It’s shaping up to be an exciting 2015 for those in the space as these platform players look to differentiate in an increasingly crowded market, while the telecoms operators struggle to recoup the cash they’re losing from decreased SMS and voice call revenue.
Canalys analyst Jessica Kwee was quick to point out the pressure these traditional telecoms players are under.
“SMS/texting in the traditional sense has been impacted greatly, especially as people see more value in messaging apps – as in many cases they are considered ‘free’ as they are part of the data plans,” she told me via email.
“Plus, messaging apps are also more flexible and can handle more than traditional texting – no character limits, and on opposite spectrum, you don’t feel obliged to try to use up the character limit either, so it’s easier to text something very short and quick. Also, there’s the ability to communicate in groups, send pictures, videos, voice notes, emoticons, etc.”
However, there are some opportunities for operators.
“People will increasingly rely on an always-on connection and not be able to just rely on wi-fi at home or at work, as they will want to be connected all the time,” Kwee explained. “So even though it is much more difficult to get people to spend a lot of money on expensive data plans, especially in price-conscious markets, it could be a compelling alternative where telecoms provide cheaper data plans to exclusively use such apps.”
Frost&Sullivan principal analyst, Naveen Mishra, added that adoption of mobile messaging apps has soared over the past 12-18 months thanks to their added functionality and free price tag.
“Increasing smartphone penetration and growing internet adoption is driving this usage. Emerging markets like India, are growing extremely fast, both in terms of adoption and usage,” he told me.
“Between May 2014 and Oct 2014, WhatsApp’s monthly active users grew from 50 million to 70 million, which is 10% of the total user base. The next 3-5 years are also looking very promising, as key emerging markets have large opportunities of growth. In India alone, there are over 930 million mobile subscriptions out of which only 70 million are current WhatsApp users.”
As for the various market players, success will come down largely to innovating with new features.
“All the OTT application companies are constantly trying to innovate, however the success of the application largely depends on the value a new feature brings in,” he said.
“Line has tied up with LG Electronics, where through its chat session, LG appliances can be activated and controlled. On the other hand, WhatsApp is working on a voice calling service, which is expected to be launched in early 2015.”
Alibaba finally announced plans to list on the stock market on Sunday after months of speculation and protracted discussions with the Hong Kong stock exchange.
A lot of the column inches devoted to this piece of news have focused on the firm’s decision to chose the US, rather than Hong Kong to IPO, and while it will be a blow to the SAR, there really wasn’t much it could do.
The bottom line is that Alibaba wanted to continue electing the majority of its board even after going public and the HKSE has a very strict one-shareholder-one-vote rule, which it could not break. End of story.
Of course, its decision to go Stateside doesn’t hurt Alibaba’s attempts to globalise its brands and attract more big name investors from the US. It will certainly be pretty happy with the way things turned out.
However, it would be wrong to interpret the move as an attempt to internationalise, even given the following statement from the firm:
This [IPO] will make us a more global company and enhance the company’s transparency, as well as allow the company to continue to pursue our long-term vision and ideals.
As numerous industry analysts have told me this week, the IPO is all about raising funds (as much as $15bn if rumours are to be believed) to grow its business in China.
Yes, it’s still China that dominates Alibaba’s thinking and it’s easy to see why. In terms of e-commerce the likes of Amazon and eBay will make it very difficult to compete outside the Middle Kingdom, while inside there is still a huge amount of growth going on.
China is poised to become the world’s biggest market for online commerce by 2015-16. “Growth will double in the next five years so the market is definitely big enough for two or three major providers,” Gartner analyst Jane Zhang told me.
This is just as well, as arch rival Tencent is breathing down its neck with its recent JD.com deal and could present a significant challenge to Ali in the future, Zhang added.
Not that Alibaba has taken its eye off the ball with mobile, investing in Sina, AutoNavi and extending Taobao to the mobile sphere, but its Laiwang messaging service has been a bit of a stinker and really pales in comparison to WeChat’s success.
A lot of the IPO money, Zhang told me, will go on growing its cloud and hybrid infrastructure, as Alibaba takes a leaf out of Amazon’s book and goes into business of providing IT infrastructure as a service in earnest.
Frost & Sullivan analyst Marc Einstein echoed these thoughts.
“Alibaba has some global ambitions but obviously competition is too severe in the US and emerging markets would be more likely targets,” he told me. “Therefore I think that they will continue to diversify into new businesses and mirror companies like Google and Amazon rather than trying to compete head on.”
Chinese search giant Baidu has just agreed to pay $1.9 billion (£1.3bn) to acquire mobile app store provider 91 Wireless Websoft in the biggest internet M&A deal ever in the People’s Republic.
Commentators have already been arguing over whether nearly $2bn for effectively two mobile app stores is a good deal for China’s biggest search company.
As with all acquisitions, only time will tell, although it’s certainly a statement of intent for the firm and one it needed to make with the likes of Alibaba and Tencent all making big mobile internet plays.
Beijing-based Forrester analyst Wang Xiaofeng said in comments sent to me that it was a smart move for Baidu to “assure its competitiveness in the age of the mobile internet”.
“Alibaba is working on its m-commerce strategy through its investment in Sina Weibo and an [offline to online] strategy through the acquisition of Autonavi; Tencent is digging out monetisation possibilities from its killer product WeChat, including eBusiness and mobile payment,” she explained.
“91 Wireless’ strength in mobile applications will be a great complement to Baidu’s current business.”
As to exactly what Baidu is buying, well the main bit of 91’s business is two app stores – 91 Assistant and HiMarket – which apparently lead the domestic market with over 10 billion downloads.
This will give Baidu a great distribution channel for its own apps, and to be honest the deal shows a good degree of self-awareness from the web giant – it knows more users in China find info on the mobile net via apps than mobile web-based search engines.
Whether it proves to be a great piece of business or a stunningly ill-judged waste of money remains to be seen but I’d lean towards the former.
Baidu certainly couldn’t sit back and let its rivals gain the initiative in the brave new world of mobile and if this acquisition doesn’t work out it could well be because it left it too late before pouncing.