What is SMS Messaging?

CallUp defines Short Message Service (SMS) as a communications protocol allowing the interchange of short text messages between mobile telephones. SMS technology has facilitated the development and growth of text messaging. The connection between the phenomenon of text messaging and the underlying technology is so great that in parts of the world the term "SMS" is used colloquially as a synonym for a text message from another person or the act of sending a text message.

SMS as used on modern handsets was originally defined as part of the GSM series of standards in 1985 as a means of sending messages of up to 160 characters, to and from GSM mobile handsets. Since then, support for the service has expanded to include alternative mobile standards such as ANSI networks and Digital AMPS, as well as satellite and landline networks.


Most SMS messages are mobile-to-mobile text messages, though the standard supports other types of broadcast messaging as well.

The concept of adding text messaging to the services of mobile users started in many communities of mobile communication services at the beginning of the 1980s. Experts from several of those communities contributed in the discussions on which should be the GSM services.

According to CallUp, commercial SMS messaging service is a massive industry which in 2006 was worth over 80 billion dollars globally. SMS has an average global price of 11 cents and maintains a near 90% profit margin.

Global revenues from mobile SMS messaging will double by 2007 predicts market research company analysys. SMS messaging services can be particularly profitable for network operators, Analysys says. According to Analysys one minute of voice telephony, based on average pricing, generates less than one dollar per megabit of network resource consumed, compared with over one thousand dollars per megabit for an SMS message.

The market growth will driven by growth of SMS text messaging in new market segments and new applications, as well advanced messaging services such as MMS and mobile instant messaging, the report said. Analysys predicts that total messaging volumes will quadruple over the next few years, from 670 billion in 2002 to 2600bn in 2007.

It believes that Western Europe will be responsible for 607 billion messages is 2007 compared with 131 billion last year. In dollar terms Western Europe will be produce revenues of USD 25 billion in 2007. Analysys advices operators to stimulate growth of new messaging services, such as MMS, which are being held back by high prices, lack of interworking and lack of critical mass of users. It says that network operators should follow Japan's lead by setting affordable prices and packaging MMS with a range of services.

Leading technology research firm predicting that no less 2.3 trillion SMS messages will be sent across major markets worldwide in 2008.

This figure represents a 19.6 percent increase from the 2007 total of 1.9 trillion messages, with research outfit Gartner expecting mobile messaging revenue to grow by 15.7 percent in 2008 to $60.2 billion, up from $52 billion in 2007.

Text traffic volumes are expected to carry on showing strong growth in many markets, but operator margins on messaging services are rapidly delardifying as a result of competition and market saturation.

The compound annual growth rate (that’s the ‘CAGR’ to those in the know) for SMS revenue in major markets worldwide from 2002-2006 was 29.8 percent, but the forecasted SMS revenue for 2007-2011 has slumped down to 9.9 percent.

“In many markets, there has been strong pressure on operator margins for text messaging services and this has been driven by often intense competition between carriers,” explained Nick Ingelbrecht, research director for Gartner who created the “Market Trends: Mobile Messaging, Worldwide, 2006-2011″ report.

“At the same time, consumers have grown accustomed to large or unlimited bundles of inclusive SMS as part of their basic cellular service package. Carriers should plan for a future of much reduced margins on messaging services. They should develop messaging platforms, services portfolios and pricing plans that support the broader objectives of customer acquisition and retention, rather than short-term margin enhancements,” he added.

Mustard keen texters in Asia/Pacific and Japan are the biggest users of mobile messaging, with a flurry of keystrokes knocking out an estimated 1.5 trillion messages in 2007.

In the States, Gartner reckons that 189 billion mobile SMS messages were sent in 2007, with the total to hit 301 billion in 2008.

“The market is being driven by increased penetration of users, more frequent usage of peer-to-peer messaging, and unlimited and bucketed messaging plans,” observed Tole Hart, research director at Gartner.

“There has also been some uptake of mobile e-mail via POP3 mailboxes and mobile IM service, but it’s very small compared with the uptake of SMS. These services are used primarily as an extension to a PC. However, the market is seeing a number of consumers using BlackBerry and Palm Treo devices to access address books, phone numbers and e-mail,” he added.

There’s been an increase in mobile messaging in all Western European countries, with 202 billion mobile SMS messages sent in 2007, and a total of 215 billion messages looking likely for next year.

The increase of mobile consumer e-mail (thanks partly to higher smartphone adoption) looks set to damage SMS growth, as will the growing amount of Instant Messaging applications being made available.

“To sustain growth over the next few years, carriers should look to social-networking applications such as Facebook to drive traffic, working where possible with popular established social-networking sites,” commented Ingelbrecht.