Can multimedia messaging replace SMS revenues?

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By: Wise Marketer Staff |

Posted on February 8, 2003

While profit margins on multimedia messaging services (MMS) are lower than short message services (SMS), and many mobile telecommunications operators intend up to 30% of their revenues to come from mobile data by 2005, industry analyst Datamonitor warns that the MMS market may not be growing as quickly as expected.

Datamonitor's new report, The mobile consumer: Data, data, data, concludes that while global revenues from MMS will grow, they will not rise to the extent that many in the industry are expecting. Moreover, if consumers were to upgrade their mobile phones, the research suggests that physical improvements such as lightweight devices and longer battery life are more in demand than data services and multimedia messaging.

More worrying for UK mobile operators, the competition commission has announced it wants cuts of 15% per year in the fee charged for calls to rival mobile networks, which will greatly reduce existing voice revenues. Moreover, while MMS revenue growth will offset the decline in SMS revenues, the situation is still concerning for operators, as margins on MMS are lower than SMS.

Revenue forecast
According to Datamonitor, SMS revenues in Europe will peak in 2003, then fall with each passing year as price competition increases and new technologies emerge, cannibalising that revenue stream.

Meanwhile, revenues from MMS (which allows text, photographs, images, graphics, voice, and audio clips to be sent from mobile to mobile) will plug the gap created by the reduction in SMS for the next few years.

However, although the MMS market will grow at a four-year compound annual growth rate of 388% in Europe (due largely to operator push and viral use), it will still only be worth US$4.9 billion by the end of 2006.

Mobile data in the future
"SMS has proven to be a cash cow for operators in Europe. As well as seeing phenomenal usage, margins crucially stand at over 95% on the service. But this is not the case with MMS," explained Datamonitor mobility analyst, Richard Clifford.

"The slowdown in the growth of messaging revenues looks worrying as mobile content has not still taken off world-wide (with the notable exceptions of Japan and South Korea). However, the fact that there will be a considerable number of e-mail and instant messaging users looks promising," added Clifford.

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