The shift could significantly erode revenues for mobile networks, which last year missed out on $25bn (£16.1bn) of revenue from texting due to "over the top" (OTT) apps, which will rise this year to $34bn, says Ovum, an Informa subsidiary.
Informa reckons that by the end of the year, text messages could be outstripped two to one by the number of OTT messages – sent "over the top" of the standard chargeable methods of SMS by using data connections.
The shift in consumer preference as smartphones become increasingly pervasive could mean a windfall for the makers of the OTT apps – but a consequent headache for mobile operators which have long viewed texting as a cash cow, from which they will earn an estimated $120bn this year.
Roughly 19bn messages were sent daily on "chat apps" such as WhatsApp, iMessage and BBM, compared to 17.6bn texts by the end of 2012, the company said in a new study. And that could rise to 50bn against 21bn by the end of next year, it says.
Taken together, the bigger apps claim a combined base of around 2.5 billion users, but many such as iMessage and WhatsApp, or BBM and WhatsApp, will include duplicates. Apple alone claimed in January this year that its iMessage service was used to send 2bn messages daily – though WhatsApp said earlier this month that it has processed up to 20bn messages (8bn of which were incoming, some to multiple recipients) per day.
"Networks aren't going to raise the prices of their data offerings – they make a lot of money already from mobile broadband which is offsetting the loss from OTT apps," Neha Dharia, an analyst at Ovum's consumer practice, told the Guardian. "They took over from SMS first in the countries such as Spain and the Netherlands where texting was too highly priced." That, she suggests, meant that when cheap or free OTT alternatives arrived, people flocked to them.
The fall in revenues from texting will probably accelerate, she suggested. Ovum calculates that by 2020 the cannibalisation of messaging revenues will be more than $86bn. But that will not accrue to the OTT services, which will only manage to generate a fraction of that amount from users, Dharia suggests.
OTT systems have the advantage over standard mobile systems of being able to use Wi-Fi connections inside houses or offices even if a mobile phone signal is not available.
SMS messaging relies on existing data channels on basic mobile connections. Texts only contain 128 bytes of data; if typical network prices for texts were applied to CDs, which contains 650MB of data, they would cost £60,000.
While text messages are increasingly offered almost free to contract customers, they are still priced highly for many pay-as-you-go (PAYG) customers.
Text messaging turned 20 in December, but is now in decline in a number of developed countries, including Spain, the Netherlands, Finland, Hong King and Australia. The first ones were free; pricing was added in 1994 with a share price alert system.
Google is reported to been rebuffed after making a $1bn offer for WhatsApp, whose chief executive revealed earlier in April that it has more than 200 million users for its cross-platform mobile-based app.
Richard Windsor, a former Nomura analyst who runs the RadioFreeMobile consultancy, says: "Google already has an instant messaging system as well as a voice and video communication and collaboration system. The key difference is that WhatApp has the ability to find which of your contacts also uses WhatsApp on the basis of their phone number. This makes adding contacts easy and painless, which I suspect is why WhatsApp has become one of the major players in the instant messaging space." He thinks the pursuit of WhatsApp is a sign of Google weakness – principally, that its Chat system isn't used enough on mobile devices.
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