Operators to Lose $3 Billion in SMS Business Messaging Revenue Globally to OTT Messaging Channels

In recent years, OTT messaging apps have become increasingly important to consumers’ everyday communications, with Juniper Research forecasting the total number of OTT messaging users to exceed 5 billion in 2028. As a result of this growing userbase, enterprises are increasingly looking to utilize OTT messaging channels as a means to connect with their customers. Business messaging market

OTT channels are commonly used to advertise products, provide customer service, and directly support sales, among other use cases.  As a result of these OTT messaging apps, CPaaS providers and CSPs are increasingly looking to monetize business messaging services by innovating their offerings to enterprises and introducing new pricing models.

Three Key Trends in the OTT Business Messaging Market

Here is an analysis of the different trends influencing the OTT business messaging market.

The Number of OTT Business Messages Sent is expected to Increase Significantly Over the Forecast Period

Over the next five years, Juniper Research anticipates that the total number of OTT business messages sent each year will rise from 102 billion in 2023 to 375 billion in 2028.

There are two key reasons for this increase in the number of OTT business messages. These are:

The Growing OTT Messaging Userbase

OTT messaging apps have become a fundamental part of everyday life, with Juniper Research predicting a total of 3.8 billion OTT messenger users in 2023. Over the forecast period, this figure is expected to grow to 5 billion OTT Messenger users by 2028.
This growing user base will continue to increase the value of OTT business messaging as enterprises are granted access to a rising number of consumers. As a result, Juniper Research anticipates the demand from enterprises for OTT-business
messaging to grow significantly over the forecast period.
Further increasing demand for OTT business messaging is the segmentation of different audiences within the OTT messaging user base. Enterprises can utilise tools from CPaaS providers and CSPs to produce specific customer buckets, based on data collected on purchasing history, browsing behavior, and click-through rates.

Declining Service Costs

Another driving factor of the growing number of OTT business messages over the forecast period is that the price of these messages is expected to continue to decline. In 2023, the average cost of an OTT business message is $0.028, with this figure expected to fall to $0.025 in 2028.
The declining cost of messages further strengthens the cost savings of OTT business messaging relative to A2P SMS; driving greater demand for OTT business messaging services.
Moreover, OTT messaging apps have begun to further optimize their costs, with key players such as WhatsApp further differentiating their pricing based on the use case.

OTT Business Messaging Continues to Compete with A2P SMS

In recent years, OTT apps have continued to innovate their business offerings, with the launch of in-app payments and new pricing models. Moreover, these messaging services have continued to grow in popularity with consumers; enhancing the reach of their business messaging offerings.
Consequentially, OTT business messaging is becoming an increasingly viable alternative to the A2P SMS services provided by operators. Juniper Research forecasts that in 2023, operators will lose $302.7 million in A2P SMS revenue due to this growing competition. This trend is expected to continue, with operators losing $906.3 million in revenue in 2028, representing a growth of over 300%.
Operators face the greatest pressure on their revenue in the advertising market segment, as they are anticipated to lose $92 million from this vertical alone in 2023.
This is because OTT business messaging allows enterprises to engage in more precise outreach as well as provide higher click-through and open rates.

Value-added Services

Value-added services are essential to enriching the experience of enterprises and the applications of business messaging solutions. As a result, integrating solutions such as CPaaS with value-added services is essential to growing revenue.

Calls to Action

Calls to action refer to messaging prompts that encourage users to take the desired action. For example, enterprises may prompt users to renew subscriptions or
purchase temporarily discounted products.

Customer Data Platforms

A major advantage of OTT business messaging is the capacity to launch targeted
advertising campaigns, which improve the cost-efficiency of messaging outreach

 

Chatbots

Over the next five years, Juniper Research anticipates that chatbots will increasingly be used for more complex customer interactions. Pivotal in enabling this
will be the development of LLMs.

Conversational Commerce

To leverage the growing demand in conversational commerce, CPaaS providers need to include integrated payments in their OTT messaging services.

 

ott Business Messaging

Market Forecast Summary: Total Operator SMS Business Messaging Revenue Lost to OTT Messaging Channels

OTT business messaging traffic will grow to 375 billion in 2028, rising from 100 billion messages in 2023. The diminishing quality of SMS networks will drive enterprises that use mobile business messaging to explore alternative channels, including OTT messaging apps. As a result, operators are expected to lose over $3 billion of SMS business messaging revenue globally to OTT channels over the next five years.

Reduced SMS network quality is being driven by the rising prevalence of fraud, while operators’ SMS prices continue to rise to maintain revenue amidst slowing demand for business messaging traffic. To capitalize on this plateauing SMS
market, OTT app vendors must deploy pricing strategies that attract high-spending enterprises away from established SMS channels. These strategies must separate traffic by use, charging a premium to enterprises for mission-critical traffic, such as MFA (multi-factor authentication).

A large increase in OTT business messaging spending for retail is expected, growing from $790 million globally in 2023 to over $2.6 billion by 2028. OTT messaging vendors must integrate data from other retail channels into OTT business messaging activities. In doing so, these vendors can position their apps as a key channel for retailers’ eCommerce strategies. To maximize the potential in this space, it is imperative that OTT messaging vendors directly integrate payment capabilities into apps to maximize the channel’s value proposition.

 

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