OTT Strategies Diverge

By Gary Kim December 26, 2013

It is obvious enough why mobile service providers face serious commercial challenges from over the top messaging apps including Facebook Messenger, Google Talk, iMessage, LINE, Skype, Viber and WhatsApp.

People can use those apps, at no incremental cost beyond a mobile Internet connection, to displace other forms of communication that produce revenue for mobile service providers and displace the mobile service provider as the provider of “branded experiences” and direct relationships with users or customers.

Perhaps in no region are the problems as severe as Europe. In most developing regions, strong adoption of mobility services, and low mobile Internet access adoption makes potential lost revenue or mind share from OTT apps is a negligible problem.

In July and August 2013, Vodafone experienced year-over-year mobile messaging traffic declines of 35 percent in Germany and 29 percent in both Italy and Spain.

Analysts at the Yankee Group therefore predict that, by the end of 2014, more than half of all mobile operators in developed markets will offer their own IP communications apps.

In September 2013 Optimus launched a youth-oriented service in Portugal that bundles free use of OTT apps such as WhatsApp, Facebook Messenger and BBM with traditional mobile services.

One might argue about the value of such a bundle in markets where mobile Internet access is not a basic part of a subscription, but the approach can make sense in markets where mobile data is deemed relatively expensive and the lead Internet applications are social messaging related.

In a few cases, mobile service providers also have experimented with YouTube-focused mobile service plans that might appeal to heavy mobile video users who do not otherwise have high needs for general purpose Internet access.

Some leading mobile providers, such as Orange, have developed branded OTT apps. Orange operates LiBon while Telefónica offers TUGo.

Sprint also recently launched what it calls its “Messaging Plus” app on a white label basis using Jibe Mobile.

How successful any of the operator-branded services will be, over the long term, is hard to say. In many ways, the strategic dilemma is similar to the challenge posed by over the top VoIP. Whether a service provider competes, or not, per-unit prices, and hence revenue and profit margin, evaporate. 

Edited by Cassandra Tucker

Contributing Editor

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