Upsetting the app cart: Asian messaging services challenge mobile order

Reuters | Updated: Feb 19 2014, 12:49 IST

LINE and WeChat threaten to overturn the mobile order of things, usurping the role of Google. (Reuters)

SummaryLINE and WeChat threaten to overturn the mobile order of things, usurping the role of Google.

Asian chat services KakaoTalk, LINE and WeChat threaten to overturn the mobile order of things, usurping the role of Google Inc, Apple Inc, Amazon.com Inc, Facebook Inc and telecoms carriers as gatekeeper to the consumer.

Where these internet and telecoms giants once controlled the lucrative choke points of the industry, social messaging services are fast emerging as an alternative distribution channel for adverts, apps, and goods and services.

For example, Tencent Holdings' WeChat allows its more than 270 million active users to book taxis, top up phone credit, and even invest in wealth management products, while Naver Corp's LINE recently launched flash sales via its app in Thailand, with more than 5 million users signing up to buy L'Oreal lipstick and other products.

The growing role of such apps as distribution channels was acknowledged by Japanese billionaire Hiroshi Mikitani when he explained why his company Rakuten Inc bought messaging company Viber last week for $900 million. "In some smaller emerging markets, it was very difficult for Rakuten to go in because of the lack of scale or distribution infrastructure. But after the acquisition of Viber we can now go into those markets with our digital businesses."

MAKING MONEY

At the heart of the battle is how to make money from the world's billions of mobile phone users.

Traditionally, it was carriers who took in the revenue from voice and SMS messages - and more recently from internet usage. Income, however, has been hurt by so-called over-the-top players such as Google and Facebook, who make most of their money from advertising.

Then there are the app stores, where users find and download apps. Although many of these are free, users are encouraged to add features which they pay for within the application. Google's Play store and Apple's App Store, the two largest, deliver these apps and handle all payments, taking a 30 percent cut along the way, some of which they may split with the carrier. In some countries, other app stores dominate, particularly China, where Google doesn't operate its online store.

These platforms are not only a source of revenue, but also effectively control access to the end-user.