There is growing evidence that the high-margin mobile text messaging market is past its peak.
Danish SMS traffic, for example, decreased by over 20 percent in the first six months of 2011, according to Strand Consult, and the trend will continue in 2012.
Social media networks appear to be the reason people are sending fewer text messages.
Text messaging volumes and revenue are not declining in all markets, but is slowing in most developed markets. The most-recent data from the CTIA suggests slowing growth in the U.S. text messaging market of about nine percent.
In the Danish market, three out of four mobile operators have been experiencing a steady decrease in their test messaging (short message service, or SMS) traffic month after month.
From 2010 to 2011, TDC experienced an SMS traffic drop of 17 percent, Telia lost 18 percent and Telenor 26 percent, while the fourth operator 3 was the only operator that had growth in their SMS traffic.
That 3 saw text messaging growth is largely attributable to the fact that 3 is gaining customers and share in the market. SMS traffic on the 3 network grew by 29 percent.
But, overall, the number of Danish SMS messages fell during the first half of 2010 to 6.4 billion and to 6.2 billion during the first half of 2011. That is a drop of about seven percent from 2010 to 2011.
Facebook messaging is the reason for the drop, Strand Consult argues. We often forget that all products have a life cycle. Fixed line voice is past its peak, and now text messaging likewise seems to be nearing or past the peak of its product cycle in some markets, though it will continue to grow in other younger markets.
So what are Danish operators doing? They are bundling mobile broadband with SMS and MMS packages as part of a smart phone purchase. That means service providers get paid even as the volume of text messages declines.
Finland's largest carrier, Sonera, for example, recorded a 22 percent decline in texting on Christmas Eve in 2011, versus the same night in 2010.
It isn't that people are communicating less. They are just using different methods of communicating. Text Messaging Declines
Hong Kong also apparently saw a similar decrease on Christmas, dropping 14% from the same day in 2010. Netherlands service provider KPN provided an early warning when it announced significant declines in messaging volume earlier in 2010. KPN text message declines
Dutch telecoms regulator, OPTA, which shows a significant decline in the number of SMS sent in the Netherlands in first half of 2011 compared to the previous six-month period.
The country's largest operator, KPN, has also reported declining year-on-year messaging volumes over the last few quarters due to what it calls "changing customer behavior."
Wireless Intelligence says text messaging volumes are falling in France, Ireland, Spain and Portugal as well.
According to OPTA, the total number of SMS sent in the Netherlands stood at 5.7 billion for the first six months of the year, down 2.5 percent from 5.9 billion in the second half of 2010, even though total text messaging revenue rose slightly (0.6 percent) to EUR378 million during the period.
That should not come as a surprise. The number of over the top and social messaging alternatives has been growing for years. But there is a "network effect" for messaging, as there is for any other communications tool. Until a user is fairly sure that nearly everybody he or she wants to communicate with can be reached by a particular tool, adoption is slower.
But there always is a tipping point, where the expectation changes from "I doubt this person uses this tool" to "there is a good chance they use this tool." Finally, there is the point of ubiquity, when the assumption simply is that "everybody" uses the tool.
Also, the history of text messaging and email are instructive. Though most cannot remember a time when it was so, email and messaging services once upon a time ere not federated. In other words, you could not send messages across domains.
History also tells us what happens after federation: usage explodes. With alternative messaging platforms, we still are not in a "full federation" mode, where anybody can send messages to any other user, irrespective of what device, operating system, service provider or application they prefer to use. That day will come, though.
The.maturing market seems now to be a growing factor in the text messaging part of the mobile business.