WhatsApp recent announcement that they now have 400 million monthly active users prompted Business Insider to compare the growth of WhatsApp to their closest competitors WeChat from China and LINE from Japan.
The data shows WeChat ending November with 297 million users and LINE having 186 million. Although both of these numbers are huge and growing quickly and WeChat and LINE are both showing how to grow their revenues WhatsApp are growing faster and seem to be taking an unassailable lead in messaging.
Apps this big must be worrying for Facebook and Twitter who rely on large networks on users regularly visiting their sites to sell advertising. WhatsApp is a straightforward user experience with a single overriding goal of messaging in a simple, ad-free environment. Compared to the clutter and ever increasing advertising in both Facebook and Twitter WhatsApp offers a reassuringly straightforward approach and with growth sustained at this level users may find that they don’t need Facebook as much as they used to.
WhatsApp have announced that they now have 400 million monthly active users - that’s actual active users, not just people who download the app or register. They’ve also added 100 million monthly active users in the last four months.
Not bad for a paid-for app.
Here’s the blog post:
"Today, we’re proud to announce that because of you, WhatsApp has reached a milestone that no other mobile messaging service has achieved: 400 million monthly active users, with 100 million active users added in the last four months alone. This isn’t a count of people who just registered for WhatsApp – it’s the number of people who are actively using the service every single month."
For yet more evidence, if any were needed, of WhatsApp’s strong position Mobidia have published some data showing the penetration of the major messaging apps on Android smartphones.
Their results show WhatsApp is installed on 41% of Android smartphones, Korea’s Kakao Talk is on 23% with Facebook Messenger and Skype on about 15%.
WhatsApp are clearly the dominant messaging app and the data shows how users use more than one messaging app, often for different uses. For example their primary means of communication with close friends may be WhatsApp but they use Skype or Facebook Messenger to keep in contact with their wider friend networks and may also use apps like SnapChat (who come in at 7% of all Androids reflecting it’s, as yet, niche appeal to young users).
KakaoTalk’s result of 23% is driven by its popularity in Korea where it is the most popular smartphone app. Apps such as Kik, Tango and even BBM show that, although they may have many millions of users, their position is driven by strong niches such as youth for Kik and Blackberry users for BBM.
Mobidia collates this data from the millions of smartphone users that use its free app to monitor their mobile data usage. According to Mobidia the sample represents smartphone users from all major, global geographies.
Here’s a companion Slideshare on my 10 ways that free messaging apps monetise post. Please feel free to download if you would like.
Free messaging apps didn’t have a business model until along came stickers and games platforms. This post looks at the options for messaging apps to monetise.
1. Paid for/subscription
Of the leading messaging apps WhatsApp is unique in charging for access. Although after a recent change they now offer their users the first year free, with each subsequent year costing $0.99.
As WhatsApp are anti-advertising and don’t offer any other premium features this subscription is how they earn their dollars although with more than 300 million monthly active users they’re probably doing ok.
That said the only reason WhatsApp can charge is they’re market leaders and any other apps following their lead will likely fail.
Along with WhatsApp most of the top messaging apps exclude banner or display advertising from their core messaging features believing that such advertising adversely affects the user experience.
WhatsApp have been particularly explicit about advertising, with CEO Jan Koum even extending their dislike of it to include
“anything that smelled like an advertising business”
By this he’s referring to the stickers and in-app purchases that competitors LINE, WeChat, Viber and others promote in their apps. For me this is a little disingenuous as the messaging part of most of WhatsApp competitors is available without advertising and the richer experience of stickers and games are opt-in.
Of which more below…
Stickers, for those who’ve been asleep for the last six months, are pictures, sometimes animated, that are exchanged by users within chats.
They’re small, visually rich, often cartoon-y images that are used by users to embellish their chats - to express emotion, tell a story, be silly, funny or serious or for any other reason that the user might like to use an image to represent how they feel. They’re like ‘better’ emoticons.
Stickers typically come in ‘packs’ of between ten and twenty and can be downloaded and used within one-to-one or group chats.
Selections of free sticker packs, often produced by the app itself, are offered to drive awareness and encourage usage with the hope that once users are hooked that they become premium stickers users.
