Instant Messaging apps market analysis

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Instant Messaging apps market analysis

  1. 1. Instant Messaging Application Market Analysis Corentin METGY 04/12/2012 1
  2. 2. Plan 1. 2. 3. 4. Market Overview Major actors Exit opportunities Telcos’ response 2
  3. 3. Market overview (1/2) The mobile instant messaging market is considerably increasing. UK based institute Juniper Research recently forecasts that global mobile messaging traffic will reach 28.2 trillion annually by 2017, nearly double the 14.7 trillion messages which will be sent this year, 2012. Mobile messages comprise SMS, MMS, IM, Email, RCS/RCS-e and Social Media messages. Global growth in total traffic will be primarily driven by the use of over-the-top (OTT) instant messaging services, which will comprise over 25% of all traffic annually in five years’ time according to Juniper’s analysts. Besides, the firm forecasted in 2011 that mobile IM will triple exceeding 1.3 billion users by 2016 . On his side, The Radicati Group, a California-based IT research firm estimated that there was 2.4 billion IM accounts in 2010 worldwide, rising to 3.5 billion by 2014. OTT instant messaging services have developed themselves thanks to smartphones’ ascension. They permit users to send messages for free using mobile operators internet connection (Wifi, 3G, 4G) and push notifications. This new way to communicate is growing strongly from several years which indicates that social messaging is not a short-term trend, but a shift in communication patterns. In August 2012, WhatsApp announced it is handling 10 billion messages a day. Increase in global mobile messaging traffic between 2012 and 2017 (in billions) 30 28,2 25 20 15 14,7 10 5 0 2012 2013 2014 2015 2016 2017 Source : Juniper Research 3
  4. 4. Market overview (1/2) VoIP Minutes of Use p.a. (Excluding WiFi) (m) via 3G Users Using Applications Split by 8 Key Regions 2010‐2015 3G VoIP Application Revenue (m) Split by 8 Key Regions 2010-2015 Juniper Research forecasts a worldwide increase in mobile VoIP application minutes via 3G from 343 millions 2010 to just over 30 billions 2015, centupling in just 5 years. Furthermore, Juniper Research estimates that the number of mobile VoIP minutes carried on 3G and 4G network will rise from 15 billion minutes in 2010 to 470.6 billion by 2015. In parallel, the expected revenue from mobile VoIP via applications will increase from $20.5 million to $1.25 billion. Finally, global mobile OTT communication market will reach 45$bn in 2016. Mobile OTT communication ($bn) 45 40 35 30 25 20 15 10 5 0 2012 CAGR 130% 2013F 2014F 2015F 2016F Sources: Juniper, Frost and Sullivan, Portio Research, Arthur D. Little analysis 4
  5. 5. Major actors (1/4) Logo Description Positionning Active Users in 2012 (mm) Business Model AOL, inc. AOL launched AIM on February 2006. Pure player / Instant messenger 195 Advertising Apple, Inc. (iMessage) Apple launched Facetime in Octuber 2010 and iMessage in October 2011. Handset vendors instant messenger 140 - Baidu Baidu Hi was launched on February 2008 IM / Search engine - - 60 The BBM Music Premium is available for a monthly subscription of $4.99, social games - - IM multiplatform 33 Advertising Social Network instant messenger 425 (mobile users worldwide) - Company Blackberry, Inc. Cisco Jabber (Cisco, Inc) eBuddy B.V. Country Some of the features of BBM include groups, bar-code scanning, lists, shared calendars, BBM Music and Handset vendors integration with apps and games using the BBM instant messenger social platform. Jabber was founded in 2000 as a non profit Pure player / Instant organization. The company was acquired by Cisco in messenger 2008. eBuddyB.V. was founded in 2003 and is based in Amsterdam, the Netherlands with additional locations in London and San Francisco Facebook lanched Messenger App. In August 2010. Facebook Messenger FBCIM allows you to use Facebook Chat without the need to be connected on Facebook. Fringland Ltd. Fringland Ltd. was founded in 2005 and is based in Tel-Aviv, Israel. IM multiplatform - Advertising + Paying regular phone calls worldwide Gadu-Gadu The company was founded in 2000 and is based in Warsaw, Poland Pure player / Instant messenger 15 - 5
