Free Texting App Textfree Is Disrupting AT&T With Over A Billion Messages Handled

Textfree Lite screenshots

iPhone app developer Pinger’s line of free texting apps have handled over one billion messages since they appeared in the App Store less than a year ago, the company announced today.

Textfree, Pinger’s core app, lets users send and receive unlimited texts for a year for the $5.99 download price. The company also offers an ad-supported free version that limits users to 15 texts per day.

Pinger tells us that its apps have opened up new possibilities for iPod touch owners, who can’t use regular text messages, because they can’t access cell networks.

But apps like Textfree have also been increasingly disruptive to mobile carriers like AT&T, the exclusive U.S. iPhone provider.

How? By allowing iPhone owners to spend less money per month on text messaging plans, which are lucrative and very profitable sources of revenue for mobile carriers.

For instance, an unlimited texting plan for the iPhone costs $20 per month. In theory, using Textfree would allow you to stop paying that fee completely, saving $240 per year — and erasing $480 in revenue for AT&T over the course of a 2-year contract.

To be sure, most Textfree users probably end up maintaining a minimal text plan — $5 for 200 texts per month — to communicate with people who don’t know about their Textfree setup. Still, each customer making this switch saves $174 a year, and the inconvenience involved is fairly minor. (Real-time alerts aren’t as good, and there’s a chance you’ll miss a message because of it. But overall, fine for most chatter.)

But it’s a potentially big loss for AT&T.

If apps like Textfree continue to grow in popularity, they could become a problem for AT&T and other carriers. Data service revenue (including texting) is still fairly small compared compared to voice, but it’s carriers’ main growth drivers.

In the last quarter of 2009, AT&T’s monthly data revenue per postpaid subscriber — including iPhone subs — was up 18% year-over-year to $19.16, representing more than 30% of their monthly bills. A good chunk of that is from text messaging, which is very profitable because text messages cost carriers almost nothing to transmit.

Meanwhile, Pinger isn’t releasing any revenue figures, but says it has been profitable for several months now. Given that the company has 19 employees and pays roughly a dozen more for outside work, that isn’t a small claim. Across all apps on the Textfree platform, they have racked up 15 million downloads, and claim to have served well over 300 million ad impressions last month, though paid downloads are a significantly larger source of revenue. The company also makes money from referrals and in-app purchases.

Pinger was founded by Greg Woock and Joe Sipher, veterans of Handspring and Virgin Electronics. They have received $11 million in two rounds of funding from Kleiner Perkins and DAG Ventures.

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