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Application-to-person messaging: worldwide trends and forecasts 2020–2025 Application-to-person messaging: worldwide trends and forecasts 2020–2025 Giulio Sinibaldi and Ameer Gaili Application-to-person messaging: worldwide trends and forecasts 2020–2025 2 About this report This report provides an overview of the worldwide application-to- GEOGRAPHICAL COVERAGE KEY METRICS person (A2P) messaging services market. It provides information about messaging services provided by both mobile network ▪ Worldwide ▪ Application-to-person SMS outgoing traffic operators (MNOs) and over-the-top (OTT) providers.1 A complete ▪ Central and Eastern Europe set of forecast results is provided in the Analysys Mason (CEE) ▪ Application-to-person non- ▪ Western Europe (WE) operator/OTT services outgoing DataHub. The forecast is based on: traffic ▪ North America (NA) ▪ Application-to-person operator ▪ Analysys Mason’s internal research (including our regional ▪ Latin America (LATAM) forecasts, Connected Consumer Surveys and various IP-based services outgoing ▪ Middle East and North Africa traffic trackers in the Future Comms research programme) (MENA) ▪ Business spend on messaging ▪ interviews with stakeholders in the communications market ▪ Sub-Saharan Africa (SSA) traffic around the world. ▪ Developing Asia–Pacific (DVAP) ▪ Business spend on fixed fees ▪ Emerging Asia–Pacific (EMAP) ▪ Application-to-person business WHO SHOULD READ THIS REPORT spend and outgoing traffic by use case ▪ Strategy and planning executives that are responsible for operators’ communication services strategies and A2P wholesale services. ▪ Application-to-person business spend and outgoing traffic by ▪ Executives in mobile operators’ technology and innovations teams that industry vertical are responsible for developing rich communication services (RCS) or proprietary alternatives. ▪ Marketing executives and vendors of communication services equipment and software, because it will help them to understand the needs of their operator customers and size the addressable market for their products. 1 The term ‘over-the-top’ is used throughout this report to refer to services that are made available to the general public via the public internet. The term is defined from the perspective of network operators and is somewhat controversial for this reason, but is nevertheless widely understood. Application-to-person messaging: worldwide trends and forecasts 2020–2025 4 Worldwide: SMS was the main channel for A2P messaging in 2020 and it will remain so up to 2025; OTT services will account for most of the traffic growth 1.3 trillion A2P SMS messages were sent in 2020, accounting Figure 1: A2P messages sent per year, by channel, worldwide, for 70% of all A2P messages worldwide. We expect that the 2016–20251 number of A2P SMS messages will reach 1.9 trillion by 2025. Both the number of A2P messages and their value are growing as brands add mobile and digital channels to interact with their existing customers and recruit new ones. Person-to-person (P2P) SMS traffic has progressively been overtaken by that from OTT services, but SMS is the most-used channel for A2P messaging, and it will remain so until 2025. Reliability and reach. SMS is supported by all handsets, and SMS read rates have historically been the highest of all A2P channels. SMS will remain the main fall-back channel in the long term. Security and spam protection. SMS is a safe channel for businesses to use to interact with customers due to traffic regulations that are beneficial to consumers and operators’ wide adoption of anti-spam and anti-fraud filters. The use of IP-based SMS alternatives from both OTT players and operators1 will grow more strongly than that of SMS as businesses look to adopt as many channels as possible to communicate with their customers. OTT and operator IP user interfaces are designed to enable A2P (and P2A) conversational use cases, which are the next step for business-to-consumer (B2C) interactions. OTT IP will account for 40% of all A2P traffic by 2025 (from 30% in 2020), and the operator IP share will reach 14%. 