BBM and the rest

Blackberry gave a few operating metrics for BBM today as part of their developer event, at which they stated BBM will go onto iOS 6 and Android ICS+. There are: 

  • 60m active users
  • 51m using it for 90 minutes a day (definition unclear)
  • 10bn messages a day (sent and received)

Blackberry claims that this is 'nearly twice' the message/user/day volume of any other platform, but this isn't quite true: on a sent-and-recieved basis BBM does 167 but Whatsapp does around 100. On a sent basis (assuming a 50/50 split), Kakao does 56 and BBM does 83. 

The two charts below give a somewhat impressionistic sense of the landscape. These are just the biggest players, and the definitions are variable. WeChat has stated 190m active users as opposed to 300m registered: Whatsapp says 'over 200m' actives. In total, there are several billion accounts on all of the services out there (with massive duplication, of course): I've lost count of how many such services there are in total. 

BBM is now one of many such services, and not the biggest any more. Cross-platform may not be enough. 

(Note - I updated the second chart after Blackberry said it is quoting 10bn messages as both sent and received Link)

Mobile social consolidation

Facebook Home is a tactical move that points to a broader structural question: regardless of the specific appeal of Home as we see it now, does the current swarm of mobile social services resolve in consolidation into one or two dominant players?

If the answer is yes, then Facebook’s existing scale makes it by far the most likely winner. However, I'm not sure that consolidation is inevitable.

There are three relevant precedents to choose from. On one hand, there were once a range of competitors to Facebook on the desktop, and some argued that there would be regional winners. Instead, Facebook crushed almost all the local alternatives, such as Bebo or Orkut, leaving only specialised niche players like LinkedIn (whose main value is as a CV database, not a social network) or dating sites.

Conversely in instant messaging, there were regional winners: everyone in one country used Yahoo Messenger and everyone in another used AOL Messenger – not because of product differences but purely though network effects. This seems a less likely outcome, though.

However, the most worrying precedent for Facebook is AOL – a hugely dominant aggregator that was unbundled and never replaced.

It seems to me that a driving dynamic for consolidation and integration on the desktop is the network barrier: the hassle of creating your social ‘graph’ (in Mark Zuckerberg’s phrase) on a new network. This argues against the current fragmentation, naturally.

Yet on mobile the social graph comes ready-made in your address book and the accompanying PSTN numbering system. Your phone already knows who your friends are – you don’t have to enter them into each new social network. Both Whatsapp and Viber leverage this: they look at your phone book and tell you who’s already using it.

This is a much simpler global identity system than Facebook Connect: phone numbers (and the address book) are themselves a single global social network that any app can use, bypassing Facebook’s biggest protective ‘moat’ and removing a lot of the problems of fragmentation. Such apps ride on mobile and mobile numbers just as Facebook apps ride on Facebook and websites ride on the web. There are lots of social apps on mobile, just as there are lots of apps on Facebook or lots of sites on the web: this is not necessarily a problem.

In other words, the current ‘fragmentation’ of mobile social may only be the same ‘fragmentation’ that happened to the web as people moved on from AOL. People decided they were ready for best of breed services and content sites, rather than getting everything through AOL. The current rapid bubbling-up and equally rapid disappearance of new social apps may not be a transitional phenomenon.

(This is an excerpt from a detailed report produced for Enders Analysis.)

RIM in the USA

Yesterday I posted a Google Trends chart showing relative search volume for "BBM for iPhone" and "BBM for Android", the hypothesis being that RIM user who switched platforms would look for BBM on their new phone (though it doesn't exist).

Narrowing this into the USA is equally interesting: it looks like rather more Blackberry users went to iPhone than Android, and also that they've now mostly already left (borne out by most other market stats). "BBM for iPhone" is red, "BBM for Android" is blue. 

This speaks to the question of whether the RIM strategy of offering Android apps on BB10 (sort of) will work: the overlap between iPhone and Android app availability is far from perfect. 

What platform do Blackberry users go to?

Google Trends data is fascinating. It's very partial, and in particular doesn't capture app store searches, but it can still give a very good indication of where things are heading. 

This chart shows search volumes for "BBM for iPhone" (red) and "BBM for Android" (blue). The hypothesis is that when a BBM user dumps their Blackberry and gets a new phone on a new platform, they Google to see how to get BBM on that new platform (they can't). 

Hence, this chart illustrates the way that RIM lost high-end customers first, in developed markets, who went to the iPhone. Then, it started losing lower-end customers (in emerging markets), who went to Android. The high end departure looks like it's mostly over (though this obviously doesn't tell us how many loyalists have stayed) - the departure to Android  is still going on. 

