Watershed moment: should mobile operators be worried we talk less?

A new report from Ofcom claims users in the UK spoke 2.5 billion minutes less on their mobile phones, down by 1.7% in 2017, the first such decline in history.

This followed the trend total talking time by the UK population has been declining over several years, primarily mainly driven by the sharp drop in minutes spent on fixed line phones. The combined talking time also suffered the sharpest drop in years, at more than 6%. See the chart from Ofcom’s The Communications Market 2018 report (p.17) below.Ofcom report call minutes decline

In some ways mobile operators should be concerned. After OTT messaging services (WhatsApp, Viber, WeChat, etc.) destroyed the text message cash cow, it looks they are also losing another revenue stream, the voice call.

However it does not necessarily mean we speak less. Some simply move the calls into other apps, especially when we need to speak to people overseas, more than one people at the same time, or when we like to combine video with audio. Group video call features from WhatsApp or Skype and others come handy.

Operators’ response is not too dissimilar to the one when they tried to fend off the OTT messaging services. After throwing in unlimited number of text messages to typical packages, they now often throw in unlimited minutes. However this does not look to have reverted the trend of fewer minutes spent on voice calls, just like the unlimited text message offers have not reverted the decline in SMS and MMS (p.20).

Ofcom report SMS decline

The experience of messaging apps may be superior when handling rich features, but it needs internet connection, and it consumes data, which is exactly what operators are working hard to monetise. Some choose to offer bigger data buckets at a higher price, while others bundled with value-added services, for example video streaming. The result shows people do pick up higher packages. The total mobile retail revenues dropped by 1.3% from 2016, but revenues from mobile packages grew by nearly 3%, while revenues from out-of-bundle data near held. The biggest drop occurred in out-of-bundle voice. It seems for most people the bundled voice was already more than enough.

Ofcom report revenue types

WhatsApp forced to enter India mobile money market early

The WhatsApp online payments trial received rave reviews in February, however the team is being forced to launch the market-ready version ahead of schedule for fear of being left behind by competitors.

WhatsApp first announced its intentions in the mobile money space back in February, trialling the feature with one million Indian users, though with more than 200 million users of the messenger app in the country there is certainly room to grow. According to Bloomberg, WhatsApp is readying the launch ahead of schedule, with only three partners instead of four, due to fears competitors are streaming too far ahead. HDFC Bank, ICICI Bank and Axis Bank are currently signed up, with the State Bank of India set to join as soon as the systems and processes are ready.

The potential for mobile and online payments in the country is massive. Aside from the rapid digital revolution which has been thrust on users following the democratization of data by Reliance Jio, the Indian Government is keen to take the country away from a cash-society. This focus on the digital world has certainly benefited certainly companies, some of which are less keen about sharing the profits around.

Vijay Shekhar Sharma, founder of Paytm Payments Bank, one of the two dominant players in the Indian online payments space as it stands, has been highly critical. Sharma was one of the beneficiaries of the government’s drive towards digital, and has not welcomed competition in the space. His Twitter feed regularly criticises the decision to grant WhatsApp a license, while also retweeting conspiracy theories about Facebook reading messages and stories questioning the security capabilities of the app.

The other dominant player currently in the market is Google Tez, though the WhatsApp team might be keeping a closer eye on WeChat. The Tencent-owned messenger and social media app has been making moves in the India space, and while it is yet to topple the dominance of Paytm, it arguably presents more of a threat. This is the reason Sharma is doing his best to limit the incursion of social media apps into the Indian payments market, he probably knows they will steal a lot of market share.

When WeChat launched its payment feature in the Chinese market as an alternative to Alibaba’s, it quickly captured market share because it already had an engaged user-base. Users could pay for a variety of products and services through a trusted and secure application, which was already being used for a variety of other features. WeChat kept users inside its walled-garden, and offered the opportunity to remove clutter and redundant apps from valuable real-estate on the home screen.

WhatsApp can replicate this strategy with its 200 million users in the Indian market. Ideally, WhatsApp would have launched on its own terms, but it does still pose a very serious threat to the incumbent players in the Indian market.

