AH Tech Talk: Generating Revenue From Instant Messages

North America is blessed with relatively inexpensive SMS costs compared with most of the rest of the world. Depending on the location, the charges for sending and receiving a simple text message may be five times as much (Japan), twenty five times as much (Spain) or fifty times as much (Brazil). Because of the difference in the domestic market, customer preferences are different around the world and one of the best examples of this is instant messaging. Instant messaging applications are one of the biggest growth areas in mobile technology and 'cost' is a big driving factor in this: rather than an individual message cost, instant messaging applications are either free or have a regular cost, which may be monthly or annual depending on the business in question. And thankfully, application developers have realized that customers want to access these instant messaging applications on whatever smartphone they are using and so most services are available on most platforms.

Of the current instant message applications, WhatsApp and Facebook Messenger are the global dominant services. All other instant message services are dominant on a local scale, but do not have the same scale of users as WhatsApp (and Facebook Messenger). However, there is another side effect of the different markets around the world: the revenue generated by that particular application is highly variable. Data from Activate shows that the third largest instant messenger application, the Chinese WeChat, generates an average revenue per customer of $7. WhatsApp generates just $0.06 and Facebook Messenger doesn't generate any revenue. South Korean KakaoTalk generates an average of $4.24 for each of its 48 million monthly users and the Japanese LINE generates $3.16 with a monthly user-base of 211 million. Viber, with 249 monthly users, generates just $0.01 per user.

The simple reason why some instant messenger services generate revenue whereas others do not is because the developers have used the instant messenger application as a foundation for other services. It's the Asian instant messenger applications that have been most successful in implementing this technology - witness how LINE's services now includes an application store that allows user content, games, and the ability to order and pay for taxi services, grocery delivery, E-commerce, payments, plus television and music services. Chinese instant messenger WeChat has a similar portfolio of third party services, but adds personal loans and fitness tracking to the mix. For customers, this provides them with one portal (username and password) to access these services and for the service, they are able to charge third party companies to use their instant messenger service.

Michael Wolf, co-founder and Chief Executive of Activate, a technology strategy and consulting business, explains that messaging services' rapid growth is set to continue and that: "Everything you can do today in a native mobile app, you're going to be able to do it in an messaging app. Messaging is the fastest-growing digital vehicle ever." The technology is forecast to add 1.1 billion users between now and 2018, bringing the total global number of users to 2.5 billion. This growth is being fueled by a combination of high carrier costs for individual messages and in some parts of the world, the additional third party services available on instant messenger applications. Activate's study shows that around half of the growth will come from the Middle East and Africa where the company believes there are 579 million untapped users, and a further 265 million in Asia.

Activate's study is already backed up by a number changes around the industry. We've already seen how Twitter has improved its instant messenger functionality, but the more Western instant messenger application services need to do more if they are to compete and generate revenue. We may see WhatsApp, Viber, Kik and Telegram start to develop links with third party services in order to increase their revenue.

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