Could social networks cannabalise the text-messaging business?

27 Mar 2009

The news that Vodafone in the UK will be allowing its customers to send and receive Twitter updates for free via SMS poses a good question – are people now using their social-messaging facilities more than SMS?

The deal between Twitter and Vodafone is for a trial period, after which sending a message to Twitter will count as a normal SMS, although receiving updates will remain free.

“The deal is interesting in that it echoes a wider trend in the mobile industry,” said IDC analyst, Jonathan Arber.

“Excessive bundling of SMS on both the postpaid and prepaid side is causing revenue erosion in many markets, and operators are seeking new applications for, and new ways of deriving value from, SMS.

“There is ongoing debate around whether social networks will cannibalise SMS, but in fact the two services fit together nicely in many cases. As social networks move closer towards the Twitter ‘real-time’ conversational model – as evidenced by Facebook’s recent makeover – mobile updates become increasingly valuable to consumers.”

Arber said SMS is the ideal delivery mechanism, given that it is device agnostic, and the pricing is easily understood by consumers.

“That is assuming that you can get them to pay for mobile access to a service they are used to enjoying for free. Another option might be to attempt to derive revenues from the social networks, while offering free access to consumers.

“But again, that assumes that the social networks have the revenues to pay for such services, and given that Twitter was forced to stop sending free SMS to UK mobiles a few months ago due to cost issues, we would be surprised if that was the case.”

Arber explained the deal is an indicator of how rapidly Twitter has grown in the UK, and of Vodafone’s desire to attach itself to the ‘next big thing’ in social networking.

“However, this may only be a temporary differentiator, given that Twitter is currently flavour of the month, and as such we would expect the other operators to rapidly try to follow suit. Mobile and Twitter are an ideal fit, given the immediate nature of the service, and SMS updates will allow all customers to ‘Tweet’ on the move.

“That being said, there are already a number of unofficial Twitter mobile applications which do the job just fine, and many early adopters will likely have discovered these already.”

Arber said IDC is yet to be convinced that Twitter will hit the mass market in the same way that Facebook has done, and it is these mass-market customers to whom tweeting via SMS is likely to appeal.

By John Kennedy