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Facebook Gets Serious About SMS

And that could be a threat to mobile carriers' cash cow


Yesterday was the 20-year anniversary of Short Message Service, or SMS — more familiarly known to you and I as simply “text messaging.”

Thing is, despite being a major success and a financial boon for telecoms, the world hasn’t seen a ton of innovation with the technology in all that time … and that’s no good for SMS, what with Facebook (NASDAQ:FB) and others going on the messaging offensive.

Facebook is launching a new messaging app in a few countries. While FB currently has a popular messaging service, it requires a Facebook account — the new app will only require users to provide a phone number.

That’s it.

The service will start on Google’s (NASDAQ:GOOG) Android platform in India, Indonesia, Venezuela, Australia and South Africa (and no surprise, these countries have nose-bleed fees for SMS). Users will still have the option of signing in with their Facebook account.

Another interesting player trying to alter the messaging map is WhatsApp, which delivers 10 billion messages per day. It is the No. 1 paid app on Apple’s (NASDAQ:AAPL) App Store, and has seen more than 100 million downloads on Google Play.

Not to mention, Apple itself has been pulling an end-around on SMS with its own rival service called iMessage.

All this is really bad news for mobile carriers like Verizon (NYSE:VZ), AT&T (NYSE:T) and Sprint (NYSE:S), which have relied heavily on SMS revenues. As InvestorPlace’s Brad Moon recently pointed out, the number of SMS messages declined in the third quarter for the first time ever.

Carriers likely won’t experience a sudden plunge; the fact remains that while smartphones are an everyday part of many Americans’ lives, feature phones still are widely used.

Yet as smartphones get cheaper and cheaper, their market share inevitably will continue to increase, leading to a long-term deterioration for SMS revenues. So unless the carriers come up with something new (which is so far not apparent) or raise other service prices to compensate (which would leave them vulnerable to lower-cost providers), there could be a crimp on long-term growth.

Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.”  Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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