Posted in: social networking

Mobile Messaging Won’t Be a Winner-Take-All Market (And That’s Okay)

The world of mobile messaging has really taken off in the last few years, with products like WhatsApp, MesssageMe, Kakao, LINE, WeChat, Facebook Messenger, Kik, Viber, and others building large and growing user networks. I think many of these companies are really interesting and many of them are building really interesting businesses in their own right, whether as platforms that enable other applications and games to ride on top or finding other ways to directly monetize the usage of their own applications.

Network Effects vs Cost of Simultaneous Usage

As with many communication tools, many (if not all) of these products have strong network effects. One nice property of network effects businesses is that they have the ability to become really sticky – switching off the social network or mobile messaging product that your friends use becomes more difficult as you have more friends on a given platform. If you want to read more about the nature of network effects, you can read more here.

The latest crop of mobile messaging companies feel like the next evolution in communication. And, as is the case with previous waves, there is some question as to whether this market will tip toward winner-take-all (as was largely the case with social networks) or will support islands of relative strength (as was the case with instant messaging).

While a lot of the conversation about how mobile messaging will play out is focused on the importance of network effects and the potential to create winner-take-all outcomes, there is another dimension to consider. The other dimension to consider is the cost of using several products simultaneously. While network effects make products sticky, having a low cost of simultaneous usage means that it’s not that hard to use several products at the same time. In the case of social networking, the cost of using several services is high – it’s not financially expensive, it’s expensive in terms of time and attention. Most people don’t want to post status updates, upload photos, and be active on many social networks (but they will use more than one). On the other hand, the cost of simultaneously using several instant messaging products is fairly low – you either run multiple clients or use some sort of aggregator.

I tried to create a simple table of the various services and markets and the nature of their network effects and the cost of simultaneous usage:

Category Example Products Nature of Switching Costs Cost of Simultaneous Usage
Consumer Email AOL, Gmail, Yahoo Let everyone know you have a new email address or set up a forwarder Modest overhead in checking multiple inboxes
Instant Messaging AIM, ICQ, Y!, MSN Messenger Difficult to coordinate moving all friends to a common network Relatively low – run multiple clients or use an IM aggregator
Social Networks Facebook, MySpace, Twitter High as value comes from activity. It’s only fun if your friends participate Relatively low as you can easily be a member of lots of social networks at once.
Mobile Messaging LINE, Kakao, FB Messenger, WeChat High if the goal is to get all of your friends on one network, low otherwise Relatively low as you can easily be a member of lots of social networks at once.

In the end, I don’t think mobile messaging is one of those markets that will tip toward winner-take-all outcomes. While the network effects are definitely present, the cost of simultaneously using these products is low. The products are, for the most part, free or very inexpensive to use. They are all delivered as applications and widely available on the most common mobile OS platforms, so access is not an issue. They all use push notifications or other channels to bring you back to the app when you have a message, so the cost of keeping up with message activity is also fairly low – so the attention overhead can be very low.

At the end of the day, I think it’s relatively easy for me to just let my network use whichever messaging platform suits their needs. The cost of simply responding to them in whichever messenger or platform they want to use is fairly low and the cost of trying to get them to all switch to a common platform feels high.

Fortunately for these companies, building interesting businesses in this space doesn’t require a monolithic winner-take-all outcome. There is plenty of diversity across geography, demographic slices, and use cases to allow lots of companies in this space to flourish without one company being the dominant product for all people in all use cases.

As always, comments are open below and you can also send me a message on Twitter @chudson.

Comments (13) on "Mobile Messaging Won’t Be a Winner-Take-All Market (And That’s Okay)"

  1. Additionally, a few other reasons why it may also not be winner take all are — 1) the numbers and regional affiliations are so big, they’re huge markets in and of themselves. 2) opening the protocols could slightly damage first movers so there’s no incentive to.

  2. Semil, how do you think about the impact of opening the protocols? What analysis leads you to conclude that it’d result in “slight damage”? I’m curious about this, because both Consumer Email and Instant Messaging ended up in interop (mostly), so it could be expected that mobile messengers open protocols at some point as well. Would love to get your take on this.

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