Research Report The Connected Consumer Survey 2015: OTT communication services April 2015 Patrick Rusby and Stephen Sale
2 About this report This report focuses on aspects of Analysys Mason s annual Connected Consumer Survey that relate to the behaviour and plans of over-the-top (OTT) communication service users in France, Germany, Indonesia, Malaysia, Morocco, Poland, Qatar, Saudi Arabia, South Africa, South Korea, Spain, Turkey, UAE, the UK and the USA. The survey was conducted in association with Survey Sampling International (SSI) and On Device Research. The research was conducted in July and August 2014. The survey groups in Europe and the USA were chosen to be demographically representative of the broader online consumer population, and those in Asia Pacific and the Middle East and Africa (MEA) were chosen to be representative of the mobile- Internet-using population. We set quotas on age, gender and employment status to that effect. There were a minimum of 1000 respondents per country, and 22 174 respondents. This report focuses on several issues that are critical to the strategy of mobile operators in 2015, including: penetration of OTT communications apps, including OTT messaging, VoIP and video calling apps the market demographics for OTT messaging adoption, and the impact of these services on operators SMS services use cases for, and barriers to adoption of, VoIP and video calling services. Figure 1: Geographical coverage of our Connected Consumer Survey 2015 [Source: Analysys Mason, 2015] USA Online survey France Spain Morocco UK (Survey Sampling International) Germany Poland Turkey Qatar UAE Saudi Arabia South Africa Indonesia South Korea Malaysia Browser-based mobile survey (On Device Research)
3 Contents Slide no. 6. Executive summary 7. Messaging was the most widely used OTT communication service on handsets, and video calling apps were used more than VoIP 8. OTT messaging penetration and SMS usage are highest among younger age groups in Europe and the USA 9. Overseas workers in the Middle East continue to use Skype to call home, but newer apps are challenging its position as the market leader 10. Recommendations 11. Recommendations 12. Penetration of communication apps 13. Messaging was the most widely used OTT communication service on handsets, and video calling apps were used more than VoIP 14. Asia Pacific: The market is fragmented so no service dominates, and competition is intense in Indonesia and Malaysia 15. Europe and the USA: Turkey has joined Germany and Spain as good markets for WhatsApp Messenger, and Skype remains strong elsewhere 16. Middle East and Africa: VoIP and video calling were more prevalent than in other regions, largely because of expatriate communities in Qatar and UAE 17. OTT messaging and SMS substitution 18. The 25 34 age group typically had the highest penetration of OTT messaging apps particularly in Germany and Spain Slide no. 19. The messaging giants in Europe and the USA appeal across age groups and platforms, but a long tail of services is catering to niche segments 20. OTT messaging penetration and SMS usage are highest among younger age groups in Europe and the USA 21. A lack of universal reach limits the ability of OTT apps to fully replace SMS, but substitution is advanced in several countries nevertheless 22. Unlimited SMS message allowances may have restricted OTT messaging penetration in some countries, but SMS volumes are decreasing overall 23. Many operators in Asia Pacific have chosen to partner with OTT players instead of competing directly in the messaging market 24. VoIP and video calling services 25. VoIP is strongest in the Middle East where the service is most widely used by older respondents 26. Overseas workers in the Middle East continue to use Skype to call home, but newer apps are challenging its position as the market leader 27. In countries that do not have large communities of immigrants, VoIP is not providing a compelling reason to convert usage from voice minutes 28. Video calling was more widely used than VoIP in most markets, suggesting that users are looking for more than just price advantage 29. Methodology and panel information 30. Methodology 31. Panel information: France and Germany
4 Contents Slide no. 32. Panel information: Indonesia and Malaysia 33. Panel information: Morocco and Poland 34. Panel information: Qatar and Saudi Arabia 35. Panel information: South Africa and South Korea 36. Panel information: Spain and Turkey 37. Panel information: UAE and UK 38. Panel information: USA 39. About the authors and Analysys Mason 40. About the authors 41. About Analysys Mason 42. Research from Analysys Mason 43. Consulting from Analysys Mason
5 List of figures Figure 1: Geographical coverage of our Connected Consumer Survey 2015 Figure 2: OTT communication app usage on smartphones, by category, country and region Figure 3: SMS usage and OTT messaging app penetration by age group, Europe and the USA Figure 4: Penetration of Skype among handset owners by nationality and country, Middle East and Africa Figure 5: Penetration of VoIP apps, Middle East and Africa Figure 6: OTT communication app usage on smartphones, by category, country and region Figure 7: Penetration of OTT communication apps on handsets, Asia Pacific Figure 8: Penetration of VoIP and OTT messaging apps by country, Asia Pacific Figure 9: Penetration of OTT communication apps among smartphone users, Europe and the USA Figure 10: Penetration of VoIP and OTT messaging apps by country, Europe and the USA Figure 11: Penetration of OTT communication apps on handsets, Middle East and Africa Figure 12: Penetration of VoIP and OTT messaging apps by country, Middle- East and Africa Figure 13: Penetration of OTT messaging apps among smartphone users, by age group and country, Europe and the USA Figure 14: Penetration of OTT messaging apps among OTT messaging users, Europe and the USA Figure 15: Penetration of OTT messaging apps among OTT messaging users, by age group and country Figure 16: SMS usage and OTT messaging app penetration by age group, Europe and the USA Figure 17: Use of OTT messaging and SMS by smartphone owners, by country and region Figure 18: SMS message allowance per month, by country, Europe and the USA Figure 19: SMS volume sent per subscriber, by country, Europe, 3Q 2012 3Q 2014 Figure 20: Operator partnerships with OTT players by region, November 2014 Figure 21: Penetration of VoIP apps among handset users, by country and age group, Europe and the USA Figure 22: Penetration of VoIP apps among mobile Internet users by country and age group, Asia Pacific and Middle East and Africa Figure 23: Penetration of Skype among handset owners by nationality and country, Middle East and Africa Figure 24: Penetration of VoIP apps among handset owners, Middle East and Africa Figure 25: Reasons stated by tablet and PC VoIP service users for not using VoIP services on handsets, 2012 and 2014, Europe and the USA Figure 26: Penetration of VoIP and video-calling services by country and region