Premium sticker packs, priced at around $2 per pack, are a mixture of the apps own-produced content, content from established producers such as Disney or Sony and from smaller providers who produce bespoke content especially for the app. The rich, graphical nature of stickers is great for movie and character content but the format also lends itself to producers who can create interesting and engaging content.
With a clear business model and users who seem to like the concept it’s no surprise that stickers have spread quickly with LINE, KakaoTalk, Viber, Tango, Kik as well as Facebook Messenger and Path all offering them. And with LINE earning $10 million per month from sticker sales alone I expect to see a lot more stickers!
4. Sponsored stickers
Once messaging apps have built up large communities of users they become attractive to brands as a means to directly engage with users. Apps like WeChat and LINE offer official, verified accounts (see 5 below) but a first step to user engagement is to offer free, sponsored stickers.
This straightforward extension to stickers offers enables brands to get to users in a visually appealing way and, by definition, where the user does the content sharing for them. This model works extremely well for music artists, movies or other mainstream digital content where users genuinely want to get their hands onto content.
Imagine how quickly Twilight, Lady Gaga or Despicable Me content spreads and brands will pay handsomely for this access.
The messaging apps have different options open to them on how they monetise including a simple access fee where the brand pays to place it’s content, payment per download or payment per message. Sponsored stickers are LINE’s third largest revenue stream after in-app payments and premium stickers so again we’ll see more of this.
5. Official accounts
Having built a large community of users the perennial question facing messaging apps is how can they monetise if they don’t accept display advertising? Well the answer to this could be official accounts.
Official accounts give brands, celebrities and merchants the ability to connect and engage directly with users. The official account uses the same, familiar features within the app so they can connect as ‘friends’ with users, exchange messages and share content.
For enlightened brands that content could include basic marketing messages but more likely will take advantage of the closeness of the relationship to the user and include prizes, media, exclusive news, offers, coupons or discounts.
In the case of WeChat users can add brands or celebrities via their user ID or using a QR code reader which is built into the app. Adding Lionel Messi, the FC Barcelona and Argentina football player, gives me, in theory (!), a direct connection to him.
LINE have similar official accounts and have brought together sponsored stickers and official accounts in their current promotion of Real Madrid. Users can download a free Real Madrid sticker pack in exchange for adding Real Madrid’s official account as a contact.
Again there’s several different ways for the apps to monetise:
- Pay to create and promote official accounts
- Pay per engagement e.g. per contact added, per message exchanged, per content downloaded
- Pay per message e.g. brands could buy ‘bundles’ of messages to send or receive
- Sponsored content
With messaging apps having many millions of users in specific markets it’s easy to see how brands would be eager and willing to pay to get access to these users, particularly if users gain something valuable in return and are incentivised to connect to the official accounts.
The risk of course is that the official accounts get excited and start spamming their followers which has a wider impact on the users willingness to keep using the app. Tread carefully would be my advice to both apps and brands.
6. Content merchandising
Content merchandising isn’t going to be an option for every messaging app but for the one’s creating their own characters licencing them for merchandising may well prove to be a highly lucrative move.
Such a move follows the success of Rovio in expanding Angry Birds into a global entertainment, publishing, and licensing brand.
Jun Masuda, LINE’s chief strategy and marketing officer spoke about LINE’s merchandise licensing business, noting that sales of LINE character goods already account for 4 billion yen in sales. He added that the company will be rebranding the character business as ‘LINE Friends’, and they hope to accelerate that business in the future.
7. Filters, wallpapers, themes and other content
With stickers having finally demonstrated a business model that works expect to see more content extensions to the core messaging experience. There’s lots of different content types that can be retailed within a messaging app including wallpapers, filters, themes and others.
Whether this works or not depends on the implementation - there’s more to success that shoving content down a users throat but stickers have proven that at least some users will pay so expect more content.
8. Platform SDK including in-app purchases
The really big revenue generator are in-app purchases from games which follows the move in casual and social gaming to freemium models where the core game is given away for free and the app monetised with ‘extras’.
