With texting the highest-margin product sold by carriers, mobile operators are trying to persuade more people 50 and over to use the data service
Connie Finn had never sent a text message from her cell phone before this year. Then she got a plea from her 26-year-old daughter. "She said she'd be in touch a lot more if I'd just get a texting plan," says the 54-year-old homemaker from Kirkland, Wash. "I was reluctant because of my bad spelling, but that was before I realized young people don't take time to spell correctly, either."
As growth in voice revenue slows, carriers are pushing data services including texting. Wireless operators see opportunity in people like Finn because relatively few people over 50 send texts. "It's a very attractive market for us," says Michael Woodward, the executive who oversees AT&T's (T) handset portfolio.
Just 42 percent of Americans aged 50 or older sent texts in any month last quarter, vs. 85 percent of 13- to 34-year-olds, according to researcher comScore (SCOR). GreatCall, which offers simple calling plans and handsets under the Jitterbug brand, expects the rate of texting among those 55 and older to hit 80 percent within three years, from 30 percent today. "The beauty of texting is that somehow it's psychologically embedded in us to respond immediately," says Michael Shore, a 58-year-old real estate agent in Beverly Hills who began texting this year to reach clients. "It's almost like being asked a question face-to-face."
The demographic is important to carriers' long-term prospects.By 2025, 17.9 percent of Americans—63.9 million people—will be 65 or older, up from 12.7 percent in 2008, according to the U.S. Census Bureau. Texting is a big driver of the industry's profits. AT&T, Verizon Wireless, and Sprint Nextel (S) typically charge 20 cents per message sent or received, and offer unlimited plans for $10 to $20 a month. Yet each text costs carriers less than one-tenth of a cent to send, says Piper Jaffray (PJC) analyst Chris Larsen. "It's the highest-margin product the carriers sell," Larsen says. "If you've got that over-50 crowd not texting, that's all incremental revenue that carriers could realize."
To reach the older market, Sprint offers free tutoring on cell phone basics in stores, including instruction in reading and sending texts. To attract more seniors, AT&T has boosted advertising in media that draw older people, including AARP The Magazine and Dancing with the Stars. Phone manufacturers Samsung Electronics and Pantech make handsets with oversize buttons and bigger screens that are aimed at the elderly.
For Finn, the Washington homemaker, another obstacle was the sometimes baffling abbreviations common in texting: OMG for "Oh my God," LOL for "Laughing out loud," and the more obscure ROTFL for "Rolling on the floor laughing" or LYKYAMY for "Love you, kiss you, already miss you." In the end, she chose not to be intimidated. "I just invented my own," she says. "My daughter doesn't always know what they mean, but now I am surprised by how much I enjoy it."
The bottom line: Cellular carriers are hoping to persuade more people over 50 to send text messages, which offer very high profits.