PUSHing SMS Out of the Way?

SMS is several things. For consumers, it’s exceedingly convenient. It's ubiquitous. And for many, it's "free" -- covered by an unlimited plan that doesn't cost all that much a month. For the carriers, it’s a cash cow, bringing home tons of profit without too much burden on the network.

For companies looking to communicate to mass markets, SMS likewise has been an incredibly effective way to deliver (or receive) a message to/from millions of people in near real-time. But it's also starting to get to be a really pricey one. Over the past year, however, SMS rates have slowly crept up, and the explosion of SMS use is starting to become apparent on many companies' communications expense charts.

Indeed, for several of our ISV/SaaS clients, SMS is becoming a big expense, and we're increasingly asked how they might mitigate this expense in the future. Indeed, in a networking environment characterized by IP everywhere, when is IP going to impact SMS?

We were really excited about the announcement of IP-based Push notifications just over a year ago but really have not heard all that much in the interim. Push has got all the elements that we'd love to see in a next-generation SMS product: low cost, real-time two-way communications, ability to have apps on the phones, and so on. Push notifications were touted as THE future for instant communications with mobile phones.

Carriers are not oblivious to this and we've seen some movements in a few of our carrier clients to embrace Push as part of their communication mix, but less than we expected given the importance of real-time communications with mobile phones.

Push is moving along quite nicely down the implementation curve. We called Scott Kveton, CEO of Urban Airship, one of the vendors to which we refer clients, to find out what his growth curve was looking like. "Push is the real deal," he says, having grown from 0 to billions of messages served in about 18 months. This number may pale in comparison to the number of SMS messages moving across mobile networks, but recall how stagnant SMS was in the North American market for quite a few of its early years. In fact, we distinctly remember reading analyses that basically said “Americans prefer to talk, they’re never going to SMS like Europeans do”. As time has told, Americans, in fact, do do SMS, in a big way.

We think the model for Push from a consumer perspective is so simple that we needn’t get into detail (“free” outside of a tiny bit of use towards a data plan allowance is something that’s not hard to sell to consumers). For companies using messaging to communicate with customers there’s a very similar economic argument: SMS is up to $1500/month for a shortcode and somewhere in the pennies per message wholesale rate for delivery, while Push notifications through a third-party Push provider are thousandths of cents per message. That's a several orders of magnitude expense reduction in communications expense alone for ISV/SaaS vendors and other SMS senders.

While, for carriers, the profit margin on Push may be a lot lower than SMS, the advantages that a carrier can offer customers with Push are numerous:
- First, Push allows a much richer message to be sent to customers, without the size and character limitations of SMS
- Second, because they can directly incent an action (buy a new level for a game, download the new issue of a magazine, purchase the “deal of the day”, etc.) and can be precisely tracked as part of a two-way communication, Push messages provide additional benefits for campaigns (marketing, advertising, etc.) when compared with the “fire and forget” approach of SMS
- Third, adding infrastructure to the carrier network for Push is almost a negligible expense compared to adding SMS infrastructure. Essentially it’s a simple server connected to the carrier’s IP network and that’s it.

Push isn’t quite ready to completely supplant SMS, of course. First, just as mobile email hasn’t supplanted SMS, neither will Push in the arena of person-to-person communications. Even in the realm of one-to-many communications Push has some limitations:
- First, devices that can receive Push are not yet ubiquitous. This is mainly just a matter of time, as the percentage of smart phones is not going down any time soon -- in fact it’s growing over 40% year-to-year. Heck, Android phones are activating at a pace of 300,000 units a day…it won't take long we're sure.
- Second, there are issues of how each device can actually receive a Push notification. For example, iOS devices receive all of their Push through Apple’s Push Notification Service, while Android devices typically receive Push notifications on an app-by-app basis.

This latter issue is where we see great promise from Push aggregators. You could probably consider them ASPs for Push. Like SMS aggregators, these companies handle the complexities of sending Push notifications to multiple carriers (actually, a far easier problem with Push than it is for SMS), as well as sorting out the individual device compatibility issues (by providing a single app for each platform that can accept Push notifications from anyone as well as being the back-end glue for individual app’s Push services).

We said earlier that carriers are starting to see the light here and are going so far as to risk cannibalizing their own SMS revenues by adopting Push. Verizon Wireless, for example, has signed a deal with Urban Airship as their preferred Push provider, making it easy for companies who want to Push to Verizon customers to do some one-stop shopping. As Urban Airship’s Kveton noted, “The real advantage of Push is the ability to drive users into a branded, contextual experience with a clear call to action”, something that Verizon obviously recognized. You can't get there from here with SMS.

There’s more we’d like to see before we declare that Push has “beaten” SMS at its own game. Foremost it is a better mechanism for determining just exactly what a potential recipient’s device is and how it can handle Push. We’d love to see a least cost routing solution that lets a marketer or advertiser send out a message to its target audience and has that message delivered in the best and most cost-effective way: Push to those who support it, SMS to others (with an easy way to get “Push-ready” included in the message). Beyond that, we think that Push is more than ready for prime time… and that carriers who aren’t getting on board are probably going to find someone bypassing them with Push solutions. It might not be immediately obvious since SMS is still growing like crazy, but we think that Push is going to get where SMS did in much less time. If Push is not part of your mid-term SMS plan, you should start having some meetings about it soon.