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Carriers Increasingly Open To Working With Mobile Messaging Startups, Research Finds
Carriers haven’t typically been friendly with startups, especially over-the-top messaging players that circumvent native phone comms — viewing them as thieves of traditional voice and SMS revenues, as indeed (from the carrier perspective) they are. But the bad old days of telcos barring and blocking OTT services are slowly giving way to a greater willingness to partner with messaging rivals.
New research conducted by U.K. analyst mobilesquared reinforces this view, suggesting more carriers are becoming open to working with messaging startups — with more than a third (36%) of the polled telcos partnering with OTT providers this year, up from 32% in 2012. mobilesquared conducted its research between May and June this year, taking feedback from more than 40 mobile network operators, MVNOs, OTT providers and vendors.
The reason for this slow thawing of relations is partly the sheer size of the opportunity as a swathe of messaging players have grown very fat indeed in recent years, with highly engaged user-bases now numbering in the hundreds of millions, being eyed jealously by carriers. These include WhatsApp (300M monthly actives), WeChat (400M registered users, 236M monthly actives), Skype (1BN+ signs ups, 280M monthly actives) and Line (200M registered users).
This “exponential” growth of OTT services is forcing carriers to rethink their approach, according to the research. Continued growth in smartphone ownership — and the corresponding drop off of feature phones — is also fuelled an expanded OTT opportunity.
mobilesquared expects the OTT market to be worth $53.7 billion and have 2.1 billion smartphone users (out of a total pool of 3.1 billion) communicating via OTT services such as WhatsApp, Skype and WeChat by 2017. It says OTT comms’ penetration of smartphone users stands at 55% this year, which it expects to increase to 66% in 2017.
Another big incentive for carriers to work with messaging startups is of course the ongoing decline in their own messaging revenues — which is effectively forcing them to seek alternatives, as the whitepaper notes:
Operators realise they need to act sooner rather than later and most have stated they now have a plan in place and have moved away from blocking, imposing surcharges or lowering the quality of service. Their original approach to make money from charging for data is declining, and their preference is to partner with OTT players by renting out virtual phone numbers and terminating OTT traffic as they can participate in revenue streams.
According to the research, a majority of carriers are experiencing declining messaging revenues as a direct result of OTT clients being used on smartphones. The number of carriers stating they had not experienced a drop in messaging revenues for this reason stood at 62% in 2011 but that has shrunk to just 36% this year.
Interestingly, despite carriers viewing WhatsApp as the dominant OTT player, Skype is singled out as more of a threat by the research. Close to half (43%) of the carriers polled said they view Skype specifically as a major threat to their revenues — which may (at least) partially explain why carriers haven’t always been too keen to promote Skype-owner Microsoft’s Windows Phone platform.
Monetising mobile messaging
Charging for data is one way for carriers to monetise OTT messaging players but that approach is steadily falling out of favour, according to the research: the number of telcos generating revenues from OTT services this way is falling year-on-year.
In 2013, the figure was one-fifth, down from 26% the previous year, and 50% in 2011. The likely reason for that drop is more carrires bundling free access to popular messaging services as a way to attract customers to their network (customer churn being the other big threat to their revenues).
But that still leaves the question of how can carriers monetize OTT? And how can messaging startups capitalise on softening carrier attitudes?
An alternative approach to charging for data which mobilesquared expects carriers to increasingly exploit is to sell “off-net” messaging capabilities to OTT players — to allow them to offer their users the ability to send messages to people not currently using their service, delivering them as SMS or a mobile network voice call (Indian mobile messaging app Hike offers an SMS conversion feature already, as a way to differentiate its offering in its home market).
Off-net messaging gets around the inherent ‘walled garden’ limitation of many messaging services. There are messaging services that can reach off their own network, such as Yuilop, but they tend to be the exception. Major OTT players currently leverage their lock-in effect to keep customers from straying to other services.
