Sheena, who made new friends on her first day of college, was in a dilemma by the time she left for home. Her new friends used BlackBerry handsets, and were all connected with each other through its messenger service, BBM, while Sheena used a Micromax handset. Saddened by the thought that she would be the only one to miss out on the fun of messaging, she sat down to watch television. And she found a solution. During one of the ad breaks, Micromax announced that the so-far exclusive BBM messenger service was now available on its smartphones. Sheena quickly downloaded the application. Next day at college, she surprised all her friends by connecting to them through her Micromax smartphone.
If eight years ago, social media opened a new gateway of communication, over-the-top (OTT) messaging servicesservices that send instant messages over the internet and dont depend on wireless cell networkshave triggered a revolution globally. India, too, has been caught in this whirlwind affair and has witnessed the launch of many mobile messaging applications including Line and WeChat in the recent past. Today, a consumer can easily download a hoard of chat based applications on her mobile phone starting from WhatsApp to Facebook chat, Google chat, ChatOn (launched by Samsung), etc.
According to industry estimates, US based WhatsApp is leading the charts with over 20 million active users in India, part of its worldwide active user base of more than 300 million. China based WeChat or Weixin (as known in Chinese) is hot on the heels with about 300 million active users globally. Next in line is Japan based Line Corporations chat service Line with about 230 million global users. In India, Line claims to have over 5 million users. Another chat service Nimbuzz claims to have 150 million users worldwide with 25 million users based in India. Meanwhile, Bharti Soft Bank (BSB), a joint venture between the Bharti Group and internet company SoftBank, which had introduced is own messenger service Hike, has 3.5 million users in India which is part of its 5 million users globally. Mobile handset manufacturer BlackBerry has about 61 million users for its BBM service globally.
Due to the rapid growth of mobile broadband subscriptions as well as the proliferation of reasonably priced low-end smartphones, the Indian market is ideal for social messaging growth. The Indian consumer has grown familiar with social media services usage on mobile and the cost-effective nature of social messaging is also a trigger for the adoption of such services. The Trai (Telecom Regulatory of India) regulations on bulk SMS regulations have accelerated the growth of social messaging as well, said Neha Dharia, analyst, consumers, telecom, Ovum, an Australia based research firm.
Even as the popularity of mobile messaging apps continues to grow, it is clear that the old days of sending text messages or SMS are coming to an end. In fact, such is the frenzy of these applications that in the last few years, social messaging has cannibalised the revenue telecommunication companies generated from SMS. According to Ovum, mobile operators across the globe have lost $23.2 billion in SMS revenues to OTT messaging services and is expected to lose $32.6 billion in 2013. In India, telecom companies in 2012 lost about $781 million and are expected to lose a combined total of $1.2 billion in 2013. In India, customers who were already on the internet and were aware of OTT have started to move towards text apps, while new messaging users and non-internet users are still on traditional SMS. Telecom operators are increasingly co-bundling free messengers and content services to push data usage, said Anupam Vasudev, CMO, Aircel. Aircel itself tied up with Nimbuzz last year and today the company finds
data consumption growing at 65%. Our data revenue has doubled in 2012 over 2011, added Vasudev.
Industry observers believe that if so far the availability of data services such as 2G has lead to the rise in usage of these apps, in future, the growth of data service will depend on the consumers need to use these apps. Of the 51 million smartphone users in India, only 50% use data service while the rest flaunt these phones to make a fashion statement. Further, the average revenue per user (ARPU) for data which ranges from R200 to R300, depending on the data pack used by the customer, is higher than the ARPU for voice which ranges between R100 and R150.
The urge to use these apps begins from first using them on Wi-Fi connection available either at the home or the office. The customer then progresses to use small data packs of R20, R30, R40, etc. Finally, after testing the waters, the customer buys a larger pack which can range from R99 to R199 or even R899. Telecommunication companies therefore are launching several small packs to increase the consumption of data services, said Prashant Singh, MD-media, Nielsen India.
The game plan
Uniqueness is one of the biggest differentiating factors in all these apps. To ensure each app provides a different user experience, companies have introduced various features. For instance, Line has introduced an array of stickers a larger version of emoticons, while WhatsApp has recently launched Tap-to-talk voice chat service that allows users to send and receive voice messages in real time, with the ability to play them within the app and without any limits for duration. There are a number of reasons behind Lines popularity. Line is perfect for smartphone users as it allows people to communicate with pictures and stickers which goes beyond the usage of words. Moreover, the app allows free calls. In all, Line is a platform for communication, said Jun Masuda, chief strategy and marketing officer/executive officer, Line Corporation.
