by Jongwoo Y
As Facebook is getting ready to become a initial public offering (IPO) in the coming weeks, it has been able to successfully tick off many of the wireless providers around the world today. Facebook boasts over 800 million users worldwide, an amount that nearly triples that of the population of the United States (~311 million); nearly half of these users connect to Facebook through mobile applications (Maisto, 2012). With the use of mobile apps created by Facebook, which include the Facebook Messaging App, many of the users are forgoing the use of their normal SMS texts and using apps instead to send messages to their friends. This has become a huge problem for many wireless providers as it has drastically effected the amount of SMS revenue that these telecommunication giants have grown accustomed to. Just last year, SMS messaging accounted for about 20% of the revenue for many of the telecommunication giants; however, this number has taken a great hit. Carriers in Denmark have begun “selling SMS as a low-cost, flat -rate product that’s part of a monthly data subscription package” (Maisto, 2012). Mobile Carriers in Denmark have recently added many flat rate messaging plans into all of their basic monthly subscriptions to try and counter-balance the pressure that Facebook has put on their SMS revenue. If this works out for these Danish carriers, expect to see this as common practice around the world. Just next week, Facebook plans to bring in between $5-10 billion and have one of the largest market debut in the US in nearly four years (Maisto, 2012). However, according to Mark Zuckerberg, CEO and founder of Facebook, “Facebook was not originally created to be a company. It was built to accomplish a social mission: to make the world more open and connected (Maisto, 2012).” Too bad Mark, it looks like you’re trampling over not only your best friends, but mobile carrier conglomerates around the world!
This article was very interesting due to the fact it is able to show the economic effects of Facebook being immensely popular around the world. It is amazing to think that due to mobile applications created by Facebook, billions of texts are being forgone and many of the top Telecommunication companies are losing billions of dollars a month. It was also very interesting to see the strategy that some of the mobile giants have come up with to combat the effects of Facebook Messaging Applications. These telecom giants are basically forcing SMS plans down the throats of their customers in order to make up for lost ground. With Facebook becoming a publicly traded company next week, mobile telecom companies will be in a large amount of pressure to promote their SMS services or come up with something new that will appeal to their customers.
After reading this article, I felt that it was not as big of a deal as it actually seems for mobile companies. This is due to the fact that in order for users to use Facebook Messaging Apps, they will usually be using it through data services such as 4g and LTE. The amount of users that are jumping onto “internet ready” phones per month is huge and is easily able to make up for the amount of money that is lost from the declining popularity of SMS. However, I do understand why these telecom giants feel afraid as they probably did not forsee their mobile internet revenue to cannibalize their SMS market. Eventually, I believe that SMS will soon fade out and internet based messaging applications will take over the mobile phone market. I also believe that Facebook will only become a larger economic player once it goes public next week. It is insane to imagine how far this company has come in less than a decade. I really wish I had some cash lying around to buy some of that stock!
Maisto, M. (2012, May 12). eweek. Retrieved from http://www.eweek.com/c/a/Mobile-and-Wireless/Facebook-Is-Starving-Mobile-Operators-SMS-Cash-Cow-Repot-730166/