Messaging app game platforms enable their users to discover and download games and other apps, play against each other and share results and leaderboards. Users can also buy virtual items and purchase extra’s like coins, levels, tips, boosts or anything that the user needs to progress in the game.
Korea’s Kakao Talk recently revealed some impressive statistics about the games on their platform:
- 30 million users have played at least one of their 180 titles
- 400 million+ downloads
- $311 million in revenue during the first half of 2013
The revenue figures are gross and are shared with the developer and the publisher (Apple App Store or Google Play Store) but they are still big numbers.
Interestingly developers are not charged to publish their apps nor do they pay for downloads - the whole model is based on free to download with in-app purchases.
In-app purchases though LINE’s games platform contributed 53% ($53.7 million) of their revenue in Q2 2013 so KakaoTalk are not on their own in producing great results from this approach.
Other messaging services are following suit with China’s WeChat, Tango and Kik also offering their own platform SDK’s.
Whether there are enough game developers in the world to publicise a good range of titles on all of these platforms remains to be seen and different users will have different expectations on the game content in their app but nonetheless a sign of the future.
With large communities of users and the presence of brands in official accounts it’s likely that mobile commerce will be a direction for ambitious messaging apps to go in.
China’s WeChat has the most advanced approach enabling user’s to connect their credit/debit cards and their WeChat account so that they can make purchases from within the app. If this sounds a little far fetched then consider:
- WeChat already includes a scanner used to read QR codes to help users share their accounts and connect with friends - this scanner has been updated so it can read product barcodes, allowing users to scan barcode and pay for the product from within WeChat
- Official accounts can use their messaging to push offers and vouchers based on location directly to a user
- Accounts can have their own dedicated mini-navigation created by WeChat so that they can link to their own pages from within WeChat
With many hundreds of millions of users on WeChat there’s incentive for merchants to integrate with them and with the direct to consumer marketing possibilities through official accounts it’s easy to see new forms of social commerce emerging.
LINE again. This time announcing LINE Music to come “in the fall of 2013.
Jun Masuda, LINE’s chief strategy and marketing officer said that LINE Music will not be a separate app but included in LINE’s basic functions. Masuda said that you’ll be able to listen and share with friends too, and the service will not be just for Japan, but outside the country as well.
How easy it is to deliver music remains to be seen as the perennial problem of securing the support of the record labels remains. Playing song snippets and pushing users to pay for a full track download doesn’t seem that interesting for users, although Shazam push $300m worth of download revenue per year.
Streaming might work though and the messaging apps are probably well suited to socialising features like playlists, popular tracks etc… We’ll see soon enough.
11. Other revenues
Call termination – either internationally or terminating calls out of/into the messaging app - seems an obvious route to monetisation for communication services with may tens, if not hundreds of millions of users.
But there seems little appetite for this route. Nimbuzz offer chargeable call termination and Viber are trialling different options on a small subset of their users but these are tiny efforts in the overall picture.
Globe Telecom offers the worlds first unlimited bundle with access to the six largest OTT messaging apps plus unlimited calls and SMS for $0.70 per day
Back in October 2012 I wrote about mobile operators starting to offer dedicated WhatsApp tariffs that include data for a small daily, weekly or monthly fee. Although unlikely to have a massive impact these packages make sense for all concerned - the operators get to attract new subscribers and a little data revenue, WhatsApp get yet another distribution channel to grow their service and subscribers get an ‘all-in’ bundle that is (hopefully) competitively priced.
But as services like Viber, LINE and WeChat have grown it doesn’t make sense to restrict these tariffs to WhatsApp only and that is exactly what Globe Telecom from the Philippines have recently announced. They’re extending an existing bundle that already offered access to Viber to include Facebook Messenger, Kakao Talk, WhatsApp, WeChat and Line.
The press release states:
"Today, Globe launches Globe Prepaid GoUNLI30, a 30 peso (US 70 cents) bundled prepaid offer which provides subscribers with unlimited texts to all networks, unlimited calls to Globe & TM users, and unlimited access to instant messaging and chat applications Viber, Facebook Messenger, KakaoTalk, and major OTT players without the need for Wi-Fi or additional data charges.
