• by Emily Burg , October 23, 2006

Wireless carriers are throwing millions of dollars into upgrading their service with multimedia bells and whistles to attract and retain customers. But recent research points out that text messaging--one of the first value-added services to mobile--continues to be the real cash cow.

"Wireless operators with a young demographic need to develop the best revenue model for SMS (short messaging service)," said John Gauntt, senior wireless analyst with eMarketer. "It's the mother's milk of their balance sheet: it's cheap, and highly profitable, with high volume."

Nor should marketers ignore it in building their brands. "Tethered with rich media, it's a great integrated opportunity for mobile marketing," Gauntt said.

In addition to the natural partnership that has evolved between shows such as "American Idol" and using SMS for voting, there are opportunities for brick-and-mortar brands to use the convenience of SMS to generate foot traffic to their stores. "Starbucks, for example, has a huge number of physical locations," Gauntt said. "They can attract and award customers by sending them an SMS with an incentive to get them into their stores."

Gauntt predicts that text messaging will generate $7 billion in revenues in the U.S. in 2006; 35% to 40% of mobile users have sent an SMS over the past month. A Harris Interactive poll found that 46% of American teens have a mobile phone and use SMS. Hispanic- and African-Americans are the ethnic groups that use SMS most frequently.

Separately, consumer research firm NPD Group last week attributed the slow adoption of advanced mobile content to the lack of a large installed base of devices to support it.

NPD reported similar findings that SMS text-messaging still accounts for 40% of wireless data activity, while 21% of mobile users download ringtones, and 9% play mobile games.