Could mobile messaging offer another huge exit in 2015?

The $19 billion purchase of WhatsApp by Facebook was one of the largest and perhaps most overvalued tech exits in 2014, with the mobile messaging market being brought into the spotlight as a huge growth area. The potential of the mobile messaging market rivalling national and global mobile network operators (MNOs) is likely to drive continued financing in the sector, while the likes of Google and Apple may consider a mobile messaging acquisition to compliment their existing interests in mobile devices and services. Sell businesses are certainly readying for continued interest in this arena in 2015.

IP-based messaging apps, such as Line, Kakao, Viber and WhatsApp, are able to take advantage of low-level mobile Internet bandwidth to transfer files, messages and voice data, thereby undercutting services offered by MNOs. Since such services are usually free or very low-cost, they are likely to especially appeal to youths and consumers in emerging markets. Facebook’s purchase of WhatsApp and Viber’s acquisition by Japanese firm Rakuten for $900 million in early 2014 signal that global digital majors are seeing the value in these platforms. Having such high-capital heavyweights behind them suggests these brands will be able to challenge established mobile majors in telecoms deliver.

As these apps grow in popularity (WhatsApp reached 400 million users faster than any other digital service according to the company), MNO revenues from SMS and voice will increasingly come under competitive pressure. This trend has already taken effect in South Korea, where smartphone and mobile broadband penetration is extremely high. The entry of WhatsApp into the voice calling market in Q2 2014, as announced by the company in February 2014, is an indication of the opportunities the Facebook-owned brand sees in the calling market. With more than one mobile handset per every person in the world, the exposure and access mobile messaging services offer is an attractive proposition for marketing and value-added revenues.

As the various mobile messenger brands continue to expand their subscriber base, which will be driven by rising mobile broadband and smartphone penetration, mature mobile markets will see their consumers spend less time speaking on the phone using MNO-priced services. WhatsApp, for example, is reportedly adding one million users every day and the company is on track to reach one billion total users by the end of 2015, which would take it above any MNO globally. Industry sources forecast that around $386 billion of revenues will be wiped off MNOs by 2018 as a result of consumers turning to messaging apps.

Countries where MNOs are state-owned and where governments thus have a stake in supporting incumbents could pose obstacles to alternative IP-based platforms. Middle Eastern economies for examples, like Kuwait and Iran, have a history of blocking services such as VoIP provider Skype as a protectionist measure.




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