But, in the long run, being able to offer their users the ability to chat with non-users could offer messaging giants a way to maintain user engagement (or startups a way to differentiate their messaging offerings), and also monetise that engagement — by charging their users for the ability to send off-net messages. This could be an alternative or supplement to other category business models in play, such as sticker sales, games, subscription fees and advertising.
mobilesquared reckons the global telco opportunity for “OTT off-net termination” will be worth $53.7 billion in 2017 — which it describes as “a substantial increase” from the $7.9 billion revenues generated in 2013.
For now, those figures are just a forecast, though. And it will be very interesting to see how this one plays out. Carriers may get cold feet. OTT giants may get too big for their boots — and try to build their walls even higher, rather than allowing users to reach out to other messaging playgrounds. Time will tell.
One final thought: carriers haven’t traditionally been known for having their finger on the Internet pulse but they haven’t failed to notice how much of a flop Facebook Home has been. According to the research, mobile operators put more store in Google+ Hangouts than Facebook Home.
Just 7% of mobile operators view Facebook Home as a major threat to their revenues vs 29% who worry about Google+ Hangouts.
Digital Gift Card Platform Gyft Raises $5 Million Series A
Gyft, a company building a digital platform to bring the plastic gift card industry to both web and mobile, has raised $5 million in Series A funding, in a round led by Karlin Ventures, with participation from A-Grade Investments, Chamath Palihapitiya’s Social + Capital Partnership, Hass Portman and Yammer founder David Sacks. The company previously raised $1.25 million in seed funding from Google Ventures, Founder Collective, and 500 Startups, around the time of TechCrunch Disrupt SF 2012, where it was competing as a finalist.
Founded in early 2012 by Vinny Lingham (CEO) and CJ MacDonald (COO), Gyft first launched as a mobile application for iPhone that allows users to add their plastic gift cards to a mobile wallet of sorts. Here, they can then track their balances and receive notifications of offers and other discounts, designed to encourage them to spend their balances with the retailer. As the company explained at the time of its launch, a 2010 law made it so that retailers can’t actually book gift card revenue as sales until the cards are redeemed. That gives retailers a lot of incentive to work with a startup like Gyft, which can help them target those carrying around unused gift card credit.
Since its debut, the company has also expanded to web and Android, and introduced features like re-gifting options, APIs, bitcoin support, and most recently, a new gift card registry option, which is something like a “wish list” for gift cards.
Today, the company is working with over 300 retailers, and has seen over $10 million from 200,000 plastic gift cards uploaded to its platform. According to MacDonald, Gyft is now on track to sell over $5 million in gift cards this year, and is adding new cards at a rate of one card every two minutes.
In the near-term, he says the team will be using the additional funding to help it focus on building geo-targeting features into its apps, meaning retailers could send messages to shoppers holding balances when they’re actually near the store. This will likely arrive around or ahead of the holiday shopping season, alongside a refreshed look for iOS 7. In 2014, Gyft will introduce other features including a card swapping option (perfect for exchanging gift cards after the holidays) and will expand internationally.
The team is currently 14 in total, mainly engineering and product. They may add a couple more hires with the new funding, but MacDonald says they actually want to keep things fairly lean as they focus on what he says is a market “ripe for disruption” – the $100 billion gift card market.
To date, the company has declined to discuss customer numbers or revenue, pointing instead to the number of gift cards on its system and their value.
Gyft is about to hit its biggest season yet, as the 2013 holidays approach. More than 50 percent of annual gift card sales occurs in the fourth quarter, the company tells us. And Gyft hopes to tap into some of those sales within its own application and online.
“We are expanding the way consumers use gift cards and retailers think about their gift card programs,” MacDonald explains. “The current model of breakage does not work for consumers or retailers. Consumers often forget that they even have gift cards and the dollars go unused and retailers have no idea where these cards reside or who is holding on to them.”
15% Of Americans Don't Have Internet. 5% Think It's Irrelevant.
Five percent of Americans have resisted the siren song of cat listicles and hashtags. Specifically, they think the Internet is “irrelevant,” to use words of Pew, which just released a report on the demographic of Americans without Internet.
