Report: Facebook Cutting Into Carriers' SMS Revenue

by Mark Walsh, May 11, 2012, 9:07 PM

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Facebook may not be making much money in mobile yet, but it’s having a major impact on wireless operators’ revenue stream from SMS text messaging. A recent report from Denmark-based tech research firm Strand Consult suggests the social network is wiping out carriers’ SMS cash cow.

With its 500 million monthly mobile users, the firm estimates Facebook probably transports more mobile traffic, number of messages and time spent online than the world’s largest operator. That’s on top of the toll that messaging apps like BlackBerry Messenger and Apple’s iMessage have already taken on SMS revenue.

“In many ways one can compare Facebook’s development in the mobile industry to how the Internet affected the media industry. Market players like Google, Skype, Twitter and MSN are only marginally important to the mobile industry compared to Facebook,” according to a Strand posting spotlighted by the BGR blog Friday. That's because people use the social network every day to keep in touch with family and friends.

Strand did not cite specific data or revenue figures in the post to back up its assertions.

But mobile industry consultant Chetan Sharma, commenting on the analysis, agreed that IP-based messaging services from Facebook to Viber Media are eating into operators’ SMS revenue. Even so, he suggested there could be an upside to the trend for carriers -- at least in emerging countries, where IP messaging is helping turn regular mobile users into data subscribers. “So it’s having a positive impact as well,” he said.

The Strand report also pointed out the Facebook effect is less threatening to carriers in countries like Denmark and the U.S., where subscribers can buy monthly, flat-fee SMS packages instead of having to pay per-message fees. The latest comScore data shows that text messaging remains by far the most popular mobile data activity in the U.S., with about three-quarters of mobile users texting in March.

In any case, don’t feel too bad for the carriers. According to research from Chetan Sharma, mobile operator profits have more than doubled over the last 10 years, and total industry revenue is expected to hit $1.5 trillion in 2012, representing 2% of global GDP. Mobile data sales will account for some $300 billion of that amount.

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