A reader from Hong Kong sent in the following email a few days ago, in response to our last commentary called SMS Redux: "I have been a sina.com investor for about 10 months. And their stock is doing so well now!! How can you in your right mind say sms is not the future for all the big web-sites in China???? That's making them valuable!"
First, it's best to never confuse stock price with the health of a company's product-line or management. Value is what value does, and we'll see corrections in the market place over the coming months, and the stock prices will slide back down. At it's best, the stock price should indicate the true value of an enterprise, and at its worst you have an Enron.
Second, we said SMS was merely a bridge technology. It is getting good cash for operators now, and that's great for the health of the entire industry. But you can't expect it to last for much longer as a means of generating e-subscription revenue for Sina, Sohu, and Netease. SMS and MMS are wireless technologies, but even with some duct-taped enhancements allowing for the sending of messages to email, they are still wireless technologies. The future is going to be non-wireless technologies migrating to the mobile handset.
For example, the popular QQ instant messaging service has partnered with China Mobile's MZone to give users QQ IM abilities to mobile phones–and vice versa. This is a start. And with the advent of smartphones, SMS will be a distance memory as people rely on their email accounts accessed via a mobile phone for all important contact. Hmmm… does this mean mobile spam, too?
In general, many of the wireless-only applications available today will disappear as more and more current desktop apps and services move to wireless. A few years ago, software that mimicked Microsoft Word was available for the Palm Pilot. Now it's replaced by Microsoft Word for handhelds. Do you understand? Put your money in "traditional tech" and you'll be better off.
Finally, last week's August 1 announcement that China Mobile is ending many payment deals with SMS providers is going to hurt SMS in China. Pornographic text messages, along with customer complaints, have given enough reasons for China Mobile to request the big portals to stop many of their revenue-generating practices.
Anyway, the point is that the main portals in China will need to quickly find another way to generate revenue. They were producing lackluster results prior to SMS's advent, and with SMS and MMS disappearing they'll need to monetize elsewhere. Maybe Charles Zhang can be a tour guide in the Himalayas?