Why ATT, Verizon & Disco Should be Looking over their Shoulder -> iMessage

At last week’s iOS5 introduction the big news across the internet was Apple’s deep OS integration of Twitter. Truth be told, it is an important development, one which makes sense for both Apple and more importantly for Twitter. The move was a typical Apple finesse, threading the wildly competitive social arena needle in a way that gives both Apple and Twitter a distinct edge in their respective battles with Google and Facebook. It is a move that could take Twitter from a well known, but not broadly used product and quickly attract a significant portion of Apple’s 200 million iOS devices to their user base. It will instantly make Apple’s mobile products more effective as a social & curation platforms. It could also facilitate Twitter’s and Apple’s entree into the deals and check in arena or other local services.

But an even more important, although somewhat less noticed, announcement came in the form of the new iMessage. The announcement was nowhere near as widely disseminated receiving a mere 2,470,000 mentions in Google’s index last week  compared to the 145,000,000 mentions that the iOS5/Twitter union brought. Did the crowd miss something (with this exception)? I think so and it was a momentous event. Apple is going after a bigger pie, texting. And it was apparently done with no prior knowledge on the part of the telcos and took them by surprise.

Texting is one of the world’s most popular forms of communication. While somewhere on the order of 13% of the US population use Twitter at least once per month, 72% of adults 18 and older with cell phones send and receive text messages on a daily basis.  But penetration is but half of the story. Usage is also orders of magnitude higher with texting. On average users send 10 texts per day but in the 12-17 demographic it rises to an average of 112 per day. Users embrace their most intimate and connected social circle via texting. Its usage patterns (and the data generated from it) much more closely reflects and predicts user activities than even Facebook or search behaviors. Texting is the ultimate local, social product.

Texting has long been a strong hold of the telcos. For years it is has languished technically while they milked the technology for profit and loyalty. The lack of innovation has not gone unnoticed and last year a number of internet companies (GroupMeGoogle’s Disco.comHuddlFastSociety and FB’s Beluga) started adding group texting and social features to texting via the internet. But these technology innovations, while needed, still require adding a totally new layer of actions to texting, limiting their appeal to the geeky not the main stream. Texting is ripe for a revolution and Apple is driving a semi-truck into the gaping hole left by the telcos, a hole that can not really satisfied by the Disco’s of the world

Here are some of the announced features of iMessage and given its open, internet backbone any number of other feature could be easily integrated:

  • Send Unlimited Text Messages via Wi-Fi
  • Group Messaging
  • Delivery & Read Receipts
  • Secure Encryption
  • Seamless integration with the current text app

Apple’s iMessage brings not just innovation but simplicity of innovation to texting. The enhanced functionality is largely automated and any complexity is totally masked by its integration into the iPhone’s existing and simple Messages app. iMessage will transparently use Wifi if available (no text plan needed), allows for a richer media experience, adds additional functionality like group texting and opens up the many  iPad and iPod as clients. It is built upon the “XMPP [protocol which] powers Jabber IM, Google Talk and Apple’s own iChat Server and local iChat IM over Bonjour ” making it easy to integrate texting with a raft of other services. Something that the current generation of texting products barely considers important.

The telcos learned that the sizzle of the internet attracts customers but that texting keeps them coming back.  Apple understands that and has enhanced texting in a way that should instill incredible loyalty amongst all users but particularly younger ones.

Looking at the recent data from Nielsen shows why this younger demographic is so important to Apple’s future:

