Short message service, or SMS, is dying. It's mostly dead for person-to-person interactions, and now it's fading for application-to-person, or A2P, interactions. You won't see the decline of SMS in growth estimates, but you already see the value of SMS slipping among customers.
When businesses communicate with customers via SMS, they do so in a textual channel. The messages might share a marketing campaign or relay a one-time password or two-factor authentication code. The messages can also remind customers of a delivery, change of flight plans or other account activity.
The problem with SMS is it's becoming our next spam box -- a place where promotional company messages go to die quietly. The only reason to open an SMS application is to get a PIN code to log into an online service or application. And, at times, even that process gets automated.
In recent years, contact centers have shifted some customer conversations toward text chat that does not happen over SMS. Instead, the messaging takes place on their websites, with chat widgets that help customers ask questions and get answers. These chat widgets are becoming powerful marketing and sales tools. As evidence of this market's growth, messaging startup Intercom recently rose to unicorn status, with $125 million in funding.
Social messaging apps see rapid growth
The next stage in this evolution is social messaging between businesses and customers. Consumers have moved away from SMS with their person-to-person interactions. They now prefer social messaging apps, such as Facebook Messenger, LINE, WhatsApp, WeChat, Telegram and others. These applications each grew to 100 million or more monthly active users, increasing their value to consumers through a network effect.
Social messaging started as a cheaper way to communicate versus SMS, but it's grown rapidly into something more powerful and expressive than SMS. Today, social messaging vendors and businesses are taking the first tentative steps to use social messaging channels to reach customers.
Apple introduced its twist on SMS with iMessage, in which iPhone users exchange messages via iMessage instead of SMS without having to do anything -- they don't even choose a specific app. This approach gave Apple an immediate large audience in the form of what carriers used to have with SMS. Now, Apple is launching Apple Business Chat, a way for consumers and businesses to interact with each other.
Besides the richness of the messages, SMS, social messaging apps and Apple Business Chat differ in other ways, too. As we examine these channels, I'll ignore rich communication services (RCS) because of its miniscule reach compared to other options. While RCS may broaden its reach in the future, it's unlikely to happen in 2018.
More ways to discover customers
Discoverability is the mechanics in which a consumer finds a business. With SMS, a user would search for a business's phone number and send a message to that number. However, the business would then have access to the consumer's phone number, which could lead to spam and abuse.
For social messaging, consumers connect with businesses through the social network. This channel requires a conscious effort from the consumer to enter a social network and search for the business.
With Apple Business Chat, users can find a business in every search mechanism on iOS, such as Siri, Safari, Search and Maps. Whenever a consumer searches for a business, the business's Apple Business Chat identity will be visible. This makes Apple Business Chat a more powerful channel for businesses.
It's important to note that both social networks and Apple Business Chat channels can be embedded into websites, as well.
Converse with customers expressively
Once a message is sent, will it be treated as a conversation or a one-off notification?
With SMS, most services offer one-way communications. For example, a business informs you of the time a technician will visit you, and maybe a web link is added to the message. But the business won't wait for replies to its message. Some systems and services are built on top of SMS and offer two-way SMS, but their penetration and popularity isn't that high because of the costly nature of programmable short message services.
Social messaging apps and Apple Business Chat are built for conversations. Both consumer and business have an inherent expectation that sent messages will have replies. Because these channels maintain history, messages and context also live longer than SMS.
In the above chart, expressiveness refers to the type of conversations and their richness. SMS is limited in its expressiveness, and messages must be short. Longer messages are split up and concatenated. Emojis, stickers, images or videos are also limited. Mostly, businesses send these messages to share links to landing pages for continued interactions.
Social messaging and Apple Business Chat introduce a richness that is sorely lacking in SMS. Beyond the richness, these channels also offer simple form-filling capabilities, such as radio buttons. This capability was added to enable bots and better interactions with consumers. It's also a useful tool in the context of contact centers, which are transactional in nature.
Identity, branding empower consumers, businesses
Knowing with whom you are communicating is doubly important when it happens between consumers and businesses. The consumer needs to associate the interaction with the company and its brand.
With SMS, branding and identity are limited. The most that can be achieved is SMS Sender ID, which enables the business to send messages that will be identified by the business name and not its number. This capability is available only in certain countries and is further limited by the length and alphabet that can be used.
Social messaging offers better identity and branding capabilities. It starts with identity and verified accounts, where a company can express its name textually instead of using a phone number. Verified accounts reduce the potential of fraud by giving customers some certainty they are communicating with a business and not someone impersonating the business.
Apple has taken this a step further by allowing companies to brand the message thread. Here's an example:
A look at payment and pricing
Customers can pay for goods via SMS, but that functionality is not commonly used by carriers, consumers and businesses globally.
In the Asia-Pacific region, large social messaging platforms offer payment through their applications: LINE has LINE Pay, WeChat has WeChat Pay and Kakao has KakaoPay. Facebook is in the process of adding payment capabilities to Messenger, and Telegram has integrated with Stripe for payments. Paying via messaging apps offers a more user-friendly interface than the SMS alternative.
Apple Business Chat integrates with Apple Pay, which lets iPhone users interact with a business and make payments within iMessage with little friction involved.
SMS is free for the consumer, but A2P SMS -- the messages sent by businesses or intercepted by businesses -- aren't exactly cheap. At $0.0075 per message, they are the most expensive messaging option for businesses, but prices vary based on the numbers, regions and volumes.
Social messaging is usually free when integrated with the social messaging application. When done via a third-party messaging aggregator, the price point can be around $0.000001 per message.
Apple Business Chat is still in testing mode and probably free to integrate with a business. Through messaging aggregators, it will be in the price range of social messaging.
With the difference in price points and richness of experience, businesses are bound to shift from SMS to social messaging in the coming years. As the market matures, businesses will look to interact with customers in a wider variety of channels.
While SMS offers a ubiquitous channel, it is by far the most limited and expensive option. With Apple joining the market and offering an end-to-end service that's available on every iPhone, the pressure is on carriers, Google and social messaging applications to up their game.