Market overview (1/2) The mobile instant messaging market is considerably
increasing. UK based institute Juniper Research recently
Increase in global mobile messaging traffic forecasts that global mobile messaging traffic will reach
between 2012 and 2017 (in billions) 28.2 trillion annually by 2017, nearly double the 14.7 trillion messages which will be sent this year, 2012. Mobile messages comprise SMS, MMS, IM, Email, RCS/RCS-e and Social Media messages. 30 28,2
Global growth in total traffic will be primarily driven by the use of over-the-top (OTT) instant messaging services, which 25 will comprise over 25% of all traffic annually in five years’ time according to Juniper’s analysts. Besides, the firm forecasted in 2011 that mobile IM will triple exceeding 1.3 20 billion users by 2016 . On his side, The Radicati Group, a California-based IT research firm estimated that there was 14,7 2.4 billion IM accounts in 2010 worldwide, rising to 3.5 15 billion by 2014.
OTT instant messaging services have developed themselves 10 thanks to smartphones’ ascension. They permit users to send messages for free using mobile operators internet connection (Wifi, 3G, 4G) and push notifications. This new 5 way to communicate is growing strongly from several years which indicates that social messaging is not a short-term trend, but a shift in communication patterns. In August 0 2012, WhatsApp announced it is handling 10 billion 2012 2013 2014 2015 2016 2017 messages a day. Source : Juniper Research 3
Market overview (1/2) VoIP Minutes of Use p.a. (Excluding WiFi) (m) via 3G 3G VoIP Application Revenue (m) Split by 8 Key Regions Users Using Applications Split by 8 Key Regions 2010-2015
Mobile OTT communication ($bn) Juniper Research forecasts a worldwide increase in mobile VoIP application minutes via 3G from 343 millions 2010 to 45 just over 30 billions 2015, centupling in just 5 years. 40 Furthermore, Juniper Research estimates that the number 35 of mobile VoIP minutes carried on 3G and 4G network will 30 rise from 15 billion minutes in 2010 to 470.6 billion by 25 CAGR 2015. 20 130%
15 In parallel, the expected revenue from mobile VoIP via 10 applications will increase from $20.5 million to $1.25 5 billion. 0
2012 2013F 2014F 2015F 2016F Finally, global mobile OTT communication market will reach 45$bn in 2016. Sources: Juniper, Frost and Sullivan, Portio Research, Arthur D. Little analysis 4
Major actors (1/4) Active Users Business Logo Company Country Description Positionning in 2012 (mm) Model Pure player / Instant AOL, inc. AOL launched AIM on February 2006. 195 Advertising messenger Apple launched Facetime in Octuber 2010 and Handset vendors Apple, Inc. (iMessage) 140 - iMessage in October 2011. instant messenger Baidu Baidu Hi was launched on February 2008 IM / Search engine - - Some of the features of BBM include groups, bar-code The BBM Music Premium is scanning, lists, shared calendars, BBM Music and Handset vendors available for a monthly Blackberry, Inc. 60 integration with apps and games using the BBM instant messenger subscription of $4.99, social social platform. games Jabber was founded in 2000 as a non profit Cisco Jabber Pure player / Instant organization. The company was acquired by Cisco in - - (Cisco, Inc) messenger 2008. eBuddyB.V. was founded in 2003 and is based in eBuddy B.V. Amsterdam, the Netherlands with additional IM multiplatform 33 Advertising locations in London and San Francisco Facebook lanched Messenger App. In August 2010. 425 (mobile Social Network Facebook Messenger users - FBCIM allows you to use Facebook Chat without the instant messenger worldwide) need to be connected on Facebook. Fringland Ltd. was founded in 2005 and is based in Advertising + Paying regular Fringland Ltd. IM multiplatform - Tel-Aviv, Israel. phone calls worldwide The company was founded in 2000 and is based in Pure player / Instant Gadu-Gadu 15 - Warsaw, Poland messenger 5
