Author Bio:
Viviana Woodbury is
a freelance writer and blog junkie from app
developer. She loves receiving reader feedback, which can be directed to Viviana.Woodbury@gmail.com.
With Facebook’s purchase of the OTT giant WhatsApp,
and the eventual merging of the WhatsApp and Facebook Messenger databases,
common wisdom might have indicated that the remaining OTT companies would either
also be bought up or would consolidate so as to beef up their combined market
value. As is often the case, however, common wisdom simply didn’t apply. To
better understand why not, and to get an idea of what is likely to happen to
the remaining “giants” in the OTT delivery field, we need to look first at what
the OTT companies actually provided.
To begin with, consider what an OTT (Over The Top)
company is. To put it simply, it is a provider of multimedia content, such as
audio, video, and graphic content, functioning independent of a supervisory
system to control or manage the content. That supervisory system doesn’t
maintain a cache or record of the content it transmits, with one very important
result being that it bears no responsibility (read: liability) for that
content. At a time when a lot of noise is being made about exercising
regulatory control over Internet content, such elimination of liability becomes
very attractive to ISPs and online content providers alike.
Furthermore, being relieved of the necessity for
maintaining documentation of the content being transmitted, ISPs and content
providers are also relieved of the necessity to invest the significant capital
that would be required to purchase and maintain the gargantuan amount of
storage hardware and administrative software to manage such a storage task.
Next, we must recognize what an OTT company is not. Realistically, the hardware and
software requirements to run an OTT operation are minimal, especially as
compared to the sheer volume of traffic involved. Essentially, the OTT
operation is little more than an operating protocol and a database of users,
and it is in the latter that the operation’s true value lies.
With that basic understanding, it becomes more
understandable why “common wisdom” doesn’t necessarily apply. WhatsApp is by
far the largest of the OTT companies, with roughly 450 million active users
each month, and with a traffic load that is likely to soon exceed the total
volume of all SMS (texting) messaging sent over every single carrier in the
world. It is this scale – in both the number of active users and traffic – that
made WhatsApp so valuable. And while the Chinese- internet giant Tencent owns
WeChat and its database of roughly 272 million registered users, the number of active
users is much smaller, and those users are primarily concentrated in Asia,
where Facebook is banned. Japan’s largest OTT messaging service, Line, is being
eagerly pursued by the Japanese company SoftBank, which acquired Sprint last
year. WhatsApp, on the other hand, is more global in its reach, and therefore
more attractive to a giant such as Facebook or Google than its more
regional-focused smaller competitors.
The
next step for the also-rans
While it is still possible that companies such as
Line and WeChat could merge, it is more likely that one or both will issue an
IPO sometime in the next year or so, in order to raise sufficient capital for
one to either purchase the other or expand their reach into other non-Asian
markets. SoftBank’s purchase of Sprint gave clear indication that the Japanese
firm intends to do just that, and their efforts to build upon an
already-sizeable user database such as that offered by Line would fit well
within such plans.
Before being bought by Facebook, WhatsApp offered a
year of its services at no charge, and charged each user a flat fee of 99 cents
per year thereafter. Frankly, such a charge was a fraction of what they
probably could have charged, since users accustomed to a given service will
tend to remain with and even pay for that previously free service, so long as
the price isn’t too high and the service remains viable. But with its low
operating overhead and 450 million users, WhatsApp’s net profits were certainly
nothing to sneeze at. Whether Facebook
will continue charging the same amount for the WhatsApp feature, raise
their annual fees, or do away with the fees altogether and compensate for the
loss of revenue with pushed advertising content is anybody’s guess at this
point. Common wisdom, at this point, flies out the window.
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