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Whatsapp costs 17.7 billion Euros to carriers around the world

Smart phones have started becoming really affordable these days. Everyone may not be able to buy an Apple iPhone 5 or a Samsung Galaxy S III or a Samsung Galaxy Note 2, but there are much cheaper and affordable smart phones which come with Google’s Android mobile operating system or Microsoft’s Windows Phone 7 or 8 operating systems. And when you are using these operating systems on your smart phones, you will have access to hundreds of thousands of apps which will help you do a lot of stuffs for free on your smart phone. Let’s take the example of talking your family and friends.

Traditionally, you would call them or send them an SMS, which is short messaging service. And even though most carriers in the world allow a certain number of free SMSs a day, the companies charge the customers once that limit is crossed. This always brings revenue to the company. But as the operating systems on the smart phones became smart enough, the apps which run on them also became smart and allow users to stay connected with friends and family for free.

Apps such as Whatsapp, ChatOn, iMessage, BBM, and others just use the data connection that you have and let you send free messages to almost anyone. Not just messages, but you can send images, videos, your location, and make voice calls and video calls on just data connection. And if you do not have a data connection active from your wireless carrier, you can just hook on to a WiFi connection you have in your home or office and use that to communicate using these apps.

This has adverse effects on carriers. Since the use of such apps has increased, the use of traditional SMS has decreased, thereby reducing the revenue to the wireless carriers. Ubergizmo writes, “According to analysis and research firm, Ovum, it seems that the use of instant messaging platforms like Whatsapp has cost carriers an estimated loss of 17.7 billion Euros this year.” So, do you still use the traditional SMS or have you upgraded to Whatsapp?

Source: Ubergizmo

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  1. First, let’s make the distinction between costing the carriers and reducing profit margins. The use of such apps over SMS doe not cost the carriers anything. The SMS rides over much older networks that are being maintained whether they are being used by SMS or not. It’s part of the infrastructure that is already covered in your regular monthly bill. Now that this is clear, it can be stated that apps using the data connection certainly reduce the carrier’s profit margins since the charges for SMS plans were 100% profit to begin with.

    With many carriers, at least in the US, moving to tiered data plans or shared data plans, they more than make up for the shift in profits from one revenue stream to another.

    The title of the article is a bit misleading in that it is an assumption that the apps are costing the carriers when, in fact, they aren’t. The carriers have already adjusted and are making more profit than ever, despite free app services.

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