Mobile Messaging Traffic Grows Faster Than Revenue

The popularity of mobile messaging is expected to continue to grow over the next few years, but revenue is likely to grow more slowly as wireless carriers fiercely compete for subscribers, a market research firm said.

The number of messages sent worldwide from mobile phones will reach 2.3 trillion next year, a 19.6% jump from this year, Gartner predicted. Revenue in the same time frame will increase 15.7% to $60.2 billion.

But operator margins are expected get slimmer as companies fight for subscribers in a saturated market, the researcher said. While the compound annual growth rate of revenue from messaging services was 29.8% from 2002 to 2006, the CAGR is expected to plummet to 9.9% from this year through 2011.

In competing, carriers have spoiled consumers with large or unlimited messaging packages as part of their basic cellular service plan. As a result, it will be difficult to reverse the trend. "Carriers should plan for a future of much-reduced margins on messaging services," Nick Ingelbrecht, research director for Gartner, said in a statement released Monday. "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."

People in the Asia/Pacific region and Japan are the heaviest users of mobile messaging, sending 1.5 trillion missives this year and a projected 1.7 trillion next year, according to Gartner.

In North America, the number of messages is expected to increase to 301 billion next year from 189 billion this year, Gartner said. The big jump is due to added users and unlimited messaging plans.

In Western Europe, mobile messaging also is on the rise, reaching 215 billion in 2008 from 202 billion this year, Gartner said. Revenue, however, is flattening and showing some signs of declining next year, due to competitive price cutting, international charging regulations, and more unlimited bundles.

To sustain growth, Gartner recommends that wireless carriers tie their services to popular social-networking sites. "Mobile search and advertising also offer attractive potential drivers for SMS traffic," Ingelbrecht said, "although most carriers appear poorly placed to support the end-to-end campaign management and reporting requirements of media buyers and advertisers."