Aside from the upcoming conflict, this is one of the first examples of genuine diversification from Facebook, parent company of WhatsApp. To date, all the ‘alternative’ strategies Facebook has used to build the bottom line have ultimately led back to bleeding the same assets through digital advertising. Video does, news does, promotional ads do, everything Facebook does is about monetizing the user while they are on the platform. It is successful for the moment, but there will be a glass ceiling; only so much advertising can be presented to the user before the experience deteriorates.

When you look at the companies who are set to dominate the world for decades, there is genuine diversification. Google has a separate video platform in YouTube, doubling the real-estate for advertising, and also has a burgeoning cloud computing business. Amazon has the world leading cloud IaaS business, while also successfully entered the content subscription market with its Prime service.

Of course this is not a new idea. Coca Cola is a business which also diversifies by acquiring brands and products which allow it to target a different demographic; it owns Innocent Smoothies for example, as well as Powerade. Successful and healthy diversification is about seeking new revenue opportunities, not simply adding addition means to bolster the same advertising machine.

A successful launch into the online payments market could prove to be very lucrative move for the Facebook business.

WhatsApp boss exits, possibly over privacy concerns, but we’re not convinced

WhatsApp founder Jan Koum is exiting the Facebook family under the guise of privacy concerns, but he might just have gotten all of his bonus.

Using the social media platform to convey his message, Koum did not give any details, though sources close to the matter claim there was a disagreement with executives at parent-company Facebook over privacy, the use of personal information and the potential weakening of encryption software. This might be the reason, or it might just be a good way to justify exiting while maintaining an anti-capitalist image.

“I’m leaving at a time when people are using WhatsApp in more ways than I could have imagined,” said Koum. “The team is stronger than ever and it’ll continue to do amazing things. I’m taking some time off to do things I enjoy outside of technology, such as collecting rare air-cooled Porsches, working on my cars and playing ultimate frisbee. And I’ll still be cheering WhatsApp on – just from the outside. Thanks to everyone who has made this journey possible.”

The Facebook post followed a report in The Washington Post detailing the clash between executives and misaligned values between the two parties. The protection of the users personal information is a core value at WhatsApp, and part of the reason so many have flocked to the service. Back in 2014 when Facebook bought the service, WhatsApp posted a blog promising nothing would change following the acquisition, though the WhatsApp values have certainly been eroded over the years.

Initially it was promised security would be maintained, personal information would not be used and advertising would not appear on the platform. In attempting to change terms and conditions in 2016, and introducing new opportunities for business to connect with customers in January, two of these promises have been compromised. Should the rumours about efforts to weaken encryption be true, all three values have been walked out the door.

As you can imagine, under-fire Facebook CEO Mark Zuckerberg has done his best to calm the waters in replying to the post:

Zuckerberg post

In complementing the WhatsApp encryption advances, Zuckerberg is seemingly attempting to play-down any concerns the protections might be diluted. Zuckerberg has not denied Facebook is weakening the encryption software, but simply calming any potential euphoria. Right now is not a good time for news to leak to the press about weakening privacy protections at Facebook considering the scrutiny the platform is facing in light of the Cambridge Analytica scandal.

While it is very chivalrous for Koum to stand-down over compromises and erosion of WhatsApp principles and core beliefs, we can’t believe he is that naïve. Facebook is an information business and will constantly searching for new ways to improve the advertising platform. When the social media platform bought WhatsApp for a monstrous $19 billion, did Koum honestly believe it was as a philanthropic exercise? Of course Facebook wanted to access the user data.

We are not 100% convinced by these reports. Generally when a company is acquired, especially on this scale, the former management team are incentivised to stay to manage the transition and integration. These incentives are usually spread over a couple of years. Considering it has been 3.5 years since the acquisition was completed, we wonder whether Koum has realised all of his transition bonuses and now just wants out. Jumping on the ‘Facebook is a privacy monster’ train might just be a way to save face. He’s doing it for moral reasons, not because he’s got as much money as possible out of the situation.

