Is the market for mobile chat apps saturated?

Spencer Ng is a client service associate director at TNS – a global market research firm. He is interested in anything mobile and currently runs Mobile Behave (a smartphone usage metering program) in key Asian markets. You can email him to find out more about the program.

Image credit: my.opera.com

Given the increasing number of mobile instant messaging (IM) or chat apps to choose from, one wonders how many chat apps the market can take. After all, apart from international platforms such as Whatsapp and Facebook Messenger, regional apps such as WeChat, KakaoTalk, and Line are really shaking up the market. Moreover, the mobile chat app production line doesn’t seem to just stop there. Just a few weeks ago, China Telecom launched Yixin, another mobile messaging app. This may suggest that the China market isn’t yet saturated.

Is the market for mobile IM apps saturated or not? The truth is probably somewhere in between and differs greatly from market to market. To illustrate this, we have produced a market grid using our syndicated research (TNS Mobile Life 2013 data). This grid enables us to look into the interaction between supply saturation (number of mobile chats per user) and demand potential (active usage of these messaging apps).

If we look at the vertical axis of the grid below as a starting point, what we will see is a very clear segregation into three categories of saturation.

1. Low saturation

Given that there are 1.5 mobile IMs per user on average in the US, the country – along with the likes of Australia & UK – is not as saturated as other Asian markets and clearly still has space to grow. However, strong barriers to adoption exist. In the US, SMS is still a widespread means of communication and mobile chat apps are yet to really take off. Compared to other markets, the US has a relatively low penetration (53 percent) of daily active users of mobile IM. In fact, peering deeper into our data – it shows that only 60 percent of smartphone users use mobile IM, compared to 94 percent using SMS.

2. Moderate saturation

Vietnam, China, and Malaysia all fall into the category of moderate saturation – with about 2.5 mobile chat apps per person. Even within this category, there are implications which arise from the wide disparity in daily active usage. Let’s compare the two polar opposites to illustrate this point. In Vietnam, there are only 44 percent daily active users of mobile IM. However, in time, we expect this percentage to increase. Currently, the relatively low smartphone penetration (27 percent of population) suggests that even smartphone users are still relying on old technology to communicate with friends beholden to feature phones. In contrast, Argentina leads in usage with 84 percent of mobile IM users using it on a daily basis. In fact, Argentina has the highest percentage of daily active users in the world – perhaps WeChat’s recent promotional blitz using Argentinian football star Messi might have something to do with this?

3. High saturation

Taiwan is the most saturated market for mobile IMs in the world – there are 3.6 mobile IMs used on average per user. The most widely used mobile IMs in Taiwan are Facebook Messenger, Line, Whatsapp, and Skype. The most surprising of the bunch is Line, which has achieved 75 percent penetration (17 million users) amongst smartphone users despite the relatively late start it had. In fact, it already supersedes Whatsapp and Skype in terms of penetration in that market. Perhaps this validates Line’s strategy of using celebrity spokespersons to target this market.

Where is the growth opportunity?

In one word: India. From the perspective of a mobile IM platform searching for new markets to penetrate, India offers limited competitive resistance with only 1.6 mobile IM apps per user. Moreover, given the rapid rate of smartphone adoption (IDC data suggests smartphones shipped to India increased by 200 percent in the last year alone), we shouldn’t expect daily active user percentage to stay at 49 percent for long.

Couple a growing active user-base with limited competitive resistance, and this is a formula for success for new market entrants. India is certainly a market to look out for in the mobile IM space.

Note: Unless otherwise stated: all data comes from TNS syndicated research Mobile Life 2013. This is a global study on the consumer mobile space and covers 38,000 interviews spanning 43 markets. The interviews were conducted in January 2013.

(Editing by Paul Bischoff and Steven Millward)