With a growing number of Americans carrying Internet-connected smartphones in their pockets, text messaging is on the decline. The average number of monthly texts sent by each user fell for the first time in U.S. history last quarter, according to a report released Tuesday by independent telecommunications analyst Chetan Sharma.
U.S. cell phone customers sent an average ofabout 675 messages per month in the third quarter, down from around 700 per month in the prior quarter. Cell phone carriers' text messaging revenues were also down last quarter for the first time in history.
More than half of cell phones in use in the United States are smartphones, according to Sharma.And dozens of their applications offer "free" text messaging services, which allow wireless customers to send and receive texts by piggybacking on their existing data plans. That means people who download those apps -- such as Microsoft's(MSFT) Skype, GroupMe, Google(GOOG) Voice, Kik, WhatsApp and Facebook(FB) Messenger -- are able to bypass the expensive texting plans offered by wireless companies.
What's more, an increasing number of free text messaging services are being baked into the smartphones themselves. Apple's(AAPL) iMessage service and Research In Motion's(RIMM) BlackBerry Messenger allow iPhone and BlackBerry users to instantly message one another over their data plans, rather than via text message.
Texting may appear to be an insignificant cost on customers' cell phone bills, but it's actually an incredibly expensive way to send data. Text messages max out at just 160 bytes, which means the standard 20-cents-per-message plans cost wireless customers an astounding $1,250 per megabyte.
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That's why text messaging has been a lucrative business for cell phone companies. Last year, texting represented 19% of wireless carriers' data sales for customers under contract, according to PricewaterhouseCoopers.
In order to avoid the financial blow associated with shrinking text messaging volumes, some carriers have begun to change their business strategies. Both AT&T(T) and Verizon(VZ) introduced shared data plansearlier this year, which give customers unlimited texting and voice minutes in exchange for an allotment of data that they can use across multiple devices. As the gigabytes rack up, so too do AT&T and Verizon's sales.