Google Trends also gives regional interest data, which supports this interpretation: "BBM for Android" (blue) clusters in Indonesia (not a big surprise), "BBM for iPhone" (red) in Canada and the UK, and more recently South Africa. 

2bn mobile social network accounts

There's nothing terribly new about trying to make 'over-the-top' (OTT) voice and messaging services for mobile phones. There was a major flowering of voice-OTT services (mainly based on call-back) half-a-dozen years ago (most of which died off), while Skype has migrated from desktop to mobile as well.

However, the flat route to market offered by app stores, the immediate scope to save money over SMS and the enhanced social and sharing features that are all possible mean that there has been another explosion in the last couple of years: in effect, these are all now social networks, not just 'cheap SMS' tools. Meanwhile, the fact that there are close to a billion users of iOS and Android means the addressable market is huge.

By my count there are:

  • At least 14 mobile OTT services with over 50m users
  • At least 20 with over 10m users
  • At least 2bn total user accounts

The chart below shows just the ones I found in an hour's searching, most of which have given a user number in the last 3 months or so (the major exception is WhatsApp, which I estimated here.) Adding Twitter and Sina Weibo (which are both desktop and mobile) would add another 500m or so users. 

Obviously, there is massive duplication here: lots of people have 3 or 4 different services installed for different groups of friends. One can also quibble about definitions: Opera does not offer messaging but does subvert the operator relationship and the data package (it is not included in the totals above); Facebook is used for more than messaging, and so on.

But the core point is that hundreds of millions of people have installed third party apps to do messaging on their phones that is neither SMS nor email, but within some form of new, closed, proprietary - and much richer - form. 

One of these, incidentally, is the mainly Spanish social network Tuenti, recently bought by Telefonica, which with 13m users is by my count only the 19th largest such network. The 'JOYN' standard announced by the GSMA at the beginning of the year, which aims to allow MNOs to offer the same rich services using their own networks and integrated into SMS, does not have meaningful number of users yet. 

What does this mean for mobile operators themselves? The naive view would be that this is lethal. People will move their messaging from operator bearers to these third-party networks, and then switch to wifi, and the operators will be dead. Or they'll cancel their voice plan and just use data, or their SMS plan and just use voice or data. 

The truth is a bit more nuanced. Consider these chart from Vodafone Group for its European segment. 

Vodafone's view of OTT, pretty bluntly, is that it's mainly a problem if you don't do anything about it.

The first piece of revenue that is vulnerable to an OTT service is the 'out of bundle' charge: the usage that is charged on a marginal basis, and hence where you have immediate scope to save money by using eg WhatsApp. This is only 11% of Vodafone's European mobile revenue.

Second, 'integrated tariffs'. Consider two scenarios: 

  • You pay €20 for 600 minutes, €5 for, say, 500 meg of data and €5 for 500 SMS. 
  • You pay €30 for a combined bundle of 600 minutes, 500 meg of data and 1000 SMS

Operator revenue is the same in both cases, but in the first there is an arbitrage opportunity: if all of your friends are on WhatsApp, you can cancel your SMS plan. In the second, there is no such opportunity to save. The same applies on prepay - different pricing changes the opportunity. 

Hence, a key objective for mobile operators is to rebalance their tariffs to remove an arbitrage opportunity: to move to integrated tariffs and cut out this risk. This is not necessarily easy: it is difficult to tell the people happy paying just €20 in the scenario above that they have to start paying €30. Any change in tariff structure creates churn, especially in highly competitive markets, which most mobile markets are. Hence, there is a potentially major transition problem, but this is not necessarily a structural problem. 

So, how could such services become a problem for mobile operators? If they were combined with a more fundamental change in the customer relationship. Consider another scenario: 

  • Mainstream smartphones prices move to $100 unsubsidised (the iPhone is currently $650) and hence can be sold unsubsidised without contract (currently, almost all smartphones are notionally available with no contract, but sales are tiny)
  • Widespread adoption of LTE makes mobile VOIP practical (on 3G data, Skype uses 3-4x more radio network capacity than a circuit-switched call)
  • Substantial numbers of people move to one-month contracts (currently about 10% of the UK market), buying their own phones
  • These people move their voice and messaging to OTT players, and hence have no residual stickiness to the phone number (number portability is in place today in most markets but imposes significant friction)
  • Therefore, such users switch between operators month-by-month chasing the best data plans

This is only one scenario, but all of the moving parts have to happen, and some of them have major barriers. Of course, if we move to a zero subsidy, zero contract market, a lot more would change than just SMS pricing, including Apple's margins. 

