Although messaging traffic is on the rise, the global market will shrink from $113.5 billion in 2014 to $112.9 billion in 2019 - a reduction of $600 million.
This is according to a recent report by Juniper Research - Mobile & Online Messaging: SMS, RCS & IM Markets 2015-2019.
The report notes that over-the-top (OTT) messaging applications, such as WhatsApp, WeChat, Viber and LINE, will see a threefold increase in message traffic - from almost 31 trillion in 2014, to 100 trillion by 2019 globally.
However, the research firm expects the revenue generated from each OTT message to be less than 1% of that from SMS and multimedia messaging service (MMS) in 2019. SMS has continued to succeed in less developed regions, particularly those with a large number of feature phones and low 3G and 4G penetration, says the report.
It explains that OTT messaging services are struggling to monetise services as they have not yet succeeded in using advertising at scale to monetise their services due to a limited acceptance by consumers, particularly in Asian markets. In these markets, messaging services have relied mostly on in-app purchases like stickers.
The messaging market has seen several trends over the past few years, impacting both mobile network operators (MNOs) and OTT players, the firm notes. It adds in regards to peer-to-peer (P2P) texting, SMS has declined in many markets, while its growth has slowed in others.
However, there are forms of SMS messaging which continue to see growth and development, in particular the enterprise messaging sector. It adds enterprise messaging allows businesses to send SMS messages to current and potential customers, but differs from standard messaging in that it is a tool for broadcasting SMS and e-mails using a Web-based application, Outlook plug-in or by integrating application programming interfaces.
Steffen Sorrell, senior analyst at Juniper Research, says the messaging market was previously dominated by SMS revenues, as the ease of use and reliability of SMS proved popular with consumers.
He adds SMS remains the largest messaging segment in terms of revenue; however, it has been surpassed considerably by instant messaging in terms of traffic.
According to Sorrell, SMS benefits from its ubiquity and reach. It is installed as standard on almost every phone, he points out, adding in times when data connections or WiFi are unavailable, SMS can prove invaluable. It is also reliable with guaranteed delivery of messages, he states.
"We have seen a shift away from the traditional P2P SMS as users have been introduced to OTT messaging services which are cheaper than sending text messages. Traffic in the SMS market has continued to show growth; however, revenues are declining as MNOs see little return on bundled text messages."
He urges MNOs to look at moving away from simply providing a data pipeline. "RCS [rich communication services] holds key potential for sustaining operator revenues. As we have seen large growth in the A2P SMS space, an OTT form of A2P which offers secure message delivery, could prove to be a money-spinner."
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