Telcos Beware: A New Wave of OTT Players in 2014

28 Mar 14

Snapchat, What’sApp, Viber, Instagram or PingTune are several of the latest messaging apps changing the way teens are communicating.

Opting for mobile messaging apps instead of alternative social media platforms like Facebook is hugely changing the amount of data sent over networks.

Consider Ovum’s prediction that the number of messages sent using messaging apps will grow two and a half times in volume over the next 12 months – from 27.5 trillion in 2013 to 71.5 trillion by the end of 2014. That works out to more than 2 million messages sent every second.

The Social Messaging 2014 Trends-to-Watch report shows that in 2014, social messaging trends will give way to a new wave of Over the Top (OTT) players hitting the market. Author of the report and consumer telecoms analyst Neha Dharia found:

Social media as an industry is undergoing a major transition, one of the key drivers of which is the rapid proliferation of social messaging services.  Social messaging apps are mobile centric services, are intuitive and viral in growth have the ability to reach a wider audience. As new services get added on to messaging apps, we can expect these services to evolve into mobile media platforms with large user bases.

“In addition, we expect social messaging to slowly but surely start to generate revenues, which will assist in the evolution of social messaging players’ offerings from messaging apps to holistic mobile media platforms,” Dharia says.

Driving social messaging (or mobile first platforms) is the growth of affordable smartphones and access to mobile broadband (in emerging markets), plus large-scale marketing campaigns. All of which will lead to the “mass adoption” of social messaging services next year, it predicts. The report summary says:

Social messaging players will trial services that move well beyond communications, including games, payments, information services and utilities. Social messaging apps will continue to evolve into mobile media platforms in their own right, using mobile technology to create contextual services for consumers.

“The rise of this new breed of mobile-focused, messaging-centric OTT players will be the driving force behind the changes in social networking and media services.”

So telcos beware!

Why do I heed this warning? Many telcos we speak to are trying to figure out how to recover from revenues lost to OTT services. Consider other findings from Ovum indicating that telecoms operators will lose US$386bn between 2012 and 2018 from customers using over-the-top (OTT) VoIP solutions such as Skype and Microsoft Lync.

The consumer OTT VoIP market is thriving, with traffic expected to grow by a CAGR of 20 percent between 2012 and 2018, and to reach 1.7 trillion minutes in 2018. This growth is being driven by improvements in the availability and speed of broadband networks; the growing sophistication, affordability, and capability of smartphones and computers; and the rise of social media. If the current trajectory is maintained, Ovum expects telcos to lose US$63bn in voice revenues in 2018 as customers use free OTT VoIP solutions.

Telecom providers must consider how to build new business models that lessen the strain on the networks by reducing the amount of data sent across it.  Application developers and enterprise businesses must consider how they build smarter, data-efficient applications and services.  They also need to consider how to climb the value stack by offering new high performance cloud services.  Doing this will create a new billing relationship where customers see the benefit of selecting a telco over the competition.

Telcos need to protect their core business and their relationship with consumers, while also seeking new revenue opportunities in non-traditional markets.

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