Opera

Interesting data from Opera's latest quarterly report. Around 160m feature-phone users are both online and sufficiently savvy to have installed Opera's mobile browser (which uses server-side caching to reduce data traffic and hence costs). Good comparison with Facebook's Java client, which has about 60m MAUs. 

Pondering Whatsapp

How big is WhatsApp? They've never said, but there are some indications.

First, the app is at or near the top of the paid downloads and top grossing lists on the Apple app store in pretty much every market: according to AppAnnie, it's currently the no.1 paid app in 121 markets (including all the big ones except for China, South Korea and Japan) and in the 'top 10- grossing' list in 97.  The fact that it only costs $0.99 and has no in-app purchases makes the high grossing rank particularly impressive. Meanwhile, it is in the '50-100m downloads' bracket on Google Play, and has been for several months (Facebook is in the '100-500m downloads' bracket). 

We know that app download rates on Android and iOS are very roughly similar: iOS is well ahead on paid apps, but Whatsapp, being a money-saver, might be an exception to that and of course it's free for the first year on Android.  So, a wild guess based on app store data might be 75m cumulative downloads on Android and 75m on iOS. WhatsApp is also on other platforms - Windows Phone, RIM and Symbian, but I'd be surprised if any of those are significant. The wild card is S40, where WhatsApp has a preload deal with Nokia. I'd expect double-digit millions here (Facebook has over 50m Java users) , but have no solid way to bracket further. Of course, downloads don't necessarily mean users. 

Next, this Google Trends chart gives some indication. It compares search volume for Whatsapp (blue), BBM (red) and Viber (yellow). Whatsapp search volume is now much higher than 'BBM', for which RIM  reports 60m users, and Viber, an OTT voice and messaging service that reports 90m users.

Adding Skype to the series (in green) is also pretty revealing. 

A map view shows some strong geographic concentration, which, for example, bears out anecdote that WhatsApp is very strong in Spain.

'Whatsapp' searches by city

'Whatsapp' searches by city

It's also interesting to compare this with search volume for 'BBM', which shows exactly the strength in Indonesia that  RIM itself reports, together with the strength in the UK that the Blackberry's lingering popularity amongst UK teenaged girls would suggest. 

Google Trends, of course, is interesting rather than definitive. This is especially true for smartphone apps, where  the main search activity is within app stores rather than on Google. This means that Apple knows more about what's going on here than Google.

The company itself is very deliberately discrete. However, it has given one very telling statistic: on 26 August 2012 it passed 10bn messages a day (4bn inbound, 6bn outbound - the difference being accounted for by group chats). 

What might that tell us about active users? An edge-case assumption of 50 messages per user per day would give 80m DAUs. A more reasonable 30 messages/day would give 133m DAUs, and a moderate 'I use this sometimes, and I also use SMS' assumption of 15 messages per day would give 270m DAUs. Naturally, there's a tradeoff: more users with less engagement or fewer users with more engagement. 

None of this is especially scientific, but taken together, it seems pretty clear that WhatsApp has well over 100m active users, and possible 2-300m. Skype, incidentally, has 254m MAUs. 

In other words, WhatsApp has several times more users than Instagram had when Facebook bought it for what was then $1bn (even now Instagram 'only' has 100m). With a staff of just 35, plus outsourced development in Russia, that's a testament to the scaling possibilities of app stores - and suggests that the M&A industry is pretty much camped out in the WhatsApp offices. 

WhatsApp also has revenue, which Instagram famously did not, though how much is even more opaque. It has no advertising and has said it doesn't want it. Rather, revenue, for now, is a one-off fee of $0.99 on iOS and $0.99 a year on other platforms with the first year free. This is pretty unusual. The free entry point on Android makes sense given the poor monetisation rate of that platform, but eschewing recurring revenue on iOS is odd - essentially, WhatsApp will only make money on iOS when it's growing the user base, at least directly.

In addition, though, WhatsApp has started doing carrier bundling deals: a small monthly fee for flat-rate access. Terms are not disclosed but the sticker price is low (just $0.30 per user per month for Reliance in India). I'm not entirely sure how sustainable this is as operators move to bundled tariffs (a subject for a future post), but in any case the revenue per user is also pretty small.

Of course, revenue of a dollar or so per user per year might sound small to a telco, but in the social world it's pretty good: even Facebook only has a run-rate of $5 revenue per user per year. 

As should be obvious, WhatsApp is both a headache and an opportunity for mobile operators, which will be the topic of a future post.

UPDATE: Sometime in early November, WhatsApp ticked up from the '50-100m downloads' bracket on Google Play to '100-500m'. Downloads do not, of course, equal active users, but this does point to continuing momentum.