The acquisition of WhatsApp by Facebook for a staggering $19 billion not only made headlines around the world, but also underlined the growing importance of OTT (over the top) instant messaging apps that work across smartphone platforms.
WhatsApp definitely leads the pack - in a recent blog post, the company noted that it has more than half a billion active users worldwide, who share 500 million pictures and 700 million videos daily.
While they may have a head start, competition is definitely catching up - Tencent's WeChat recently reported 396 million active users, mostly in China, where it is known as Weixin. Further, they are aggressively targeting emerging market with a $200 million ad campaign, using Bollywood stars in India, footballer Lionel Messi in Brazil and more.
Unlike WhatsApp which has a straightforward business model - an annual subscription fee of $1 and an ad-free environment, Tencent has developed creative ways to monetise its huge user base. Hello Kitty sticker packs, deals with game makers like King (of Candy Crush Saga fame), thereby acting as a gateway for international apps to enter China. And the most powerful one - they allow users to link their cards and bank accounts to the app, effectively becoming a gateway for any transaction or service they want to offer users. For instance, the ability to order and pay for a taxi from within the app, is a service offered in China. Small wonder that Alibaba, China's leading commerce company, considers Tencent as a key competitor and threat in the mobile space. And here is the icing on the cake - WeChat has an ARPU of $7 vs. $1 for WhatsApp, and is valued at $30 billion - significantly more than its competitor.
Mobile messaging app Line has 400 million users, mostly based in Japan, and also uses a games-and-sticker sales model to generate revenue. Line has announced that it is gunning for 1 billion users by 2015. They have announced a Creators Market which lets users make and sell their own sticker sets on Line's Web Store, with the company retaining 50% of the proceeds.
And here is an entirely fresh take on OTT messaging.A post on VentureBeat points out that messaging apps directed specially at couples are registering steady growth. It's a well known fact that communication is a key element in relationships, and this segment of apps attempts to tailor their services to romantic relationships, with tie-ins to dating sites, e-commerce, media streaming services and more. The leader of the pack is Between, with a 7.45 million downloads, primarily from South Korea, Japan, China and Taiwan. Other apps have miniscule downloads (2.5 million or less) but this is a nascent market and they should catch up soon.
The interesting fact here is that we are seeing a fragmentation in the mobile messaging space, with offerings targeted at local markets, different demographics and different need-sets of users. And it's possible for people to use more than one messaging app depending on their needs. Looks like Facebook has their work cut out to retain WhatsApp's premium position in the category. Competition is definitely here to stay.