New messengers for Russian market. What for?

Pavel Durov, Telegram founder, in a traditionally controversial manner, is preparing an ICO project. The name of the entrepreneur and internet users’ liberty and independence champion, is incessantly in the focus of the media attention. The most secure – as its developers claim – messenger is to be put on sale, hence those willing to buy a bit of it are already queuing up while the places in that line are already offered to be bought. It was leaked to the media, that at Telegram’s presale it is anticipated to raise over $500 mio, whereas tokens’ aggregate capitalization may well reach $5 bln. Should that happen, the cryptooffering will be the biggest ever. According to Techcrunch, the ICO is scheduled for this March, while the blockchain platform is to be launched early next year. With abundance of scam (that is what most ICOs really are) in the background, the said project seems to be really functional, thus causing all this hype throughout Moscow’s blockchain community. Given that analogous WhatsApp was priced at $19 bln whereas WeChat has successfully evolved into a China’s national payment system, the prospects of the messengers market seem to be well secured. 

One more device to taste… / Drawing by Yuri Aratovsky

Everybody in there

Pavel Durov is certain that everyone has been using the current messengers since long. That is also true about leading IT companies which invest in instant messaging systems. One of the market players is Microsoft which paid $8.5 bln for Skype. Its competitor, Google, has repeatedly attempted to produce a solution of its own. Japanese giant Rakuten has acquired Viber for $900 mio, Alibaba has been investing in its own DingTalk instant messaging system application. Facebook is in the lead as the company owns two most popular messengers with an aggregate audience exceeding 2 bln (Facebook Messenger and WhatsApp). The latter was bought in 2014 for $19 bln which was well above the real value of the service. Nobody doubts worthwhileness of the said investments now. As BarclaysCapital forecasts, by 2020 advertizing in WhatsApp and Facebook Mesenger will additionally generate for Facebook $11 bln in revenues.

Messengers have opened up new possibilities for marketing professionals since they meet the requirements of the advertisers for a greater customization of messages and a contextual marketing. They are both a product and an instrument of attention economics, since the one who gathers a greater audience is in the lead. There is no reason to doubt the fact that the audience of the messengers will keep growing. This communication channel is gradually substituting all others channels such as SMS, phone calls, emails and even social networks. Instant messaging systems’ popularity is due to the mobile infrastructure dynamic development, falling costs of devices and internet connections for the ultimate users.

A messenger these days is not merely a separate product, but a most essential element of an application interface. In this case, it performs various functions ranging from technical support automated performance to scaling-up users’ loyalty. In the C2C segment, it links a user and a doer, an Uber or YandexTaxi driver and a passenger, for example. In the B2B segment, corporations are unwilling to hand their internal traffic over to alien companies and hence set up their own closed messengers for communicating with their clients, since that speeds up services provision and strengthens customer loyalty. For instance, many banks have their messenger services.

National teams of developers come up with very good nonpublic messengers, but no Russian products may be found among public services. According to Mobile Go, the best known national services (such as ICQ, TamTam, MTS Connect, Veon, Emotion) have an aggregate monthly audience of under 600K, whereas WhatsApp’s Russian audience is 10.7 mio per month.

“No one will have enough resources to compete with WhatsApp”, Sergei Kravtsov, founder of OMMG Technology, believes. “VK could be the only one capable to oppose the major players, since in fact it is the biggest messenger in Russia. Nevertheless, it is widely seen as a social network which is Mail.Ru Group’s big mistake since it has been unable to release a separate product of that kind”.

Purple ocean

The bulling market tempts enthusiasts who offer prospects of a revolution in communications.

“Messengers market is a Purple Ocean already. Competition is not just sky-high, but has reached a level when there is no point of talking about any new significant players in the mass market”, Alexander Vereshchak, a member of an international team developing SafeUM secure messenger, claims. “Since a technical implementation of one or another software product is not a big challenge, then the understanding what will draw people’s attention, what will motivate users to download a certain application and to run and employ it later, is ultimately the only matter of significance. The answer to the question is now searched worldwide”.

The developer is certain that conservativism of the users who are accustomed to their messenger’s interface and functions and maintain their contacts and communication history there, make up the best firewall preventing new players from entering the market niche.

“On the other hand, a vast number of messengers which offer their services free of charge bring some corporate clients to asking a simple question, Cui prodest? It is quite clear to anyone that developing, improving, supporting and upgrading a product and operating multiple servers costs substantial money. Hence at some point the question why all that is done by someone starts jangling nerves of corporate security services and national intelligence agencies. While trying to obtain an answer to the question, one should always remember that in the market, there are lots of services which offer most of their functions to the ultimate user absolutely free. What is the return on investments and operational activities, who gets it and how, is the subsurface portion of these seemingly free messengers”, Alexander Vereshchak adds.

According to Vasily Gorshenin, chief of solutions for telecoms operators at CROC IT service provider, the most popular messengers in Russia are WhatsUpp, Telegram, and Viber. Jointly they hold a somewhat 80% share of the market and have an audience of over 80 mio.

