The Power of Cooperation

5 min read

For a long time now, MNOs have been sensitive to the challenge OTT messaging apps pose to their SMS business. Younger users and forward-thinking enterprises alike are gravitating towards the richer experiences provided by Viber, WhatsApp, Messenger and others. WhatsApp alone has around 2bn users, and like other OTTs is looking to monetise this userbase via business messaging. Operators simply cannot offer the same features or interactivity and so cannot expect to monopolise the messaging market as they once did when SMS was the only game in town.

While the A2P messaging market shows healthy growth, OTT messengers are making the most headway, eating into the potential of “traditional” SMS messaging. According to recent research by Juniper, while A2P messaging volumes as a whole are set to increase by more than 60% between 2020 and 2025, the OTT part of that messaging will increase by nearly 1,500%!

A multiplicity of channels

The primary threat comes from the fact that OTT messengers offer various features that SMS cannot. Apps are designed from the ground up to facilitate conversations, taking a great deal of inspiration from the inventive ways in which subscribers actually use messaging.

Consequently, apps offer typing notifications and read receipts (critical to enterprises that want to gauge the effectiveness of campaigns) as well as emojis, stickers, video and more. They support many tools with which users and brands can make their conversations more engaging, emotive, and meaningful.

Importantly, they are well suited to the growing trend for conversational commerce thanks to the ease with which they support these interactions and embed rich content directly into messages. In fact, analysts MobileSquared have noted that WhatsApp in particular is positioning itself as a P2A channel, aiming to corner the market in customer-initiated conversations.

Conversely, OTTs have historically had to face the fact of market fragmentation. They are not a cohesive whole encroaching on the MNOs’ messaging turf, but instead multiple competitors each trying to take a share for themselves. Added to this is their geographical reach, or perhaps we should say boundedness. While WhatsApp is the leading messaging app for some markets, in others it is Viber, or Telegram, or Facebook Messenger.

Despite that fragmentation, operators will have a tough time competing against OTTs, since many aggregators now style themselves as CPaaS providers offering a unified platform. This lets enterprises access multiple channels from one interface and simplifies campaign orchestration, mitigating some of the weaknesses of the OTT threat.

Images and emojis quote GMS

What can operators do?

The solution is clear — operators must work with enterprises, not simply offer them messaging as a commodified product. They need to help enterprises achieve their goals, including making customer communications simple and convenient, which means supporting OTT messaging.

Why? Since messaging apps are unlikely to disappear, even with the advent of RCS, the logical route is to find some way to secure a revenue share from OTT messaging. The only way to do that is to offer connectivity as a service.

Mobile operators are in an ideal position to make this shift. Their subscribers trust them, and because of that brands and enterprises are willing to trust them. In a GSMA study, three quarters of respondents said they trusted operators. At the same time, around 60% of subscribers prefer more visual and rich messages — and liked using tools like images and emojis — showing continued demand for advanced messaging applications.

Providing a platform for collaboration

To compete, MNOs could start acting like so-called CPaaS providers, who will offer connectivity to multiple channels (including operators’ own SMS networks) for enterprise communications. The process of building such a solution can, however, be costly and time-consuming. Access to a pre-existing platform such as GMS’ mitigates these issues.

White-labelled platforms let operators launch their own multichannel messaging business, augmenting their SMS business, without the development and maintenance overheads. MNOs can then focus on working with their enterprise clients to enhance their communications strategies, whether that be marketing, customer services, or sales support. This is especially valuable with local clients, not just because of the aforementioned trust the operator has, but also the local knowledge about the messaging and retail markets operator sales staff will bring to the table.

Messaging chain players GMS

Shifting the approach to business messaging

Such collaboration requires a new mindset, however, particularly since newer (rich) messaging channels like apps and RCS are being lauded for being more conversation-based. In turn, they also support new use cases, like customer service, conversational commerce, and multichannel marketing.

In their 2019 RBM forecasts, MobileSquared explored the various pricing models for RCS Messaging, including revenue share. They argued that the revenue share model best suited rich messaging since it avoids commodifying the channel and helps keep a campaign’s focus on the desired outcome. This viewpoint is supported in the second version of MEF’s RCS Messaging Best Practices. There MEF’s experts note that outcome- or success-based commercial models help encourage innovation and move beyond the commodified per-message status quo of SMS and the standard cost-per-click paradigm prevalent in online advertising.

And yet, both sources note that this requires a reorientation in how operators work with enterprises and aggregators/providers. The different messaging chain players have to come to a greater understanding of the aims and measures of success. This will realise the actual value of rich media messaging, according to MEF, because it “reward[s] the messaging channel based on the value of a successful commercial outcome to the customer, not on the volume of messaging that that led to that outcome.”

Operators and providers will need to account for desired outcomes and how best to achieve these using the tools and data provided — as well as how to measure success and how to charge for it. While operators may not have the resources or organisational bandwidth to generate these rubrics, they should ensure they have enough understanding to pick a provider partner who can.

The power of cooperation

Although the messaging market continues to gain value year-on-year — potentially reaching $72.8bn by 2025 — operators still face pressure on their own SMS business. As we see it, the correct response is to tap into the rest of the messaging market to make the most of developing trends and technologies.

The challenge — that enterprise customers want to use different channels for specific purposes — actually contains the solution within itself. If operators could offer access to multiple channels, in addition to their SMS service, they could become the critical point of contact for enterprise messaging. Offering access to OTT channels actually becomes one way of mitigating revenue loss to OTT messengers.

Cooperation between MNOs, GMS, and enterprises is the perfect way to grow revenues, remain relevant, and secure a share of the mobile messaging market.

Add Your Heading Text Here