15 Aug

SMS is King, Heaven and Hell, all at the same time

SMS is King, from the end-user’s perspective. SMS is heaven, from the operators’ perspective, as it is a cash cow. And SMS is hell for businesses offering messaging, but that don’t have a good plan for monetizing it…

SMS is way expensive to offer. For example, in the U.S.:

  • A dedicated keyword will cost you around $12K a year,
  • Connectivity to a message aggregator will cost you like $2K a month,
  • Messages originated from your server will cost you about 2-5 cents, depending on volume.
  • Time and development costs related to certifications across carriers (and differences between them), plus the ongoing support for audits.

Startups must do appropriate planning and have a business model that will cover SMS operational costs, or your SMS support will be short-lived. For better or worst, the above costs are barriers to entry for startups and anyone wanting to play the game. But SMS is King, a necessary “evil”, an important channel to support.

Twitter recently killed its support for SMS on the UK; for a long time many of us have been wondering how the hell Twitter has been able to support its offering without a business strategy that allows them to make money and cover operational costs.

So I’m not surprised to see Twitter cut costs, but what I’m surprised to see is that they decided to cut support for U.K. instead of introducing a revenue model and validate it; people will pay for useful services.

The question is not “Will someone kill SMS already?”. But the question is “Will SMS (costs) kill a Startup already?”.

“To SMS” or “Not To SMS”; that is the question…


6 thoughts on “SMS is King, Heaven and Hell, all at the same time

  1. Right on the money Enrique (pun sort of intended). As an application provider we use SMS as a distribution method in addition to direct downloads and we went through all the same issues you mentioned plus another one – carrier approval. In North America if you want your own short code you need to get it approved, in general, by each carrier individually. The aggregators will help you with it but because its a very subjective process you can end up approved on one carrier but not another and you left scratching your head . The process is pretty inflexible and very slow especially if you don’t fit into one of their ‘standard’ uses of SMS so you need to account for that time as well as the costs and the extra work of supporting all the side processes (making sure your optin/optout is valid, all the correct keywords are supported, etc).

    The costs certainly add up (we have 3 aggregators to get global coverage and fallbacks) but at the same time there’s no comparing getting a text message with a link you click to download an app vs having to start your mobile browser and type in a url (no matter how short) so you have to support it and you have to include it in your business plan (as you pointed out). Now if you’ll excuse me I have to explain to another carrier that we aren’t sending out jokes for $5 a day over our short code.

  2. Enrique, good post as always.

    I think the death of SMS depends on the platform and the plan. For example, Blackberry usage within an Enterprise almost certainly kills SMS…for what value is an instant message when email covered under the carriers plan is almost as instantaneous?

    This argument certainly falls down when a user in a BB only environment tries to communicate outside, to a non-BB user.

    Chat also should be a good alternative, covered as well by data plans; again, the issue is commonality, with many different types of chat (are you on AOL or Google Talk?) but only one SMS.

  3. *Sean* Yes, the certifications (and difference between them) and the ongoing support for audits adds to the cost… totally agree that SMS is a great delivery mechanism. Thanks for the comments…

    *Larry* I don’t think SMS will die and it is long-lived. But supporting SMS on your server, if not properly planned for, can suck you dry ($). I don’t think, even in enterprises, that email kills SMS, because they are complementary. Note that a hybrid SMS/MobileIM is what I believe the future of handset-based messaging will be on one side, and email on the other — both complementary. Thanks for the comments…


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