“It is hardly possible for new developers to secure a niche in the market in the current environment of an exorbitant competition. To establish itself in that market, one must offer users unique and, most importantly, most time-sensitive services. So far, nobody has been able to be on par with the classic messengers. Besides, the latter also keep up with the time, employ Artificial Intelligence, use chat bots, develop solutions for paying for goods and services within a single application, assemble a common communication platform”, Gorshenin notes.

He believes that only corporate and ad hoc messengers have viable potential. These messengers are created to address some specific tasks such as communicating via secure channels, shaping a closed information environment, integrating internal systems and IT solutions, for example, corporate paperflow or personnel management systems, etc. As a rule, such messengers are of interest to large geographically-distributed companies aiming to accelerate and improve corporate communications.

If a messenger is not global, it will hardly be used by anyone. The bad experience of the major national telecom operators is a good illustration to that point, since MTS has launched its MTS Connect, Megafon has upgraded its MultiFon, while Beeline has come up with Veon.

“Those messengers are not really outspread as they can only operate within the applications of their telecom operators. A Beeline user, for example, is unable to communicate with Megafon user and vise versa. Few people would be interested in such a service. Hence the classic messengers have a great advantage. They have a distribution channel of their own, Play Market or App Store, to name some, and they are not restricted by the networks of telecom operators”, Gorshenin says.

Since a messenger is one of the basic applications, launching a new project in the market is probably a most complex task for B2C startups”, Vyacheslav Popkov, SherlockPlatform chat platform cofounder, believes. “For a few years there is no point to even think of making money on ads or paid subscription, since the key goal is building up an audience and gaining a foothold in the market. With all its resources, Google has been unable to come up with an extensive messenger despite a number of attempts made. That is a good illustration to the fact that resources availability is not the only element of success. Every new messenger offers some elaborately developed and absolutely new option, trying to use it as a breakthrough tool. Automatic deletion of messages after some fixed time or AI-based automatic replies when there is no need to type an entire message, were, for instance, offered by one of the latest Google’s projects. In my view, it is impossible to predict emergence of a new major messenger in the market, even though the developers’ incentives are quite apparent since the market potential is immense. According to the estimates, WhatsApp, for example, was purchased for an amount equivalent to $40 per subscriber”.

Nevertheless, some are of an opinion that the messengers’ age will not last long, as a presence of several isolated players in the market ruins an individual’s information space integrity. Companies in fact monopolize the right to communication, while imposing restrictions on the clients and failing to guaranty users’ adequate security (a Secure Hypertext Transport Protocol is not a panacea and all the claims of an extraordinary safety are more a marketing trick than anything else). Open code solutions may be a response to that.

“Communication is the area of a neverending confrontation of open and closed solutions. In closed systems a company is responsible for the product and service quality whereas a system operation is cost-intensive. The moment users stop paying for a service, such users become goods themselves”, Sergei Kravtsov, OMMG Technology founder, says.

Socializing monetization

According to Alexander Vereshchak, it is hard to turn a messenger into a commercially interesting product.

“But one can imagine a synergetic tandem of a messenger with a loyal audience and a hype story, say, digital currencies. Marketing promotion makes 2/3 of a successful cryptoproject. So, if a messenger loyalty is coupled with a new cryptocurrency developed by the messenger’s team, one can get a business model which will eventually produce a sizeable monetization”, Alexander Vereshchak contemplates.

Sergei Kravtsov is certain that messengers tokenization is a new nobby trend followed by investors and audience.

“Once in five years, there appear some brand new features where investors are ready to invest with no hesitation. Some while ago, there were lots of requests for developing nanomessengers, since everything ‘nano’ was trendy. Still, nobody was able to explain what a nanomessenger is about. Nowadays, there are lots of those willing to invest in blockchain messengers, but that makes no sense. There will probably be companies eager to develop such a product aimed at attracting large investments. They will ultimately sell very basic and cheap things for very big money. That is the specifics of this market where some people have cash in a flash, and a desire to invest in IT products, but a very little understanding of what these products really are”, Sergei Kravtsov states.

He believes, there will always be new players appearing in the market, since a new technical solution presented in a new paradigm will certainly attract users’ interest whereas building up a service comparable to WhatsApp in scope will take somewhat five years, if an investor is disposed to wait for the desired outcome.

“At the moment, WhatsApp which was bought for nearly $20 bln, generates no revenue but incurs huge expenses. It nevertheless has the largest audience and hence in a few years’ time that may bear the financial fruit. But for Facebook, audience dominance is currently more essential than the messenger’s prospect revenues, though. By acquiring WhatsApp, the corporation reduced younger users outflow and came to manage over 2 bln people”, Sergei Kravtsov notes.

A messenger is comparable to a car which is of no value if kept in a garage but becomes a highly valuable item if it is in a constant use and intensively employs all of its features. Some messengers are very simple and intended for text messages only, with no photo or video attachments, where no spam may be sent. At the same time, there are multifeature services such as WeChat, which has become a national payment system, controls gigantic cashflows and generates revenues comparable to South Korea’s Line. It is most likely, the Asian approach to a messenger as an ecosystem will expand globally.

By Anna Oreshkina

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