Analyst: OTT messaging destroying billions in operator revenues

Operators stand to lose more than $3 billion (€2.3 billion) in mobile messaging revenues will be lost to operators between 2012 and 2017 as consumers are attracted to use over-the-top messaging services, according to a new report from research firm Strategy Analytics.

This stark forecast points to the Asia Pacific region as an example where the runaway success of messaging apps, namely Line, KakaoTalk, TicToc Plus and WeChat, have lured hundreds of millions of mobile customers to use these free services.

However, the report argues that there may be hope for mobile operators, and notes that nearly all of these OTT messaging apps share a common characteristic--a shared lack of an ability to monetise this messaging traffic.

The research firm said that the business plan adopted by these OTT service providers is built on the premise of gaining a large audience and then looking to generate revenues from the sale of virtual goods and other items.

Yet Strategy Analytics maintains that operators should be heartened that a virtual goods business model focusing on personalisation may not play with the mass market in the Asia Pacific regions or with Western consumers. Given the array of free messaging apps, the ability to charge for the services seems remote, forcing these OTT firms to look for alternative routes to find revenue. Therefore, a failure to establish a viable long-term business model will likely drag down some of today's high-flyers, the report notes.

"Apps will drive more than $36 billion in revenue by 2017," Strategy Analytics analyst Josh Martin said in a statement. "However, billions in revenue will also be destroyed and never replaced. The notion that OTT messaging services can be perpetually revenue free will proliferate until one service fails - making consumers face the stark reality that everything has a price."

"As OTT top messaging services transition to social networks, the need for them to maintain eyeballs could provide an opening for Joyn," Martin added. "Without the need for advertising revenue, Joyn could extend beyond a messaging app and turn into a platform that attracts third party developers and with them innovation. If operators can build a platform with robust API and developer support they can differentiate from the competition and perhaps open a new revenue stream for themselves."

For more:
- see this Strategy Analytics release

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