Is OTT a threat or an opportunity for A2P SMS?

Person-to-Person (P2P) SMS was once a huge revenue driver for Mobile Network Operators, as people sent billions of messages a day. In recent years, this has changed dramatically; Over-The-Top (OTT) services like WhatsApp, Facebook Messenger, and WeChat have firmly displaced P2P SMS as the channel of choice for keeping in touch with friends and family. But what does that mean for SMS? Is OTT a threat or an opportunity to the channel as a whole?

The perceived threats of OTT

Consumers are using OTT services in similar ways to P2P SMS and social media – that is, to maintain social contact with those people in their immediate lives. The resulting steep decline in P2P volumes and revenues has led some in the industry to predict that OTT will simply replace SMS and ring the death knell for SMS as a channel.

The knock on effect of P2P SMS volumes declining is all too clear for operators – it means taking a hit on revenues. The once valuable communication tool has all but dried up, leaving operators wondering how they’ll be able to reclaim this lost revenue. But is that the whole picture?

The opportunities for A2P SMS

The truth is that Application-to-Person (A2P) SMS is growing significantly and OTT services are directly contributing to this growth, as they almost always require two-factor authentication – a now standard layer of security. For example, if you want to create an account, it will need verifying via SMS. These services also offer account notifications to users, regularly delivered via a text message. While OTT may have replaced P2P SMS, it is also helping A2P SMS flourish.

The distinction between personal messaging and business messaging must be recognised. Recent research commissioned by Dialogue Group found that A2P SMS (19 per cent) was far more popular for business and brand communications than OTT services like WhatsApp and Facebook Messenger (1.4 per cent and 2.1 per cent respectively). The SMS channel must therefore be considered as a valuable, trusted and wanted means by which brands and organisations can reach their customers.

We believe that one of the reasons for this consumer preference is the reliability of SMS. With minimal signal and no data connection, consumers can still receive SMS. This is crucial for time-critical communications – for example, when alerting someone to a potentially fraudulent transaction using their Credit Card or when confirming a hospital appointment. OTT services simply cannot compete when it comes to reliability.

Coexistence in a win-win situation

OTT and SMS should not be thought of as competing channels – not only is there space for both to coexist, but there are clear roles that are not just complementary, but symbiotic. It is important for operators to maintain this perspective of OTT services and not see them simply as a threat.

OTT should be thought of as an indirect driver of A2P growth, as it has helped SMS become a defined channel for brand/business communications. SMS is still a crucial channel, just not for P2P communications. As we look ahead, A2P SMS will be a strong channel for brand and business communications – reaching consumers directly.

In order to deliver value to brands and consumers, and to generate significant revenue for themselves, operators must take control of their networks and ensure the A2P channel is respected, protected, and of course, monetised.

Perry Offer, Global CEO of Dialogue Group