Thursday, February 20, 2014

Mobile carrier SMS pricing created the messaging lottery - and WhatsApp won it

If mobile carriers priced MMS/SMS messaging as a dumb pipe data service, there'd be no WhatsApp. But mobile carriers wanted short term revenues, and lack of competition and contract lock-in (inflated switching costs) meant individual carriers could generate enormous margins on simple texting. Network effects and Prisoners Dilemma (game theory) meant that if a significant number of carriers could make money that way many could do it.

Which in turn drove the creation of a data-only messaging service industry, and made WhatsApp the winner of the alt-MMS lottery (feels very late 90s, which ends in tears).

Markets are weird.

I wonder when Facebook's Messaging service will interoperate with WhatsApp's service - and if iMessage would ever play along. I've always assumed Apple used the threat of iMessage Unleashed to keep its mobile partners in line, but that may be less useful now.

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