Free texts are killing the SMS

April 30, 2013: 9:10 AM ET

Services like Apple's iMessage and WhatsApp that transmit messages over the Internet are wiping out billions in revenue.

Mobile messaging apps like Apple's iMessage, WhatsApp, and Facebook Messenger are slowly killing off traditional texting.

Mobile messaging apps like Apple's iMessage, WhatsApp, and Facebook Messenger are slowly killing off traditional texting.

FORTUNE -- It's been said before, but it's now official: SMS texting's days are numbered. The culprit? Messaging apps like Apple (AAPL) iMessage and WhatsApp. According to Switzerland-based firm Informa, 2012 marked the first year mobile users sent more messages over these kinds of apps than traditional text. By next year, the difference will be vast: 50 billion messages tapped out by way of chat apps versus just 21 billion texts.

Though carriers like AT&T (T) and Verizon (VZ) have long since offered cell phone plans with unlimited texts for a premium, messaging apps offer a better alternative in many cases, often for free. Own an iPhone? iMessaging transmits faster and offers the added optional benefit of letting users see when their message has been read. Launched in 2009, WhatsApp works on Apple, Google (GOOG) Android, Windows (MSFT) Phone and BlackBerry (BBRY) devices. The app is so popular, WhatsApp CEO Jan Koum revealed earlier this month it has more users than Twitter, which reported 200 million-plus members last December. And because Facebook (FB) and its messaging service are so deeply intertwined, its mobile messaging platform benefits from a built-in membership 1 billion-strong.

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Given the popularity, convenience, and cost savings of free services, it seems inevitable text messaging should take a hit. That's bad news for mobile carriers, who pad their bottom lines with the profits from unlimited text plans. According to a recent study by London-based research firm Ovum, the rise of messaging apps will cost them $32.6 billion of lost revenue in 2013 and as much as $86 billion come 2020.

Not everyone is convinced, however, that SMS texting is on life support. "Millions of smart phone devices are being activated daily and connecting to new app services. That means there is room for both messaging platforms," explains Arjun Sethi, co-founder of MessageMe, a chat app that lets users also share photos, doodles, songs, videos, and their location. With $1.9 million in funding from backers like Andreessen Horowitz, Greylock, and Google Ventures, MessageMe rolled out last month and picked up 1 million users after just one week.

So while text messaging may not disappear entirely, it means, just like the decline of voice usage, that it won't be the dominant form of communication it used to be.

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About This Author
JP Mangalindan
JP Mangalindan
Writer, Fortune

JP Mangalindan is a San Francisco-based writer at Fortune, covering Silicon Valley. Since joining in 2010, he has written on a wide array of topics, from the turnaround of eBay to the evolution of net neutrality. A graduate of Fordham University, Mangalindan has also written for GQ, Popular Science, and Entertainment Weekly.

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