Kids Today…

  • Are the Heaviest Mobile Video Viewers: On average, mobile subscribers ages 12-17 watched 7 hours 13 minutes of mobile video a month in Q4 2010, compared to 4 hours 20 minutes for the general population.
  • Are More Receptive to Mobile Advertising than their Elders: More than half (58%) surveyed in September 2010 said they “always” or “sometimes” look at mobile ads.
  • Out-Text All Other Age Groups: In Q1 2011, teens 13-17 sent an average of 3,364 mobile texts per month, more than doubling the rate of the next most active texting demo, 18-24 year olds (1,640 texts per month).
  • Talk Less on the Phone: Besides seniors 65-plus, teens talk the least on their phones, talking an average of 515 minutes per month in Q1 2011 versus more than 750 minutes among 18-24 year olds.
  • Grew Up in the Age of Social Media—and It Shows: While they make up just 7.4 percent of those using social networks, 78.7 percent of 12-17 year olds visited social networks or blogs.
  • Watch Less TV than the General Population: The average American watched 34 hours 39 minutes of TV per week in Q4 2010, a year-over-year increase of two minutes. Teens age 12-17 watch the least amount of TV on average (23 hours 41 minutes per week).
  • Spend Less Time on their Computers: American 18 year olds averaged 39 hours, 50 minutes online from their home computers, of which 5 hours, 26 minutes was spent streaming online video.

This age group doesn’t just text but  are throwing over their TVs, phone and computers for their mobile devices and they READ the dam ads. This is the truly post PC generation that will make the portable connected device like the iPhone, the mainstream computing platform of tomorrow. Apple is creating the products that speak to these consumption patterns.

Apple may be the one company that can penetrate the walled garden that has existed around texting for so long. They are not beholden to the telcos in the same way as Microsoft or Google (although I suppose Google could solve this problem is they so desired) and they offer an integration with the phone that companies like Disco can’t match. Minimally the new technology will create pressure on the telcos to enhance texting. But it could very well also lead to an unseating of the incumbents and bring more innovation and lower pricing to texting technology.

But in making iMessage a compelling, no-brainer and compelling loyalty play, Apple is not just moving into the territory defined by texting usage but they are cementing their relationship for years to come with the generation that defines the future of computing. Its not just the telcos that need to look over their shoulders.

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11 thoughts on “Why ATT, Verizon & Disco Should be Looking over their Shoulder -> iMessage”

  1. Hey Mike,
    Those stats are really eye-openers. I know your points are being made mainly to highlight a technological/business practice issue, but my strongest takeaway from those stats is one of wonder about the ‘toys’ in kids hands these days.

    I wonder, will these youngsters become immune to ads…either because they themselves age or because they pass on a jaded attitude to younger kids and their peers?

    I also wonder if, like the hula hoop and the walkman, texting will once become a quaint memory from the past…and what will replace it?

  2. @Miriam

    I don’t think message or the reaction to it will much change… its the medium that is changing… they will react much like their parents did… become inveterate consumers 🙂

    It will just be cooler, more Buck Rogerish all in one handheld do everything toy instead of 4 different toys (TV, Computer, regular phone, mobile phone) but the outcome will be much the same; consumption.

  3. You are likely right, Mike.

    You know, I’m so not a fan of advertising to children. It creeps me out that there are whole print journals devoted to this subject in the U.S., whereas in some countries, such activity is illegal.

    But then, I live low on the consumer chain, so I’m not terribly American about this.

  4. I agree with Mike, all though I’d like to think that I’d be able to keep a “kid” attitude about these things. Question is what I should do when all of this advertising starts to hit MY kids! Not sure I even want them to have phones, can it be stopped? Don’t think so!

  5. Thanks. I didn’t understand why iPhone users were so excited, and now I do… the problem is that they don’t know about Google Voice.

    Google voice allows any Android phone user to do the full circuit. They can send SMS (not some kind of proprietary “Google Voice messages” but SMS) without using their phone’s SMS plan. The Google Voice service itself initiates the outgoing message for free. In turn, Google Voice and receive incoming SMS messages. It has two modes for delivery (or you can use both). You can install the Google Voice app and have it notify you, or you can have it duplicate the incoming SMS on your Google Voice phone number to your physical cell phone number.

