OTT messaging apps create new biz models

Telecom Lead India:
OTT messaging apps are creating new biz models in the industry.

Strategy Analytics says KakaoTalk and others messaging apps are a threat to messaging revenues. But apps can crater existing business models without replacing revenue.

Nearly all the over the top messaging apps share many common features – the most prevalent is a shared lack of a monetizing messaging.

Instead, these services are seeking to build a large audience and look to monetize from the sale of virtual goods and other items. The success of apps launched Asia Pacific – where LINE, KakaoTalk, TicToc Plus and WeChat are dominating – reflect the global innovation and do not necessarily ensure global dominance.

Operators should be heartened that the virtual goods business model focusing on personalization may not play with the mass market in these regions or western consumers. With free alternatives, the ability to charge for messaging services seems unlikely, forcing messaging companies to find other ways to monetize. Failure to do so will likely doom some of the high flying companies today.

Josh Martin, director-Apps Research, Strategy Analytics, said: “Apps will drive more than $36 billion in revenue by 2017. However, billions in revenue will also be destroyed and never replaced. The notion that over the top messaging services can be perpetually revenue free will proliferate until one service fails – making consumers face the stark reality that everything has a price.”

As over the top messaging services transition to social networks, the need for them to maintain eyeballs could provide an opening for Joyn – an operator backed OTT messaging initiative.

Without the need for advertising revenue, Joyn could extend beyond a messaging app and turn into a platform that attracts third party developers and with them innovation.

If operators can build a platform with robust API and developer support they can differentiate from the competition and perhaps open a new revenue stream for themselves.

Increasing popularity of OTT (Over The Top) stores had led to many operators closing their own storefronts. OTT is threatening operator revenues.

Ovum said in 2012 that impact of OTT players will cost operators $23 billion in SMS revenues in 2012, and that figure is expected to rise to $54 billion in 2016. We have argued that one way for operators to effectively combat this threat is to partner with OTT players, and in the past few months partnerships have begun to emerge between operators and social messaging players.

Meanwhile, Juniper Research on Wednesday said by offering carrier billing to third-party storefronts, operators could more than offset the continued decline in portal revenues. Storefronts which have already integrated carrier billing solutions have seen a 5-6x increase in conversion rates compared with credit card billing, together with an uplift in average transaction values.

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