More than half of smartphone owners worldwide are already active users of OTT (over-the-top) messaging apps such as WhatsApp, Viber, Microsoft Skype, Apple iMessage and Facebook Messenger, and there are no signs of the market slowing, according to a new study.
UK-based Analysys Mason (whose wide client list includes Telecom NZ and Vodafone NZ) says widespread smartphone and mobile data uptake saw OTT messaging use soar in 2012 and 2013.
Who's down with OTT?
All NZ telcos have talked in general terms about a rise in OTT volume.
And in its submission to the Telecommunications (Interception Capability and Security) Bill, passed in November, Telecom got specific, revealing the numbers on its network who used several high-profile OTT services during May 2013 (Telecom has around 1.81 million customers all up):
- 150,000 used Apple’s iMessage service
- 140,000 used Facebook messenger
- 78,000 used Viber
- 35,000 used Microsoft live messenger
- 32,000 used Microsoft Skype
- 25,000 used Google Talk (now called Hangouts)
- 23,000 used WhatsApp messenger
Telecom also quoted research that shows Skype now accounts for one-third of cross-border calling minutes, and counting.
IP messaging is turning out to be a ‘killer app’ for the mobile Internet
Major Internet players such as Apple, Facebook and Google have identified the messaging market as a target for market disruption and one that can complement their core businesses.
In addition, specialist start-ups such as Kakao, Line and WhatsApp have driven innovation in feature sets and supporting business models. The segment proved wildly successful, and Analysys Mason estimates that 55% of smartphone owners worldwide were active users of IP messaging services at the end of 2013.
The services are driving much higher levels of user engagement compared with SMS. WhatsApp recorded an all-time high of 10 billion outgoing messages in a single day in June 2013, which equated to an average of more than 30 messages per user per day.
Analysys Mason estimates that the total volume of messages sent from mobile devices via IP services exceeded the volume of SMS messages for the first time in 2013, at more than 10.3 trillion compared with 6.5 trillion worldwide. These trends are set to continue, driven by increased adoption levels.
Analysys Mason forecasts the number of users on smartphones to increase from about 1 billion in 2013 to almost 3 billion in 2018. Messaging volumes associated with OTT services are expected to almost double in 2014 and will reach 37.8 trillion messages sent in 2018.
Operators need to reassess their role in the messaging market
The weakening role of operators in the messaging value chain suggests that it is only a matter of time before SMS services are dislodged from their current default position on smartphones. Phone makers and operating system software providers are moving aggressively into the messaging market and it will be increasingly commonplace for alternative messaging services to be set as the default.
Operators’ IP-based initiatives could serve to limit substitution in some markets, but are likely to only secure minority market shares. In most cases, the momentum behind OTT alternatives is too strong, Analysys Mason says, and phone companies lack compelling means of differentiation in messaging.
The carrots ...
As phone companies decide whether or not to seriously compete in messaging, they should focus on the following areas, Analysys Mason says.
Support for a broader consumer proposition built around voice and video: Operators will struggle to compete directly with the major internet players and niche providers of messaging services. Instead, they need to focus efforts on supporting services where they are able to differentiate and derive revenue.
Improving the feature set available to the business-to-business and businessto-business-to-consumer and wholesale sectors: Given the limited opportunity in the consumer retail space, operators should focus their efforts on using their network assets and brand strengths to ensure that they are well positioned to address opportunities in other segments. Working with partners and fostering ecosystems is critical to success in the broader communication services market.
- Cost reduction: Competition from major players with extensive financial resources and indirect business models further underlines the need for operators to focus on cost reduction. Messaging margins are very vulnerable when services such as WhatsApp Messenger can run on operating costs in the tens of cents per subscriber per year.
... and the stick
There's a negative option, too: impose special data charges on OTT operators, or the for people using their services - contrary to the principle of net neutrality.
Another market researcher, Strand Consult, notes last week a court in the United States issued a judgment that the American telecom regulator did not have the authority to impose net neutrality rules on operators. However, carriers are expected to mount a fresh challenge.
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