  6. 6. Major actors (2/4) Google, Inc. Google talk was launched on August 2005 IM / Search engine - - groupme As of August, GroupMe was founded in 2010 and is based in New Pure player / Instant 2011, GroupMe York messenger delivers in excess of 100 ICQ LLC. The company was founded in 1996 and is based in Tel Aviv, Israel. Pure player / Instant messenger 42 Free daily-limited SMS sending, resumable file transfers, greeting cards, multiplayer games imo.im Imo Chat was founded in 2007 and is based in Palo Alto, California. IM multiplatform 7 - Kakao Corporation (Kakaotalk) Kakotalk was founded in 2006 and is based in Seoul Pure player / Instant messenger 66 Advertising, Digital items, and game center Kik Interactive, Inc. Kik Interactive, Inc. was founded in 2009 and is based in Waterloo, Canada. Pure player / Instant messenger 30 - LiveProfile The company was founded in 2007 and is based in New York. Pure player / Instant messenger - - Meebo The company was incorporated in 2005 and is headquartered in Mountain View, California. IM multiplatform - - MySpace Myspace developed MySpaceIM in 2006 as an addition to its social platform Social Network instant messenger - - NHN Corporation (KOSE:A035420) Created in 1999, NHN Corporation operates Internet search portals primarily in South Korea and Japan. LINE was launched on June 2011. Instant messenger / Gamers community 40 (25mm in Japan) Advertising, Digital items, and game center - 6
  7. 7. Major actors (3/4) Nimbuzz Pinger Nimbuzz B.V. was founded in 2006 and is based in New Delhi, Indi IM multiplatform Pinger was incorporated in 2005 and is based in San Pure player / Instant Jose, California. messenger 220 Advertising, Freemium model, agreement on revenue sharing with IM companies. - Advertising Pinterest - Social Network instant messenger 10 - Samsung Electronics ChatOn was introduced by Samsung Electronics in September 2011 Handset vendors instant messenger - - Shape.AG was founded in 1999 and is based in Stuttgart, Germany IM multiplatform - Freemium : IM+ 3.0 Lite, a free ad-based version and IM+ pro for 8.99€ 600 (not only mobile) Paying regular phone calls worldwide 11 - 200 - 1 - 110 Freemium : Gold & Silver versions, social game, virtual goods Shape.AG Skype (Microsoft) Startphone Limited (Hyves) Tencent (WeChat) TextMe textPlus, Inc. The company was incorporated in 2004 and is based Pure player / Instant in Palo Alto, California. messenger Hyves was in 2010 still the most popular social network in Holand with 10.6 million Hyves users and Social Network a 68% penetration. As of November 12, 2010, instant messenger Startphone Limited operates as a subsidiary of Telegraaf Media Groep. Tencent is a leading Chinese internet company. WeChat was initially launched as Weixin in China in Pure player / Instant January 2011. The app has recently been launched in messenger Thailand. San Francisco based TextMe was originally launched Pure player / Instant in March 2011 as a free, texting-only application for messenger Ipod The company was formerly known as GOGII, Inc. Pure player / Instant textPlus, Inc. was founded in 2007 and is based in messenger Marina del Rey, California. 7
  8. 8. Major actors (4/4) Touch Touch was primarly known as PinchChat Pure player / Instant messenger 13 - Twitter - Social Network instant messenger - - Valve Corporation operates as an entertainment software and technology company. The company was Instant messenger / founded in 1996 and is based in Bellevue, Gamers community Washington. 54 - Valve Corporation Viber Viber was launched in 2010 Pure player / Instant messenger 100 - VKONTAKTE VKONTAKTE is the first russian social network. Social Network instant messenger - - 100 $0,99 for the app and a subscription of $1,99 per year Whatsapp WhatsApp funded was founded in 2009 and is based Pure player / Instant in Santa Clara, California. messenger Windows Live (Microsoft, Inc.) Windows Live Hotmail App. Pure player / Instant messenger - - Yahoo!, inc. Yahoo! Messenger was originally launched under the name Yahoo! Pager on March 9, 1998. IM / Search engine - Advertising Yandex Yandex, the first russian search engine, launched an IM platform on August 2008. IM / Search engine - - 400 - YY YY Inc., through its subsidiaries, operates an online Pure player / Instant social platform in the People’s Republic of China. messenger Sources : OTT companies websites, blogs, Wikipedia, Press releases 8