    If you rely on the app for notification, you entirely bypass SMS on your phone both for outgoing messages (because of the intents system, even other apps that want to send SMS will invoke Google Voice instead, should you so choose) and for incoming SMS and notifications. Thus, I buy the cheapest SMS plan I can get just so that random SMS spam isn’t something I have to haggle with the phone company over, and I never use all of the allotted messages. Yet, I send and receive SMS all the time.

    It’s been this way for the 1.5 years that I’ve had a Droid.

    1. Google Voice has been available on the iPhone BUT and this is a big but for most users, it required you to get a new number. Now they allow you to transfer your number but either or… it is a barrier to the process and most normal folks won’t do that.

      What is significant about this is that users need do nothing. Google Voice has not had the penetration it could have/might have but this will work right out of the box and provide an alternative without users even knowing it…thus 200 million users can seemlessly switch away from SMS

  6. I don’t think the iPhone version is useful for this in the same way, but maybe I’m out of touch (I have not owned an iPhone for a year an a half).

    My understanding was that it wasn’t able to receive a new message and pop up a notification when the phone wasn’t being used. If they’ve changed that, then the iPhone has had this capability all along.

    In terms of numbers, it really doesn’t matter. You just get a GV number and start using it. People will very quickly start responding to your texts which come from this new number and within a month or two you’ll find you don’t get any texts at your “hard” cell number. But that doesn’t matter. The point is that iMessage doesn’t do anything new. The ability to avoid SMS charges has been built into Android at least, and possible iPhone for at least 2 years.

  7. @Aaron

    The iPhone added active notification in the past 12 months (ios4?)

    I recognize that it isn’t anything new… that it isn’ the point. The point of the article is that the way in which Apple implemented it can go a long way towards penetrating the market… unlike current entrants and alternatives.

    The phone number doesn’t matter in a technical but it matters in an adoption sense. I have tried to convince wife, children and co-workers to go the Google voice route and only my son half ass adopted it. Google Voice faces the same obstacle to market share in Texting as Disco does… it requires ACTIVE consumers… they aren’t! At least not at any scale large enough to impact the telcos.

    To make a dent in the armor of the telcos you need broad and rapid adoption by lots of people. Since this is baked in and just being in the presence of a wifi will precipitate it, Apple, unlike Google, actually might take a bite out of the telcos business model…. I think it will even be on by default making 200 million users INSTANT Text Over Internet Users… and circumventing the current system.

    By consolidating their market power around a single endeavor Apple with the weight of the iPhone, iPad and iPod can shift a market that is notoriously resistant to shifting because of network & incumbancy advantage. Google has moved it nary a smidgeon with its product. I am saying that this could actually be different.

    Maybe after Apple breaks down the walls Google can also enter the inner sanctum but not yet, not with Voice.

  8. Mike, I see your point, but if it’s only going to work for talking to your iPhone-using friends and GV works for everyone, I don’t see why you wouldn’t use GV… As for adoption, this is Google’s primary problem. They don’t know how to build in adoption. GV could be hugely successful, but they haven’t designed a message around it. You can adopt it in any of about 5 different ways, and people get confused about how far they have to go. Everyone I know who has started using it has been shocked and has become a strong advocate, but Google fails to get the word out.

    Good to hear that iPhone can now do async messaging to apps. That was a huge part of the reason that I went to Android when I did. I hope to see the two platforms become more and more alike as time goes on, hopefully developing more and more standards for compatibility (especially video).

  9. The race is on… and I believe Apple is a strong contender to reel in the young and the old (like me). The younger generation love Apple products. Mike’s right about kids love for texting… they could care less about voice – and they are soon going to be young adults with purchasing power. It will be interesting to see how Google responds.

  10. @Aarron

    That was my point exactly. Once Apple removes the shackles from folk’s minds, Android users might become more aware and move towards Google Voice… Google might even figure out a way to increase the awareness and the penetration but they haven’t up to this point.

    Google, as Aaron points out, has a full fledged alternative already available they just have not figured out how to get too many folks to use it… I think Apple’s play will open up the market to G’s product will lead to greater adoption there as well … although it will still not be as friction free as iMessage.

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