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OTT Messaging Apps Chew Away at SMS

We've been saying it for a while -- OTTs are eating the SMS consumer market. As younger generations find new and preferred ways to communicate with each other, their weapons of choice become WhatsApp, Facebook Messenger, or iMessage; rarely do they use SMS.

With WhatsApp's recent announcement and intention to turn its business model around, not only is the app eating the consumer SMS market, but the B2C market's stability is now also at risk.

The WhatsApp blog post states: "Starting this year, we will test tools that allow you to use WhatsApp to communicate with businesses and organizations that you want to hear from."

These "tools" could mean that WhatsApp is opening up its app for third-party integration or API access "a la" Google Now or Facebook Messenger (now integrated with Uber), and this could be a huge deal, especially for the future of SMS.

For a long time, SMS was the killer app of your phone, that is, until actual apps came along.

Today, the C2C communication market is saturated with apps of all shapes and styles. Just like making calls, SMS is just another stock app on the smartphone. With increasing all-you-can-eat data plans, and more features and value in communication apps, the battle here is clearly lost.

With WhatsApp alone surpassing the number of daily sent SMS messages by 50%, OTTs have eaten a big chunk of the C2C messaging market. However, SMS was still king of B2C communications. For example, airlines could send a link to your boarding ticket or a satisfaction survey, all via SMS. By providing APIs on top of SMS gateways for businesses to implement, operators could offer enterprises the ability to interact with their customers.

However, with a growing population flocking to OTT services and companies capitalizing on SMS, our SMS app's fate is slowly filling up with spam (or application-to-person messages, to stay politically correct). In good faith, I've added a screenshot of my SMS app today:

See how there is only one message that doesn't come from a robot? (Also, it seems that I have to call mom back.)

The life and value of SMS services was clearly extended when companies like Twilio added APIs on top of an SMS gateway, making it easy for companies to build marketing campaigns and communication services via SMS. For a long time, companies could send targeted messages to their users assuming full ubiquity of the SMS platform; if a user provided a phone number, well, he or she could receive an SMS. That was the selling point of SMS: easy to implement, with a very wide reach (except for all the issues associated with international regulations, roaming, etc.).

Now we've got the five biggest messenger apps -- WhatsApp, Facebook Messenger, Viber, WeChat and Line -- with more than 3 billion daily users offering something close to global domination, potentially opening their platforms through API integration. This would allow enterprises to reach their clients where they are actually interacting frequently, all without the hassle associated with telecom regulations.

Opening up these platforms to third party API access, similar to how Google Now or Facebook Messenger did, will offer much greater possibilities for contextual communication than what SMS APIs originally provided.

This potential is already being tapped through hacks and tweaks (before these platforms officially opened up to third parties) created by the teams behind Assi.st, the virtual assistant living in your Facebook Messenger contact list; Facebook M, the company's own half-AI, half-human version of Siri; or WhatsBot, a virtual assistant for WhatsApp built by a few hackers at last year's TechCrunch Disrupt.

Now that Facebook has acquired WhatsApp, it will be interesting to see how the company will design the user strategies for both Facebook Messenger and WhatsApp. It seems that it has the intention to open WhatsApp to a bigger third party crowd, while keeping Messenger more private and spam-free. Will WhatsApp be the new SMS B2C platform? Will my WhatsApp look like my SMS app in a few years?

There are approximately 7 billion mobile phone subscriptions in the world, potentially meaning 7 billion SMS users. Though OTTs have a long way to go, they are undeniably catching up (and accelerating). OTTs haven't achieved full ubiquity like SMS yet, so operators can continue to capitalize on SMS APIs for a little longer.

A great article was recently written discussing why SMS, this old technology, was still in use in our future-driven society. Though the technology still provides a high send-through rate and 90 % read rate in minutes, operators need to think about what will happen when the whole world has cheap access to the Internet, and hence, redefine their strategies for offering world-wide, hassle-free targeting services.

2FA is the best measure for ubiquity of a service. IT services providing this feature clearly cannot afford being unable to send a code to their customer, and everyone has a phone number, right? Companies like Authy have gained a strong foothold in the 2FA market and are dethroning the all mighty SMS. All because it's just another app!

Many OTTs, such as Viber, have implemented the ability to send 2FA codes to their apps. It is just a matter of time until others follow suit, and we are even able to log into services using our WhatsApp or WeChat logins, much like Facebook or Google's OAuth mechanisms.

That leaves us with people that don't have access to these services yet. Most emerging markets have one particularity: They skipped the whole fixed telephony game and started using mobile directly. Therefore, SMS became a staple of the economy in countries like Nigeria.

To reach those without access to the net, operators with established worldwide presence bridge the gap that exists until everyone has country-wide Internet access. There's no need to dive deep into history to understand that smartphones have become cheap and initiatives to connect the last 4 billion people to the Internet are widespread, with Facebook and Google taking the lead (see a trend yet?).

Do you think there will ever be a service (or a few) providing ubiquity just like SMS was able to provide? How long do you think it will take these services to eclipse the widespread use of SMS? Leave your comments below!

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