In total, 15% of Americans don’t go online for a variety of reasons. By far the largest reason is that it’s a “waste of time”. A smaller slice of Americans can’t get online for a few reasons related to the digital divide: the Internet is too expensive, it’s inaccessible in their area, or it’s too complicated. The delightful chart below shows all the glorious reasons why some Americans live off the grid:
About half (44%) of these offliners qualify for Medicare. 20% are from rural areas and 41% have no high school diploma:
The very same percentage of older users do cheat a little. 44% of offliners have asked (probably their granddaughter) to use the Internet on their behalf”
But, perhaps the gem of the report is that 3% of Americans still hear fax-machine music to go online. Yes, a sizable slice of Netizens still use dial-up.
You can view the full report here.
Location-Based Photo And Video Discovery App Tapastreet Raises $500,000 Seed Round
Location-based photo and video discovery platform Tapastreet, which first unveiled its wares at our recent TechCrunch Disrupt in San Francisco, has announced that it’s closed a $500,000 seed round. The funding comes from Kernel Capital through the Bank of Ireland Seed and Early Stage Equity Fund, and Enterprise Ireland.
Founded in 2012 by ex-Intel engineer Joe Mitchell and ex-Googler Dave Johnson, the Irish startup offers an Android and iOS app that aggregates publicly available photos and videos from various social media, based on location. The idea is that by getting a visual overview of what people are talking about/sharing, users can discover what’s going on around them, while also cutting through the noise, says co-founder and COO Johnson.
“People want real-time information about the places and things that matter to them,” he says. “Social Networks are a great source of real-time information, but are swamped by noise. By consolidating location-based photographs and videos from a range of social networks into a single easy-to-use app Tapastreet cuts through the noise and enables users to see and share what is currently happening at any location worldwide, in real-time.”
News and photo aggregating services, such as Storyful, might be considered potential competitors, though these tend to manually consolidate stories and images into a single curated feed, says Johnson, whereas Tapastreet “provides a user with direct, raw and unfiltered access to real-time images and videos that would never otherwise be seen”. A more direct competitor is Banjo, which offers a social media aggregation service. In contrast, however, Tapastreet focuses solely on images and videos to “reduce the level of noise and provide a more relevant, focused user experience”.
Interestingly, Tapastreet says it has also developed a joint research project with Trinity College Dublin and The Institut National des Sciences Appliquées de Lyon (INSA) under the EU’s Industry-Academia Partnerships and Pathways, Seventh Framework Programme (FP7). The product of that research will be fed directly back into the Tapastreet platform.
There’s no word yet on how the startup plans to monetize the free app. All Johnson will say is that the newly announced seed funding will allow Tapastreet to “focus on building out a strong user base while enhancing the technical strengths of the product”.
In other words, scale first and flick the monetization switch later.
Chute Makes It Easy For Brands To Ask Fans For Permission To Use Their Photos
Chute is a startup aiming to become a “complete visual platform” for brands and publishers, initially by helping customers collect and publish user images and videos. Today it’s taking an important step in that direction by adding tools for companies to actually get user permission to republish their content.
There are companies, including Chute’s customers, who were already taking advantage of user generated content — one common approach is to ask users to share photos using a certain hashtag, and to treat the inclusion of that hashtag as “implied consent”. But co-founder and CEO Ranvir Gujral told me that as “bigger and bigger brands” want to use this content, and as they start using it in more commercial ways (such as incorporating them into ads powered by Chute), they’re also taking a “more conservative” approach to these issues.
Gujral and his co-founder Gregarious Narain gave me a quick demo of the new permissions system. They emphasized that they’re allowing companies to be as loose or as conservative an approach to rights as they want. So as customers look at content posted to Instagram and Twitter, one might just tweet a personalized message at a photographer, asking them to use a certain hashtag to signal their permissions. Other customers might ask fans to actually click through online forms that spell out the rights that they’re giving the company, or to upload their photos and videos directly to the businesses’ website.
One reason to include a number of different options, Gujral said, is because “there’s not a ton of legal precedent” — if a company requires fans to do more work, they may be more legally secure, but they’re also less likely to actually get permission. beyond the legal requirements, Gujral argued that connecting with consumers in this way can be a good way for brands to engage with their fans.
