The Universe of Messaging

At the dawn of time there was email – the actual definition of an Internet killer app. As the mobile […]

At the dawn of time there was email – the actual definition of an Internet killer app. As the mobile phone rose to prominence shortly thereafter, we got text messages, or SMS. Today, the number of messaging apps is exploding. Whether we want to build our brand or use new services, it’s a jungle. Future Report asked Christian Printzell Halvorsen, Schibsted’s own expert on the subject, what to make of it all.

From 31 trillion 2014 to 100 trillion 2019. That’s how much analysts expect the number of messages to grow. Growth in pure messaging services are even expected to outpace that of ordinary social media apps in the coming years, according to some.

“Messaging is one of the strongest trends right now, around four to six of the top-ten most downloaded apps globally are messaging apps,” says Christian Printzell Halvorsen, Chief Product Officer at Schibsted Classified Media.

So what’s behind this explosion? One answer is the wish to separate different kinds of communication. “Users don’t use only one messaging app, they keep two, three, or four, and they use them to various types of communication depending on their specific needs,” notes Christian Printzell Halvorsen.

He and other observers of the business of messaging see a future where users have to evaluate a whole array of messaging apps to see which ones best suit their specific needs, often coinciding with the ones that friends and family use.

Like a friend of mine. To her, and a growing number of other professionals, messaging apps and social networks have long evolved from extensions of personality and hobbies to finetuned marketing tools. While social media, like Facebook and Instagram is carefully tuned to portray a perfect image, private conversations are kept on Snapchat or Facebook Messenger, not to mix the two. Some may even keep conversations with family and friends on one or two apps, channel work matters through a third, using a fourth and fifth as advertising boards.

Adding built-in services

But many messaging apps are also quickly evolving into everyday-utilities, with built-in services.

Mobile payments is already an important part of the messaging app community, and it’s growing. Alongside with the booming trend for mobile communication are numerous attempts by banks and tech companies, such as Apple, to once and for all have us abandoning our wallets and start paying for food and send money between accounts with our smartphones. We can already send money via Facebook Messenger, and Snapchat launched Snapcash last November, enabling peer-to-peer payments between friends.

“The feature to send money is being built into almost all of these messaging apps,” says Printzell Halvorsen. “Look at the classifieds business for example, where a user easily can ordera new product, change an order or pay for it via the smartphone.”

Other services like e-commerce, breaking news stories, booking tickets and managing reservations are all part of what experts see as the real new trend in messaging. “App owners are opening up their platforms so that others can build new services around the messaging feature,” says Christian Printzell Halvorsen. “What we get are different sorts of B2C (Business to Consumer) solutions that make it easier for companies to communicate with their customers.”.

This creates an environment where we can ditch other mobile services simply because their features are now included in one or several messaging apps.

What if, for example, your news, financial transactions, your business contacts, time schedule and calendar were rounded up in one or two applications on your favorite gadget?

Or all services in one app. In China this is happening. Within the WeChat app you can reach numerous services that are part of a digital ecosystem. From fixing your nails to ordering a cab.

An assistant of your own

Users want things to be simple, but simplicity can also mean concentrating multiple features and services into a few, optimized apps.

And speaking of easy. What if you had an assistant in your messaging app? That’s what Facebook recently announced. M is a personal assistant built into Messenger that can buy things, deliver gifts, make reservations or arrange travel if you send a request. These requests will then be fulfilled either through artificial intelligence or manual work by a staff of people and it’s part of a larger trend often called “conversational commerce”.

As far as data traffic goes, the number of messages is forecasted to double by 2019, according to a June report by Juniper Research. The growing trend is driven largely by popular apps like Facebook’s WhatsApp and Line, one of Japan’s leading mobile messaging services.

For app makers, depressingly enough, revenues and profits are not likely to increase at nowhere near the same rate. In terms of revenues, according to Juniper’s calculation, the messaging market as a whole will actually decline in the next four years to 112.9 billion USD in 2019, down from 113.5 billion USD in 2014.

“My guess, though, is that regular text messaging is included in these numbers. The underlying trend is a strong shift from telecom operators to new apps,” Printzell Halvorsen notes.

This hasn’t frightened off neither small nor large players. The all-mighty Facebook, awash with profits, has been using massive amounts of cash to buy up competitors within the hot messaging business. In 2014 it spent a staggering 19 billion USD to acquire WhatsApp, which continues to pile up hefty losses. On the other hand, statistics indicate that WhatsApp is leading the global messaging race with some 800 million users, followed by Facebook messenger and Chinese instant messaging service QQ Mobile as the top three competing messaging apps, although the numbers are somewhat sketchy. “Facebook and others can either win the marketplace, or buy the competition. They’re buying these companies that ride the wave, but it’s not investments that they intend to grow,” Tech Analyst Jeff Kagan says, adding, “Except once in a while. If you put enough quarters into the slot machine, you’re gonna get a jackpot. But most of these investments are wasted.”

