The opportunity in A2P messaging
Mobile Squared recently suggested that only between 2% and 5% of businesses worldwide are leveraging mobile messaging to reach their customers. With 300 million enterprises globally the scope of the opportunity begins to come into view. When you factor the 90%+ open rates on mobile messages it is only a matter of time before this channel expands rapidly for business marketers.
Despite the popularity of internet-based messaging platforms like WeChat and WhatsApp, they are not suitable for most A2P services due to their fragmentation. When it comes to crucial reminders like medical appointments, or banking notifications or package delivery ETAs then, A2P SMS is the only reliable option. This is why companies are willing to pay a premium for SMS when they want to communicate with their customers. To put it in perspective messaging platform penetration for Whatsapp is circa 45%, Viber circa 22% and SMS, of course, is 100%.
According to Future Market Insights, the global A2P SMS market is projected to generate $77.29 billion in revenue in 2023. This includes revenue from SMS, RCS, and OTT business messaging formats for industries such as banking, ticketing, healthcare, content payment, advertising, and retail. A2P SMS refers to messages where replies are not expected, and are often used by businesses to communicate with customers.
What is driving revenue in A2P messaging?
The truth is a variety of factors are driving revenue spend in A2P messaging but the underlying push is from businesses need to communicate better with customers.
Some of the contributing channels of revenue creation include:
- Customer care use cases including two-way communication
- Contextual marketing
- Two factor authentication requirements
- Ad spend by businesses to reach new or existing customers
- Organic business growth
- Rich messaging use cases
Who will win the revenue in this rising tide landscape is a bigger question. Up until now it has been media companies and aggregators who have garnered much of the revenue from enterprises and passed on some of that revenue to network operators. Now however, network operators are keen to get a larger piece of the revenue pie. Let’s drill into this dynamic a bit here.
Businesses pay a premium to communicate with their customers through SMS and other messaging services provided by operators. Many businesses use software companies to manage their customer engagement through multiple channels, such as text, email, voice and chat. These companies are experts in marketing and develop a comprehensive strategy for customer engagement.
Both software companies and businesses use an Aggregator, eg Twilio, to submit messages for delivery. Aggregators have access to operators and the telecom network for message delivery and aim to find the cheapest routes for message delivery. This may not be through the home operator of the target subscribers, but instead, a low-cost facilitating operator or a direct route into the international signaling network. These low-cost routes used by some aggregators and facilitating operators are known as “Grey Routes” in the industry. This is a way of reducing the cost of delivering a message for the business and results in mobile network operators missing out on revenue that they should earn by standard routes.
Home operators can also create problems for themselves by providing low-cost access to local bulk providers. This access may have been granted for specific use cases in the past, but if it continues to be used for new use cases, it can negatively impact the operator’s efforts to grow their A2P business.
Revenues decrease significantly at each point in the value chain. The presence of Grey SS7 Routes and low-cost bulk access via SMPP means that the termination fees that the home operator can charge may be kept at an artificially low level.
How mobile network operators can maximize their revenues from A2P
As the mobile network operator controls what is delivered on the network, it holds significant market power that can be used to strengthen its position in the value chain. To do this, the operator should develop a strategic plan centered around four elements of the A2P Marketing Mix: Pricing, Position, Promotion, and Platform.
Pricing: The operator should set a single minimum price for A2P access across all interfaces and types. This price should reflect local economic conditions and not be too high as to discourage businesses from using the service. Existing low-cost access contracts for local bulk providers should be terminated as they limit A2P revenue growth. Additionally, different tiers of service at different price points could be offered for different types of messages like financial services notifications.
Position: The operator can increase its margin and secure its pricing strategy by moving up the value chain and directly servicing large aggregators and enterprise customers.
Promotion: To attract enterprise and large aggregator customers, the operator must develop a sales and marketing strategy to promote its services. This will require re-skilling existing enterprise sales teams to effectively communicate the features and benefits of working directly with the operator.
Platform: To compete for direct enterprise business, the operator must offer enterprise-friendly interfaces that allow large volumes of A2P messages to be conveniently submitted for delivery to mobile customers. Administrators at enterprise sites should be able to manage employee use of the operator’s services and have visibility into the progress and success rates of mobile messaging campaigns. The operator should also have appropriate firewall platforms in place to block grey routes access to the network and prevent leakage of A2P traffic into the network, such as via SIM BOX farms.
The secret to driving profit in A2P messaging for business
- Create a strong A2P platform for selling directly to business/enterprises
Openmind specializes in building tailored solutions in the Cloud and on-prem for network operators to serve Enterprise customers directly.
- Stamp out security and fraud issues to inspire confidence
Ensuring a clean network that isn’t flooded with Smishing, Spam or fraudulent requests is a key part of the attractiveness of A2P solutions that come directly from network operators. Enterprises need to rely on their operator to keep the integrity of messaging intact for end-customers.
- Aggressively market the outcomes to business customers, only 2-4% of businesses are using A2P messaging
As was said in the opening paragraph, only a tiny fraction of businesses worldwide have opened the potential of business messaging direct to customers. Having this product built is a great first step but you also need to do the marketing to back it up. Happily the business case for A2P messaging in all its forms is extremely strong. With existing relationships among your customer base it should be a straightforward upsell for you.
If you would like to talk to us about A2P messaging please fill out the contact form and we will help you to increase A2P revenues this year.