1 Please see the appendix for metrics definitions. The operator IP channel includes RCS Business Messaging (RBM). Application-to-person messaging: worldwide trends and forecasts 2020–2025 11 Worldwide: mergers and acquisitions will continue because acquiring smaller messaging providers appears to be the most efficient way to grow revenue Further market consolidation will be driven by players looking to Figure 8: High-profile acquisitions and IPOs, 2020 scale up, enter new markets and expand their SaaS Buyer Target company/IPO details Price (USD) Date capabilities. Twilio Segment 3.2 billion 4Q 2020 Almost all major A2P messaging and CPaaS players acquired a Sinch ACL 75 million 3Q 2020 company in 2020. Inorganic growth is a key strategy for entering Sinch Wavy Group 120 million 2Q 2020 new markets, gaining customers and adding new technologies. Common technological infrastructure, which makes the Sinch SAP Digital Interconnect 250 million 2Q 2020 integration relatively easy, allows for wide synergies between the Cisco IMImobile 750 million 4Q 2020 buyer and the target asset. Infobip OpenMarket 300 million 4Q 2020 The number of mergers and acquisitions in the A2P messaging LINK mobility USD1.85 billion market cap (1Q 2020) 4Q 2020 and CPaaS space has increased significantly in the last 2 years Routemobile USD1.41 billion market cap (1Q 2020) 3Q 2020 and a clear pattern has emerged: large companies are willing to Source: Analysys Mason buy smaller, local CPaaS providers or specialised software enter the US market and consolidate its leadership position in the providers. Some are even listing to collect the necessary messaging aggregation space. resources for acquisitions. For example, LINK mobility and Twilio’s and Cisco’s recent acquisitions suggest that Tier-1 Routemobile went public in 2020 to raise funds, and both CPaaS providers are planning to become CRM providers. announced acquisitions only 1 month later. Serving all of customers’ communication, engagement and Aggregators are buying competitors to increase their scale. analytical needs is a common long-term strategic objective. Twilio Merging or acquiring to enter new geographies or customer has taken a major step towards this with the acquisition of segments is very common. For example, Sinch made four such Segment, a market leader in customer relationship management acquisitions in 2020, including ACL in India for USD75 million. (CRM) technology, for USD3.2 billion. Cisco acquired IMImobile for Buying competitors is also used as a defensive tactic. Infobip USD750 million to complement its existing CRM platform and acquired OpenMarket and Sinch acquired SAP Interconnect to integrate its UCaaS capabilities with a CPaaS proposition.1 1 UCaaS stands for unified communication-as-a-service. Application-to-person messaging: worldwide trends and forecasts 2020–2025 Contents Worldwide trends Regional trends Forecast methodology and assumptions About the authors and Analysys Mason Application-to-person messaging: worldwide trends and forecasts 2020–2025 28 About the authors Giulio Sinibaldi (Senior Analyst) is a key contributor to Analysys Mason's Consumer Research practice. He is the lead analyst for the Future Comms research programme, which focuses on operators’ and OTT service providers' communications services. Giulio also specialises in research on gaming strategies and has extensive experience in managing and analysing primary research data sets. He currently manages Analysys Mason's annual Connected Consumer Survey. Giulio holds a BSc and an MSc in Economics from Bocconi University. Ameer Gaili (Research Analyst) is a member of the data team within the research division in London, and mainly contributes to the Telecoms Market Matrix, Middle East and Africa and Global Telecoms Data research programmes. Prior to joining Analysys Mason, Ameer was a strategy consultant at a boutique management consultancy. Ameer holds an MEng in chemical engineering from the University of Manchester. Application-to-person messaging: worldwide trends and forecasts 2020–2025 29 Analysys Mason’s consulting and research are uniquely positioned Analysys Mason’s consulting services and research portfolio Consulting We deliver tangible benefits to clients across the telecoms industry: ▪ communications and digital service providers, vendors, financial and strategic investors, private equity and infrastructure funds, governments, regulators, broadcasters and service and content providers Our sector specialists understand the distinct local challenges facing clients, in addition to the wider effects of global forces. We are future-focused and help clients understand the challenges and opportunities new technology brings. Research Our dedicated team of analysts track and forecast the different services accessed by consumers and enterprises. We offer detailed insight into the software, infrastructure and technology delivering those services. Clients benefit from regular and timely intelligence, and direct access to analysts. Application-to-person messaging: worldwide trends and forecasts 2020–2025 30 Research from Analysys Mason Application-to-person messaging: worldwide trends and forecasts 2020–2025 31 Consulting from Analysys Mason Application-to-person messaging: worldwide trends and forecasts 2020–2025 PUBLISHED BY ANALYSYS MASON LIMITED IN MARCH 2021 Bush House • North West Wing • Aldwych • London • WC2B 4PJ • UK Tel: +44 (0)20 7395 9000 • Email: [email protected]