Global OTT messaging to surge due to drop in quality of SMS networks

OTT business messaging traffic is expected to reach 375 billion messages in 2028, a substantial increase from 100 billion messages recorded in 2023, says Juniper Research. This surge is attributed to the drop in the quality of SMS networks, prompting enterprises to seek alternative communication channels, including OTT messaging apps.

Consequence of this shift, operators are anticipated to suffer significant revenue losses, with over $3 billion of SMS business messaging revenue projected to be diverted to OTT channels over the next five years.

Key Drivers of the Shift to OTT Messaging:
Declining SMS Network Quality: The increasing prevalence of fraud and rising SMS prices by operators are contributing to the erosion of SMS network quality. To mitigate this, enterprises are exploring alternative channels like OTT messaging apps for their business communication needs.

Pricing Strategies: OTT app vendors are urged to deploy pricing strategies that attract high-spending enterprises away from traditional SMS channels. These strategies may involve segregating traffic by use cases and charging premiums for mission-critical traffic such as Multi-factor Authentication (MFA).

Expanding Retail Spend on OTT Business Messaging
The report also highlights a substantial increase in OTT business messaging spend within the retail sector, projected to grow from $790 million globally in 2023 to over $2.6 billion by 2028. To tap into this growing market, OTT messaging vendors are advised to integrate data from various retail channels into their business messaging activities. This integration allows vendors to position their apps as crucial channels for retailers’ eCommerce strategies.

Moreover, the report emphasizes the importance of directly integrating payment capabilities into OTT messaging apps to maximize their value proposition within the retail sector.

The anticipated surge in OTT business messaging traffic underscores the evolving landscape of enterprise communication preferences, driven by factors such as network quality concerns and changing pricing dynamics. As businesses increasingly embrace digital communication channels, OTT messaging apps are poised to play a pivotal role in shaping the future of business messaging.

Juniper Research said the number of OTT messages is projected to soar from 120 billion in 2023 to over 175 billion by 2025, marking a substantial growth of over 70 percent within two years.

In a bid to align with the European Union’s Digital Markets Act, WhatsApp is set to roll out third-party interoperability in early March. This move will enable users to exchange messages from WhatsApp to other messaging platforms, effectively breaking down the barriers of siloed ecosystems within messaging networks and fostering greater growth.

The implementation of interoperability in the EU will trigger similar legislation in countries outside the region. This global third-party interoperability is poised to mitigate issues of regional fragmentation within OTT applications and enhance the value proposition of OTT channels, especially for enterprise users of business messaging.

Research author Alex Webb commented on the evolving landscape, emphasizing the importance of OTT messaging apps taking responsibility for addressing fraud over their channels. Authentication of brands before initiating conversations is highlighted as a crucial step in ensuring the integrity of OTT networks and minimizing potentially fraudulent activities.

OTT to Encounter Increased Fraud Challenges
Looking ahead to 2028, the report forecasts a global OTT messaging app user-base reaching 4.3 billion users. However, with such a vast user pool, the report predicts a migration of mobile messaging scams, such as smishing attacks, from SMS to OTT channels. Smishing attacks involve fraudulent actors impersonating trusted brands to deceive users into divulging sensitive information.

In response to this looming challenge, the report underscores the importance of OTT messaging apps adopting measures to combat fraud, particularly through brand authentication mechanisms to maintain clean networks and safeguard against fraudulent activities.

Drivers of Growth in OTT Messaging
The study outlines key drivers fueling the growth of OTT messaging, including the expanding userbase, which is projected to reach 5 billion OTT messenger users by 2028. This surge in users is expected to drive significant demand for OTT business messaging among enterprises seeking to engage with consumers across various demographics.

Additionally, the declining service costs of OTT business messages, expected to drop from $0.028 in 2023 to $0.025 in 2028, further bolster the appeal of OTT messaging for enterprises. With the reduced cost barriers, OTT messaging is becoming increasingly viable for various use cases, driving greater demand and adoption over the forecast period.

Juniper Research anticipates a significant increase in demand and total revenue for OTT (Over the Top) messaging apps, as they continue to refine their pricing strategies. To harness the growing number of OTT business messages, Communication Platform as a Service (CPaaS) providers and Communication Service Providers (CSPs) are urged to enhance the scalability of their solutions by advancing their network and server architecture.

Recommendations
Load-balancing Architecture: This architecture enables providers and aggregators to optimize traffic distribution across different servers, based on factors like geographic location and capacity. Improved network detection solutions are suggested to better prepare for traffic spikes, expected to become more frequent as OTT business messaging gains popularity.

Microservice Architecture: Transitioning to a microservice architecture can enhance scalability and flexibility, enabling providers to meet the growing demand for OTT business messaging.

OTT Messaging Competes with A2P SMS
OTT apps have been evolving their business offerings with features like in-app payments and new pricing models, increasing their popularity among consumers. Consequently, OTT business messaging emerges as a viable alternative to A2P (Application to Person) SMS services provided by operators. Juniper Research forecasts a significant revenue loss for operators due to this competition, with a projected loss of $906.3 million in revenue by 2028.

Operators face substantial revenue pressure, particularly in the advertising market segment, where they are expected to lose $92 million in 2023 alone. OTT business messaging offers enterprises more precise outreach capabilities and higher engagement rates, leading to increased adoption and revenue.

Driving Factors for OTT Messaging Revenue Growth
The expanding market presence of OTT business messaging is evidenced by the increasing revenue generated by these services. OTT business messaging is projected to generate $9.3 billion in revenue by 2028, with key factors driving this growth:

Expanded Offerings: OTT messaging apps are diversifying their offerings, introducing features like in-app payments, expanding the range of applications and use cases for OTT business messaging. TelecomLead