It should come as no surprise to anyone that when you fire a text off to a premium rate SMS service, the network providers make a good profit. You’d expect them to do this; they are having to process the payment, handle the SMS, route it and so on. However, what may surprise some is exactly how healthy this profit is. If you’ve paid £1 for a service, you can expect around 42p of that to go to the network operator. If you’re dealing in a business that receives thousands of questions a day, then that’s a lot of money.  Although if you deal at the higher price points you can reduce the 42% take down to around 35%-ish and things start to look a little rosier. Indeed, many of our competitors have recently increased their prices. AQA 63336 have recently increased their pricing from £1 to £1.20 and then further on to £1.50.  The SMS service provided by the ‘men with moustaches’, 118118 has recently been raised from £1 up to £1.20. Without this trying to sound like an advertising bite (it isn’t!) Quext is still only £1 per question and we hope to continue this way for the forseeable future (actually, we’re one of the only services to still offer messages No Charge if we can’t find an answer, but anyway..).

For some years now, those providing mobile SMS services have had to live with this – it’s an unavoidable bit of the business we’re in. However, a revolution has taken over the world of mobile recently and it’s called Apps. Mobile Applications have taken off on a scale that few could have predicted a few years back. It pains me to say it, but primarily, the success has been a result of the experience users have received on the iPhone. Yeah, applications have been available for some time on older phones (I used to have a on old-school HTC phone on Windows Mobile and I managed to download some rather appalling apps on that) but they never really got useful or intuitive until the iPhone and his older brother, iOS came along. Perhaps more importantly, the purchase mechanism was never really trusted until Apple introduced the App Store. One centralized location where you can purchase applications safe in the knowledge that your details are safe with the guys from California (well, almost).

Since then, applications are all the rage. Blackberry have an App World, while Android has Android Market. Companies are clambering over each other to build the next big app with big software houses such as EA now taking the handheld gaming market seriously. This is wise, considering that the iPhone game industry is worth $500 million dollars in the US alone (that’s about £311m in the Queen’s money). However, it’s not just games houses that are pumping out apps. Sky have an app that lets you record TV; the Highways Agency has a traffic app; even Starbucks has an app. That’s all super and smashing, but where can SMS service operators take advantage?

Well firstly, whatever you were delivering over the air, you can now deliver on app (obviously, provided it’s suitable). One fixed price and away they go. No need to text you for bus timetables (for instance), you can now get them over the air on your app. Result. With the increasing availability of Internet, Push messaging can even do away with the requirement for any SMS interaction at all.

For services like Quext though, there is one very important place where Apps come into play, and that is the returns from places like the App Store. At the moment, Apple retains approximately 30% of all transaction funding which is immediately around 12% better for service operators than delivering and charging by SMS. The funding mechanisms of the other App Shops is not as transparent which isn’t going to be helped by the introduction of more marketplaces as Amazon and Chomp decide to get themselves into the mix.

The future for applications looks interesting. Whether the Apps will totally do away with SMS services is unclear. You can now even ‘text’ each other using mobile apps (with messages delivered by Push Messaging, meaning no SMS again). However, even if Apps do destroy the world of SMS services, is that such a bad thing? If you’re stuck in a loud club and need a taxi number – does it really matter if you send your request to us by SMS or an App?

Categories: Business, Internet, Mobile, Quext

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