Carriers Lucrative Texting Revenue Fizzles as Alternatives Grow

I have to say I found this news pretty interesting.   I know the world is run by fees, but it hadn’t occurred to me how lucrative millions of thumbs-flying texting teens were to the wireless carriers.  Those pennies-per-text or unlimited monthly package charges are a big part of their profitability.   And they are about to make a big hole if they do start to fizzle out, as the talking heads are projecting.

What’s the problem?   Well, last year the growth of texting slowed, not a lot, but significantly enough to set off the early warning bells.   And now the fear is that the US market will figure out what other countries, like The Netherlands and Germany, have already found.   If your phone provider allows Apps that route texting over the internet – versus over your wireless carrier’s network – your texting goes from a $20 per month charge to, well, FREE.  And as we all know, its pretty hard to compete with free.  And once people figure that out, it spreads quickly, as this shows..

In the Netherlands, KPN saw a surge in adoption of the free WhatsApp messaging app—from 0% of Hi’s Android phone users in August 2010 to 85% in April 2011.

That’s eight months to get from 0 to 85% adoption.   It’s like a nightmare 100% off Groupon for the carriers.  One kid figures it out, tells all their friends, and parents the world over shout for joy as at least one thing about raising their teen gets cheaper.  No more texting fees.

Apple is leading the charge in the US, with Google right behind.  And Blackberry has offered their Messenger for awhile now. Whoever, provides it, these these new messaging tools represent a a growing threat to a texting business that generated $25 billion in revenue in the U.S. and Canada last year.  And this texting business has low costs and high margins. A dollar of texting revenue produces at least 80 cents of profit compared with about 35 cents of profit from $1 in wireless data or voice services, according to analysts at UBS.

Feel free to read the whole article, its pretty enlightening.  http://on.wsj.com/jtx2lj