OTT vs SMS: Online Services Are Disrupting Mobile Phone Carriers' Messaging Binge

The initials don't matter but the monetary impact does. 

Messaging drives the mobile business model - and it is hugely profitable. Revenues of approximately $140 billion with profits to match.

For phone carriers this is the key to current survival and future opportunity. They are rolling in revenue from SMS messaging which has softened the impact of declining land line sales and actual phone conversations.

But there is now a disruptive innovation on the market and it could be a killer. The new messaging services are called OTT, which stands for over-the-top. And are they ever.

The OTTs provide instant messaging over the net that does not require wireless cell networks. Some provide the service for free and charge advertisers to send messages. Some prohibit adverting messages but offer phone carriers promotional opportunities. Some carriers are fighting but some think the best approach is to acquire the new services. Whatever the final outcome, the emergence of the OTTs reminds us that no one in any business dependent on technology and communications can afford to become complacent. JL

Business Insider reports:

A new batch of companies are providing over-the-top (OTT) messaging services — services that send instant messages over the Internet and don't depend on wireless cell networks.

Messaging, led by SMS texts, has grown to become a huge global industry and a revenue windfall for the world's mobile carriers: $140 billion annually over the next three years. 

The OTT services are already causing big changes in the mobile industry. From Facebook's Messenger service to Santa Clara, Calif.-based startup WhatsApp — which boasts 200 million monthly active users, more than than Twitter, and Korea's LINE, these players are some of the biggest crowd-draws in mobile. It's not just carriers that are threatened, but legacy social media too.

Here's an overview of the monetization opportunity:

• The size of the opportunity is massive: OTT instant messaging apps are enjoying phenomenal audience growth and message volume. Some back-of-the-envelope estimates have pegged WhatsApp revenues at $63 million. There's a rush of developers and publishers scrambling to find their place in this market. MessageMe, a new aspirant to the field of OTT messaging heavyweights, launched earlier this year and attracted a million users in less than two weeks. 
• Advertising: Asian OTT messaging players KakaoTalk and WeChat charge brands to send messages, including photos and videos, to users who opt in. KakaoTalk calls this program "Plus Friends," and encourages its users to add brands and show business acts as plus friends, with real and virtual prizes. But, other OTT apps like Viber and WhatsApp have so far said no to advertising. 
• Carrier partnerships: These are nascent but could work in certain markets. WhatsApp boasts 15 carrier deals, including Asian, Middle Eastern, and African operators. Viber and Bubbly have explored or struck deals with carriers in Asia. The carriers promote the messaging apps and pre-load them on phones. In exchange, the apps might feature carrier-managed services like enhanced voice calls or data plan top-ups. In China, wireless carrier Unicom has reportedly advocated working with the super-popular WeChat, rather than attacking it. 
• Acquisition: Messaging apps might be looking to be acquired by the very mobile players they threaten: social media and carriers. The rumor late last year that Facebook was close to acquiring WhatsApp spotlighted just how dominant WhatsApp has become. In fact, in many months its download volume exceeded that of Facebook's Messenger app, although WhatsApp is a paid download and Facebook Messenger is free.