In-App Chat vs. SMS: What’s the Difference?

6 min read

Keeping open lines of communication with customers is essential to nurturing their engagement, education, and awareness of your brand.

Emily R.
Emily R.
Published March 28, 2023
Two phone screens with examples of in-app chat and SMS text

But what's the best way to get in touch with them? We'll cover the difference between chat and SMS, their use cases, benefits, and limitations of each to help you decide which method of user outreach is right for your app. 

What is SMS?

Short message service (SMS) are text messages that can be up to 160 characters in length for application-to-person (A2P) communication. Businesses can leverage SMS by sending short, simple copy and links to subscribers, although messaging and data rates may apply.

Example of SMS Messaging

Common Text Message Use Cases

SMS text messages are a direct way to reach your customer base and can support a variety of use cases for multiple industries, including:

  • Telehealth: These apps can use SMS to send appointment reminders, confirmations, and links to patient portals.

  • Team: These apps can use SMS to notify remote teams of software updates, new security agreements, and features.

  • Gaming: These apps can use SMS to alert users of live gaming streams, special events, and new friend requests.

  • Dating: These apps can use SMS to remind users to check their matches and friend requests.

  • Marketplace: These apps can use SMS to promote sales, send discount codes to subscribers, alert them to new arrivals, and share limited-time offerings.

  • EdTech: Edtech apps can leverage SMS to remind students of incompleted assignments, share class updates, notify them of upcoming events, and more.

Benefits and Limitations of SMS

Communicating with your user base via SMS text is the most straightforward and low-lift option for many scenarios, but this method comes with its unique set of challenges, too. Before committing to SMS vs. chat messaging, be sure to take the benefits and limitations listed below into account.

SMS Benefits

  • Reach Users Anytime: A major advantage of SMS is that you can reach your app customers at any time, even when they're not logged in or connected to the internet.

  • Higher Open Rates: SMS chat open rates are upwards of 90% because they merge with the natural design pattern of social text messages users might receive and respond to throughout the day.

  • Cost Effective: SMS can be an inexpensive customer engagement strategy if users have unlimited texting and data plans.

SMS Limitations

  • Legislative Regulation: Since SMS texts are pushed into the same interface as a user's personal messages and can resemble spam, legislative SMS regulations are getting stricter regarding opt-ins that differ by country and change often.

  • Disrupted UX: While SMS texts reach users directly, they have to leave your app to view them. This means your messages are driving them away from your app and risk losing control over the UX.

  • Low Reply Rate: If a user does not have an unlimited texting and data plan, it costs them money to reply to SMS and discourages them to do so.

  • Transactional: Due to limited character counts, SMS messages can make the user feel their relationship with your brand is transactional and impersonal. 

  • Data Loss: When you send an SMS, you lose ownership and access to the UX and conversations to cellular data providers.

What is In-App Chat?

In-app chat is a natively integrated messaging interface your brand's team and app users can leverage to build community, enhance UX, increase engagement, lower churn, and drive transactions. Developers can choose to build an in-app chat solution in-house or partner with a third-party vendor and integrate a ready-made chat API which can save engineering resources, reduce time to market, outsource maintenance efforts, support scale, and enhance feature iteration.

Screenshot of in-app chat example

Common Use Cases for In-App Chat

Many industries can leverage in-app chat messaging to drive engagement, increase retention, and lower churn in the following ways:

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  • Telehealth: These apps can use in-app HIPAA-compliant chat to connect with patients remotely and enable them to upload and share image files and documents with providers.

  • Team: These apps can use in-app chat to encourage remote teams to stay connected and productive despite different time zones, languages, etc.

  • Gaming: These apps can use in-game chat to create a strong community that creates a loyal and engaged user base.

  • Dating: Dating apps can use in-app chat to connect singles faster, safer, increase retention, and gain insight into user analytics.

  • Marketplace: eCommerce apps can use in-app chat to keep transactions on the platform, connect users anonymously, speed up deliveries, safely process payment information, and more.

  • EdTech: These apps can use in-app chat to create a more natural, effective, and traditional classroom environment for students and educators from anywhere in the world.

