A Battle of Wills in Text Messaging

I was recently doing research into companies serving the wireless market and it struck me that there are an awful lot of venture-backed companies out there whose business plan depends on getting a big deal with one or more of the wireless carriers.  These companies need to either 1) get one of the increasingly rare slots available on the deck (the standard menu of choices the wireless carriers make available on their phones) or 2) convince the carriers to adopt their company's media management/encoding/delivery technology.  The carriers have a chokehold on access to the end user of which Bill Gates is no doubt envious.  I can imagine that this is exactly what he was gunning for with the Internet when he tried to blend the browser into the desktop.

As part of my research, I came across a recently funded company called 3jam that looks like they have an interesting twist on the 'beg the carrier' approach to business development.

3jam's concept is simple - turn text messaging into a group communications tool by enabling messages to be sent to multiple recipients and then allowing the recipients to respond to some or all of the group.  These capabilities have been a mainstay of email since its inception but are currently unknown in the text messaging world.  The genius of 3jam is apparently that their group messaging service can be used by anyone using any phone served by any carrier.  There is no software to download or service to subscribe to.  It simply works right through the standard text messaging interface, allowing 3jam to bypass the carriers and go directly to the wireless customer. (Note: There are some rough edges to iron out)

This ubiquity is required if 3jam is going to be successful.  Unless a sender knows that everyone in their group can get and reply to their message, they won't use it.  Keeping track of who can and cannot group text will be a show stopper for most users.  How often would you send an email to multiple recipients if you had to know whether each recipient was capable of receiving group emails and not just emails addressed only to them?  Therefore, even access to 50% or even 75% of text messaging users is not good enough.  This also means that 3jam has no choice but to make its service free to the end users.  Free is the only way to get ubiquity.

Assuming that the service is truly ubiquitous and they can iron out the rough edges, I predict that everyone who text messages regularly will be using it in a matter of months.  The value of its service is intuitively obvious and it is one of the most naturally viral offerings I have ever seen.  When the first 3jam message is sent, it introduces the service to all of the message's recipients.  When any of the recipients then sends a 3jam message of their own, they in turn introduce it to a whole new group of users, and so on - rapidly exposing the service to every text messenger.

Looking out 6 months, I can imagine millions of 3jammers, sending one-to-many instead of one-to-one messages, generating huge incremental traffic and revenue for the carriers - and nothing for 3jam.  Obviously, 3jam will need to monetize its user base and because it needs ubiquity, charging consumers is out.  That does not leave a lot of interesting choices.  Other than selling ads (of which I am skeptical), all I can come up with is convincing the carriers to share some of their 3jam generated revenue - thus setting up the battle of wills.

If a carrier decides not to pay 3jam, the company's only recourse is to restrict its service to the carrier's customers.  However, since 3jam needs ubiquity, cutting off any one of the major carriers would doom 3jam.  That leaves both sides playing a game of chicken.  If a carrier refuses to share, they risk having 3jam shut them off and losing all of the related revenue.  On the other side, 3jam would have to choose between continuing to serve the carrier's customers for free or mortally wounding itself by shutting them off. Either way it loses.

How this plays out should be of enormous interest to anyone investing in or working for a company serving the wireless market. Will the carriers make nice?  Will they make an end run around 3jam and introduce their own offering?  Will 3jam find some additional leverage over the carriers, perhaps by finding a way to restrict a carrier's customers without fundamentally damaging the value of its service?  Will it find a way to monetize its base without needing the carriers at all?

We should know in a few months. It will not take years for this to come to a head.