Choppy Waters Or The Crest Of A Wave?

As Chief Business Officer, Ivan Ostojić is responsible for strengthening Infobip’s critical future and market-shaping functions.

SMS marketing is becoming increasingly central to business marketing strategies, both in the U.S. and globally. With the latest developments in generative artificial intelligence (AI), we’re at the crest of a wave in customer communications. Messaging is the perfect vehicle to ride this, yet the recent proliferation of spam messages is causing havoc for carriers, consumers and brands alike. What’s going on? And how can the industry steer clear of these choppy waters?

The Growth Of SMS

In an era where digital communication channels are abundant, SMS marketing has emerged as a front-runner in business growth strategies. The channel is ubiquitous: With an estimated 7.33 billion global mobile phone users in 2023, virtually every individual can send and receive SMS, making it the most universally accessible form of communication.

Originally conceived as a person-to-person (P2P) medium, SMS has evolved into an important application-to-person (A2P) channel. Businesses are using A2P SMS to augment marketing efforts, bolster customer service and drive user engagement.

Opt-in requirements ensure that the audience is already engaged, unlike the public nature of social media marketing. High delivery and open rates at relatively low costs make SMS a high-ROI channel. In fact, an analysis across my company’s platform indicated a 75% increase in business-to-customer SMS interactions on our platform in 2022 compared to 2021, with 16% of these interactions related to customer engagement and marketing.

Brands are increasingly reimagining the customer journey through a conversational lens, where the entire user journey is through a single chat app or digital channel, and SMS is well placed to facilitate this. The global reach, cost-effectiveness, versatility and reliability of SMS marketing make it an essential tool. Moreover, developments in generative AI are enabling conversational interactions via SMS and other chat apps between businesses and consumers, enriching customer experiences and consolidating disparate interactions into one seamless flow. As gen-AI enters people’s pockets, I believe we will see a revolution in customer communications.

Growing Pains

Yet, as with any fast-growing market, I’ve had some issues arising and spam messages are a growing challenge, particularly in the U.S.A. Earlier this year, we saw reports of “sophisticated robotexts bombarding Americans’ phones, costing unsuspecting people millions of dollars.” In 2022, U.S. phone users reportedly got 157 billion robotexts. In response, the federal government demanded that mobile phone companies start blocking spam texts.

Regulation around SMS marketing is rapidly evolving to meet this challenge, yet the failure of some messaging platforms to act quickly is impacting both brands and consumers.

Take, for example, developments around SMS codes. In the U.S., there are three types of SMS numbers: short code, 10-digit long code (10 DLC) and toll-free. The 10-digit long numbers were, for a long time, unregulated. There was no process to validate that the content was wanted (compared with short codes, which are highly regulated via an extensive review process). This contributed to the deluge of unwanted traffic that consumers were receiving.

Carriers have acted, implementing a new registration process for 10-digit codes. There are now penalties for unregistered traffic. The new A2P 10DLC offers stability, security and delivery reliability. This contrasts with the low-security, low-volume 10-digit codes designed for person-to-person messaging.

Though a positive development, this has become a market disrupter, particularly given that the deadline for the change was the beginning of September. The carriers first announced their intention to address this issue over two years ago, and at my company, like others in the industry, we’ve been working since then to implement the necessary changes while ensuring our clients remain compliant.

Yet, some A2P platforms and messaging providers have deliberately built large businesses around this unsanctioned offering, with some even charging a consulting fee to manage this change. The result is that many brands are having to scramble to meet the new framework.

The Future Of Messaging

It’s essential for carriers, A2P platforms, messaging providers and regulators to work together to resolve these issues to protect both brands and consumers while seizing the enormous opportunities that messaging platforms offer.

Business-to-consumer communications are evolving from transaction-based messaging to end-to-end conversational journeys. Whether for marketing, customer support or even the ability to purchase a product directly via a messaging platform, customers want a conversation with a business or brand on the channels they already use.

As interactions between brands and consumers become increasingly conversational, messaging has a central role to play. The next generation of messaging, RCS (Rich Communication Services), is gaining traction as a pivotal channel for business-to-customer interaction. Combining the reliability of traditional SMS with enriched functionalities akin to WhatsApp and iMessage, RCS allows businesses to send not just text but also images, videos and files.

Brands worldwide are witnessing tangible benefits from RCS campaigns, including higher engagement and response rates. RCS also enables the deployment of chatbots for automated customer interactions. Businesses can seamlessly integrate human agents to handle complex queries that chatbots can’t manage, exemplifying an optimal mix of automation and human touch.

Selecting the right partner is important for businesses looking to step into RCS. They should have strong carrier and partner relationships and guide the business through onboarding and growing within the channel. They will have solutions that allow clients to migrate existing SMS traffic to RCS and develop content-rich conversational experiences. And they will have a wide reach and support a breadth of channels to ensure that they can provide the reach and capability needed.

If not looking to move into RCS, there remain a number of mobile messaging channels that can meet a business’s needs, whether that be ensuring notifications are delivered effectively or supporting rich and conversational interactions. Again, working with the right partner who is able to provide the channel access and the platform solutions to enable this.

With the rise of SMS, chat apps and omnichannel communications firms can have a 360-degree view of their customers. Better customer data and segmentation enable a more personal service. By pairing messaging with AI, firms can offer one-to-one personal interaction between people and businesses over the internet and through chat apps. We are at the crest of the wave in the evolution of customer communications. It’s crucial we don’t lose our balance.

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