In martyring himself, Koum has likely removed one of the final hurdles the Facebook advertising machine had in harvesting the personal information vaults of WhatsApp. Some might argue Facebook has destroyed the principles of the brand, but Koum and co-founder Brian Acton told us how much their values are worth; $19 billion. Considering the reasons for creating WhatsApp in the first place, privacy and a disdain for ads, Koum and Acton effectively did a deal with the devil.

Reports might claim he is making a moral stance against the company, but the high-horse is simply trotting Koum away from any responsibility while dragging the loot over the principles of WhatsApp which now lay tattered and tarnished in the dirt.

WhatsApp says no to sharing with parent Facebook

The Information Commissioner’s Office in the UK has announced WhatsApp has agreed not to share user information with parent-company Facebook until the process is compliant with GDPR.

After an investigation the ICO concluded the sharing of any information between the two organizations was contrary to the first and second data protection principles of the Data Protection Act. WhatsApp has not to date found a lawful way of sharing information with Facebook, while the investigation also states it has not provided enough information to users in relation to any such sharing of personal data.

“I am pleased to state that WhatsApp has now signed an ‘undertaking’ wherein they have given a public commitment not to share personal data with Facebook until they can do so in compliance with the upcoming General Data Protection Regulation (GDPR), which comes into force in May this year,” said Information Commissioner Elizabeth Denham. “I reached the conclusion that an undertaking was the most effective regulatory tool for me to use, given the circumstances of the case.”

During the course of the investigation WhatsApp has maintained it has not shared any information with its parent company, which is lucky in the sense the ICO said it would have been very illegal. The issue here seems to be focused around the idea that WhatsApp and Facebook did not seek permission to share personal information from the users. Back when WhatsApp tried to rewrite T&Cs to allow for such practices, the team told users they were doing it as opposed to seeking permission. This would not be deemed appropriate under current data protection rules or the upcoming GDPR.

This is of course not a deal which means WhatsApp will never share data with its parent-company. Once it finds a way to do so without being fined or sued it will do freely and without any concern as to what public opinion is. WhatsApp will at some point contribute to the Facebook advertising machine, it is just figuring out when and how.

Investigations throughout Europe will continue against Facebook and WhatsApp, though at least in the UK the pair seemed to have satisfied the privacy and data protection concerns of regulators. The more privacy-sensitive might be a bit more difficult to satisfy, so it might be worth keeping an eye on Germany.

Elsewhere in the Facebook universe, the team has taken the decision to ban Britain First and the social media accounts of its two leaders. Stating the group continually broke community standards, the move is a win for advocacy groups who have accused Britain First of stirring up hatred through social media.

“There are times though when legitimate political speech crosses the line and becomes hate speech designed to stir up hatred against groups in our society,” Facebook said in a blog post. “This is an important issue which we take very seriously and we have written about how we define hate speech and take action against it in our Hard Questions series. We have Community Standards that clearly state this sort of speech is not acceptable on Facebook and, when we become aware of it, we remove it as quickly as we can.”

While we are pleased with the move, it is also a bit of a surprise. The social media giants have taken more of a hands-off approach to date, but maybe this is the first sign of changing trends.

WhatsApp to enter world of mobile money – first stop, India

WhatsApp has been granted permission to test out a money transfer service in the Indian market, a move which could generate notable ripples in the maturing mobile money segment.

While there are several mobile money services available currently, penetration has been limited. There is noticeable momentum for the idea of a virtual wallet, though a brand such as WhatsApp entering the market could certainly provide a boost in credibility and trust, thrusting adoption upwards.

The National Payments Corporation of India (NPCI) has given its consent to roll out a WhatsApp beta launch in India to test out the money transfer service. Four institutions will join the multi-bank Unified Payments Interface (BHIM UPI) UPI model, which will be announced at a later date, and a full feature product shall be released after the beta test. For the moment WhatsApp will be limited to a user base of 1 million during the test, while only small transactions will be permitted.

This is a very logical step for WhatsApp to take, and does pose a considerable threat to anyone who is currently offering mobile money solutions to its customers. Samsung and Apple are two companies who do offer such services, but only to those who have Samsung or Apple devices. A WhatsApp solution would be applicable to everyone who has a WhatsApp account making the potential pool considerable larger.

