Mobile messaging apps need to be priced right

Service providers such as WhatsApp or WeChat need to price their services right, or face consumer exodus as people look for free alternatives.
Written by Jamie Yap, Contributor

Mobile messaging service providers will start charging fees, whether on their own volition or due to pressure from external forces, and this decision is not surprising. But the pricing will be critical as it may force consumers to turn to other platforms, and analysts urge providers to consider other means of monetization to prevent an exodus of users.

Apps such as WhatsApp, Tango, WeChat, LINE, Viber, and KakaoTalk are highly popular today as they allow smartphone users to send messages, photos and videos and, for some, make phone calls over the Internet. This means users are no longer beholden to operators for SMS messaging and voice calls.

Mobile messaging apps may start charging users fees, but developers should consider other ways of monetization or risk losing customers.

The catch is that for most of these apps, they were free downloads initially, but that is starting to change. WhatsApp, for example, announced last month it will no longer offer its app for a one-time US$0.99 download fee to iOS users. Instead, it will align the pricing model with its Android scheme whereby users can download the app and use it for free for a year, before having to pay US$0.99 annually.

Consider other monetization methods

Analysts say the decision by mobile messaging app developers to start imposing fees on users is not surprising as they have to capitalize on their growing user base and develop a sustainable business.

Vishal Jain, mobile services analyst at 451 Research, said: "Since they are not doing advertising, the natural way is to charge users for using the service otherwise it would be difficult to show a business model in the long run."

For service providers which are startups, imposing a download fee is necessary once the initial capital funding they had runs out, added Andrew Milroy, vice president of Asia-Pacific ICT practice at Frost & Sullivan.

Asked if users will switch to another messaging platform once a fee is imposed, Milroy pointed out there are many variables at play. Price sensitivity and how frequently the app is used on a daily basis is subjective. "It's hard to say if US$2 a year is a big deal to those below 25 versus working adults who use the app for communicating at work," he said.

Jain, however, believes that charging fees at this point in time is "full of risks" as it creates an opportunity for rival messaging providers to offer the same service for free. Mobile operators, for instance, are fighting back against over-the-top (OTT) competitors by introducing their rich communication services (RCS) for free, he noted.

Both analysts said other methods of monetization might be more palatable for consumers. Milroy said building the messaging platform to offer more features and paid services beyond the core capability will help create "stickiness" among subscribers and entice them to pay for these additional services.

Another way is to adopt the freemium model in which functionalities such as group chats are subject to in-app purchase, or capping messages and making users pay for additional messages sent within a specific timeframe, he suggested.

"Reasonable" pricing acceptable

Singapore-based consumers expressed mixed feelings when asked if they are willing to pay for mobile messaging services.

WhatsApp user Angela Wu was skeptical of service providers which "forcibly" impose a fee as the only reason why consumers remain on the platform is because the service is free. That said, for people who "cannot function" without it, they might find it difficult to migrate to another platform.

Wu said she uses WhatsApp to "chat with nearly everyone from my work to personal life", so she would think twice before deleting the app.

Another WhatsApp user, marketing executive Jenna Lee, said: "Without blinking, lots of people just dropped SMS to use WhatsApp and other free [apps]. It won't be any more difficult to move on to another app if one of them starts charging a fee."

Lee added there are at least a few apps consumers can use as alternatives. "In the unlikely scenario all the popular apps start imposing fees at the same time, there's always Facebook Messenger, which is accessible on phones."

There were others, though, who were not against paying the fee if the amount was small. Travis Koh, a music teacher, said he would pay if "it is reasonable and it will still [be] cheaper than the going rate for each SMS". Data roaming rates aside, the app fee would be the same around the world, unlike international SMS charges, he added.

Koh did suggest to pay payments easier, recurring fees should be included in consumers' mobile subscription plans or factored into the monthly subscription fee.

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