With Facebook's (NASDAQ:FB) Messenger crossing the 1 billion user threshold just shortly after FB enabled Android users to use SMS in Messenger, we believe it is an appropriate time to revisit a thesis we proposed a few months ago: Messenger is gradually replacing traditional SMS as the choice form of phone-to-phone communication.
The idea might seem outlandish and highly speculative, but we believe it becomes more and more tangible every day. We first got the idea from Messenger CEO David Marcus, who pointed out in a blog post that SMS communication was a tool that rose to popularity with the now extinct flip phone. Just as the flip phone has disappeared, Marcus argues, so too will the traditional messaging service that accompanied it. Its replacement will be an enhanced, cross-platform messaging app that allows people to send stickers, photos, videos, voice clips, GIFs, location and money. In other words, something just like Messenger.
Its an out-with-the-old, in-with-the-new shift, but as we pointed out in our prior article, it also is an economically beneficial transition for the consumer. While data plans are still entirely necessary, the threat of Wi-Fi everywhere threatens the necessity and even relevancy of these expensive data plans. Why pay for a data plan when you can simply search anything, call anyone, or message anyone for free through publicly available Wi-Fi?
The idea of making Wi-Fi an available-everywhere public good might seem like a stretch, but we think it is more of an inevitable occurrence than an overly optimistic vision. To an extent, Wi-Fi already is a minimally available and growing public good. Complimentary in-store Wi-Fi is a growing trend as it is proving to boost sales and customer loyalty and Wi-Fi is becoming more of a norm from transportation vehicles to have built-in.
But a couple cars and a few stores is still far off from Wi-Fi everywhere. The late Steve Jobs envisioned a future wherein the creation of a multitude of guest networks at homes and businesses could enable smartphone owners to always find a Wi-Fi network within range. This is essentially the establishment of widespread guest networks. Concerns here relate mostly to security, but we don't see any reason why security tools to enhance security in a guest network won't be developed.
There also are several other ways the world could get to Wi-Fi everywhere, and we recommend investors read this article to take a deeper look into them. The biggest question at play, then, is to the extent that Wi-Fi becomes available everywhere, how crucial will carrier data become?
The Wall Street Journal has reported of some consumers ditching the wireless bill and living off Wi-Fi in a world where public Wi-Fi coverage is minimal. What will the wireless bill churn look like in a world where Wi-Fi is everywhere? We hypothesize the churn will be significant and that it is only a matter of time before Messenger phases out the phone number.
There are many challenges to this thesis, namely those related to security of information and establishment of the Wi-Fi networks. How are we going to secure everyone's information in guest networks? Who is going to set up the Wi-Fi infrastructure?
Nonetheless, it is an interesting idea to think about and an important one to consider in light of recent Messenger headlines. To be clear, we are long FB for reasons aside for Messenger replacing the phone number, but as investors, we are excited about the early-read prospects of this long-term trend.
Disclosure: I am/we are long FB.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.