If you thought the hype around mobile messaging apps had reached some pretty crazy heights already — what with SnapChat apparently snubbing cash acquisition offers of $3bn and even $4bn, from Facebook and Google respectively — expect even more craziness next year. A lot more, as usage of over-the-top messaging services reaches an “inflection point”, as analyst Ovum puts it in a new report.
Ovum says it expects the number of messages to be “transacted” on social messaging apps like WhatsApp and Line to grow from 27.5 trillion in 2013 to 71.5 trillion by the end of 2014. So that’s more than 2.5x in messaging volumes. If one such service, SnapChat grows at a similar rate it could mean its users are receiving more than a billion Snaps daily by the end of next year, up from the 400 million daily they’re currently getting. Which (maybe) makes a $3 billion cash offer for an ephemeral messaging app seem a little less crazy. Or not.
The drivers for “social messaging”, as Ovum terms these mobile-first platforms, include the growth of affordable smartphones and access to mobile broadband (in emerging markets), plus large-scale marketing campaigns (Japan’s Line does high profile TV advertising campaigns in its priority markets, for instance).
All of which will lead to the “mass adoption” of social messaging services next year, it predicts.
Social Messaging: A force to be reckoned with — not a fad
So if you thought the user numbers being bandied around by the likes of WhatsApp (which now has more than 350M monthly active users); WeChat (more than 270M MAUs); and Line (300M registered users) were already pretty impressive, think again. There’s still apparently room for growth — a lot of room for a lot more growth, according to Ovum.
The analyst notes that the “cumulative strength of the social messaging industry” has long since crossed the billion-user mark — and it’s predicting that, given the current speed of adoption, “we can expect it to cross the 2-billion mark by the end of 2014”.
“Even though social messaging players have been around since 2011, only in 2014 will they become a force to be reckoned with,” the report adds.
Ovum said it expects to see a new wave of over-the-top messaging players next year devising mobile-first services and building out lasting businesses from this small screen foundation. Albeit, many social messaging startups won’t go the distance of course — Ovum says a two-year “waiting period” is required to establish whether a social service is going to last, or whether it’s just a passing fad.
But looking generally at the social messaging space it’s passed the point of passing fancy — to establish itself as a mobile fixture.
“The strong and steady ascension of social messaging in the past few years means it has established itself as not just a fad, but a mobile-first service that is going to be around in the long term,” says the report. “It will evolve along with consumers and their digital appetites into a mobile social media platform.”
Ovum also expects to see social messaging players trialling services that take them beyond comms next year — citing examples such as games, payments, information services, and utilities. (A fitting expansion, if photo-sharing behemoths like Instagram are eyeing up adding messaging.)
Some current gen messaging platforms are already doing this, of course, including Line and KakaoTalk (games) and WeChat (payments), to name a few. But expect to see more services being added by more players as they vie to build out fully-featured media platforms and compete to create contextual services that tickle the fancy of their respective massive mobile user-bases.
Ovum argues that mobile-first social messaging players have a natural advantage over legacy social networking players which have had to port services from PC to mobile, being as they are developed for the mobile-first era. Which again may explain why such large amounts of cash are being waved in front of SnapChat by longer-toothed tech veterans who cut their own teeth on the desktop.
Money, money, money: From stickers to carrier partnerships
On the question of monetisation, the analyst points to larger social messaging players which have successfully started generating revenues off of their large user-bases, including Line via in-game purchases and sticker sales, which contributed to it generating revenues of more than $132 million in Q2; and KakaoTalk building up game revenues of $300 million in the first half of the year. And says it expects those two services’ revenues in particular to grow in 2014.
However it also notes that games and stickers won’t work for social messaging’s smaller fish — arguing that this monetisation method demands large user-bases to generate the required revenues. Which in turn explains why Line, as one example, is pursuing an aggressive international expansion strategy, and shouting about rising numbers of registered users. It needs large numbers of users to funnel into its games and stickers shop business model
“There are questions over the longevity of social messaging without a sound revenue stream, and some expect these players to be fattened up through VC funding and then to be sold. That might be true for some of the smaller players in the industry, but the bigger players have moved beyond the stage of accumulating a large user base and are now focusing on growing their revenues,” the report notes.
“The key to monetization is having a large and loyal user base, which is becoming a reality for the top four players,” it adds.
Ovum said it expects other social messaging giants to speed up their monetisation efforts in 2014 to achieve sustainable revenues — with other strategies being pursued including WhatsApp’s subscription-model, coupled with carrier partnerships; and WeChat doing celebrity-based chat channels, sponsored stickers, and mobile payments.
Despite stickers only being a ticket to riches for the largest social messaging players, Ovum said it expects expressive, pictorial pixels to be even more popular next year — becoming a “universal means of expression over social messaging apps”.
One reasons for stickers’/emoji’s enduring power among users is that visual imagery can be understood even when words cannot — crossing language barriers, and (along with voice messaging features) allowing for communication between people who can’t read. And from the messaging app maker’s perspective, adding non-linguistic comms features to apps — such as stickers and voice messages — allows them to tap audiences who may not be literate but absolutely want to communicate.
With the growth of OTT messaging, carriers might well fear being left out in the cold, as their customers ditch SMS for messaging apps with fancier features like stickers in increasing numbers. But some carriers are already looking to partner with social messaging players, to attract new customers or increase engagement. And that’s an opportunity for some of the players, large and small, in this space.
Ovum specifically notes that carriers may seek to “compensate” for the dampening of SMS revenues by, for instance, offering SMS APIs to mobile messaging app players — to allow their services to reach into a wider 2G pool. If carriers become a little more comfortable about working with messaging startups, rather than trying to choke off their services, there is potentially something in it for both sides.
And, indeed, research put out by UK analyst mobilesquared in September suggested carriers are increasingly open to working with social messaging players — partly on account of the “exponential” growth of OTT services, as well as also the corresponding decline in their own traditional SMS messaging revenues — and the need for them to seek replacement revenues.