The move would also counter any security concerns which some might have. WhatsApp is widely recognised as one of the most secure messaging platforms worldwide, so much so governments are attempting to introduce legislation forcing the firm to weaken its encryption algorithms or introduce backdoors. The introduction of such legislation indicates the spooks can’t hack their way through the WhatsApp security which is a thumbs up for the software’s performance and resilience.

A seemingly unhackable messaging app offering money transfer solutions would certainly be of interest to some. It also builds on a use of the messaging app which is already out there. For those organizing group holidays or larger social occasions, WhatsApp has been used for logistics but also to pass on bank account details to those in the group. Adding a payment feature in the app is simply removing a step in this payment chain.

100% secure is of course impossible, but if you listen to the right people, WhatsApp is as close as you can get for a mass market product. A money transfer service certainly addresses a need of its users and provides reassurance for the security conscious who are currently resisting the mobile money revolution. Should the beta be successful in India, this could prove to be quite a disruption and enabler of growth for mobile money worldwide.

WhatsApp takes a step into the world of business

WhatsApp has launched a business version of the popular messaging app, just to make sure businesses don’t actually have to talk to those pesky customers face-to-face.

The move should not come as a surprise as the man on the street either doesn’t have the time to talk to businesses on the phone, or quite frankly doesn’t want to. The resentment of conversation goes both ways.

“People all around the world use WhatsApp to connect with small businesses they care about — from online clothing companies in India to auto parts stores in Brazil,” the company said on its blog.

“But WhatsApp was built for people and we want to improve the business experience. For example, by making it easier for businesses to respond to customers, separating customer and personal messages, and creating an official presence.”

On the app companies will be able to create their own profiles, create quick replies to frequently asked questions, automated messages, split personal and business messages, and even spam potential customers to ‘introduce’ them to the business. The idea does seem to be a continuation of Facebook’s wider strategy to monetize small businesses.

WhatsApp owner Facebook has been increasing the emphasis on smaller and medium size businesses to continue the extraordinary growth it has seen over the last decade. Whether this is helping local plumbers to engage with the local community or a start-up to reach the next continent, the strategy has been a success. Taking WhatsApp down the same route would be a sensible plan.

The pilot scheme was introduced in September last year, with the intention of being free for smaller organizations, while WhatsApp will monetize through relationships with the larger enterprise customers. In short, the more message you are likely to send, the more you’ll pay. There is potential for sponsored messages here, as there were updates to the T&Cs last year which opened the door for greater flexibility in advertising solutions.

The new business version of the app is now available in Indonesia, Italy, Mexico, the UK and the US, and will be introduced in new counties before too long.

WhatsApp mulls business revenue streams

Facebook-owned IM service WhatsApp reckons it might finally be able to make some money by charging businesses for clever access to their punters.

Apparently quite a lot of people already use WhatsApp around the world to interact with shopkeepers and other relatively simple business transactions such as placing orders, but the company reckons that experience can be improved. So it’s going to be spending the next few months WhatsApp is going to focus on special features for this sort of thing and is even launching a special business app, which is free for now.

“We’re building and testing new tools via a free WhatsApp Business app for small companies and an enterprise solution for bigger companies operating at a large scale with a global base of customers, like airlines, e-commerce sites, and banks,” explained a WhatsApp blog. “These businesses will be able to use our solutions to provide customers with useful notifications like flight times, delivery confirmations, and other updates.”

In an interview with the WSJ WhatsApp COO Matt Idema revealed that the ultimate aim is to develop features businesses might be willing to pay for. “We want to put a basic foundation in place to allow people to message businesses and for them to get the responses that they want,” he said. “We do intend on charging businesses in the future.”

There isn’t much detail right now but WhatsApp would have to come up with some pretty compelling features to persuade businesses to pay for something that is not only free now but has countless equally free competitors. Maybe it will follow in its parent’s footsteps and find ways of exploiting its users’ data for profit.