Why changes to SMS commercial models today are hastening SMS’ untimely demise

By James Williams, Director of Programmes, Mobile Ecosystem Forum (MEF)

The largest digital infrastructure event in Africa takes place November 14 to 16 in Cape Town, and in the weeks running up to AfricaCom 2023 and the Africa Tech Festival, there is a lot of preparation work to do on site, so I have been watching a fair amount of South African television recently.

RELATED: Operators’ revenue from SMS business messaging to reach $58b by 2027 – Juniper Research

And this has really opened my eyes to the prevalence of the use of SMS text messaging by South African organisations of all shapes, types, and sizes to both communicate with existing clients and help reel in the new. It’s very simple: viewers see a TV ad and if they’re interested in what is being sold, they text, and they’re called back. Done. So many brands in South Africa use it that you really can’t miss it. SMS may be 30 years old, but it clearly resonates and continues to do something right.

Commodity

I keep hearing that SMS is a commodity and when people refer to business SMS (Application-to-Person SMS, A2P) as ‘bulk messaging’ I really hate it. Truly. Not dislike, hate. It’s doing a disservice to a mobile digital channel which requires zero introductions, something that more than 5 billion people globally are inherently comfortable with right now and for which no internet connectivity or fancy smartphones are required. If you send an SMS right now to a friend or loved one, I’d bet my bottom dollar they would read its content within a handful of minutes or less if they were available there and then. Can’t say that about email, can you? SMS is therefore very valuable.

Business and SMS

I can tell you from vast personal experience that the world over, millions of organisations are using SMS to great effect. Yet millions of others are not using it because (and now this is my opinion) quite simply the business messaging industry has done a bad job of working together to publicise just how effective it is at getting eyes on content, ultimately driving real outcomes, i.e., conversions.

We see (for example) TV adverts about numerous goods and services (including those from mobile operators about mobile data, fancy new handsets, and other things) but have you ever seen an ad about mobile business messaging – never mind one just focused on SMS. Me neither. I just don’t get it. The market is growing fast and will be worth a not too inconsiderable $78 billion come 2027 (source: Juniper Research) so why not shout about how powerful it can be if used properly, and how easy it is for even the smallest of organisations to hook up to it?

There’s a truckload of growth potential globally sitting there for the taking, particularly where small and medium sized businesses are concerned. I’m not saying it’ll be like taking candy from babies but with some collaboration and concerted efforts from multiple stakeholders, we could be doing a load more.

Now let me bring this back round specifically to my friend SMS again.

Money and SMS

The past couple of years have proven to be a real gut punch financially for billions of us around the world. Basic commodities have increased in price faster than in living memory for a plethora of reasons. In my home country the UK, the cost of sugar, milk, pasta, and a host of other staples has skyrocketed.

Globally the price of SMS is proving to be moving in a similar direction in many countries, just even faster. It’s particularly noticeable where international A2P SMS is concerned, in other words, the SMS (typically larger) brands send to their stakeholders internationally. This trend has become particularly noticeable where two-factor authentication (2FA) use-cases are concerned since WhatsApp Business Messaging (SMS’s greatest single challenger) changed its commercial model on 1 June 2023.

Overnight WhatsApp became a far more attractive commercial proposition than SMS for 2FA use-cases in the majority of countries around the world. This really helped to put the spotlight on the commercial models in play by many mobile network operators (MNOs) where international A2P is concerned.

At a crossroads

I am painfully aware it’s a free market and that MNOs (just like most other organisations) can practically charge what they like but the A2P SMS industry finds itself at a real crossroads: huge users of SMS for 2FA purposes (think the likes of Google, Meta, Amazon and Apple) are making concerted efforts to find alternative channels that can deliver the same results. That is one tough ask given that SMS is both the first truly ubiquitous mobile engagement channel (that no internet being required, no smartphone etc. thing again) and – mark my words – it will prove to be the last ubiquitous channel. Nothing will ever come along again that so unassumingly, with little or no fanfare, worked its way into our subconscious quite like the way SMS has. For things to get to this point – where even mortal enemies are teaming up to work on alternatives to SMS for 2FA – has to tell us something. And that makes me sad.

SMS should be cherished, nurtured, and allowed to flourish. Left to its own devices it would grow nicely organically. But sprinkle a little bit of that extra marketing sauce I think the industry should collaborate on, it could really rock and roll. Truly. But much of that growth potential is being stopped in its tracks by the challenging commercial models in play.

Yes, the genie is out of the bottle but having worked at the coalface of the business messaging industry from every angle over the past couple of decades, we should not be throwing the baby out with the bathwater. And before you start reporting me to authorities for child cruelty, this is a peculiarly British English phrase, no children were hurt in the writing of this article! Consult the Cambridge Dictionary and you’ll find this meaning: “to lose valuable ideas or things in your attempt to get rid of what is not wanted”. For sure, mobile network operators shouldn’t miss out on a nice little earner, or a revenue opportunity, but stretch things too far and…well…I’ll let you fill in the blanks. The results might just prove to be sub-optimal with no point of return. And there are no winners of that game.

James Williams is Director of Programmes at MEF (Mobile Ecosystem Forum) a global trade body established in 2000 and headquartered in the UK with members across the world. As the voice of the mobile ecosystem, it focuses on cross-industry best practices, anti-fraud and monetisation. The Forum provides its members with global and cross-sector platforms for networking, collaboration and advancing industry solutions.