Benefits and Limitations of In-App Chat

In-App Chat Benefits

  • Identifying Info Not Required: In-app chat users do not have to share their phone number or email to be contacted.

  • Push Notification Support: Push notifications can support in-app chat visibility by sending alerts to their home screen about unread messages to drive them back into your app.

  • High Deliverability: In-app chat can be manipulated to provide offline messaging and cache unsent messages to be sent when the user comes back online.

  • Personal Connection: In-app chat enables your team to communicate in a personable, human way that features like presence indicators and typing statuses can enhance.

  • More Control: In-app chat developers heightened flexibility and control over their user experience with out-of-the-box features like GIFs, emojis, and video and audio recordings, as well as custom branding and proprietary data ownership.

In-App Chat Limitations

  • Download Required: One drawback to in-app chat is that your userbase must download your app to use, which requires a small extra lift on their part.

  • Internet Connection: Users must be connected to Wifi or the internet in order to send and receive in-app messages.

  • Opt-Out Potential: Users have the agency to opt out of in-app and push notifications, meaning they will not see your messages unless they are actively logged into your app.

What is the Cost of In-App Chat vs. SMS?

Now that you know the benefits and limitations of each communication method, let's get down to what they'll cost. We'll use Stream Chat's pricing and Twilio's SMS pricing models to demonstrate the example, so let's start with the facts.

Comparing the Cost of Stream Chat to Twilio's SMS Pricing

You can integrate in-app chat and send an unlimited number of messages, but the price of your plan is based on your app's number of monthly active users (MAU). Stream's Startup plan is $499/mo for up to 10,000 MAU. It increases as your app's MAU scales, but apps with over 50K MAU can receive volume discounts.

Twilio's pay-as-you-go SMS pricing is $0.0079 to send and receive text messages from local, toll-free, and short code phone numbers,which Twilio can also supply for additional usage and set up fee, ranging from $1.15/mo to $4,500/3 mo. It is 153% more expensive to send and receive picture SMS messages, called MMS, at $0.02/message. However, not forgetting to factor carrier fees into your cost projections is critical. There is a standard $0.0079 fee for all major carriers, like Verizon, AT&T, and T-Mobile, plus additional fees depending on the type of phone number or short code you use and if your message contains media files. 

Cost vs. Value

The question of which method is more cost-effective differs from which method is more valuable. By integrating an API to support your in-app communication experience, you're not only buying chat, but you're also buying user engagement, the ownership of customer data (as opposed to losing it to a message carrier), white-glove customer support, industry-leading security and compliance standards, unlimited message counts for your MAUs, greater user safety thanks to moderation, and a reliable performance infrastructure. 

Considering User Experience and User Data

While the basic function of SMS (without an upgraded phone number or vanity short code) may cost less month to month, you risk interrupting the user experience and forfeit valuable data. In many countries, replying to an SMS costs users money if they don't have unlimited texting as part of their mobile plan. While these unlimited plans are common in the US, SMS rates as high as ZAR 0.52 in South Africa or MXN $1.09 in Mexico will prevent those users from replying. One of the biggest advantages of in-app chat messaging is that users don't need an unlimited cellular plan because they rely on Internet transmission.

By using SMS, you'll also miss out on gaining insight into valuable customer analytics and user engagement without the ability to drive them back into your app. Plus, you can always leverage the push notifications feature from your in-app chat solution to reach users who have exited your app—no carrier fees required!

Which is Right for Your App?

When comparing in-app chat to SMS, we can see that SMS is best suited for short, functional, and instructional messages to your app's users and customers. While there can be benefits to a one-way communication line, there are also disadvantages. In-app chat offers multi-way communication where users can create groups with each other or talk 1:1, as well as send and receive messages from your app's team.

With the increasing saturation of apps for all industries on the market, set yours apart by curating a personalized, community-based, and holistic environment with in-app chat. It supports a seamless UX, is easily integrated, doesn't require users to offer up their personal contact information, and offers a richer experience than what SMS can provide.

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