Overview of the application-to-person SMS aggregation market in India

Transcription

1 1 Research Viewpoint Overview of the application-to-person SMS aggregation market in India December 2011 Sourabh Kaushal

2 2 Executive summary In FY2011, the application-to-person (A2P) SMS aggregation market in India was estimated at USD60 million, with more than 8 billion messages being sent per month. This volume has grown at a CAGR of 114% during the past four years. Currently, the market is dominated by the top four SMS aggregators that control around 6 of the total A2P SMS market and the rest constitutes a large number of smaller resellers On the supply side, majority of the bandwidth (~ 7) is procured from Tata Teleservices. However, new entrants such as Loop and Aircel are trying to gain a larger share of the market Traditionally, BFSI and travel were the key verticals using SMS aggregation services, but over the past few years several other verticals such as E-Commerce, Real Estate and Retail aggressively adopted the SMS channel for CRM and marketing purposes. This resulted in an increase in unsolicited and untargeted messages resulting in a negative consumer perception for all A2P commercial messages. A National Do Not Call Registry was mandated by the regulator to control these unsolicited messages but it did not result in effectively controlling the issue and consumers continued to receive unsolicited, spam messages Finally, this led to the intervention of the regulator to control the situation and mandate stringent guidelines, along with implementing termination charges to control unsolicited commercial messages. These guidelines have controlled this issue but have also had a critical impact on the A2P market in terms of volume (4 decline) and pricing (2x increase). Even the service providers themselves are being over cautious about adhering to these guidelines and are ensuring additional measures such as a standard template for commercial messages. In fact they do not even allow resellers to send out messages if they do not strictly adhere to these internal, policy measures In response to the decline in the messaging volumes, the service providers are experimenting with innovative models (NetCore s Phone.CC), encouraging consumer opt-in and offering variable pricing models for resellers

3 Revenue (USD million) Messages (billion) Overview of the application-to-person SMS aggregation market in India 3 In FY2011, the A2P SMS aggregation market in India was estimated at USD60 million, with more than 8 billion messages being sent per month Figure 1: A2P SMS revenue and messages, India, FY2006 FY2010 [Source: Analysys Mason, 2011] A2P SMS aggregation market in India has seen a steady growth in the volume of messages being sent out per month and has seen a CAGR of over 114% for the period FY2006 FY2010. Initially, BFSI and travel were the key verticals using SMS aggregation services, but over the past few years several other industries such as e-commerce, real estate and retail have started to adopt the SMS channel for CRM and marketing/promotion purposes FY2006 FY2007 FY2008 FY2009 FY2010 Revenue SMS messages 24 0 Price of bulk SMS has also been declining steadily over the years with growing volumes. Currently, industry average bulk SMS price is US cent However, this can vary significantly depending upon the volume of messages and purchase channel.

4 4 The top-four SMS aggregators control about 6 of the total A2P SMS market, and Tata sells the majority of the bandwidth Figure 2: A2P SMS aggregation market by key player, India, FY2009 and FY2011 [Source: Analysys Mason, 2011] Figure 3: A2P SMS aggregation market by service provider, India, FY2009 and FY2011 [Source: Analysys Mason, 2011] 5 45% % 2 Value First 18% SMS Gupshup 15% 1 1 5% Air2Web ACL Wireless 3 1 5% 5% 5% Unicell NetCore Others % 5% 8% 1 6% Tata Airtel Loop Aircel BSNL/ MTNL 2% 5% 2% Vodafone RCom FY2009 FY2011 FY2009 FY2011 Over last one year, SMS Gupshup has seen significant growth in this segment, given its rapidly increasing subscriber base However, NetCore has lost a significant market share due to closure of its SMS based information service MyToday Airtel has exited completely from the A2P SMS aggregation market Aircel and Vodafone are the new entrants in this market. Even Loop had been increasing its market share before the recent regulations were introduced

5 5 Players in verticals such as financial, travel and e-commerce have been heavy adopters of A2P SMS particularly for transactional messages Figure 4: A2P SMS services and key end-user segments in India [Source: Analysys Mason, 2011] Service Description Key verticals Key end-users Business transactional Companies have a high dependence on SMS channel for all CRM, ERP, SCM transaction related processes for example, updating consumer transactions Banking, financial services and insurance (BFSI) Tourism Retail ICICI Bank, MakeMyTrip, Flipkart, LIC of India Social networks All leading social networks offer their users the option of receiving and sending updates via the SMS Channel Several mass market brands that advertise on social networks based on the A2P platform try to reach their target audience through these social networking communities Media Tourism Retail SMS GupShup, McDonald s, Facebook, Levi s, Big Bazaar Consumer opt-in Consumers can opt-in to receive promotions based on their preferences for example, real estate, education, tourism and leisure, technology and others Tourism and leisure Real estate Reuters, 99acres, Yatra Enterprise solutions Enterprise wide communications comprising both internal as well as external communications across IT systems and employee divisions Transport and logistics Blue Dart, Gati Commercial messages Marketing promotions are sent by companies to their customers for example, airlines and e-commerce companies send promotional updates to their consumers Tourism E-commerce Real estate Fashion and You, Fly Kingfisher

