Apple Inc (NADSAQ:AAPL) introduced iMessaging with its iOS 5 platform last year, and in the time since, the software - and other services like it - have taken a bite out of the SMS text message market. According to well-respected mobile analyst Chetan Sharma, who reported the data on his personal website earlier today, text messaging activity in the U.S. had declined for the first time in history, from an average of 696 texts per month in Q2 to 678 in the most recent quarter. Revenue was also down slightly in the third quarter.
While he didn't name names, it can be surmised that services from the likes of Facebook Inc (NASDAQ:FB) and Apple Inc (NASDAQ:AAPL) have played a role into cutting down texting activity, as cellular subscribers now have a variety of data-driven alternatives to the traditional SMS message. Sharma notes that the U.S. is actually late to the party when it comes to text message decline, but does not give any specifics on why this may be the case.
Logically speaking, our guess is one of two reasons: (1) American consumers were able to initially increase their capacity for different types of messaging services more easily than their peers, or (2) the U.S., which has the most mobile phones in the Western Hemisphere, simply has less need for SMS alternatives than other countries do. Either way, Sharma puts it best when he states that:
It might be early to say if the decline has begun or the market segment will sputter along before the decline takes place [...] once the market segment reaches the 70-90% penetration mark, the decline begins and we might be seeing the start of the decline in messaging revenue. The decline is primarily due to the rise in IP messaging and operators have been slow to evolve their strategies in the segment.
Despite the increased pressure from Apple Inc (NASDAQ:AAPL) iMessage and Facebook (NASDAQ:FB) Messenger, the New York Times so aptly pointed out that Sharma's report did hint that telecom-focused investors shouldn't worry over "the seemingly imminent decline of text messaging, which is highly lucrative for carriers," as major players like "AT&T and Verizon Wireless are still posting healthy profits, largely because of revenue from mobile data plans, the fees people pay to use the Internet over their networks."
Moreover, the market's top trio, which includes AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ), and Sprint Nextel Corporation (NYSE:S) receives close to half its revenues from the consumption of mobile data, so fear of a text message demise may be a moot point. After all, for for the smartphone-using crowd in its entirety, Apple Inc (NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB)'s services can offer a cheaper way to send messages depending on the data plan one is subscribed to. While IP messengers have been around for quite some time, it's their implementation into mobile applications that have truly changed the telecom landscape; this is a fact that Apple and Facebook fanboys surely won't let die easily.