Earlier today we wrote about Twitter’s decision to stop sending text messages to phones outside the US, Canada, and India. Due to an essential difference between business models of US and European mobile operators, the costs became too high.
How Twitter and mobile operators make money in the US
The difference is how these operators handle MT and MO Text messages.
- A MO message is sent from a mobile phone (to for instance Twitter).
- An MT message is sent from a server to a mobile phone (the Twitter update message).
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In the US you pay for sending a text message, but also for receiving a text message. Parties like Twitter who send massive amounts of text messages generate a lot of money for the SMS gateways (or mobile operators). Twitter has a lot of bargaining power and can manage to get 1) the outgoing message for free and 2) a kickback on every delivered message. In other words, the consumer pays for receiving the updates, the carrier earns a bit and Twitter gets a tiny kickback.
A European user costs Twitter up to 7.5 to 10 euros per week
In Europe you only pay for sending the text message. So Twitter is bleeding with every message sent. The costs of sending huge amounts of messages still is around 3 a 4 euro cents per message. So every European Twitter dude can cost up to (250 times 0.03 cent) 7.5 euros to 10 euros per week! That’s obviously not a scalable model.
Option 1: reversed billing
European SMS gateways do offer the possibility to charge the receiver via a so-called reversed billed SMS. The process to charge people via a reversed billed SMS is that you send a message to a short code (e.g. Twitter on to 4200). But the huge disadvantage here is that the total costs of these messages are way higher. A reversed billed SMS costs the receiver normally between 0.25 and 1.50 euros (determined up front by the value added service -in this case Twitter-). Twitter would get a kickback of about 50% of the amount charged, but you can imagine that there are less then zero people willing to pay 25 cents per tweet!
Option 2: a kind mobile operator
Another option is to partner with the operators who would allow Twitter to send the messages for free – hoping that people who receive the message would send one back (to generate revenue). I don’t think that there is one mobile operator who would want to do this, because there is an inter operator charge to deliver a message on a different network of around 1.5 euro cents. And the possible ‘extra’ revenue is far from guaranteed.
Option 3: a pro account
The only viable option I can see is to offer users a PRO account. It makes perfect sense to me: get me some extra cool features and I’ll pay Twitter for it.
Why use SMS anyway?
One more thing. Why use SMS anyhow? It is the most expensive way of transporting data and there are free alternatives. What about twittering per email or via mobile web (For iPhone users there are tons of solutions to work around SMS).