Major actors (2/4) Google, Inc. Google talk was launched on August 2005 IM / Search engine - - As of August, GroupMe was founded in 2010 and is based in New Pure player / Instant 2011, GroupMe groupme - York messenger delivers in excess of 100 Free daily-limited SMS The company was founded in 1996 and is based in Pure player / Instant sending, resumable file ICQ LLC. 42 Tel Aviv, Israel. messenger transfers, greeting cards, multiplayer games Imo Chat was founded in 2007 and is based in Palo imo.im IM multiplatform 7 - Alto, California. Kakao Corporation Pure player / Instant Advertising, Digital items, Kakotalk was founded in 2006 and is based in Seoul 66 (Kakaotalk) messenger and game center Kik Interactive, Inc. was founded in 2009 and is Pure player / Instant Kik Interactive, Inc. 30 - based in Waterloo, Canada. messenger The company was founded in 2007 and is based in Pure player / Instant LiveProfile - - New York. messenger The company was incorporated in 2005 and is Meebo IM multiplatform - - headquartered in Mountain View, California. Myspace developed MySpaceIM in 2006 as an Social Network MySpace - - addition to its social platform instant messenger Created in 1999, NHN Corporation operates Internet NHN Corporation Instant messenger / 40 (25mm in Advertising, Digital items, search portals primarily in South Korea and Japan. (KOSE:A035420) Gamers community Japan) and game center LINE was launched on June 2011. 6
Major actors (3/4) Advertising, Freemium model, Nimbuzz B.V. was founded in 2006 and is based in Nimbuzz IM multiplatform 220 agreement on revenue New Delhi, Indi sharing with IM companies. Pinger was incorporated in 2005 and is based in San Pure player / Instant Pinger - Advertising Jose, California. messenger Social Network Pinterest - 10 - instant messenger ChatOn was introduced by Samsung Electronics in Handset vendors Samsung Electronics - - September 2011 instant messenger Shape.AG was founded in 1999 and is based in Freemium : IM+ 3.0 Lite, a Shape.AG Stuttgart, Germany IM multiplatform - free ad-based version and IM+ pro for 8.99€ The company was incorporated in 2004 and is based Pure player / Instant 600 (not only Paying regular phone calls Skype (Microsoft) in Palo Alto, California. messenger mobile) worldwide Hyves was in 2010 still the most popular social network in Holand with 10.6 million Hyves users and Startphone Limited Social Network a 68% penetration. As of November 12, 2010, 11 - (Hyves) instant messenger Startphone Limited operates as a subsidiary of Telegraaf Media Groep. Tencent is a leading Chinese internet company. WeChat was initially launched as Weixin in China in Pure player / Instant Tencent (WeChat) 200 - January 2011. The app has recently been launched in messenger Thailand. San Francisco based TextMe was originally launched Pure player / Instant TextMe in March 2011 as a free, texting-only application for 1 - messenger Ipod The company was formerly known as GOGII, Inc. Freemium : Gold & Silver Pure player / Instant textPlus, Inc. textPlus, Inc. was founded in 2007 and is based in 110 versions, social game, virtual messenger Marina del Rey, California. goods 7
Major actors (4/4) Pure player / Instant Touch Touch was primarly known as PinchChat 13 - messenger Social Network Twitter - - - instant messenger Valve Corporation operates as an entertainment software and technology company. The company was Instant messenger / Valve Corporation 54 - founded in 1996 and is based in Bellevue, Gamers community Washington. Pure player / Instant Viber Viber was launched in 2010 100 - messenger Social Network VKONTAKTE VKONTAKTE is the first russian social network. - - instant messenger $0,99 for the app and a WhatsApp funded was founded in 2009 and is based Pure player / Instant Whatsapp 100 subscription of $1,99 per in Santa Clara, California. messenger year Windows Live Pure player / Instant Windows Live Hotmail App. - - (Microsoft, Inc.) messenger Yahoo! Messenger was originally launched under the Yahoo!, inc. IM / Search engine - Advertising name Yahoo! Pager on March 9, 1998. Yandex, the first russian search engine, launched an Yandex IM / Search engine - - IM platform on August 2008. YY Inc., through its subsidiaries, operates an online Pure player / Instant YY 400 - social platform in the People’s Republic of China. messenger Sources : OTT companies websites, blogs, Wikipedia, Press releases 8
Fundraising & private placements (1/3) From 2003 more than $300mn have been leveraged by over-the-top (OTT) instant messaging services providers.
These start-ups have interested institutional and corporate funds. Thus, Jabber was funded by France Telecom, Intel and Webb interactive Services before being sold to Cisco in 2008. KakaoTalk was funded by WeMade Entertainment Co., a South Korean online game developer and Tencent which develop QQ IM, the leading instant messaging service in China. More recently the company has been funded by Yahoo! following the signing of a partnership between the two structures concerning the Japanese market.