Meanwhile, China based WeChat is betting on emoticons of Indian celebrities such as Parineeti Chopra and Varun Dhawan, apart from tie-ups with Bollywood production houses. According to Katie Lee, WeChat spokesperson, the app comes loaded with innovative and distinctive features such as voice messaging, group chat and location based friend-discovery social features.
Moments is another exclusive feature for WeChat which allows users to share pictures and post with close and trusted friends. We have also introduced Official Accounts on WeChat which is a feature that can be utilised by companies and merchants to build interactivity with their users, added Lee.
Interestingly, localisation seems to be the flavour of the year, with Hike launching stickers featuring caricatures of Bollywood actors such as Amitabh Bachchan, Shah Rukh Khan and even South Indias most popular actor Rajnikanth, smoking a cigarette and saying his signature dialogue, Mind it.
The messaging market is extremely crowded. Each player is trying to differentiate itself. While Gupshup is incorporating local traits such as Bollywood gossip and cricket news communities, Line is offering games and WeChat and
WhatsApp have resorted to services such as voice messaging. The social messaging player needs to keep refreshing their service portfolio in order to keep the service fresh and of interest to its consumers, explained Dharia.
Moreover, taking a cue from social media platform Facebook, companies such as BlackBerry and Nimbuzz have introduced features targeting brands. BlackBerry, for example, has launched BBM Channels service, which allows brands and content providers to maintain a page to post messages and video for their audiences.
The service allows targetted marketing as brands can see who is visiting and therefore can engage with them, said Annie Mathew, director, business development and alliances, BlackBerry India. The company claims that as of now the traffic on BBM exceeds 10 billion messages a day.
Nimbuzz, on the other hand, has introduced features such as Nimbuzz Brand Buddies which allows users to interact with co-branded chat buddies, apart from Nimbuzz Credit. The service allows users to buy credit to make international calls. The service is mainly available in the Middle East, says Vikas Saxena, chief executive officer, Nimbuzz.
Reaping the benefits
What good is a business if it does not yield profitable results In case of mobile messaging apps, as most of them are free to download, companies have charted new avenues to monetise them. Different apps follow different monetization models. BBM follows the subscription model. Facebook Messenger relies on revenue drawn from advertising from its parent company, etc., added Dharia.
If Nimbuzz has an advertising based model to earn its revenue, app makers such as WeChat or Line Corporation sell their stickers and other digital items to users to bring the cash home. We have introduced a new model that goes beyond the traditional models of advertising and subscription. We sell digital items such as stickers and emoticons to consumers and that is how we make our revenues. Globally, we earn 1 billion Yen per month from the sales of these digital items. Secondly, we have Line family of apps. While these games are mainly created by a third party, we sell stickers and other digital items inside the games, explained Masuda. The company sells each sticker for $1.99. As per Ovum, the Japanese social messaging app generated revenues of $60 million in 2012, of which $45 million came in the final quarter of the year.
WhatsApp, which until July charged iPhone users $0.99 upfront to download the app, recently tweaked its strategy as users now pay the same amount after a year of free use. According to industry estimates, about 30% of its users own iPhones which further provides a better scope for it to earn the moolah. Additionally, mobile messenger creators ink exclusive deals with telecommunication serviceproviders as well as handset manufacturers so that the mobile phones are pre-loaded with their apps.
According to Lee of WeChat, the company has established a partnership with Panasonic for its new range of smartphones. In such a scenario, a portion of the revenue earned by the telecom service provider as well as the handset manufacturer is shared with the maker of the app. Interestingly, a few app makers such as Hike give R50 as credit to users for downloading the app. While this move has lured users to download the app, once downloaded, the app is not necessarily used. App makers are trying various business models to understand which one yields a better result.
Nevertheless, most of them still rely on advertising, said Singh of Neilsen India.
As of now, the messaging market may seem crowded but a shakeout could be just around the corner.
Like any other category, even this one is expected to grow through a shakeout in the future, added Singh. Masuda of Line Corporation goes on to say that while it easy to acquire another mobile messaging app, integrating both the apps is a big challenge and a difficult task. This might stop a bigger player buying the smaller player, ultimately forcing the app maker to shut shop.