Facebook Is Starving Mobile Operators' SMS Cash Cow: Report - eWeek

Posted: 12 May 2012 08:53 AM PDT

With Facebook just a week away from its highly publicized initial public offering (IPO), the social network is getting the blame for stealing—or at least weakening—the wireless carriers' favored cash cow: SMS traffic.

SMS traffic has generated nearly 20 percent of operators' turnover for years, but recently it's losing that traffic to Facebook, Danish first Strand Consult said in a May 10 research note.

"Today, over 800 million people around the world use Facebook on the Internet and over 425 million of them use Facebook on their mobile phones," stated the firm. "Measured in minutes of use, Facebook probably transports more mobile traffic, number of messages and time spent online than the world's largest operator."

People who believe Google to be the biggest threat to mobile operators, it adds, may be underestimating how much time people spend on Facebook or the degree to which Facebook has changed the way people communicate.

Still, there's hope for that cow, says Strand Consult, suggesting carriers take a new look at SMS pricing.

In countries like Denmark and Norway, it explains, the trend of Facebook stealing SMS traffic has been "very visible." In response, carriers in Denmark have begun selling SMS as a low-cost, flat-rate product that's part of a monthly data subscription package.

"This has resulted in almost all Danish mobile customers purchasing a SMS package every month as part of their mobile subscription, without questioning whether they need it and also without worry about how many or few SMSs they actually send per month—they feel their SMSs are 'free.'"

Put another way, says Strand, "Mobile operators have taken out an insurance on their Danish SMS revenue by marketing and selling flat rate SMS to almost all Danish mobile customers as a natural part of their mobile subscriptions."

The Facebook IPO, on May 18, is expected to bring in between $5 billion and $10 billion and to be one of the largest market debuts for a U.S. company in nearly four years. CEO Mark Zuckerberg, in his Feb. 1 letter to the Securities and Exchange Commission, wrote that "Facebook was not originally created to be a company. It was built to accomplish a social mission: to make the world more open and connected."

T-Mobile this week also noted Facebook's ability to keep folks connected. Its Bobsled voice over IP (VOIP) app, which also enables Facebook users to place free calls to other Facebook users, now has more than one million users. Of the people using Bobsled Calling, T-Mobile said May 8, 95 percent aren't T-Mobile subscribers. Additionally, 90 percent of the people using Bobsled Messaging are doing so from the United States, while 80 percent of the calls being placed through Bobsled Calling are from users outside of the U.S.

On May 9, Facebook introduced App Center, a new applications store where Facebook users can find apps for things like SMS, mobile calling and of course games and other things. The App Center is designed to help Facebook grow its mobile apps, and will help a user to find apps that are compatible with his or her device.

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