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OTT Messaging: Impact and Reactions
February 2014 Aditi Olemann
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0
5
10
15
20
25
30
35
40
45
2011 2012 20
Average number of messa
day (billion)
1994
1999
2000
2007
2009
2013
The birth of SMS
Tipping
Source: Informa Telecoms & Media, EY re
Messaging- SMS and the rise of OTT
SMS hits first 100
billion target
MMS Service
launched
Smartphone
market explodes
with the advent ofiPhone
launched in 2009,
Viber and
KakaoTalk in 2010
WhatsApp: 300m users
Viber: 200m users
Kakao Talk: 90m users
Line:150m users
WeChat: 300m users
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1994
1999
2000
2007
2009
2013
The birth of SMS
Messaging- SMS and the rise of OTT
SMS hits first 100
billion target
MMS Service
launched
Smartphone
market explodes
with the advent ofiPhone
launched in 2009,
Viber and
KakaoTalk in 2010
WhatsApp: 300m users
Viber: 200m users
Kakao Talk: 90m users
Line:150m users
WeChat: 300m users
0
10
20
30
40
50
60
70
80
90
2012 2016
Predicted Loss of Operat
Source: Ovum.
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Drive
TechnoReadin
StrengtOTT
alterna
Socialpropensity
to adoptOTT
Region-wise Predictions
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Netherlands, South Korea,Spain
Canada, United States, Italy
Brazil, India, China
Drive
TechnoReadin
StrengtOTT
alterna
Socialpropensityto adopt
OTT
Source: McKinsey & Company Telecom.
Region-wise Predictions
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StrategyBlock OTT messaging services to
revenues
ChallengesDependent on net neutrality pol
and competitiveness of the mark
Prone to criticism for curbing cus
Example
Regulators in Vietnam and Egypttowards banning OTT services.2
In 2012, Korean regulators allow
Telcos (KT, SK Telecom) to contro
messaging services including Kak
Sources: Gatner1, Reuters2
Offensive
Throttling
OTT services
OTT app
development New
business
unit creation
Joint product
development
and promotion
Charge
premium from
customers
Defensive
Tactical Strategic
Operator Strategies to counter the OTT th
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StrategyOpportunistic approach: Objectiv
Charge customers a premium fo
on the OTT wave.
ChallengesCustomer dissatisfaction
churning over to other service p
Example
China Mobile and China Unicomthat they would provide a standa
for app users and developers, w
allow them to take a greater sha
made for mobile apps in the wor
market.
Operator Strategies to counter the OTT thOffensive
Throttling
OTT services
OTT app
development New
business
unit creation
Joint services
and promotion
Charge
premium from
customers
Defensive
Tactical Strategic
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StrategyDevelop own OTT services: in-ho
outsourcing
Re-establish consumer relationsEstablish itself as an innovator
Leverage core assets (eg. custom
distribution channel) to differen
ChallengesLack of software and IT expertise
High upfront investmentUnpredictable ROI
Stiff competition from OTT comp
Potential cannibalization of SMS
ExampleTelefonica TU Me
T Mobile Bobsled
Orange Libon
Operator Strategies to counter the OTT thOffensive
Throttling
OTT services
OTT app
development New
business
unit creation
Joint services
and promotion
Charge
premium from
customers
Defensive
Tactical Strategic
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StrategyCollaborative approach: Partner
players and leverage core compe
OTT servicesShare revenue or charge fees for
(eg. guaranteed QOS, customer c
Acquire new customers who are
OTT brands
Challenges
OTT remains the consumer facincollaboration.
Lack of exclusivity in the deals
ExampleReliance and Whatsapp
Airtel and Facebook
Operator Strategies to counter the OTT thOffensive
Throttling
OTT services
OTT app
development New
business
unit creation
Joint services
and promotion
Charge
premium from
customers
Defensive
Tactical Strategic
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StrategyEnable Rich Communication Serv
operator standardized communi
Long term and highly strategic so
ChallengesOffering competitive solutions to
alternative applications
Example
Consumers can identify the presservices through the joyn bran
Telenor, Orange, Telefonica, T-M
are attempting to create this new
initiative led by GSMA.
Operator Strategies to counter the OTT thOffensive
Throttling
OTT services
OTT app
development New
business
unit creation
Joint services
and promotion
Providing
services to
OTTs
Defensive
Tactical Strategic
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RCS Deployment
Source: GSMA, Rich Communications
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An alternate view: OTT not cannibalizingSMS
South KoreaAlthough overall use
OTT has become ve
popular, but average
SMS usage per pers
has decreased only
about 2%.
The NetherlandsThe Netherlands is the second
most expensive mobile market in
Europe. Over the last 3 years, the
whole market has contracted
subscriber numbers have declined,
voice revenues are declining, non-
voice revenues are under pressure,
SMS revenue has declined.
Source: Portio Research
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An alternate view: OTT not cannibalizingSMS
SpainMarket has witnessed declining subscribers, declinin
revenues and declining SMSs for several years. Cann
determine if OTT is the reason or declining economi
conditions.
North AmericaBetween 2009 and 2011,
the market became
unsustainably inflated,
and subsequent drop-off
was inevitable.
Source: Portio Research
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The Way Ahead
1. A number of initiatives are underway. Innovation is2. Pricing will be critical.
3. Exposure varies significantly between
operators/countries.