OTT (Over The Top) mobile messaging apps have recently garnered significant attention thanks to Facebook's acquisition of WhatsApp for $19B back in February. But what everybody is really dying to know is exactly how these app companies make money — what are the revenue streams?
While all offer free or nearly free messaging (and potentially calling) for consumers, at the end of the day someone needs to pay the bill. There are a lot of companies vying to prove that they have an answer to the revenue conundrum, but Salesforce’s recent partnership with LINE has, in my opinion, the most interesting potential. Through this deal, marketers will have a way to directly connect with customers. This is a massive step toward the one to one communication holy grail that is custom tailored to fit consumers’ interests and preferences.
Other messaging apps like Kakao Talk and WeChat are trying to find ways to make money through additional services like video games. The biggest challenge for those apps is to ensure that efforts to generate revenue don’t jeopardize their appeal as communication and social networking tools. While some messaging apps offer advertising features, WhatsApp in particular has sworn off advertising anytime in the near future (I guess a $19B payday gives you some latitude to make bold statements like Facebook …).
What's About to Change?
However, the recent Salesforce/LINE deal is not about advertising. It is about modern marketing. People will connect with a brand (just like a friend) and be able to communicate on a one to one basis. This makes it possible for OTT mobile messaging apps to become an application to person (A2P) messaging channel like SMS, MMS and Push Notifications are today. LINE is allowing brands to participate directly in their native app experience for the mere price of $25,000 per year (OK, so maybe it is an extremely expensive friendship).
Brands will need some tools to communicate with their “friends,” and this opens up a new revenue stream for the cross channel messaging players. Agencies and CRM shops are likely all feverishly trying to learn these channels so they can have a perspective by the time their clients start asking how to take advantage of this marketing opportunity.
Being in the cross channel messaging space myself, this is a very exciting, and also very scary change. Why is that? Consider these questions:
Which Apps Will Open APIs to Businesses for Marketing Tools?
Technology firms don’t have unlimited resources, so integrating with five or more new potential channels is not a small task. Each one will have its own set of challenges, but every new challenge presents an opportunity. I guarantee companies will develop an aggregation layer to make this easier. I predict that a new set of software companies will evolve to address this challenge in due time.
Which Apps Should Brands Focus On?
Each brand is going to have to look at the demographics, region and feature set to make an ROI decision. It is way too early and nuanced of a discussion to answer yet.
How Will Regulations Evolve?
I don’t think anyone wants to have the complicated compliance discussion just yet. Unfortunately, history tells us that when a new marketing channel opens, the spammers find it. Each of the apps will likely build some logic to throttle messaging and discourage spam, but an industry body or regulatory authority is going to need to step in at some point and define the rules of the game. If not, the spammers will kill the channel before it has a chance to flourish.
What About Pricing?
Punny sure, but a LINE has been drawn in the sand. LINE’s $25,000 a year price tag has set the fee standard. I am quite sure the company will end up taking a tiered pricing approach in the end, but each app is likely to try a few different models (license, license + messaging, messaging, etc.) until the market starts to dictate the right model (similar to how SMS, MMS and Push have many flavors of pricing for businesses depending on how you build and manage your solutions).
At the end of the day, the tools and solutions pricing and the agency strategy discussions also need to be considered, but I expect these will take a couple more years to become standardized. It's still the wild west in these “more developed” channels if you look at the ecosystem from a 10,000 foot level.
Will the Apps Themselves Offer Business Messaging Tools?
I think they may, but I hope they don’t spin their cycles. The cross channel messaging ecosystem already knows how to service these customers, and brands do NOT want to have yet another toolset to use. Between email, mobile and social, brands are already overwhelmed.
Will the Patent Trolls Wreak Havoc?
I am quite sure the mobile messaging apps have already gotten served some notices. The moment businesses — and not just consumers — start playing, it will only get much worse.
So, what is the end game? Monetization in the OTT app space has been secondary to garnering consumer demand — the old “if we build it, they will come” strategy. For marketers it’s all about the revenue stream. While Salesforce and others will need to figure that out, brands need to take advantage of the exploding potential of one to one marketing.
At its core, mobile, the future of consumer technology by any account, enables messaging — for consumers and thus for the businesses from which they purchase. Though business/consumer communication may lag consumer/consumer communication — as is the case with OTT — marketers who don’t get a grasp on mobile messaging of any form now may lag too far behind to recover in the future.
Title image by Unknown or not provided [Public domain], via Wikimedia Commons
About the Author
Matt Silk is head of strategy for Waterfall, Inc., responsible for corporate development, strategic partnerships, and client services. As a cofounder of the company, he leads Waterfall´s Austin office.
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