Application-To-Person (A2P) messaging allows customers to interact with businesses through their personal cellular data connection in a one-way line of communication. The growth in the market has resulted in operators and enterprises to monetize A2P messaging services in an attempt to achieve profit generation from previously non-profitable A2P services. A forecast by Mobilesquared predicts the global A2P messaging market growth to reach a staggering $26.61 billion in 2022 from $11.86 billion in 2017.
How the threat of OTT players have made monetization of A2P messaging a priority today
With the decline of Person-to-Person (P2P) messaging, enterprises quickly turned to A2P messaging as part of their customer outreach strategy. However, when Over-The-Top (OTT) services entered the market with free voice and messaging applications; there was a visible shift in the customers’ preferences as OTT services provided a media space as their primary domain. According to a report by McKinsey & Company, mobile voice, messaging and fixed services provided by OTT players reckoned 2, 9, and 11 percent of the respective revenue at the beginning of the decade. The increase in the respective revenue is estimated to be up to 25, 60 and 50 percent in 2018 (in an all-IP setup). The significant jump in the share for each of these services demonstrates the growing community acceptance of the services that OTT players offer to the customers.
A2P messaging services are experiencing a value chain takeover by OTT players due to new technologies. To keep up with the growing business messaging market, existing messaging service operators need to find strategies to prevent the leakage of revenue to OTT players, and make A2P monetization a priority.
What monetization implies for operators and enterprises
For operators and enterprises, the monetization of A2P messaging services is not limited to introduction of new technologies and strategies that allow personalized, targeted interaction with the customers but also includes setting up of tools to prevent spamming and revenue loss due to grey routes.
A major problem that operators need to address is the loss of traffic and leakage of revenue to grey routes that encompass low-cost international messaging via indirect routes. A research report by Mobilesquared reveals that grey routes account for 65 per cent of A2P messaging traffic.
To prevent traffic loss to grey routes and successfully monetize A2P messaging services, operators need to install an SMS firewall that simultaneously filters and blocks unsolicited traffic whenever an attempt is made to infiltrate the network and convert unauthorized grey routes to white routes. Only when operators and enterprises are able to extract the desired amount of traffic from grey routes would they be able to monetize A2P messaging services.
How operators can best leverage A2P messaging to revive messaging revenue
There are several ways for operators to leverage A2P messaging services to generate the desired revenue:
- Installation of SMS Firewall which continuously filters and block unsolicited messages from unauthorized sources on the network, and can also transform grey areas to white, resulting in an increase in revenue.
- Closing grey routes either with the help of SMS firewall upgrade or by ring-fencing the network to block grey routes.
- Introducing a tracking and reporting system that provides real-time reports on the kind of traffic, an operator receives the traffic volumes, original source, et al.
- Partnering with an OTT provider which allows the operator to share the revenue with the OTT provider.
- Hiring a Consulting Partner to identify and analyze patterns of fraud on the network in order to prevent similar entries into the network.
- Introduction of a single platform to monetize the A2P traffic using cloud-based integration. Access to an API would allow integration into any operational support system/business support system or other third-party systems such as Enterprise Resource Planning (ERP) or Customer Relationship Management (CRM)
- Use of protocols and systems such as Rich Communications Services messaging, Internet of things, machine-to-machine communication, and phone number portability.
The challenges these players face in this process: key takeaways
Businesses are relying on driving customer interactions with the help of channels such as A2P SMS. Operators are, however, unable to monetize the majority of the generated traffic. The top challenge that operators face in monetizing A2P messaging is fraud which according to a research by Mobilesquared estimates to a revenue leakage of 9.4 per cent of overall A2P revenue.
To capture all the opportunities that the A2P market can provide, operators and enterprises need to shift their focus to address the entirety of the market rather than just presenting countermeasures against OTT providers. An anti-spam and fraud prevention security system needs to be placed in the network to provide traffic visibility, control the level of unauthorized messaging traffic and prevent loss of revenue to frauds and grey routes.
Ensuring monetization is sustainable in the long term: a future path
Due to the high volume of SMSs that are sent through A2P messaging, enterprises face challenges in sustaining the quality of their service and keeping the system cost-effective. The increasing volume of A2P also holds the possibility of eventually leading to a fall in the revenue margin for individual messages. It has become crucial to cut down on expenses by creating a sustainable messaging system.
The introduction of an SMS firewall in the network is an important element in ensuring that monetization is sustainable as it can result in an increase in revenue due to the conversion of grey routes to white and filtering of spam messages. Enterprises should consider the performance and operational simplicity of the service, followed by total monetary investment. This can also be combined with a third party system such as cloud technologies or with protocols such as RCS to maximize the generated revenue. For small scale enterprises with low assets and investment scale, partnering with a local service provider can prove to be a sustainable step towards action.