Tuesday, April 17, 2012

Network Effect of Text Messaging

After reading the article "Types of Strategy", my mind started racing with endless examples of low-cost leadership, differentiation, customer relationship, and the network effect. For instance, I'm one who will drive 15 extra minutes to get to get to a low-cost Walmart, and my mom waits on average 2 hours for her favorite hair dresser. Looking at network effects, there is tons of social media sites that have followed this effect (i.e. Facebook, Twitter, LinkedIn, etc). One other effect that instantly came to my mind was text messaging. 

Looking at the history of text messaging1, the first text message was sent in 1992 from a computer to a mobile phone.  In 1993, Nokia made the first mobile phone that allowed customers to send to each other, but if they could only send to each other within the network, how useful was the idea?  It wasn’t until 1999 that texting could be sent between the different providers.  In 2000, customers were only sending on average 35 messages per month.  Today, the average American sends 357 texts per month (although teenagers smash those numbers with an average of over 3,000 messages per month2).  In 2007, the network effect of average numbers of text messages surpassed the average number of phone calls.  In 2011, text messaging generated over $585 billion and is expected to continue growing steadily.

Personally, I remember with my first cell phone, I only ever used text messaging on rare occasion.  With my second phone, I had a limited text plan that I never exceeded.  As time and technology quickly progressed, I had to increase my texting plan and eventually go to unlimited text messages.  I don’t think twice about it if I don’t get a phone call during the day; however, if I don’t get a text, I would probably be concerned that my phone isn’t working.  Today I regularly text way more than calling with my mom, my grandparents, and even my boss at work.  Text messaging is becoming the most common form of communicating, starting to surpass number of phone calls, emails, and face-to-face interactions.



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