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Messaging apps are mightier than a Text

By Brian S Hall / April 28, 2014


Messaging apps are mightier than a text

In the US, where just about everyone adds unlimited texts (SMS) to their phone plan, messaging apps rarely received much attention. That all changed with Facebook’s jaw-dropping $19 billion acquisition of WhatsApp.

Still think paying for text messages is a necessary evil? Here are just a few more head-spinning facts that will make your mobile-service provider’s stomach churn:

  1. Facebook’s messaging apps, including WhatsApp and Facebook Messenger, transmit more than ten billion messages everyday.
  2. Messaging apps are becoming more vocal. India’s Facebook Messenger app allows free voice calls within friends lists, Japan’s Line messaging app offers low-priced international calls through its service and WhatsApp is expected to roll out similar capabilities in the near future.
  3. Tencent, the Chinese company behind the popular Tencent QQ messaging app, is the fifth largest Internet company in the world behind Google, Amazon, Facebook and eBay.
  4. There are multiple messaging services with active user numbers that top 100 million. China’s QQ has more than 800 million users, with approximately 200 million people simultaneously using the service at any given moment.
  5. Japan’s Line messaging service has 400 million users and earns about $200 million per quarter, thanks to their new game-downloading platform that premiered in 2012.
  6. In China, messaging app users can pay for coffee and taxi rides, make a restaurant reservation, order tickets for an event, and many other time-saving functions, all from within their app.
  7. China’s WeChat (also known as Weixin) has an estimated value of $64 billion, more than three times what Facebook paid for WhatsApp.
  8. Last month, the Tango messaging app grabbed $280 million in Series D funding, bringing its total venture capital raised to $367 million, even with just 70 million monthly active users. Tango’s messaging service supports text communications, voice and video calls, photo sharing and gaming.
  9. Korea’s KakaoTalk has over 100 million users and a stunning 95% penetration rate in Korea. Lest you think user growth potential is all that matters, note that Kakao earned over $200 million in 2013, with $59 million of that resulting in pure profit. Most of the revenues were generated via digital content and e-commerce, with ads accounting for only a small percentage of sales.
  10. BlackBerry claims its BBM messaging service has 85 million monthly active users. The company intends to make BBM a core pillar of its comeback strategy. BBM will soon be available for iPhone, Android and Windows devices.

What’s the big idea?

The humble text message has suddenly morphed into a platform, one set to remake the global smartphone wars and deconstruct today’s biggest social media empires. The potential to remake branding, marketing, digital downloads, payments and more is also within sight. What’s more, many of these platforms have hundreds of millions of users and are generating significant revenues across multiple lines of business beyond advertising.

Messaging Wars

Why and how is this happening? In short, opportunity. In many parts of the world, texting is relatively expensive. Messaging apps function through Wi-Fi and over top data plans, separating themselves from service providers while giving users quick and simplistic alternatives to text messages.

Another reason messaging apps are catching on is their seamless integration with friends lists. When you launch a new messaging app, it automatically grabs your phone’s contacts and tells you who among them already uses their service. Some even tell you which of your friends aren’t using the service, encouraging you to invite them to join in on the fun. Viral growth is practically built into the system.

Betting on messaging

Messaging apps are a real-time, direct channel to billions of people. Though they may have started out as a free or low-cost alternative to carrier-based SMS service, they have quickly evolved into highly robust communications services linking friends, groups, brands, and businesses, all while simultaneously offering content discovery, payment services, photo sharing, loyalty rewards and fun.

No wonder the entire industry is aggressively staking claims on various territories. Hiroshi Mikitani, CEO of Japanese e-commerce conglomerate Rakuten, recently paid $900 million for Viber’s 300 million users. “This is a no-brainer,” explained Mikitani. “Messaging apps are taking over the world.” Line, a rival to Rakuten, already has 400 million users and transmits over 10 billion messages a day.

Line

Justifying Facebook’s highly-publicized WhatsApp acquisition, Mark Zuckerberg recently told the New York Times, “I think we basically saw that the messaging space is bigger than (Facebook) initially realized.” Since this realization, Zuckerberg has acted fast. Along with the mega-purchase of WhatsApp, Facebook just re-designed its Messenger app, making it a fully functioning standalone app that supports groups, message forwarding among friends, and improved integration with the traditional Facebook service.

Zuckerberg’s conversion is not isolated. Beginning with KitKat, Google requires that its Hangouts app be the default messaging app on Android devices. With the potential of a billion-plus smartphones on its Android platform, that’s a very big deal.

Apple has made few waves in the mobile messaging market since making iMessage its standard iOS messaging service, but that could all change with a rarely discussed iOS 7 feature called Multipeer Connectivity Framework. This framework enables Apple iOS devices to connect with one another over Bluetooth or Wi-Fi, allowing iMessage and other messaging apps to offer a means of letting users join chat rooms and send messages anonymously when in close proximity with one another.

And fighting to maintain its own bit of relevancy, BlackBerry’s BBM service includes an innovative “Channels” feature where users can join in a group interaction led by a popular brand. CNBC, Virgin Atlantic and others have already signed up, viewing the BBM Channels service as an engaging way to interact with customers.

Startups staking their ground

A crop of well-funded messaging app start-ups are also seeking traction in the enterprise. Eko, Flowdock, Convo and several others have been developed and marketed to serve specific industries and employee needs. For a monthly fee, Voxer offers a walkie-talkie-like messaging service for the construction, transportation and hospitality industries.

TigerText offers secure messaging for companies that have strict legal requirements regarding communications. With TigerText, messages are not only secure, but also disappear after a designated amount of time – like Snapchat or Mission Impossible. This will come in handy for some sectors that have federal HIPAA regulations regarding sending, receiving and protecting information, like the healthcare system. More than 10,000 businesses have signed up for TigerText, which pairs nicely with their $21 million in Series B funding.

Messaging apps are certain to continue growing, evolving and extending their services to new markets and new industries. Apple and Google will undoubtedly seek to leverage control of their respective ecosystems. Facebook will continue to call upon its billion users to hold their ground. But as we’ve seen, this entire industry is just getting started and innovation can come from any Fortune 500 company or two-car garage on the globe.


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