The mobile messaging (r)evolution

Social messaging apps had a great 2015 and they are now pushing the mobile economy in a different direction – driving a seismic shift in advertising and targeting methods, says Yinon Horwitz.

Some would say that 2015 was the year of mobile messaging and dating. With the proliferation of chat apps across the mobile market from Telegram to Facebook Messenger, it is easy to see why.

However, I predict that we are only witnessing the first steps of the new social revolution – a revolution that has the potential to transform the whole mobile industry.

In 2016 and beyond, we are going see an eruption of the messaging industry like we have never seen before.

As these apps mature, the number of users they attract and the data they share will usher in a brand new era for the mobile economy.

People now spend over 80% of their mobile time on apps, and a big piece of that time is on social apps. We already can see a lot of big companies investing a lot of money on acquisitions and investments in the mobile social sphere.

Apps from WhatsApp and Tango to Grindr and Tinder are getting big offers for their businesses.

As the days go on, social messaging apps are moving up the app store charts as they gain more and more users. When combined, the top four social messaging apps (Facebook Messenger, WhatsApp, WeChat, Viber) have almost 3 billion monthly active users from across the globe.

According to The Wall Street Journal, even Google is working on a chat platform (though it is still not certain whether it is going to part of Google Hangouts or a standalone chat).

Chat apps changing the game
In some countries, social messaging apps are literally changing the game – some in a way that was not imagined before. For example, in Brazil, a judge decided to close WhatsApp for 48 hours.

Overnight, almost 5 million users joined WhatsApp’s competitor Telegram in order to keep chatting. These users are engaged – and their numbers are skyrocketing.

Finally, the rest of the mobile industry is beginning to take notice.

Even though most mobile marketers and advertisers are still focusing on social networks, some are finding that the massive, young, and engaged user bases of messaging apps are ripe for engagement and monetisation.

For one, chat apps have incredible user retention rates and very high usage rates. Users are returning to these apps frequently and staying within them for a long time, with some returning up to 12 times a day for 10+ minute stretches of time.

Secondly, mobile social publishers are harnessing their user data to offer mobile marketers brand new avenues for user acquisition. Chat apps like Messenger, WhatsApp, and WeChat have started to integrate services beyond just messaging to their users.

We are starting to see social messaging apps like these evolve into what I predict is the next phase of mobile – the mobile messaging revolution.

Integration key to monetisation
At the moment, WeChat is leading this transformation. By offering more than 20 different non-core services within the messaging app itself – from ordering a cab, sending money, playing a game with a friend, or booking a restaurant – WeChat is offering a whole new experience to its users.

Another prominent example of this is Uber’s integration with Facebook Messenger. Users on Facebook Messenger can now hail a Uber directly from the Facebook Messenger app without ever needing to leave. Similarly, apps like Line and Kik are adding features like these into their pipelines for the months to come.

Even enterprise messaging platform Slack is diversifying its chat business by building out a “Bots” API for app developers to build on top of their collaborative, B2B platform.

These kinds of deals between publishers and marketers seem to benefit both parties in a different way. On one hand, companies like Uber can run a user acquisition campaign without needing to create and manage another standalone mobile ad campaign.

The user base is built-in and data can help them target the highest-value users. On the other hand, messaging app publishers get to provide new features to their user base which improve and diversify the user experience while simultaneously adding a revenue stream that wouldn’t have been available before.

I expect this type of partnership to spread throughout the mobile app world, especially within apps like social messaging apps where advertisements aren’t a natural fit.

I believe this is the next evolutionary step for the app economy in an era where most mobile companies are trying to solve the issues of user retention, growth, and monetisation.

Data gives social apps an edge
Social apps are finding new ways to engage their users and expand on their core offerings in ways that actually enhance the user experience.

One of the main advantages that social apps have over other popular app types like games is the vast amounts of specific, personal data they receive from their users.

These data stores make it easier for social apps to integrate more and more services because they know what their users want.

This encourages users to stay in the app and complete actions from other apps like Uber, YouTube, or Spotify without ever needing to leave the original app.

Since the beginning of the mobile revolution, users had to search through different app stores and comb through millions of apps in order to download an app of their choice.

Then, if you are like me, after you find the app you want, you will most likely need to delete some videos and pictures on your device to clear up storage space.

By leveraging their user data, messaging apps can serve their users with better and more targeted marketed content which has the added bonus of not taking up space on the user’s device.

This not only creates higher engagement but is also a potential native, non-ad based monetisation source for publishers. As businesses begin break into mobile, mobile data, like the data from social and messaging apps, is becoming increasingly important.

The days where users on mobile were targeted via broad demographic data are coming to a close. Advertisers are finding that the data available from mobile social apps is helping them target exactly the right users.

And, this shift in mobile advertising and targeting methods is trickling down to non-social publishers as well. In order to compete in today’s evolving mobile world, publishers of any type of mobile content have to embrace targeting users on a very personalised level.

First, mobile publishers which rely solely on in-app advertising to support their apps benefit from the increased targeting capabilities available to advertisers for their mobile campaigns, which increases engagement with ads in apps and earns the publisher more revenue.

Second, publishers can start harnessing their own mobile data in the way social publishers do to find out even more about their user’s behavior. By identifying which users are more likely to engage, publishers can start introducing in-app purchasing to those users and phase out showing ads to them.

For other users, publishers can use data to increase the effectiveness of other monetisation and retention strategies.

When you can tailor your app to a specific user, you not only improve the overall user experience, but you can also increase your app revenue by ensuring that the user is central to a monetisation strategy that will work for them as well.

As recently as a few weeks ago, Line announced it was exploring a dual IPO in Tokyo and New York. Telegram announced it had reached the 100 million daily active users benchmark. Facebook Messenger announced two new partnerships with Lyft and Spotify.

The mobile social industry is growing – and growing quickly. Everyone should keep an eye on how mobile social publishers explore the problems of monetisation and user retention.

Much like how the explosion of mobile gaming challenged traditional revenue streams by embracing F2P, mobile social publishers are beginning to push the mobile economy in a new direction.

I predict publishers of all types will begin to approach data and monetisation in this new way, bringing mobile into a new era.

Yinon Horwitz is director of business development at StartApp.