Chatting, engaging, and buying - the future of messaging

12 Jan 2016

It is said, “markets are conversations.” Now it looks like e-commerce and sales will be conversations too. Messaging services are getting a more prominent role in e-commerce, and in all customer communication. It is not only small companies that sell something through messaging apps, but even physical services like taxes, restaurants and wealth management of leading banks.

Over 2.5 billion people have at least one messaging service in their mobile. They have started to use them for one-to-one communication, and in some apps group communications have become very important. Now services start to have additional functions like transferring money and supporting commerce. All this enables businesses to utilize those apps in marketing, sales and customer transactions.

In December, Uber let users hail Uber cars straight from the Facebook Messenger app. Now the service is available in the US. Facebook Messenger includes a transportation option that allows users to book a ride and share this with their friend. The user can either start a conversation with Uber or make an Uber app style booking from Messenger. Messenger doesn’t make money from this, at least not yet.

China's WeChat is probably the most important messaging app for e-commerce. It also makes money from these services, i.e. it takes a commission when a user buys through WeChat. People buy real and virtual items through WeChat, but they can also hail taxies (not Uber, but Chinese service Didi Kuaidi), book services, schedule a restaurant or hair cut reservation, or order food to their homes.

Even financial services have started to use messaging apps for the customer communications, especially to replace calls and emails. This, of course, raises questions about their security. Especially, if customers can give orders or ask information about their accounts, loans, or investments, the connections should be encrypted and users identified. Many messaging services cannot yet offer or support end-to-end encryption. And these needs can be also in conflict with national security agencies that are worried about encrypted messaging services.

Messaging apps are especially popular in Asia. One reason is that in the US and Europe text messaging got more important role and texting is very cheap. But in Asia messaging apps really opened a new cost-effective channel to communicate. SMS services have had an important commercial role in some countries especially in Europe, for example, for taxi bookings, airline boarding and appointment bookings. But now these SMS services are losing share due to smart phone apps and poorer user experience. SMS allows carriers to make money from messages and take a cut from paid fees, but for messaging apps the carriers are only bit pipes.

Another reason, why Asia is leading the messaging app business, is the age structure. Younger people use more messaging apps and their portion in Asia is higher than in the west. A person from a main investing bank commented, “in Europe most of our wealth management clients are over 60-year-olds, but in Asia they are typically less than 45-year-old, that’s why our main channel to communicate with customers is WhatsApp in Asia, but we cannot even dream about that in Europe.”

Messaging is one of the hottest areas for Internet and mobile giants to develop new business. And they need new revenue streams for messaging services. It is hard to get users to pay more for basic messages, but business services and e-commerce open new revenue opportunities. And businesses have needs to make their customer experience more interactive and engaging. That’s why we can expect to see much more business in messaging apps, and also see new innovations that combine messaging and e-business.

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