  9. 9. Fundraising & private placements (1/3) From 2003 more than $300mn have been leveraged by over-the-top (OTT) instant messaging services providers. These start-ups have interested institutional and corporate funds. Thus, Jabber was funded by France Telecom, Intel and Webb interactive Services before being sold to Cisco in 2008. KakaoTalk was funded by WeMade Entertainment Co., a South Korean online game developer and Tencent which develop QQ IM, the leading instant messaging service in China. More recently the company has been funded by Yahoo! following the signing of a partnership between the two structures concerning the Japanese market. Private Equity firms invested large amounts in several rounds. For example, Mangrove Capital Partners participated in 5 funding rounds for Nimbuzz and Kleiner, Perkins, Caufield & Byers and Matrix Partners supported textPlus during 3 rounds. This shows that they have a huge interest and that they trust in the long-term development of the sector. 9
  10. 10. Fundraising & private placements (2/3) Target Closed Date may-24-2011 Fringland Ltd. (Fring) apr-30-2009 nov-27-2008 aug-09-2007 jan-04-2011 GroupMe Inc. aug-25-2010 Investors Size ($mm) North Bridge Venture Partners; Pitango Venture Capital; Veritas Venture Partners North Bridge Venture Partners; Pitango Venture Capital; VenFin DD Holdings Limited; Veritas Venture Partners - 10,0 - North Bridge Venture Partners; Pitango Venture Capital; VenFin DD Holdings Limited; Veritas Venture Partners Betaworks; First Round Capital; General Catalyst Partners; Khosla Ventures; Lerer Ventures; SV Angel Betaworks; First Round Capital; Lerer Ventures; SV Angel 10,6 0,9 ICQ Ltd. 1996 IM+ (SHAPE.AG) Feb-13-2012 Finam Global Jabber, Inc. mar-19-2003 France Telecom Technologies Investissements SA; Intel Capital; Webb Interactive Services Inc. (OTCPK:WEBB) oct-15-2012 Yahoo Japan Corporation (TSE:4689) apr-15-2012 Tencent Holdings Ltd., Investment Arm; WeMade Entertainment Co., Ltd. (KOSE:A112040) 81,1 aug-26-2011 CyberAgent Ventures, Inc.; DCM; Korea Investment Partners Co. Ltd.; Maverick Capital, Ltd.; WeMade Entertainment Co., Ltd. 19,2 Kakao Corporation Shalom Management 12,0 10 7,2 - Kik Interactive, Inc. mar-07-2011 RRE Ventures LLC; Spark Capital; Union Square Ventures LiveProfile Inc. apr-01-2011 Lightspeed Venture Partners 8,0 1,1 Source : Capital IQ, MergerMarket 10
  11. 11. Fundraising & private placements (3/3) Target Closed Date déc-20-2010 Meebo, Inc. avr-30-2008 Investors Size ($mm) Draper Fisher Jurvetson; JAFCO Ventures; Khosla Ventures; Sequoia Capital; Time Warner Investments Draper Fisher Jurvetson; JAFCO Ventures; KTB Ventures; Sequoia Capital; Time Warner Investments 27,5 25,0 janv-18-2007 3,5 Mangrove Capital Partners mai-18-2010 Myriad International Holdings B.V. 12,4 juil-01-2008 Mangrove Capital Partners; MIH Holdings Ltd. 15,0 juin-18-2007 Holtzbrinck Ventures Gmbh; Mangrove Capital Partners; MIH Holdings Ltd. 10,0 août-29-2006 Mangrove Capital Partners - 2005 Startphone Limited (Hyves) Sequoia Capital déc-31-2011 Pinger, Inc. 9,0 déc-19-2005 Nimbuzz B.V. Draper Fisher Jurvetson; Sequoia Capital Mangrove Capital Partners - févr-23-2012 T-Venture Holding GmbH 7,5 déc-06-2006 DAG Ventures, LLC; Kleiner, Perkins, Caufield & Byers 8,0 - Van den Ende & Deitmers Venture Capital Partners Buyer Funds: Crossmedia Fund GRP Partners; Kleiner, Perkins, Caufield & Byers; Matrix Partners; The Raine Group LLC 18,0 janv-31-2011 GRP Partners; Kleiner, Perkins, Caufield & Byers; Matrix Partners 15,0 déc-09-2009 Kleiner, Perkins, Caufield & Byers; Matrix Partners 8,2 avr-08-2011 Sequoia Capital 8,0 Jan-2008 oct-16-2012 textPlus, Inc. WhatsApp Inc. - Source : Capital IQ, MergerMarket 11
  12. 12. Exit opportunities (1/2) There are some good exit opportunities. Most of leading internet, telecom and handset vendors are present on the market and do not hesitate to spend hundreds of millions dollars to acquire leading independent actors. Note that ICQ has been acquired by AOL in 1998 for $407mm and sold ten years later for less than the half to Digital Sky Technologies Limited, the largest Internet company in the Russian-speaking and Eastern European markets. There is no multiple, EBIT or revenue available on major databases (Capital IQ, MergerMarket, etc.) 12