Percolate is another company that recently added features in this area. It’s not a direct competitor to Chute (it’s more focused on helping companies find content worth sharing on social media), but it’s worth noting that Percolate basically offers one approach to obtaining permission, in contrast to Chute’s wider range.
Chute connects these rights management tools to a customizable workflow, which allows customers to determine exactly when different teams and team members should be brought into the approval process. And it also offers analytics, so that customers can see whether their requests are actually working. Some of the early users of the product (a group that includes Benefit Cosmetics) have seen response rates of more than 80 percent.
Chute Rights will be offered as an add-on to the basic Chute subscription, Gujral said.
Verdict On Pakistan YouTube Ban Delayed As Case Is Moved To High Court Full Bench
The year-long saga of the Pakistan government’s YouTube ban has just taken another twist, as a case to unblock the website has been referred to a panel of Lahore High Court justices who will now decide whether the country’s haphazard internet censorship regime is unconstitutional. It’s another reprieve for the government’s IT minister Anusha Rehman, who has overseen an increasingly oppressive online censorship regime in Pakistan.
Yasser Hamdani, the petitioner of the case and lawyer for internet rights group Bytes For All, told TechCrunch the move will deliver a more definitive ruling because the panel of three to five, as yet unnamed, High Court judges has the jurisdiction to issue binding constitutional writs — which wasn’t the case in the previous hearing. It comes five months after Hamdani legally challenged the ban, which was first introduced in September 2012. While disappointed that a seemingly imminent verdict on the lengthy saga has been postponed until next year, he said the elevation of the litigation before a full bench (which only hears about five cases a year) demonstrates the importance of the case.
“We don’t want to win the battle and lose the war. If the court decided to unblock YouTube now, it might have been overturned on appeal in a higher court, which would’ve meant a strategic defeat for the internet freedom cause,” Hamdani said.
It gives him time to hone his legal strategy based on lessons from the hearings over the past year. Originally, their argument was focused on the technical dangers of administering a YouTube filtering mechanism, rather than solely demonstrating how the government’s patchwork ban on YouTube, pornography, and other nominated sites contravened the country’s constitution.
“This is a constitutional issue as it pertains to freedom of speech. We’re not interested in technical solutions and how to manage filtering. The censorship in current form is completely unconstitutional,” Hamdani said.
“I’m kind of happy. While it’s not instant gratification of having YouTube opened, overall, whatever the judgement comes, it will have a profound impact on the freedom of expression in Pakistan.”
It also buys more time for the country’s elusive IT minister. She has already declined two invitations to appear before the previous court case but has previously told the media of her preference for blocking specific YouTube videos deemed insensitive and blasphemous – which activists believe is the start of a wider internet filtering regime. (the IT minister did not respond to requests for interview for this story).
Registration For Hardware Alley Berlin At TechCrunch Disrupt Europe Is Now Open
Hardware Alley is my favorite part of Disrupt and we’re bringing the festivities to Berlin on October 29 when 30 lucky hardware companies can show off their wares. It is a crowd favorite and I’d love to feature your gear.
What is Hardware Alley? It’s a celebration of hardware startups (and other cool gear makers) that features everything from robotic drones to 3D printers. We try to bring in an eclectic mix of amazing exhibitors and I think you’ll agree that our previous Alleys have been roaring successes.
We’d like you to register as a Hardware Alley exhibitor. You’ll get to exhibit on the last day of Disrupt Europe, Sept 11, to show off your goods and get access to some of the most interesting people (and most interesting VCs) in the world. We’d love to have you.
All you need to demo is a laptop. TechCrunch provides you with: 30″ round cocktail table, linens, table top sign, inclusion in program agenda and website, exhibitor WiFi, and press list.
You can reserve your spot by purchasing a Hardware Alley Exhibitor Package.
If you are Kickstarting your project now or bootstrapping, please contact me at john@techcrunch.com with the subject line “HARDWARE ALLEY.” I will do my best to accommodate you but understand we have a limited number of discounts available so act quickly.
We want startups from across Europe so please let me know what you’re up to and if you’re coming. I’m very excited to see the great hardware coming out of the Old Country.
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