Exploring different paths

Other apps operating in the twilight zone between messaging and social media are exploring different paths to fame and fortune. If you sign up for an account with Path, for example, the social media app founded by former Facebook manager Dave Morin in 2010, you’re not likely to find many friends if you’re Swedish, Norwegian or even American.

In Indonesia, however, it’s another story. Limiting the maximum number of followers to 150, the Path’s idea is to build close-knit and small online communities of trustworthy followers. That concept never earned much traction in places like Europe or the United States. But somehow people in Southeast Asia, and especially Indonesians, found the prospect intriguing, so much so that the country now holds the largest number of Path users anywhere.

Path and others have yet to figure out how to profit from its growing user base.

Some app developers choose to go big in the financial markets, hoping investors will keep the company floating until a profitable business model emerges. In May 2015 reports came that Line is preparing for a dual listing of its stock in Tokyo and New York. Owned by a Korean search portal, Naver, Line boasts 205 million users and seeks to challenge Facebook’s WhatsApp. Line is making money, too, charging users for games and personalized icons to spice up their conversations. The company has doubled its revenues in one year.

Still others are betting that what we want is content and that partnerships with credible content providers will provide the much-needed positive cash flow.

In 2013, Evan Spiegel, the CEO of Snapchat, turned down an alleged offer from Facebook to acquire the company for 3 billion USD. At the time, Snapchat had no revenues, much less profits.

Spiegel’s move was widely regarded as the stupidest business decision of the year. In the beginning of 2015, though, people stopped laughing as Snapchat launched a new feature called Discover. In it, eleven media companies – including CNN, Comedy Central, Cosmopolitan and National Geographic – are given an open channel into Snapchat’s users, many of whom are teenagers (around 70 per cent of all Americans between 18 and 29 use Snapchat, according to Cowen, an analysis firm), where editors post daily video clips and stories.

In an instant, Snapchat had created a new advertising market worth millions with an audience consisting almost solely of the coveted teenagers. The publishers in Discovery sell their own ads, handing over a small percentage to Snapchat.

Suddenly, Snapchat’s valuation well north of 10 billion USD seemed to make a little more sense.

Of course, Snapchat still runs the risk of losing its appeal among its current young user base, notes Rebecca Lieb, an analyst at Altimeter Group.

”Snapchat is the darling this year, but how about next year, when the novelty wears off,” Lieb says to Businessweek. ”It’s not sustainable”.

Becoming a bigger part of our everyday life

Yet, the idea of connecting users of messaging services with high-quality content may seem like a win-win deal for both social media firms and media companies. Over at Facebook, business developers this year have engaged media companies to actually start hosting some of their content, like stories, videos and photos, rather than just linking to them. ”Instant Articles” was formally announced by Facebook in May, featuring deals with nine publishers – including The Guardian, NBC News, the New York Times, the Atlantic and Buzzfeed.

And while not a messaging service, Spotify, the Swedish music streaming company, took a step similar to Snapchat’s in May when it launched a revamped version of its app, featuring video content, podcasts and other types of media from well-known sources like the BBC, alongside with music.

By becoming a bigger part of our everyday life, Snapchat, Facebook and others clearly hope that money will follow.

But there is another reason behind these companies interest in our messages. The trick they’re trying to pull off, Printzell Halvorsen explains, is to funnel massive amounts of user data into advanced marketing, providing the delivery of tailored ads and enabling for other businesses to build their own, unique solutions based on the messaging platform. “The insight Facebook gets into their users’ behavior is quite formidable,” he says. “They know exactly what people communicate about, and they can use that information in ads solutions, for example.”

That has raised privacy concerns, but so far hasn’t stopped especially teenagers to dive head-first into the widening selection of mobile communication solutions.

”To a growing number of other professionals, messaging apps and social networks have long evolved from extensions of personality and hobbies to ne-tuned marketing tools.”

Keeping up – a full-time job

One thing is clear – keeping up with all new messaging apps is fast becoming a full-time job.

Hardware can provide some relief. LG, Samsung and Apple are all selling wearable watch-like gadgets that help sorting through inboxes and alert users when someone seeks contact. Without doubt, life becomes a little easier when a quick glance on your watch is enough to determine if a new mail, text or Instagram post require your attention.

By using built-in speech recognition software, it’s now possible to dictate a reply by just talking to the gadget. Provided, of course, that being seen in public talking to your watch doesn’t embarrass you.

The Schibsted Future Report is our outlook at trends and phenomena happening around us. Things we believe are shaping the future and stories that we want to share with you and the world around us.

Read more at futurereport.schibsted.com