This post was originally published on the Y Combinator blog here: http://blog.ycombinator.com/smartphone-messaging-outside-the-us-whos-winning/
Person-to-person communication on a mobile phone has always been the most basic of all mobile phone features, but the proliferation of fast and abundant internet access has fostered a well-funded competition to be the go-to mobile messaging platform. Like almost everything in technology, there are two distinct approaches to the goal of ultimate messaging domination: grow fast or monetize. While Western Hemisphere companies like Facebook and Google are utilizing accelerated growth strategies, Asian competitors seem to have figured out how to monetize and yet still grow fast. Here is a breakdown how these two strategies actually play out in the messaging world.
Facebook and Google
From the viewpoint of a smartphone user in the United States it might seem like for the most part mobile messaging is dominated by Facebook with both its Messenger app and Whatsapp and Google with Hangouts and its recently launched app, Allo.
To put numbers behind this assertion, Facebook and Whatsapp each have a billion monthly active users, and while Google doesn’t share its user numbers specifically for Hangouts, it did reveal that Gmail has a billion MAU’S. (Hangouts is a part of Gmail) For the sake of comparison, Skype arguably one of the first peer to peer desktop and now mobile communication tools only has 300 million users.
Expansion and Growth
Both Facebook and Google have a similar approach towards rapidly expanding their user base. Earlier this year, Facebook opened up their Messenger app for developers to build in-app bots that could do anything from ordering pizza to sending an invoice. Google followed shortly by announcing Allo a brand new messaging app that has similar bot capabilities.
In encouraging developers to build apps for their platforms, Facebook and Google are widening their pool of potential users with new use cases for their products. Increased usage of the message apps will in theory lead to top line revenue growth for their advertising driven business models. While at least the adoption part has already proven to be somewhat successful for Facebook with tens of thousands of bots available on, it’s worth noting that this strategy is really only scratching the surface of the revenue / business potential from messenger apps.
The State of the Market in Asia
However impressive Facebook and Google’s numbers might be, they are not without some very substantial global competition. In Asia where there’s a fragmented messaging market. The major Asian messaging apps of WeChat, QQ, Line, Kakao Talk, Viber and BBM are not just growing their user base by leaps and bounds but they are even able to generate in-app revenue in tandem with that growth. Rather than simply encouraging developers to build onto their platform, these Asian companies build engaging and profitable add-ons by themselves. Let’s have a look at Asia’s top messaging apps and how they monetize.
WeChat, owned by the Chinese Internet conglomerate Tencent is one of the largest messaging apps in the world with 700 million monthly active users. Within WeChat users can message with videos, voice and text. Users can also send each other money or even pay utility bills. WeChat recently started charging users of its payment service (the ability to send funds to other users) which opened up a new revenue stream for them. WeChat’s global average revenue per user is $7. WeChat is incredibly popular in China, but as one of the most feature rich messenger apps it is quite popular in many other places around the world too.
Tencent also owns another messaging app called QQ which was originally a desktop app, but has now migrated to mobile and is available in English. QQ has 829 million monthly active users and monetizes by selling games. The most interesting feature of QQ is that it has a live translation option to allow people who don’t speak the same language to converse. The majority of QQ’s user base is in China.
Line is owned by the Korean company NHN which also owns the most used search engine in Korea, Naver. Line was created after the Tohoku tsunami in Japan as a way for people to communicate without straining the calling networks, but it struck a nerve and people loved it. Line has 218 million monthly active users and monetizes by selling stickers and games to its users. Line is most popular in Korea and Thailand.
KakaoTalk owned by Daum, the operator of the other major search engine in Korea, currently has 93% of the Korean messenger market and has 100 million monthly active users. While KakaoTalk began as a simple messaging app it has grown into a platform for games and apps. KakakoTalk monetizes by selling its users stickers and even consumer goods like Starbucks gift cards.
Founded in Israel and now owned by the Japanese eCommerce giant, Rakuten, Viber boasts 100 million active users around the world. In Asia, Viber is the go-to messaging app in the Philippines and Myanmar. Viber monetizes by selling stickers and charging users to make calls to non-Viber users.
Blackberry Messenger or BBM as it is known, likely was the first mobile messaging platform. BBM was one of Blackberry’s most popular features and it was opened to cross-platform users on iOS and Android in 2013. While Blackberry and in parallel BBM declined in popularity globally with the rise of other messaging options, BBM is still the most popular messaging platform in Indonesia. BBM monetizes with stickers and mobile payments.
The Potential of Mobile Messaging
While in many respects the Asian mobile markets lag the United States (details to come in a future article), the monetization strategies of popular messaging apps in Asia demonstrate one area where there might be untapped potential for Facebook and Google to explore. Messaging apps have the ability to be everything that happens between multiple parties on smartphones even to the extent of becoming their own operating system. With the current state of the fragmented messenger market there is clearly a large revenue opportunity for whichever app can unify the world onto a single platform.
In the next few years we will learn which approach will lead to ultimate domination: the Facebook and Google strategy of partnerships with developers or the Asian model of build and monetize internally. What do you think? Will Wechat or any of the other Asian apps saturate the Western markets or will Facebook and Google eventually push aside the local apps on Asian devices?