Reports of the demise of SMS are exaggerated: in fact, in this ultra-engaged world, it’s going from strength to strength. In this month’s Telemedia Magazine, Our Chief Strategy Officer explains how SMS is driving creativity, and vice-versa.

Recent M&A activity by messaging companies has seen increased interest in the sector. The decline of P2P (person to person) SMS volumes, driven by the penetration of OTT messaging apps such as WhatsApp, often leads to a perception that business (A2P, application to person) SMS must also be a declining market. The reality is very different, however, with the A2P SMS market enjoying long term growth, and the broader A2P messaging market poised for exciting new opportunities as new technology and creativity come to the market to complement SMS as a messaging channel.

Before we discuss the current market opportunities and the future growth of business messaging, we need to look at its past to understand how we have reached the position we are in, and why the sector will continue to grow.

The first factor in the rise of business messaging is the simplicity and ubiquity of SMS technology – every mobile phone in the world can send and receive SMS messages. This means that it is the perfect marketing and communication tool for businesses. It is simple for the business to employ and simple for the user to engage with – because everyone uses SMS. No other communication channel, including traditional channels such as voice and email, or new messaging platforms such as WhatsApp or Facebook Messenger, can reach the level of penetration of the 4 billion active SMS users (the next highest messaging platform is WhatsApp with 1.5 billion).

The second factor is engagement. The simplicity of the tool means that it has always had a level of engagement far superior to any other digital communication channel. Recent research by one of our brands, Esendex, showed that the global average open rate of SMS is 94% (95% in the UK).

While the growth of the new messaging applications has driven a reduction in P2P SMS volumes, it has seen a huge growth in ‘messaging’ in total. As individuals we are now messaging more and more to our families, friends and work colleagues. This increased familiarity with messaging has meant that we are happier to communicate with all parties – personal and business – via this medium. As such, the new messaging applications have actually helped to fuel the rise in A2P messaging – and due to the ubiquity of SMS, the vast majority of this A2P messaging has been via this channel.

What we are finding at Commify is that the growth is split, with one third of it being new customers realising the power of messaging and using it for the first time. They are aware that their customers and staff will positively interact with the business via messaging. However, we see two thirds of our growth coming from existing customers, having seen the success of their current messaging, creating new use cases and solving business communication challenges.

As the sector grows we are seeing creativity grow – in both new use cases and new messaging channels.

Very few business customers have fully penetrated messaging for all of the use cases they could or should be using it for. There are almost an infinite number of use cases for mobile messaging across business processes and operations. For many it is about identifying the business issues that could benefit from a messaging solution – and then finding a creative solution that meets or surpasses their requirements.

Of course great creativity – producing great results – will then see further growth for messaging as more business problems are given a messaging solution.

For example, npower, an Esendex customer, initially came to us to set up a single SMS use case – and a few years later we now have over 40 use cases for SMS within npower to help them communicate with customers and staff. In 2017 we built them an award winning intelligent multi-channel messaging solution, including SMS, email and voice, to improve their rate of collecting unpaid final bills when their customers moved home. That has proved so successful that we are now expanding the solution to encompass all of npower’s unpaid customer bills.

In terms of messaging channels, the launch of RCS (Rich Communication Services), which is being promoted by Google and the mobile networks, means that fuller, enriched messages with greater functionality can be sent and engaged with by the end user, directly in their phone’s native messaging application – the same phone application from which SMS messages are sent and received. WhatsApp is also launching a similar product for businesses to message their customers. The opportunity for enriched business messaging use cases is almost endless.

Creativity is not just for the use case or the messages themselves; creativity is also important when managing the messaging flow between the various channels. For businesses, the current messaging market can be very confusing – how do they know which channel to use for which message? How do they know what mobile phone (Apple or Android?), messaging app (WhatsApp, FB Messenger, WeChat?) or mobile network (Vodafone or O2?) their end customer uses?

Growth can be restricted by complication, but increased through simplicity. The best messaging companies are those which offer simple and clear journeys to their business customers and those customers’ end users.

We believe the future lies in a ‘Messaging as a Platform’ solution. Businesses want to deliver a message and receive a response, and that should be as simple as possible. For example, if a customer wants to send a message to set up an appointment with a choice of times/dates, it can be tried first on RCS, but if the customer doesn’t have an RCS enabled handset, then it will fail over to an SMS message including a web link to a Landing Page (hosted mobile web form) that includes similar functionality to RCS app. In this way the complexity is all taken care of for the business.

There are a number of market players who can see the value and growth potential of the A2P messaging sector and are therefore investing significantly to drive this growth and creativity. From the mobile networks, through to the leading mobile software players in the market (e.g. Google and Apple) and the social messaging and networking companies (e.g. Facebook and WeChat), they are all investing heavily in infrastructure and products for these new business messaging channels.

What is needed from the business customer point of view are suppliers they can deal with that bridge the gaps and solve the complexity between all the major players.

The successful A2P messaging companies that will grow with the sector’s growth will be those that are big enough to work closely with the major players and develop the tools (e.g. webtools and APIs) that best take advantage of the opportunities out there. Yet they are also dedicated enough that they can react to the market demand and work with business customers of all sizes from FTSE 100 enterprises to a sole trader.

This is why, for the foreseeable future, M&A will continue in this sector. To provide business messaging solutions all across Europe for multinational players, you need scale. While to introduce SMEs to business messaging solutions, you need further expertise in areas such as sales, marketing and product development.

Consolidation being driven by a small number of large, well funded messaging specialists means that the smaller companies in the sector will have access to the investment, skills and experience that they wouldn’t have gained organically. This will benefit their customers, their staff and the market as a whole.

Creativity, growth and investment are all working symbiotically within the business messaging sector and are driving each other on making this one of the most exciting sectors to watch over the next few years.