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Messaging services are rapidly growing beyond online chat
Mar 28th 2015
I PROPOSE, if and when found, to take him by his beastly neck, shake him till
he froths, and pull him inside out and make him swallow himself. It is not
often that Silicon Valley s denizens quote P.G. Wodehouse. But this is what
Benedict Evans of Andreessen Horowitz, a venture-capital firm, expects the
success of messaging services could do to both mobile and corporate software.
The most striking example so far of this process came on March 25th when
Facebook announced at a conference in San Francisco that it has started to turn
its Messenger service into a platform that can carry, and be integrated with,
all manner of apps created by other software firms. So Facebook Messenger,
which is itself an app for smartphones that run on Apple s iOS and Google s
Android operating systems, will then be competing with those operating systems
services for buying apps and downloads. In plain language, it could become the
app that ate Apple s app store.
The prospect may surprise those who thought messaging apps were just another
way for teens to share this week s tragic news about One Direction (a pop
group, apparently). But their continuing explosive growth suggests that they
will be a lasting phenomenon. According to Flurry, a market-research firm, the
total number of users grew by more than 100% last year (which explains why
old-style text messages seem to have peaked, see chart). Together the ten
biggest messaging apps, which include KakaoTalk, Viber and WeChat, now boast
more than 3 billion users. WhatsApp, the leader of the pack, alone has 700m a
big reason why Facebook last year paid $22 billion for the firm, despite
continuing to develop its own Messenger app.
As the number of users has grown, specialised versions of messaging apps have
emerged. What made Snapchat popular was the ability to exchange pictures that
vanish after a few seconds (and often contain nudity). Secret, Whisper and Yik
Yak let users remain anonymous (including bullies, unfortunately). Telegram
stands out because of its strong encryption (making intelligence services
unhappy). And FireChat works without cellular service: users phones
communicate directly, which was a popular feature during recent protests in
Hong Kong.
The time users are spending on messaging services has encouraged investors to
value them highly, even though it is not yet clear how some of them will make
money much as happened with the rise of Twitter and with Facebook s original
service, its social network. WhatsApp handled more than seven trillion messages
last year, about 1,000 per person on the planet. In Britain users spent as much
time on WhatsApp as on Facebook s social-networking app, according to
Forrester, another research firm. In China subscribers to WeChat are estimated
to use the app for about 1,100 minutes a month on average.
Although the numbers are smaller, something similar is happening in the
business world. Slack, a messaging service that works on both smartphones and
personal computers, seems to be succeeding where other attempts to create
corporate social networks have failed, by replacing e-mail as the main
communications channel inside firms. Just over a year old, Slack now has
500,000 users. It says they typically spend 135 minutes each working day on the
service and altogether send 300m messages a month which is why investors valued
the firm at more than $1 billion when it raised capital in October.
Instead of inundating workers with individual messages, Slack divides the
digital deluge into more manageable channels , each dedicated to a project or
a team. Users can create and subscribe to such channels, exchange messages,
post links and upload files all of which are saved. Besides reducing the time
everyone spends handling e-mail, the channels also help new employees to get up
to speed quickly, instead of starting with an empty inbox.
Slack is not the only service of its kind. Other startups, including Quip and
HipChat, offer similar features. Established firms are not far behind. Cisco, a
maker of networking gear, recently launched a service called Spark, which looks
and feels a bit like Slack, but lets users switch to voice and video
communication if needed. IBM will soon follow suit with Verse, a web-based
e-mail service which lets users exchange instant messages, but also employs the
firm s artificial-intelligence engine, Watson, to sort messages and even reply,
to reduce the communication burden.
To please investors as much as they evidently please their users, messaging
services, in their consumer and corporate incarnations, will eventually need to
turn a profit. There are several ways in which they aim to do this. One is by
selling add-ons, at a modest price but in large volumes: for instance, in Asia
some messaging services sell stickers , little pictures that let users make
their messages more expressive, for something like a dollar a dozen.
Another way to make a living is to take a cut of any e-commerce or money
transfers that take place over their networks. WeChat users have long been able
to order taxis and buy air tickets over the service, and as its popularity
keeps growing, so will its ability to start charging businesses for sending
customers their way. Snapchat already lets CNN, National Geographic and other
news media publish articles on its service in return for a share of any
advertising revenue. Line and Snapchat have recently added a payment service,
as has Facebook Messenger.
Although most messaging services are free, WhatsApp charges a small
subscription fee, of 99 cents a year, something the main social networks have
shied away from. Once users, and all their friends and contacts, have grown
accustomed to using a particular messaging service, it should become easier to
get them to cough up a small annual payment. Multiplied by a huge user base,
with only modest running costs to subtract, that could provide a handsome
profit.
For corporate messaging services, there is even more potential for charging
such recurring fees, since businesses are already used to paying annual
licensing and maintenance charges for the e-mail systems and other software
that these services aim to replace. Companies large and small have all sorts of
online functions, from customer support to the tracking of software bugs, that
bombard them with alerts and queries so anything that helps them deal with
these more efficiently is worth paying for. Slack s customers, for $7 a month
for each user, can pump unlimited numbers of external messages into channels,
turning the service into a hub for all the flows of information that make a
company tick.
Yet the juiciest prospects may lie in the example Facebook set this week
allowing messaging services to become platforms on top of which other firms can
develop content and apps, with all sorts of means to generate revenues. WeChat,
with its various add-ons, is already a platform of sorts. Facebook now intends
to go even further and wants its Messenger to become the point of integration
for other services and apps. Users will, for instance, be able to open another
app simply by tapping a link embedded in the flow of messages.
Such moves to become the platform that supersedes other platforms are a natural
evolution in software, says Venkatesh Rao of Ribbonfarm, a consulting firm.
Similar battles have happened before, most notably in the browser wars of the
mid-1990s, when Netscape s Navigator tried to usurp a dominant platform,
Microsoft s Windows operating system. This time the incumbents are Android and
iOS, and they will certainly fight back.
From the print edition: Business