ET had an interesting article a couple of days ago on declining SMS usage in India –http://economictimes.indiatimes.com/Indians_dont_just_talk_less_…
While the absolute number of SMS’s sent continue to grow (simply because Indian operators continue to add subs at a mind-boggling rate), the average SMS message per user fell significantly in the Sep. quarter relative to the June quarter – a trend that apparently began in late 2006, according to the article. While a number of possible explanations are put forth for the decline, I think the biggest factor is that with over 200m mobile subscribers we’re now well past the 70-80m subscribers who are English literate (I’ve seen some numbers as high as 100m for the English literate population). With over 50% of the user base unable to send/receive a “standard†text message, is it any wonder that SMS usage is falling? The bigger question in my mind, is when the operators will wake up to the fact that Value Added Services beyond SMS (yes, operators treat SMS as a “VASâ€, simply because its non-voice, rather than a source of differentiation) is not something they can continue to soft-peddle if they want to stem the inevitable decline in ARPUs. Operators also need to take a long and hard look at their revenue sharing arrangements (in India 60-70% of VAS revenue goes to the operators vs. 25-30% in most other countries) since that’s leading to a chicken and egg situation – smaller share of the VAS pie stifles innovation in VAS and lack of compelling VAS applications means operators continue to milk whatever they can from SMS based quasi-VAS services. On a related note, the opportunity for non-text based as well as multi-lingual applications is real, and compelling. There are 3-4 companies in this space, but there’s room for many more. Would love to hear thoughts from others.
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Inflection point…? Far from that…
The last sentence in the linked article – “…higher charges coupled with the restriction on the usage of free/discounted SMSs on festive occasions, were resulting in reduced usage. “Thus, this could be a case of higher prices pushing down the usage,  – hits it on the head.
And we thought SMS was addictive. That report makes me say; only Economics is addictive. Raising prices as a strategy will work only for basic groceries/vegetables. Telcos gouging VAS enablers also retard the pace of innovation in VAS domain.
VAS is moribund purely for reasons of bad economics and sub-optimal utility. We may be getting consumerist, but VAS still slinks under our radar. Unless it has the power to choke up our air supply, majority Indians don’t find it compelling if he has to pay a price for a `nice to have’ utility.
So if you want VAS to pick up, follow the Google model. Offer something that’s like oxygen. It can be much less essential, but it has to be necessarily FREE. You can think of charging for fragrances later. With core service FREE for the user, soon there will be someone with a need to chase that multitude and let him pick up the tab 🙂
Till then we will make do with MCT (missed call tech) and by asking a friendly pedestrian which road to take (don’t need GPS). Freeloaders that we are, we don’t book film tickets thro mobile, we can always wait till we can access the FREE phone/internet at office. Heck, you can check the no.of posts / comments in this blog during weekends, for that matter 🙂
Deepak – I do think there will be a big enough market for GPRS apps, particularly if you’re loooking four years out. Also, consumers don’t necessarily have to explicitly get an (expensive) data plan to use these apps – a case in point is Airtel’s Instant Messenger application, which uses GPRS, but forces users to go through the Airtel Live portal, and hence keeps it within the “walled garden”. As regards number of GPRS users vs. GPRS capable handsets, that’s a natural evolution I think (very similar trends were/are seen in the US when operators first launched 3G services)
Alok, yes – bulk SMS. We’re planning to have Moneyoga deliver portfolio stock/future quotes for all our users by SMS at the end of each day. We want it to be free, and I wanted to ensure our pockets do not need fire extinguishers 🙂
Not sure if this is an english language issue – the local language handsets that have been launched haven’t been a big hit from messaging perspective. Perhaps a pricing issue – just as the ARPU is declining with new base of people coming in, I guess that would mean declining average voice revenues as well as declining average SMS revenues.
Deepak, the rates you are mentioning are bulk SMS rates, right? not retail? I have heard that they can get lower than 20 paise for even higher volumes.
I have cost related questions:
What rates are you guys getting on SMS?
I have got (india wide) SMS costs of 50 paise (10K messages permonth) down to 20 paise (100K messages). Plus about 5K of rentals per month. Is this a deal, or way overquoted?
Also do you have any idea of cost structures for USSD based apps? Any links that I could use? Appreciate all links, thanks.
Another type of question is: what really is VAS? GPRS? Nearly everyone I know has a GPRS “capable” handset but no one actually uses it (other than the blackberriers) So is it viable to bother creating GPRS applications or symbian applications that use GPRS at all? (Next four years timeframe)
My gut feel says no , but some data – like Moneycontrol.com’s latest GPRS app suddenly getting 100K users (according to them) gets me thinking otherwise.