Indonesia Malaysia South Korea France Germany Poland Spain Turkey UK USA Morocco Qatar Saudi Arabia South Africa UAE Percentage of respondents The Connected Consumer Survey 2015: OTT communication services 7 Messaging was the most widely used OTT communication service on handsets, and video calling apps were used more than VoIP Figure 2: OTT communication app usage on smartphones, by category, country and region [Source: Analysys Mason, 2015] 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Asia Pacific Europe and the USA Middle East and Africa Penetration of OTT messaging (IP or social messaging), voice and video calling services varies significantly by country. 1 OTT messaging was the most commonly adopted category of OTT service, because it offers an improved user experience compared with SMS, at zero or minimal cost. 2 Penetration of VoIP on mobile handsets remains relatively low in Europe and the USA. In contrast to messaging, VoIP apps have not been able to offer a significantly differentiated user experience or price advantage for domestic calling. The Gulf Cooperation Countries (GCC) in the survey had the highest VoIP and video communication app penetration in the panel because the large population of workers from overseas use these services to communicate with friends and family in their home countries. In Malaysia and Indonesia, fragmentation between services was significant. Five services have more than 20% penetration of respondents in Malaysia, and six in Indonesia. In South Korea, only KakaoTalk fits this description. 2 OTT messaging VoIP Video Question: Which of the following services do you use on your handset? ; n = 15 072. 1 The respondent panels in Asia Pacific and MEA are representative of mobile Internet users, who are more likely to be smartphone owners and to use these services than the general population. In these regions, smartphone owners tend to be early adopters, and therefore penetration of services may appear higher than in more mature markets worldwide. 2 Social messaging apps are those that fall between social networks (such as Facebook) and pure messaging apps (such as WhatsApp Messenger). Examples include Instagram and LINE.
Percentage of respondents The Connected Consumer Survey 2015: OTT communication services 8 OTT messaging penetration and SMS usage are highest among younger age groups in Europe and the USA OTT messaging penetration is highest among younger age groups and these respondents are typically heavy users of SMS. OTT messaging services often encourage users to send more messages because the apps facilitate chat-style conversations, and are free. In Europe and the USA, Facebook Messenger, Skype and WhatsApp Messenger, the three dominant apps, were each used by over 30% of OTT messaging users in these regions. The market is characterised by a long tail of niche apps that appeal to specific groups, often based on age, and often within a specific country for example, Kik in the USA and Snapchat in the UK. Respondents in most countries in Asia Pacific and MEA used a combination of OTT messaging and traditional SMS for messaging on their handset. In Europe and the USA, 63% of respondents with smartphones did not use OTT messaging services. The example of Turkey shows that high usage levels of SMS do not protect against OTT substitution. Operators need to use pricing levers to more-effectively manage the decline of SMS. They should also consider improving the user experience of their communication services to remain competitive. Figure 3: SMS usage and OTT messaging app penetration by age group, Europe and the USA [Source: Analysys Mason, 2015] 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 38% 41% 36% 23% 15% 8% 18 24 25 34 35 44 45 54 55 64 65+ Age group Number of SMS/MMS messages per month: <100 100 249 250 499 500 999 >1000 Penetration of OTT messaging apps Questions: How many text messages (SMS and MMS in total) do you send per month? ; n = 7052; and Which of the following services do you use on your handset? ; n = 7052.
39 Executive summary Recommendations Penetration of communication apps OTT messaging and SMS substitution VoIP and video calling services Methodology and panel information About the authors and Analysys Mason
40 About the authors Patrick Rusby (Analyst) is the lead analyst for Analysys Mason s SME Strategies research programme, and contributes to the Mobile Services programme within the Consumer research practice. Patrick s areas of specialisation for SME strategies are SME technology trends and adoption, enterprise mobility, SaaS and IaaS services for SMEs and unified communications. Within Mobile Services, Patrick is focused on the MVNO market and churn-reduction strategies for operators. Patrick was previously a Research Manager for Knowledge Peers, a peer learning platform helping SME CxOs share best practice in finance, technology and telecoms. He holds a Master s degree in Contemporary British Politics from Goldsmiths College, University of London. Stephen Sale (Principal Analyst) is the lead analyst for Analysys Mason s Mobile Services and Next-Generation Services research programmes. His primary areas of specialisation include next-generation communication services, over-the-top (OTT) player strategies and mobile pricing. He also has extensive experience in analysing mobile operator strategies and forecasting mobile service markets. Before joining Analysys Mason in 2004, Stephen worked in the industry on areas that include VoIP, next-generation service architecture and broadband access. He has a degree in economics and an interdisciplinary MRes from the University of London.
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