  13. 13. Exit opportunities (2/2) Closed date Transaction Type Target Buyer Size ($mm) Nov-21-2012 IPO YY, Inc. - - June-04-2012 Acquisition Meebo, Inc. Google Inc. (NasdaqGS:GOOG) - Augt-21-2011 Acquisition GroupMe Inc. Skype, Inc. 80 Nov-12-2010 Acquisition Startphone Limited (Hyves) Telegraaf Media Groep NV (ENXTAM:TMG) 60,69 May-08-2011 Acquisition Skype, Inc. Microsoft 8 500 July-08-2010 Acquisition ICQ LLC (AOL Inc.) Digital Sky Technologies Limited (DST) 187,5 Oct-31-2008 Acquisition Jabber, Inc. Cisco Systems, Inc. (NasdaqGS:CSCO) - Dec-18-2007 Acquisition Gadu-Gadu S.A. Naspers Ltd. (JSE:NPN) 155 Aug-30-2005 Acquisition Teleo, Inc Microsoft - June-05-1998 Acquisition Mirabilis Ltd. (nka: ICQ Ltd.) AOL Inc. (NYSE:AOL) 407 1997 Acquisition MSN Messenger Microsoft 400 Source : Capital IQ, MergerMarket 13
  14. 14. Telcos’ response (1/2) As we seen in the first part, the messaging industry is approaching a watershed moment. Ovum firm believes that global SMS revenues will plateau in 2014, meaning that operators need to implement a strategy now so that they can to cope with the subsequent decline in revenues. OTT companies became a real threat for operators. $14bn (11%) have been lost in SMS revenues to OTT players in 2011. In the report Counteracting the Social Messaging Threat, Ovum firm estimated that social messaging services would cost telecom operators $23,2bn in SMS revenues in 2012 (18,1% of 2011 revenues) and $54bn by 2016 (42,2% of 2011 revenues). Global mobile traffic revenue 2011 ($bn) 620; 58% 128; 12% Sms Data Voice 315; 30% initiative to deploy inter-operator RCS services. The GSMA (RCS project association) aims to provide customers with instant messaging or chat, live video sharing and file transfer across any device, on any network, with anyone in their mobile address book. It will permit operators to face OTT competitors that cannot offer a global solution. Mobilization is global and the project is now supported by many major industry actors including operators such as AT&T, China Mobile, Orange Telefonica, Vodafone and Deutsche Telekom and handset vendors such as HTC, LG, Nokia and Samsung. The solution is now available under the consumer brand Joyn. It has been launched this semester in Spain by Orange, Telefonica and Vodafone, in Germany by Vodafone and in the USA by MetroPCS. In addition, operators in France, Italy and Korea have committed to commercial launches. Deutsche Telekom announced it will start supporting Joyn in Germany from December this year and Orange will begin to deploy Joyn in France from June 2013. Source : Juniper Research In 2007, a group a group of leading telecom operators have formed the Rich Communication Suite (RCS), a global 14
  15. 15. Telcos’ response (2/2) Telefonica was the first operator to declare war on OTT services providers with the application TU Me. The app is free to download and allows users to send texts and pictures, make calls by using their data allowance. Services which offer similar functions, such as Skype, often need Wi-Fi to make it work and, while Wi-Fi is an option here, the 3G connection enables users to be a lot more mobile when communicating on the move. Orange has maybe find a solution, with Libon’s freemium business model. There is a free version and a paid version without advertising, automatically renewed because of 2.69 euros per month (charged to iTunes account, so Apple keeps 30%), with more features including 1 hour of calls to 30 international destinations. The challenge will be to convince users to abandon services they are accustomed to using and move to a paid solution. Telefonica has been fallowed by other operators like TMobile with Bobsled, a similar application that also offer free voice calls within Facebook. Orange Telecom have just launched Libon, a mobile application which allows users to send messages, chat and call in voice over IP, 3G or WiFi, including in countries where it does not have its own mobile network. (This service is available in 80 country whereas Orange is operator in only 33 of them). Operators become OTT themselves. Their services compete directly with OTT companies like Whatsapp but operators will need to identify new revenues because even if voice calling and text messaging are still growing, the revenues and margins are in decline. 15

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