Private Equity firms invested large amounts in several rounds. For example, Mangrove Capital Partners participated in 5 funding rounds for Nimbuzz and Kleiner, Perkins, Caufield & Byers and Matrix Partners supported textPlus during 3 rounds.
This shows that they have a huge interest and that they trust in the long-term development of the sector.
Fundraising & private placements (2/3) Target Closed Date Investors Size ($mm) North Bridge Venture Partners; Pitango Venture Capital; Veritas may-24-2011 Venture Partners 10,0 North Bridge Venture Partners; Pitango Venture Capital; VenFin DD apr-30-2009 Fringland Ltd. Holdings Limited; Veritas Venture Partners - (Fring) nov-27-2008 - - North Bridge Venture Partners; Pitango Venture Capital; VenFin DD aug-09-2007 Holdings Limited; Veritas Venture Partners 12,0 Betaworks; First Round Capital; General Catalyst Partners; Khosla jan-04-2011 Ventures; Lerer Ventures; SV Angel 10,6 GroupMe Inc. aug-25-2010 Betaworks; First Round Capital; Lerer Ventures; SV Angel 0,9 ICQ Ltd. 1996 Shalom Management - IM+ (SHAPE.AG) Feb-13-2012 Finam Global 10 France Telecom Technologies Investissements SA; Intel Capital; Webb Jabber, Inc. mar-19-2003 Interactive Services Inc. (OTCPK:WEBB) 7,2 oct-15-2012 Yahoo Japan Corporation (TSE:4689) - Kakao Tencent Holdings Ltd., Investment Arm; WeMade Entertainment Co., apr-15-2012 Corporation Ltd. (KOSE:A112040) 81,1 CyberAgent Ventures, Inc.; DCM; Korea Investment Partners Co. Ltd.; aug-26-2011 Maverick Capital, Ltd.; WeMade Entertainment Co., Ltd. 19,2 Kik Interactive, mar-07-2011 RRE Ventures LLC; Spark Capital; Union Square Ventures Inc. 8,0 LiveProfile Inc. apr-01-2011 Lightspeed Venture Partners 1,1 Source : Capital IQ, MergerMarket 10
Fundraising & private placements (3/3) Target Closed Date Investors Size ($mm) Draper Fisher Jurvetson; JAFCO Ventures; Khosla Ventures; Sequoia déc-20-2010 Capital; Time Warner Investments 27,5 Draper Fisher Jurvetson; JAFCO Ventures; KTB Ventures; Sequoia avr-30-2008 Meebo, Inc. Capital; Time Warner Investments 25,0 janv-18-2007 Draper Fisher Jurvetson; Sequoia Capital 9,0 déc-19-2005 Sequoia Capital 3,5 déc-31-2011 Mangrove Capital Partners - mai-18-2010 Myriad International Holdings B.V. 12,4 juil-01-2008 Mangrove Capital Partners; MIH Holdings Ltd. 15,0 Nimbuzz B.V. Holtzbrinck Ventures Gmbh; Mangrove Capital Partners; MIH Holdings juin-18-2007 Ltd. 10,0 août-29-2006 Mangrove Capital Partners - 2005 Mangrove Capital Partners - févr-23-2012 T-Venture Holding GmbH 7,5 Pinger, Inc. déc-06-2006 DAG Ventures, LLC; Kleiner, Perkins, Caufield & Byers 8,0 Startphone Van den Ende & Deitmers Venture Capital Partners Buyer Funds: Jan-2008 Limited (Hyves) Crossmedia Fund - GRP Partners; Kleiner, Perkins, Caufield & Byers; Matrix Partners; The oct-16-2012 Raine Group LLC 18,0 textPlus, Inc. janv-31-2011 GRP Partners; Kleiner, Perkins, Caufield & Byers; Matrix Partners 15,0 déc-09-2009 Kleiner, Perkins, Caufield & Byers; Matrix Partners 8,2 WhatsApp Inc. avr-08-2011 Sequoia Capital 8,0 Source : Capital IQ, MergerMarket 11
Exit opportunities (1/2) There are some good exit opportunities. Most of leading internet, telecom and handset vendors are present on the market and do not hesitate to spend hundreds of millions dollars to acquire leading independent actors.
