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Mobile IM: The Next $50 Billion-a-Year Mobile Application Market

11 января 2007
Mobile Instant Messaging (or IM) may likely be the next really big mobile application market, and may eventually exceed the SMS market. And a little-known company, called NeuStar, in Sterling, Virginia may find itself right in the middle of this new "real-time mobile IM" market as a result of its acquisition of Followap. Here's why.

NeuStar is best known as the number portability company, whose directory services are used to route all calls, signaling, messaging and other inter-carrier transactions in countries such as US, Canada, and Taiwan. The company manages the wireless operator's directory of mobile phone numbers so that when a user wants to move his or her mobile phone number from one wireless operator to another, NeuStar provides the change in the phone directory, and defines what number is assigned to which operator. While directory services for number portability have generated impressive year-over-year growth for NeuStar, the company has had a strong interest in applying this expertise to new services, such as IP/SIP. This led NeuStar's management to focus hard on what it believes will be the next big growth market in which the company's inter-operator directory services might put to good use--Mobile Instant Messaging.

Frost & Sullivan estimates that SMS is a $63B revenue opportunity, and $10B/year infrastructure market for 680+ wireless operators, representing more than two billion users and a trillion messages per year. It is the second largest mobile application market (behind basic mobile voice services).

But SMS has a number of limitations that will prevent it from ever surpassing voice services, most notably the limitation to 160 characters per message, the lack of message threading in most phones (where you can see the exchange of messages between two people in one folder), lack of presence (you never know if the other person is online), and some restrictions for interoperability internationally.

Last year at 3GSM, a number of wireless operators made a commitment to support inter-operator compatibility for Mobile IM. Thus, with this commitment, subscribers on one wireless operator's network could seamlessly IM subscribers on another wireless operator's network. NeuStar developed the core SIP protocol standards used for Mobile IM, as well as the interoperability and directory standards. And London-based Followap is the leader in IM applications on mobile devices. The acquisition of Followap puts NeuStar right at the core of what will undoubtedly become one of the next big mobile application markets. Mobile IM will likely eventually become more popular than SMS. This is simply due to the inherent advantage of Mobile IM over SMS for most mobile subscribers, including unlimited message length, buddy lists, presence (so you know if they are available to chat), and extension from desktop IM, which is already surpassing email as the messaging medium of choice for young people.

Further, a subscriber on any one wireless operator's network is able to IM with any IM portal user that has set up a partnership with that wireless operator. For example, if one wireless operator had a partnership with Yahoo, all of Yahoo's IM subscribers would be able to IM with that wireless operator's wireless subscribers, thus extending the IM portal's value. The inter-operator agreements do not extend cross-operator to the portal partnerships held by other wireless operators. Thus, AOL IM users (AIM) may have a partnership with one wireless operator but they could not IM with Yahoo IM users even though the company might have a partnership with another wireless operator--at least not yet initially.

Inter-portal IM still seems like the Holy Grail in IM - where all users on all IM portals will be able to IM without interference. We truly have "walled gardens" today in portal IM, which doesn't make a bit of sense. Think if AOL users could only send email over the Internet to other AOL users, but not to someone with an EarthLink account.

Mobile IM will succeed big time in wireless because:
  • All mobile users know the SMS messaging paradigm, evidenced by the 70% penetration of mobile subscribers today using only the mobile phone number as a universal form of address.
  • Most mobile users likely also have one or more IM accounts and, hence, they already know how the IM paradigm works.
  • Buddy lists will include presence, just like on the desktop, so that users will know if someone is online and can chat. (Currently, users can send them an SMS if they are not online, and ask them to get back online so that you can chat).
  • Most mobile users know about "social networking" and, as a result, understand the benefit of doing IM.

Note that Mobile IM will also become more popular as feature phones adopt QWERTY keyboards, similar to what you find in smartphones today, such as the RIM BlackBerry, Palm Treo, and Nokia E-Series. You see it happening already with a number of "pull out" keyboards in lower-priced phones.

Watch for major developments in Mobile IM over the coming months. It's going to happen first in Europe and then Asia and, finally, in the U.S. (Again, the U.S. is behind and not part of the first round of inter-operator agreements.) Users throughout Europe will be able to establish buddy lists and IM with other wireless subscribers. Eventually, Mobile IM will come to the U.S.

Frost & Sullivan believes that the Mobile IM market will continue to grow at compounding rates for many years. As a result, NeuStar's acquisition of Followap should result in true synergy, where both companies benefit greatly from the combination. And, since Mobile IM is all IP-based, you can expect to see multimedia services, such as file transfer, voice, video, pictures, and music, added to Mobile IM before too long.

And, maybe - just maybe - the NeuStar-Followap combination will lead to the Holy Grail in messaging - where all portal users and wireless subscribers will be able to freely IM each other. That would be huge.

Gerry Purdy, Frost & Sullivan, for FierceWireless


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