Mobile messaging apps are booming, as people abandon traditional SMS text messaging and flock to apps like WhatsApp, Tango, and Kik, which offer better experiences — at low or no cost.
But while messaging usage has skyrocketed over the past few years, we’re still waiting to see a dominant leader emerge in the space, as Facebook did with social networking.
Today, the messaging landscape is a highly fragmented space, with hundreds of nearly identical services vying for market share. More importantly, there’s little indication that any of the current leaders will win– unless they change their user experience.
The messaging landscape today
The messaging market is extremely competitive, but the size of the overall pie is huge. Messaging volumes will be double that of SMS text messages by the end of 2013, as consumers look for more flexible, real-time messaging that circumvents billing from their mobile carrier.
With 300 million users and 25 billion daily messages worldwide, WhatsApp has emerged as the most popular messaging app in the U.S. Rival services have all made impressive progress in certain demographic and geographic markets like Kik (under 18 year-olds), WeChat (China), Kakao Talk (South Korea), Line (Japan), and Tango.
Even though WhatsApp may be enjoying its current status as market leader, recent engagement data cautions us that the story of their market share may still have a few unwritten chapters. According to an Onavo Survey, the number of iPhone owners who use WhatsApp on a monthly basis has dropped from 9.25 percent in May to 7.97 percent in August — and has fallen for three straight months.
Some may argue that these numbers are just a momentary blip on WhatsApp’s road to leadership. However, there’s more to the story: WhatsApp, along with other current messaging leaders, are failing to address the realities of the messaging space. And until they do, we won’t see a clear winner emerge.
Why a winner hasn’t taken it all
There are three major reasons why messaging remains a highly fragmented market:
1. Most IM usage is driven by teens, who are notoriously more fickle than other audiences and quicker to move on to other services. We see younger consumers gravitating toward new and fresh services like Snapchat and Kik.
According to Clark Frederickson of eMarketer, “Older generations have less free time, so it takes more time for their habits to change. The younger generation can spend hours a day on one site, get bored of it and switch to something else the next day.”
2. There’s a smaller social graph associated with IM than Facebook. For example, you may text 10-20 people, while the average person has 300-400 Facebook friends. This means that there’s a far lower cost to switch your IM app provider, because you’re leaving a smaller group behind.
While teens increasingly view Facebook as a lame social network that their parents and grandparents belong to, there has been little indication that teens are actually abandoning the social network site altogether. After all, dropping Facebook breaks a connection with 300+ people, many of which you would not reconnect with on another platform.
3. IM lives purely in the present. Your past history with a messaging app is far less than relevant than on a social networking site like Facebook, Instagram, and possibly Twitter. For example, over the years, Facebook becomes a virtual repository of all the important, and not-so-important, things that happened in your life. For many, the platform stores photos of vacations, parties, graduations, weddings, babies, etc. It hosts years of conversations and announcements.
While the text you sent five minutes ago may not matter any more, chances are the photos you posted on Facebook two years ago do. In other words, while your history and content may lock you into a site like Facebook, there’s no such effect in the temporary world of instant messaging.
What will it take to win?
At a basic level, all of today’s messaging leaders work the same: they provide real-time messaging between two users (who are either identified by their email or a unique user name/ID). That means differentiation is key to acquiring new users and keeping the existing community from moving on to ‘what’s next.’ In short, messaging companies need to provide a deeper and richer experience if they want to win the space.
One strategy is to provide deeper context for the content, so real-time messages aren’t immediately irrelevant. That should make it much harder for users to abandon the history of content they’ve built. For example, Snapchat is changing the ephemeral nature of its service by offering Snapchat Stories where Snaps live for 24 hours.
Another strategy is to differentiate by providing more than just text/image messaging. Kik Messenger — with more than 50 million users and widely popular among teens — is aiming to differentiate itself from the crowd with Kik Cards, lightweight apps (like games) that can be sent, received, and opened within conversations.
In short, while WhatsApp has currently been on a tear, we shouldn’t assume the platform will automatically lock in its user base. Messaging startups must recognize the fickle nature of the market. The winner will be the company that manages to become irreplaceable to its users, whether that’s by offering unique features, storing historical content, or finding a new strategy.
Boris Wertz is the founder of Version One Ventures, an early stage VC firm that has invested in more than 40 early-stage consumer Internet and enterprise companies, including Flurry, Indiegogo, Wattpad, and Edmodo. He and Version One do not have any investments in the mobile messaging market. Read more from Boris at http://versiononeventures.com/blog/ or find him on Twitter.
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