications at IHS iSuppli Market Research. “The decline of text messaging in and of itself is a symptom of what is happening in this industry. In a short, succinct way of describing it, we’re basically moving from a voice-centric communication with minutes of talk time to a system of paying for the amount of data we use.”
SMS and social media: Facebook mobile on the rise
The decline in text messaging has been partially attributed to the rise of other social services; Facebook, for instance, lets users send messages to each other in both e-mail and live chat formats, all via its cohesive Web, smartphone and tablet applications. Apple also offers iMessage, an app that lets iPhone users send text messages to other iOS devices independent of any carrier, but the idea to have a separate messaging service was originally pioneered by Research in Motion with BlackBerry Messenger, fondly known as BBM.
Just as RIM's BlackBerry paved the way for enterprise devices and mobile email, it did so with platform-based messaging. BBM let users send messages directly between devices, and now this feature has been adopted on today’s most widely used smartphone platforms, letting users forgo a cost to their messages by using a proprietary messaging service that's compatible with all computers -- mobile or desktop.
“It’s just part of the growing and changing industry,” said Jeff Kagan, an independent mobile analyst ranked as one of the most influential tech thinkers in the U.S., according to AdWeek. “The idea of sending a message is not declining, it’s actually increasing. Individual pieces of the puzzle are shrinking. So its just one of the earlier [technologies] that’s shrinking, but the idea of text messaging is actually growing.”
Facebook expects its mobile presence to be the key to its growth, the company said earlier this year. In Facebook's 10-Q filing from late October, the social network said it expects its rate of growth from mobile usage to “exceed the growth in usage through personal computers for the foreseeable future.”
This is just one indication that people are communicating through social apps via mobile devices on a massive scale. Facebook recently decided to begin experimenting with ways to cash in on this phenomenon by rolling out a $1 charge to a small portion of its users to send a message to other users outside the sender’s network.
“Text messaging and other services are going to be available on Facebook, Twitter and other [platforms] also,” Kagan said. “They’re going to be available on your favorite social sites, and we like to use one technology even if five are available. The [question] is which one is our favorite? This means that what we’re using is changing, but we’re still sending messages. Maybe it won’t even be called text messaging; maybe it will be called something else. It’s just the majority that’s changing.”
While services like iMessage and Facebook may be dipping into the market share for SMS messaging, the need for one unified messaging method will be around for quite some time, Lam believes.
"There are all these different platforms and ecosystems that users can play in, and there are some of these that cross between such as Facebook messenger, which will become even more popular now that they’ve dropped the need to authenticate with a Facebook account,” said the senior IHS iSuppli analyst. “So, with this profusion of standards you will need a universal standard. That universibility of the wireless phone number and text is still going to be valuable; it’s still going to exist.”
A changing industry means a shift in carrier plans
This decrease in SMS messaging reveals more about the state of wireless data plans than it does about mobile messaging itself. The mobile industry has basically reached the point where data packages are more valuable than voice and text. According to Kagan, five years ago a single text message would cost 50 cents. Rewind another five years or so, and the price was even higher, perhaps a dollar or two. Now, text messaging costs about 20 cents per text.
“It was brand new technology," Kagan said, referencing the launch of SMS messaging. "There was no usage in it, they didn’t know how to promote it. It was overpriced because no one was picking it up. And as the years went by they lowered the price. Now, they’re giving it away. I don’t know how it can get much less than that, but it constantly changes.”
Most carriers in the U.S. will offer an option to pay for a certain amount of data each month, which is often bundled with unlimited voice and text. AT&T, for example, offers data plans ranging from $40 for 1GB per month to $200 for 20GB per month. Unlimited voice phone calls and text messages are included in that flat price.
“Your phone is becoming more of a data-centric device,” Lam said. “You’re talking on it, but you’re getting a lot of engagement and experience through the data portion of it.”
This inclination toward data-heavy mobile plans, according to Lam, was commercialized when Apple introduced its iPhone in 2007. Prior to the iPhone, cell phone users still surfed the Web on their devices. Though RIM’s BlackBerry acted as the precursor to smart devices, the idea of a smartphone still wasn’t truly understood by the masses, or demanded by them, until Apple launched the iPhone about five years ago.
“Ever since that can of worms was opened and the genie was let out of the bottle so to speak, folks have been migrating away from the traditional cash cow of the wireless carrier service which is voice and text,” Lam said. “It’s the monetizing and the reducing of the overall cost of entry for texting.”
As smartphones continue to gain momentum in the mobile market, users are likely to continue using data services to replace some basic messaging features.
“When you have these phenomena going on and people are increasingly adopting smartphones and have these data plans, they’re offloading a lot of these traditional text features to the data service,” Lam said. “So in a sense, this is gonna be a trend.”
The state of smartphone usage: now and in the future
Everyone you know may own a smartphone, but that doesn’t mean everyone is using a smart device. According to statistics from Nielsen dating back to March 2012, smartphones are in the hands of 49.7 percent of all mobile subscribers in the U.S. This certainly is not a number to be ignored, but that still leaves about half of Americans with basic "feature" phones.
“There’s always going to be, for the foreseeable future, room for a regular cell phone because many people just want a phone,” Kagan said. “I don’t think this basic service is going to go away. Not even in the near future.”
While there will always be a market for low-cost value phones, Lam predicts smartphone usage may see a major bump in the next few years, possibly making up 70 percent or even 80 percent of all American mobile phone usage.
“The U.S. is leading the world in smartphone adoption,” Lam said. “This year there’s this tipping point, and when we move out to 2015, 2016, smartphones will be the majority.”
However, at the rate the mobile industry has been growing, it’s impossible to pinpoint where it will be in the future. According to Kagan, only two or three hundred apps existed in the mobile market about five years ago. Today, there are literally a billion to choose from.
“Six years ago, people weren’t even talking about it,” Kagan said. “Apple saw it as an opportunity, but they didn’t even know what it was going to turn into. They just saw it as an opportunity.”