In early September, two weeks after Mark Zuckerberg told the world that Facebook had just achieved its first billion person day, WhatsApp founder Jan Koum announced that WhatsApp had 900 million active users.
That’s 600 million more than Twitter, 500 million more than Instagram and 200 million more than Facebook’s own messenger service. Moreover, 18% of all US social media users are on Snapchat, WhatsApp’s biggest rival.
While WhatsApp and Snapchat are hundreds of millions of users in front of their competitors, an emerging second wave of chat apps promises to offer up real competition in the future.
They need to create growth by offering customers a form of behavior or content that is more than a fad or a niche, but one that can build on an installed base and increase an engaged audience through other features, in the same way WhatsApp has done before them.
These chat networks are differentiating themselves by offering focused and different forms of content. Based on the interest from venture capitalists, the companies that run these networks will not suffer from lack of investment.
One such example is Canadian company Kik that has a big following in the U.S. and recently raised $50 million from Tencent, the maker of WeChat (Weixin), a chat platform that has more than 500 million users in China. As a result of this investment, Kik now has a valuation of more than $1 billion and more than 240 million registered users.
WeChat is not only a messaging platform, but also a development environment, where services can be built within the app to access location, identity, payment and other tools. WeChat’s Chinese users can send money, order a cab or book a restaurant without downloading new apps for similar services.
Kik has plans to follow WeChat’s lead and offer QR codes (‘Kik codes’) as a way of connecting people on the platform with their favorite brands. This, in turn will lead to extra features such as a payment service to make this relationship more immediate.
“Kik is the chat app of choice for young Americans. About 40% of Americans aged 13 to 19 years old are active on our network. Chat is already the way this new generation connects with their friends, but there is a huge opportunity to power more of their lives by building services that can be delivered through chat,” said Chris Best, co-founder and CTO of Kik.
While Kik is taking its inspiration from China, another Asian chat app company with a huge customer base is Japanese company Line, which offers stickers as a way of increasing and engaging its users. This simple ‘emoji-based’ business also allows its users to play social games on its platform.
The use of stickers is huge in Asia. Sending stickers is an easier option in such countries because of the complexities of using Asian characters and languages on a keyboard. The company reported last year that it had 560 million users and earlier this year, announced that 211 million of those were active users.
The company’s recent launches such as Line Taxi, Line Music, Line Delivery, Line Mall and Line Pay underscore how chat apps are growing into other areas, similar to the way WeChat (and Kik) are operating.
The popularity of stickers outside Asia may be limited, but the Line app may yet extend to other continents. Eighteen months ago the company used soccer stickers of global superstars such as Real Madrid’s Ronaldo and Barcelona’s Messi to engender interest. It obviously scored a very good goal; Line now has 15 million subscribers in Spain.
While WeChat, Kik and Line all have hundreds of millions of users and unicorn valuations, the market is still thriving with other chat platforms. Korea’s KakaoTalk has more than 140 million users and according to Bloomberg is used by 93% of smartphone users in South Korea.
Then there are those emerging companies that are focusing their chat platforms on specific genres. UK-based Palringo has been downloaded more than 40 million times and is adding one million users per month. It has centered on games as a way to grow its network and in the past 18 months has acquired niche mobile developers in Sweden and Finland to grow out this business.
Recently announced annual revenues of $14 million were up 100% from 2013 and out of that $14 million revenue, 85% was from games, of which the profit margin was 50%. The company offers a range of games that can be played within chat groups, of which there are more than 350,000, some with up to 2,000 members. They also develop standalone games that connect to the main app for an enhanced social gaming experience.
“It became clear to us a couple of years ago that it was more sensible to focus on building a messaging-based business. In our case, that analysis also took in the fact that the most active part of our user base were focused primarily on entertainment and not on communication utility,” said Tim Rea, CEO of Palringo.
“Most of of our users were there because it was fun to communicate with people they didn’t already know, but who were into the same stuff and this is different from the standard use case where users are looking for ways to more effectively/secretly/conveniently/cheaply communicate with people they already know,” he continued.
Video-based messaging is another interesting area, as are the often overlooked territories of India and Africa. Indian-based Reel Messenger is a free video messaging application for Android, developed for people in emerging markets with low-end devices and 2G network connections.
“There are 500 million Android users in India and Africa alone, yet the vast majority can’t use apps such as Snapchat as it uses too much device memory, too much data and hasn’t been optimized to work on 2G.
“We think it’s unfair that people in emerging markets who cannot afford higher end devices, or are in less technologically advanced countries, have to miss out. So we have developed an application with a user experience that works on 2G and uses minimal device memory or data”, says Adam Baker, CEO of Reel Messenger.
Then there’s Wire, a communication app developed for mobile, tablet and desktop, where text, talk, pictures, video and music are woven together with privacy in mind. The company was founded in Switzerland and is backed by Skype co-founder Janus Friis.
“We are taking the better devices, computing power and faster networks and pairing them with beautiful design to deliver a rich and encrypted communications experience. Ultimately, we want to offer an experience that is as close as possible to in-person, real life communications,” said Jonathan Christensen, CEO, Wire.
While WeChat, Line, Kik, KakaoTalk, Palringo, Reel Messenger and Wire are very different companies at different stages of development, the level of innovation at all of them are presaging the way we will use our chat networks.
Wire’s Christensen and Palringo’s Rea are both correct in positing that it is all about how we connect and what users want that matters… as well as chat networks being a service, be they in-chat games or payment platforms.
WhatsApp and Snapchat were the first companies to emerge in this sector and offer great services to their customers. The new breed of chat companies are standing comfortably on their shoulders with achievable visions of taking chat platforms to a level where they may come to dominate the mobile web, perhaps as much as Facebook controls the Internet as we currently know it.