Home Messaging Solutions Why Monetizing A2P Messaging is a Good Business Strategy

These are interestingly turbulent times for telecom operators. On one hand, the players have to contend with rapidly falling average revenue per user, wafer-thin profit margins, increased competition, the list is endless andon the other, Over-The-Top (OTT) players have stolen their customers under their very noses, with the lure of free voice and messaging applications.

To illustrate, according to mobilesquared, in 2011-12, operators elected to either block OTT traffic, introduce an OTT-related data usage tariff, develop their own white-label OTT-based offering, or aim to provide an advanced range of messaging services, such as SMS forwarding, SMS signature, and SMS blacklist. Jumping ahead, in 2012-2013 the strategies included figuring out the most viable methods to capitalise on the OTT communications opportunity, including (but not limited to) OTT-to-SMS on-net termination and, (more surprisingly) partnering with OTT providers. Cut to 2014-a survey conducted by mobilesquared revealed that operators finally bit the bullet and chalked out an OTT communications strategy.

At the end of the day, however, I can safely say that these efforts (though laudable) didn’t get them too far, quite the opposite, in fact. Since then, the telecom industry has grown by leaps and bounds, throwing new market conditions and players into the mix, tempered by even more cutting-edge competition than ever before. The result? A lot of chaos, of course!

Here’s the catch, though. Operators have been so busy fighting multiple battles that they’ve failed to recognize an extremely lucrative potential revenue source waiting in the wings. I allude, of course, to Application-To-Person (A2P) messages. Now, we’ve all heard and read about debates that have cited A2P messaging as the “new face” of the messaging space (in terms of service monetization). Amidst gloomy reports of declining Person-To-Person (P2P) messaging revenue, it came as no surprise that enterprises were quick to adopt A2P messaging as an integral cog of their multi-pronged customer outreach strategy.

However (and this is the tricky part), operators and enterprises are still failing to revive their moneys (to some degree, at least) from messaging services. The first (and arguably most interesting) reason is that the as per mobilesquared, though the A2P messaging space is booming (valued at $12.88 billion in 2015 and forecast to touch $58.75 billion by 2020), operators are able to monetize only a mere one-third (or even less) of this revenue. Why? Well, because there exists a fair amount of uncertainty around the volume of illegal A2P traffic. Here’s why- essentially, A2P SMS traffic is divided into three parts, namely; white, black and grey route traffic. Without delving too much into the nitty-gritty, it ought to be sufficient to say that apart from thoroughly examining white route traffic, it is impossible for telecom operators to generate bills for SMS traffic, without the obligatory pre-set termination agreements in place. Why? Because operators will be unable to get a clear picture of the SMS traffic being terminated on their network-thus enter grey and black route traffic.

The threat of grey and black route traffic is very real, in fact. Juniper Research provides an interesting perspective on this. In an attempt to quantify the scale of the business operators lose to grey route traffic; they multiplied the annual grey route traffic with the price differential between P2P and directly connected A2P traffic. this translates into an annual revenue leakage of nearly $11.9 billion in 2016, falling to $8.6 billion by 2021. The cumulative revenue loss for this period will stand at $62.5 billion. That’s not all; mobilesquared has estimated that today, grey route traffic accounts for approximately 65 per cent of total A2P traffic.

Clearly, operators need to think of foolproof ways to leverage the business potential of A2P messages to the fullest. In my opinion, the following measures are a good place to begin:

Focus on Generating Revenues from Enterprise Engagement

Keep in mind that today’s customer has become very demanding. They demand constant engagement with brands, the price of retention. This, naturally, gave rise to communication options with MMS, push messaging and newer channels like chat applications and other IP based forms of communication.

So, to ensure optimum monetization of A2P messaging traffic, what is the need of the hour? Well, enterprises are looking for solutions that facilitate the creation and delivery of the messaging process by providing tools that allow personalised targeting, control and filtering of unwanted messages and strict adherence to existing contact policies across a range of messaging options. And crucially, by providing a range of messaging channels, usually SMS, USSD and MMS, enterprises and operators are able to offer their customers choice over their preferred channel of communication, determined by taking a customer centric view. Typically that breaks down as; SMS (75-85 per cent), USSD (10-15 per cent), MMS (5-10 per cent).

Control and Curb Revenue Leakage and Spam

Just to re-emphasise on how real the issue of grey route is; as per industry estimates, operators are losing 90 per cent of their revenue from A2P messaging to entities which are using grey routes to terminate the traffic. A staggering 75 per cent of telecom companies do not have any control over these grey routes and are thus unable to leverage the potential of A2P messaging. So, in my opinion, a two-pronged solution in this case would be:

  • Ring-fencing the network to block grey routes and curb revenue losses
  • Identify a suitable partner which offers business consulting services to identify and analyse various patterns of fraud in the network, and to safeguard the network against new fraud mechanisms.

Unearth Revenue lost on Grey Routes

Currently, as per industry reports, SMS aggregators are capitalising on the A2P SMS opportunity, by purchasing the SMS traffic wholesale from operators. What’s worse, they’re monetising it via either white or grey routes. Mobilesquared has stated that Tier 1 aggregators often have direct connections to the SS7 network, enabling them to provide the assurance that only white route traffic will be generated. Naturally, then, aggregators who do not make such promises deploy grey routes to get the job done. In this case, the operator ought to appoint the best aggregators in the market-at least two or three at that! This is a win-win proposition, as they are all interconnected with each other so the operator will, in any case, get the traffic. That is, of course, if the player has managed to technically funnel the traffic via their appointed aggregator partners.

In sum, the time, dear operators, is NOW! The more you let go of the A2P opportunity, the more at risk you are of becoming the fabled “dumb pipe” or, worse, letting the OTT players win. Which one will it be, then?

 

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