Submitted by Mike Grenville on Thu, 14 Aug 2008 10:53

Twitter abruptly turns off SMS alerts to users outside USA, Canada and India.

The costs of sending free SMS to subscribers without an obvious business model has finally taken its toll on Twitter and it has turned off text message alerts to everyone outside USA, Canada and India.

The announcement from Twitter says notes that "Mobile operators in most of the world charge users to send updates. When you send one message to Twitter and we send it to ten followers, you aren't charged ten times--that's because we've been footing the bill. When we launched our free SMS service to the world, we set the clock ticking. As the service grew in popularity, so too would the price. Our challenge during this window of time was to establish relationships with mobile operators around the world such that our SMS services could become sustainable from a cost perspective. We achieved this goal in Canada, India, and the United States."

Unfortunately being based in California it doesn't seem to have appreciated the SMS pricing model in the rest of the world. In the USA text message users are charged to receive SMS. Of course with bulk plans most users don't notice this charge but it means that services such as Twitter can earn some small revenue from sending out text messages. In India SMS fees are negligible.

The flip side is that it means that spammers can also earn money from it as well. Since European operators introduced an interconnect fee for messages between each other, there was been a dramatic fall in the amount of SMS spam. The late arrival to the world of text messaging, USA, is the market that is out of step with the revenue model of the rest of the mobile world.

In the announcement Biz Stone, Co-founder Twitter says that "We took a risk hoping to bring more nations onboard and more mobile operators around to our way of thinking but we've arrived at a point where the responsible thing to do is slow our costs and take a different approach."

Stone notes that "Even with a (recently imposed) limit of 250 messages received per week, it could cost Twitter about $1,000 per user, per year to send SMS outside of Canada, India, or the US."

If Twitter had put even a small premium on SMS it might not be cutting the SMS service today - and it would have a sustainable business model.

Launched in July 2006 with $20.4M funding, perhaps the rumoured $15 million new investment from Spark Capital and Amazon founder Jeff Bezos has brought some reality into the company.

Twitter says it will continue to negotiate with mobile operators in Europe, Asia, China, and The Americas but gravity seems to have finally reached Twitter.

As one blogger bluntly put it: 'Twitter - SMS = DEAD'. It's too early to say that much but by cutting off the service without any warning, some naivety seems to have been demonstrated.