Mobile messaging grows, monetization remains the challenge

Mobile-messaging through apps in Canada and globally is on the rise as it attracts users wanting a convenient interface that can help them be included in social circles, though the steep growth in users is not yet being matched in dollars generated. Research from Juniper Research Ltd. released in June said messages sent via apps such as Facebook Inc.’s WhatsApp, Canada's own Kik Interactive Inc. and others were expected to grow from 31 trillion last year to 100 trillion in 2019. Juniper said in another release in July that “within the next 12 months will overtake email, generating almost 43 trillion messages annually,” and that there was a “significant migration from ” with WhatsApp users sending more than 30 billion messages per day. Last year, Facebook ended up paying $21 billion US for WhatsApp. “As with other nations, Canada is seeing increased popularity in OTT instant messaging services such as WhatsApp," Juniper research analyst Lauren Foye said an emailed statement. "Juniper forecasts this to continue well into 2020.” Anabel Quan-Hasse, an associate professor of media studies at Western University, said in a phone interview that one of the driving factors for the growth is that young adults want to be included within their peer groups, especially when everyone else is using these services. “The ability to form and maintain social ties with peers is one of the factors," she said. "All of their peers are on these . They’re all texting and communicating with one another in real time. There’s a lot of pressure for to adopt." Quan-Hasse said apps such as WhatsApp and Kik —the latter of which recently received a $50-million US investment from Chinese company Tencent Holdings Inc., maker of the WeChat messaging app — create a sense of flexibility by allowing users to have several conversations with multiple groups, noting that users can also add or block specific individuals, share specific content like pictures and voice notes, and know when contacts are online or not. “These added features are really becoming very important today in our society because people want to be able to communicate effectively and in real time with different sets of individuals,” Quan-Hasse said. Mobile-messaging apps were initially most popular in Asia, where they have seen steady growth since 2011, said Duncan Stewart, director of research for technology in Canada at Deloitte Touche Tohmatsu Ltd. He added that most of the early adopters in Canada were immigrants, in particular those from China who used these services to communicate with friends and family living overseas to reduce long-distance charges. But now the growth can be seen among non-immigrants who are using the app as their main messaging tool to communicate with people near and far, Stewart said in a phone interview. Stewart said part of the reason messaging apps were not as popular in the past was because wireless plans bundled in texting without additional charges for domestically sent messages. Yet those who use messaging apps for international communications tended to also use it domestically for the sake of continuity, he added. “Since you can have the same app for international usage, you might as well keep it open and use it in Canada," Stewart said. "You’re not using the in Canada because you would otherwise be paying for it; you’re using it because you’ve already got it set up, you know how the interface works, you’re comfortable with it. “Why open five different apps for messaging, when one of them will do?" Texting is faster than email, and messaging apps are even faster, Stewart noted, adding that speed is another reason the user base for this technology grows. However, Juniper said in June that the monetization of mobile messaging remains a challenge. It said overall market for messaging, including apps and SMS, will shrink to $112.9 billion US in 2019 from $113.5 billion US last year, even as the quantity of messages sent by apps triples over that time. The research company said messaging companies have not yet been able to incorporate advertising to a significant degree, and some players in this space are turning to things such as electronic payments in an attempt to raise revenue. Despite seeing declines in volume, Juniper said carrier-based text messaging is raising more revenue through things such as application-to-person messages, which the research company said in July would grow to a $70-billion US market by 2019 from $62.8 billion US this year. It said enterprises see SMS as more reliable and secure than messaging apps. Brian Blau, research director at Gartner Inc., said in a phone interview that there is longer-term potential for revenue growth in mobile messaging, otherwise Facebook would not have spent so much for WhatsApp. Blau said Facebook is looking forward five to 10 years in terms of its business plan for WhatsApp. Blau said it has been difficult to monetize messaging apps in the early stages because providing these services for free is key to generating large user bases. He said while most messaging apps are using ads to generate cash now, one way these services could thrive in the future is by collaborating with service-oriented businesses, which would pay for access to consumers through the messaging apps. “WeChat access to services like taxis and banks," Blau said. "You’re going to see a lot of those business services connecting with messaging and creating a different user interface. “It’s a great way for businesses to connect with users in a short-form box.” — With reporting by Shruti Shekar at sshekar@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

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Mobile messaging grows, monetization remains the challenge

Broadcast | September 23, 2015

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