6 6 However, recent regulations have had a significant impact upon the A2P SMS market, resulting in policy measures to curb unsolicited messages Figure 5: Recent TRAI guidelines on commercial communications [Source: Analysys Mason, 2011] Regulations Commercial messages Consumer opt-in messages Termination charges Description TRAI released Telecom Commercial Communications Customer Preference Guidelines to address the issue of unsolicited commercial messages Guidelines mandate that consumers can either opt for a fully blocked category or a partially blocked one which will enable them to receive promotional messages from registered telemarketers under a particular category for example, education or travel and leisure In order to further reduce the number of unsolicited commercial messages, TRAI has recently imposed a termination charge of INR0.05 on each commercial message Commercial messages: Telemarketers have to check/clean their National Consumer Preference Registry (NCPR) database prior to campaign execution to ensure that no consumer registered with the NCPR is sent a commercial message Strict penalties are proposed for violation of these guidelines for both operators and telemarketers (upon sixth violation, tele-marketer gets blacklisted and operator is fined USD per violation) Consumer opt-in messages: Currently, consumers do not have any flexibility as there is no provision for opting for messages from an individual company and only from pre-defined categories No provision of opting for updates from a particular airline, instead need to select the entire tourism and leisure category Termination charges: The additional termination charge will increase this cost to INR per SMS, and is expected to reduce wide distribution of commercial SMS even by registered marketing agencies, resulting in making the SMS channel less attractive to advertisers

7 7 These regulations have had a significant impact on the entire A2P SMS segment, affecting volume, pricing and service mix of messages Figure 6: Impact of TRAI s regulations on the A2P SMS segment [Source: Analysys Mason, 2011] SMS volume per month (billion) Price of SMS (INR) SMS type mix (%) x March 2011 October March 2011 October 2011 March 2011 October 2011 Transactional Commercial As a result of the stringent regulations, both the operators as well as the tele-marketers are cautious about the categorisation of commercial messages. This approach and rigorous scrubbing of the consumer database against the NCPR has resulted in a significant decline in volume and has changed the mix of commercial and transaction messages Introduction of the additional termination charges of INR0.05 has resulted in a 2x increase in the price of a commercial message

8 8 Besides, a cautious approach has led service providers to implement additional measures to standardise commercial messages Figure 7: Standard template format applicable for BFSI verticals [Source: Analysys Mason, 2011] From LM SCBank Dear Customer, thank you for using your credit card no. ending 3580 on 25/11/11 for INR Please call our helpline If you have not transacted - StanFigure Approved, standard format Figure 8: Non-standard format used for educational alerts [Source: Analysys Mason, 2011] All leading service providers have started implementing additional preventive checks at their end to ensure that no unsolicited messages are sent from their messaging pipeline. Even the legitimate resellers can not send non-standard messages. A standard, template format based model has been laid out by several service providers: for example, for BFSI vertical, a standard template is being used by players across the industry. Whereas, in case of other verticals, if the message format is not standard, then service providers are currently not sending the messages. Not approved, unstandardised format From XX ABCD Dear Parent, please come for the PTA meet on 07/12/11 from 10:00 Hrs onwards. Kindly ensure your child accompanies you. - XYZ School Management Even in case of transactional messages, a double scrubbing of the consumer database often leaves out legitimate recipients. For example, a leading online ticketing provider s users used to receive their e-tickets over SMS, but now several users do not get them.

9 9 The regulations have had a significant impact on all leading providers, particularly if commercial messages formed a large part of their revenue Figure 9: Impact of recent TRAI guidelines on key service providers [Source: Analysys Mason, 2011] Service provider Key SMS offerings Impact of regulations Level of impact Value First SMS Gupshup NetCore Customised SMS marketing Short-code services integrated with all mobile operators in India Long-code with two-way global SMS Offers mobile communities for social networking and chat rooms Provides CRM applications Launched Reply-All (many-to-many) SMS capability Key SMS based service was MyToday that offered SMS updates on more than 250 topics Offers mobile marketing solutions Enterprise solutions comprising CRM Transactional messages have declined by approx 2 Commercial messages declined by 3 Impact on revenues from advertising as several advertisers have stopped sending promotional messages until the guidelines are further amended MyToday service has been put on hold until it is included in the consumer opt-in category Other A2P messages declined by 4 ACL Wireless Offers mobile community apps that provide an engaging and interactive experience to mobile users through services like SMS Chat, Voice Chat and Mobile Social Networking Frenzo Severe impact on its revenue, as bulk of its revenues were generated from commercial messages Key to level of impact: Very high High Medium Low Very low

10 10 SMS aggregators will place greater emphasis on encouraging innovation and offering lower pricing models to maintain growth Figure 10: Emerging models in A2P SMS aggregation market in India [Source: Analysys Mason, 2011] Opt-in messaging models There is increasing emphasis on encouraging consumers to subscribe to A2P based opt-in messaging Several amendments are gradually being released to include more services under the current consumer opt-in categories Focus on emerging models Innovative messaging models Launch of new models such as NetCore s Phonce.CC in partnership with Verisign. It enables a user to create a message inbox on the web, which allows for the selective blocking of spam messages, receive messages over mobile Internet, and also allows enterprises to send consumers those messages which they choose to selectively receive It also resolves issue of increased SMS costs because of termination charges Blended pricing model Currently, in case of commercial messages, several service providers have started offering a new pricing model known as blended pricing that constitutes traditional pricing and an additional amount to cover the increased messaging cost due to implementation of termination charges. For example, a blended rate of INR0.045 is being offered to advertisers to maintain the attractiveness of this medium