In addition… subscribers who prefer pure messaging apps and want to get access to over 1 billion users around the world can register to UNLICHAT25, which offers uninterrupted use of Viber, Facebook Messenger, KakaoTalk, and major OTT players for only P25, or US 60 cents valid for 1 day, without the need for Wi-Fi.”
Good for subscribers?
They key determinant of success for this offer is of course basically price. Subscribers can access any of these services directly by just paying for their data (or using wifi) so the price has to be good enough for them to choose this bundle.
Interestingly it may be the inclusion of unlimited SMS and calls that provides the price attraction and provide Globe with the majority of it’s benefits.
Tu Me is dead. What now for operators response to voice and messaging apps ‘stealing’ their revenue?
Telefonica are withdrawing Tu Me, poster child of mobile operators over the top voice and messaging app response
Telefonica have confirmed Tu Me’s death. A message on the Tu Me website advises users the service will end on September 8th. Jamie Finn who led Tu Me’s development told Light Reading that it’s abandoning Tu Me to focus on Tu Go, its app that lets users use their mobile number from any device.
"We are doubling down on Tu Go since it only makes sense to focus on what is working and our customers are asking for every day," adding that Telefonica had to prioritise "based on "not unlimited engineering resources."
Tu Me is dead. What now for operators OTT app response?
Interesting is what this does to mobile operators efforts at fighting back against the voice and messaging apps that are hammering their revenues. Tu Me was a poster child for operators efforts to develop their own apps and taking on WhatsApp, Viber et al at their own game. Telefonica had Tu Me but weren’t alone with Bobsled from T-Mobile, Libon from Orange, MSNGR from TelCel/Claro (developed by Myriad Group who I work for) and GMessage by Globe in the Philipines.
These services all face the same problem - mobile users have increasingly chosen their favourite voice and messaging app and once the apps grow amongst their group of friends and family it is incredibly difficult to lure them to a different service.
The operator backed services can fight back by using whatever leverage they have to make their app attractive – for example making it free of data charges, offering free SMS, including it in post or pre-paid tariffs or simply promoting it heavily to their subscribers - but they’re fighting against some very fast, very committed, experienced apps that have already created massive user numbers.
Telefonica Digital doing the right thing
Against this background Telefonica Digital’s decision to kill Tu Me shows that it really does understand the market it operates in. It’s mission is to “seize the opportunities within the digital world and deliver new growth for Telefonica” and if Tu Me wasn’t growing fast enough and was judged to have failed then it should be killed and resources focussed elsewhere. This is what happens in the real world, but so often not in mobile operators.
In many respects Tu Me delivered on its promise - it was a decent app, well featured, that worked well - but it was probably too close to WhatsApp et al to be able to carve out it’s own niche.
Tu Go on the other hand seems to meet a clearer need where it allows the users mobile number (and their minutes and texts) to be used on any device. This is an extension to Telefonica’s core communication service and adds some value to the user- on this basis it may stand more chance of success than Tu Me which was offering different way to communicate.
Reuters report that Vietnam’s government is considering a ban on messaging apps. The report states "State media said the government might ‘ban’ free messaging services because of the harm done to network providers."
It goes on:
"The prime minister said the government would "build and promulgate the policies" in managing the free communication services on the internet (Over-The-Top (OTT) services.)”
"We will lose 40-50 percent of our revenue if all of our 40 million customers use Viber instead of traditional call and text," a representative of Viettel Telecom, one of the country’s biggest phone network providers, told state media."
Well that’s one way to go about addressing the ‘problem’ of messaging apps.
Not sure how successful it will be but at least there’s a plan. Not one that any user, mobile operator subscriber or right thinking capitalist will like but hey, it’s a plan.
One of the obvious questions facing any of the many free social messaging services is what, if any, is their business model and can they earn any revenue from their many millions of users?
Until fairly recently the answer to that question was unclear. WhatsApp are vehemently anti-advertising but have a revenue model where they charged $0.99 for a years subscription (which could be free for the first year depending on the platform). Other services included advertising but generally the messaging market has focussed on user growth with monetisation coming later.
