Is SMS dead?

Two weeks ago Google shut off its free SMS platform to 3rd parties (the one that powered Infinite SMS on the iphone). Days earlier Google had also shut down Dodgeball, the SMS powered location based social app. One might conclude from this that the services were unpopular. Instead, the real problem was just the opposite; and the fact that Google was paying for each tiny message.

Unfortunately, unlike with most technologies, when it comes to SMS the marginal costs do not necessarily shrink with higher usage. This economic problem is caused by the operators (outside of the US) and SMS aggregators (in the US) who can afford to demand applications to pay a price for reaching their subscribers.

With the rise of new open platforms the current SMS model will begin to deteriorate. Platforms such as the iPhone are paving the way for other means to reach users without having to pay a toll to the operator or aggregators. Another important trend is the growing popularity of flat data plans. These are gradually being adopted and marketed by operators to expand their more advanced premium services and content (ah, the irony).

But getting real... there is still a long way to go.

Today SMS is still the optimal way to reach a really wide mobile audience. In the US for example, mobile users with data plans who are able to reach their favorite applications via mobile web are just about 60 million. In contrast, almost all mobile users (over 200 million of them) can be reached via SMS. This gap is even greater in emerging markets, where Mobile Web penetration can be as low as 3%, while SMS is over 90%.

So to answer the question... it's getting closer and closer, but it has a long while to go.