Note that ICQ has been acquired by AOL in 1998 for $407mm and sold ten years later for less than the half to Digital Sky Technologies Limited, the largest Internet company in the Russian-speaking and Eastern European markets.
There is no multiple, EBIT or revenue available on major databases (Capital IQ, MergerMarket, etc.) 12
Exit opportunities (2/2) Closed date Transaction Type Target Buyer Size ($mm) Nov-21-2012 IPO YY, Inc. - - June-04-2012 Acquisition Meebo, Inc. Google Inc. (NasdaqGS:GOOG) - Augt-21-2011 Acquisition GroupMe Inc. Skype, Inc. 80 Telegraaf Media Groep NV Nov-12-2010 Acquisition Startphone Limited (Hyves) 60,69 (ENXTAM:TMG) May-08-2011 Acquisition Skype, Inc. Microsoft 8 500 Digital Sky Technologies Limited July-08-2010 Acquisition ICQ LLC (AOL Inc.) 187,5 (DST) Cisco Systems, Inc. Oct-31-2008 Acquisition Jabber, Inc. - (NasdaqGS:CSCO) Dec-18-2007 Acquisition Gadu-Gadu S.A. Naspers Ltd. (JSE:NPN) 155 Aug-30-2005 Acquisition Teleo, Inc Microsoft - June-05-1998 Acquisition Mirabilis Ltd. (nka: ICQ Ltd.) AOL Inc. (NYSE:AOL) 407 1997 Acquisition MSN Messenger Microsoft 400 Source : Capital IQ, MergerMarket 13
Telcos’ response (1/2) As we seen in the first part, the messaging industry is initiative to deploy inter-operator RCS services. The GSMA approaching a watershed moment. Ovum firm believes that (RCS project association) aims to provide customers with global SMS revenues will plateau in 2014, meaning that instant messaging or chat, live video sharing and file operators need to implement a strategy now so that they transfer across any device, on any network, with anyone in can to cope with the subsequent decline in revenues. their mobile address book. It will permit operators to face
OTT competitors that cannot offer a global solution. OTT companies became a real threat for operators. $14bn
(11%) have been lost in SMS revenues to OTT players in Mobilization is global and the project is now supported by 2011. In the report Counteracting the Social Messaging many major industry actors including operators such as Threat, Ovum firm estimated that social messaging services AT&T, China Mobile, Orange Telefonica, Vodafone and would cost telecom operators $23,2bn in SMS revenues in Deutsche Telekom and handset vendors such as HTC, LG, 2012 (18,1% of 2011 revenues) and $54bn by 2016 (42,2% Nokia and Samsung. of 2011 revenues).
The solution is now available under the consumer brand
Global mobile traffic revenue 2011 ($bn) Joyn. It has been launched this semester in Spain by
Orange, Telefonica and Vodafone, in Germany by Vodafone
and in the USA by MetroPCS.
Sms In addition, operators in France, Italy and Korea have
Data committed to commercial launches. Deutsche Telekom
announced it will start supporting Joyn in Germany from Voice
December this year and Orange will begin to deploy Joyn in
315; 30% France from June 2013.
Source : Juniper Research
In 2007, a group a group of leading telecom operators have formed the Rich Communication Suite (RCS), a global 14
Telcos’ response (2/2) Telefonica was the first operator to declare war on OTT Orange has maybe find a solution, with Libon’s freemium services providers with the application TU Me. The app is business model. There is a free version and a paid version free to download and allows users to send texts and without advertising, automatically renewed because of 2.69 pictures, make calls by using their data allowance. euros per month (charged to iTunes account, so Apple
keeps 30%), with more features including 1 hour of calls to Services which offer similar functions, such as Skype, often 30 international destinations. need Wi-Fi to make it work and, while Wi-Fi is an option
here, the 3G connection enables users to be a lot more The challenge will be to convince users to abandon services mobile when communicating on the move. they are accustomed to using and move to a paid solution.
Telefonica has been fallowed by other operators like T- Mobile with Bobsled, a similar application that also offer free voice calls within Facebook.
Orange Telecom have just launched Libon, a mobile application which allows users to send messages, chat and call in voice over IP, 3G or WiFi, including in countries where it does not have its own mobile network. (This service is available in 80 country whereas Orange is operator in only 33 of them).
Operators become OTT themselves. Their services compete directly with OTT companies like Whatsapp but operators will need to identify new revenues because even if voice calling and text messaging are still growing, the revenues and margins are in decline. 15