Well ‘later’ has arrived and the routes to monetisation are illustrated by the results Japan’s LINE and Korea’s KakaoTalk who are both making hundreds of millions of $ revenue from in-app purchases from their games platforms and stickers .
LINE Corporation, the parent company of messaging app LINE, published their quarterly results for Q2 showing impressive revenues for LINE of $101.3 million, up 66.9% from the previous quarter.
In-app purchases though LINE’s games platform contributed 53% or $53.7 million revenue, followed by sticker purchases at 27% or $27.4 million with sponsored stickers and other revenue from brand integrations making up the rest.
LINE’s games platforms enables games and other apps to connect into LINE and use the LINE community to share scores, send invites and play games. LINE currently have 33 games available including LINE Pop with 30 million downloads and LINE Wind with 10 million.
Similarly Korea’s KakaoTalk revealed that their own games platform have generated $311 million in revenue during the first half of 2013, up 194% from the final quarter of 2012. These revenues are shared between KakaoTalk, the games developers and a share to the platform provider (Apple or Google) but they’re still great numbers.
Kakao passed 100 million users in July 2013 and says that 30% of its users have played at least one game. Games that hook into Kakao Talk are estimated to have passed a cumulative 400 million-plus downloads.
There’s a lot of competition out there in messaging app land. WhatsApp is very strong in most markets where it operates and there’s a lot of regional variation where individual apps dominate a market, for example:
- LINE in Japan
- WeChat in China
- KakaoTalk in Korea
But there’s obviously still room for growth as many essentially undifferentiated apps are also growing fast - Tango, Nimbuzz, Kik Messenger, Voxer, MessageMe, GoSMS Pro among many others. And that’s before we consider iMessage, Facebook Messenger, Skype and BBM.
So the question is how do apps compete against that lot? Well TelCel and Claro shows how one major mobile operator group is approaching it.
TelCel and Claro MSNGR
Firstly smartphone market penetration in Latin America is large and growing fast. For example at the end of Q1 2013 Vivo, Telefonica’s brand in Brazil, had 10.2m smartphones, up 78% year-on-year. Nonetheless as a proportion of the overall subscriber base smartphones remain relatively small at 14% although again, growing very quickly.
The opportunity for brands like TelCel and Claro is to join in the landgrab for users before WhatsApp, LINE dominate. And that’s where Messenger comes in (branded as MSNGR and developed by Myriad Group who I work for).
MSNGR has a series of features and benefits that are targeted at the Latin American market, some of which are difficult for OTT messaging apps to replicate. For example:
- Completely free of all data charges
- Includes free SMS to send and receive to non-users
- Mobile browser version to engage with non-smartphone owners
- Wide coverage of smart and feature phone OS - Android, iOS, Windows Phone, Blackberry, J2ME, HTML and Firefox OS
- Comparable features
The main user benefits are of course that it’s completely free to use. Not just free of premium charges where the user has to pay for data traffic but completely free - with no data charges. An XHTML browser version that can be used on any feature phone enables users to engage with all of their contacts whatever their device, helpful in a market where smartphones are still relatively limited. Together this makes MSNGR an attractive service to users in markets where ARPU is low but users have the same demand for services that they do in markets with higher smartphone penetration.
With TelCel and Claro putting their marketing might behind MSNGR to drive awareness and uptake by using their usual marketing channels - SMS campaigns, broadcast, posters, online, social etc… - MSNGR really should fly even in the face of competitors like WhatsApp and LINE.
What do TelCel and Claro get out of it?
TelCel and Claro are basically trying to build a massive community of users in advance of WhatsApp et al growing in their markets so that they can control their own destiny. They may cede some revenue by offering a free service but with the users on their own service they can control how they approach and monetise this. With users tied to other services TelCel are reduced to the role of the access provider with less influence.
As the community of users grows TelCel and Claro can also benefit from different revenue streams such as:
- Display advertising
- MO SMS - which is charged at a small premium
- Content revenue from stickers, wallpapers etc…
- In-app purchases from games platforms
All of this of course depends on MSNGR holding it’s own against the competition, in particular the mighty WhatsApp and the fast growing LINE. TelCel will not back a service that is reduced to a bit part player so we’ll be watching the growth of MSNGR closely.