1. Instant Messaging Application
Market Analysis
Corentin METGY
04/12/2012
1

2. Plan
1.
2.
3.
4.
Market Overview
Major actors
Exit opportunities
Telcos’ response
2

3. Market overview (1/2)
The mobile instant messaging market is considerably
increasing. UK based institute Juniper Research recently
forecasts that global mobile messaging traffic will reach
28.2 trillion annually by 2017, nearly double the 14.7 trillion
messages which will be sent this year, 2012. Mobile
messages comprise SMS, MMS, IM, Email, RCS/RCS-e and
Social Media messages.
Global growth in total traffic will be primarily driven by the
use of over-the-top (OTT) instant messaging services, which
will comprise over 25% of all traffic annually in five years’
time according to Juniper’s analysts. Besides, the firm
forecasted in 2011 that mobile IM will triple exceeding 1.3
billion users by 2016 . On his side, The Radicati Group, a
California-based IT research firm estimated that there was
2.4 billion IM accounts in 2010 worldwide, rising to 3.5
billion by 2014.
OTT instant messaging services have developed themselves
thanks to smartphones’ ascension. They permit users to
send messages for free using mobile operators internet
connection (Wifi, 3G, 4G) and push notifications. This new
way to communicate is growing strongly from several years
which indicates that social messaging is not a short-term
trend, but a shift in communication patterns. In August
2012, WhatsApp announced it is handling 10 billion
messages a day.
Increase in global mobile messaging traffic
between 2012 and 2017 (in billions)
30
28,2
25
20
15
14,7
10
5
0
2012
2013
2014
2015
2016
2017
Source : Juniper Research
3

4. Market overview (1/2)
VoIP Minutes of Use p.a. (Excluding WiFi) (m) via 3G
Users Using Applications Split by 8 Key Regions
2010‐2015
3G VoIP Application Revenue (m) Split by 8 Key Regions
2010-2015
Juniper Research forecasts a worldwide increase in mobile
VoIP application minutes via 3G from 343 millions 2010 to
just over 30 billions 2015, centupling in just 5 years.
Furthermore, Juniper Research estimates that the number
of mobile VoIP minutes carried on 3G and 4G network will
rise from 15 billion minutes in 2010 to 470.6 billion by
2015.
In parallel, the expected revenue from mobile VoIP via
applications will increase from $20.5 million to $1.25
billion.
Finally, global mobile OTT communication market will
reach 45$bn in 2016.
Mobile OTT communication ($bn)
45
40
35
30
25
20
15
10
5
0
2012
CAGR
130%
2013F
2014F
2015F
2016F
Sources: Juniper, Frost and Sullivan, Portio Research, Arthur D. Little analysis
4

5. Major actors (1/4)
Logo
Description
Positionning
Active Users
in 2012 (mm)
Business
Model
AOL, inc.
AOL launched AIM on February 2006.
Pure player / Instant
messenger
195
Advertising
Apple, Inc. (iMessage)
Apple launched Facetime in Octuber 2010 and
iMessage in October 2011.
Handset vendors
instant messenger
140
-
Baidu
Baidu Hi was launched on February 2008
IM / Search engine
-
-
60
The BBM Music Premium is
available for a monthly
subscription of $4.99, social
games
-
-
IM multiplatform
33
Advertising
Social Network
instant messenger
425 (mobile
users
worldwide)
-
Company
Blackberry, Inc.
Cisco Jabber
(Cisco, Inc)
eBuddy B.V.
Country
Some of the features of BBM include groups, bar-code
scanning, lists, shared calendars, BBM Music and
Handset vendors
integration with apps and games using the BBM
instant messenger
social platform.
Jabber was founded in 2000 as a non profit
Pure player / Instant
organization. The company was acquired by Cisco in
messenger
2008.
eBuddyB.V. was founded in 2003 and is based in
Amsterdam, the Netherlands with additional
locations in London and San Francisco
Facebook lanched Messenger App. In August 2010.
Facebook Messenger
FBCIM allows you to use Facebook Chat without the
need to be connected on Facebook.
Fringland Ltd.
Fringland Ltd. was founded in 2005 and is based in
Tel-Aviv, Israel.
IM multiplatform
-
Advertising + Paying regular
phone calls worldwide
Gadu-Gadu
The company was founded in 2000 and is based in
Warsaw, Poland
Pure player / Instant
messenger
15
-
5

6. Major actors (2/4)
Google, Inc.
Google talk was launched on August 2005
IM / Search engine
-
-
groupme
As of August,
GroupMe was founded in 2010 and is based in New Pure player / Instant 2011, GroupMe
York
messenger
delivers in
excess of 100
ICQ LLC.
The company was founded in 1996 and is based in
Tel Aviv, Israel.
Pure player / Instant
messenger
42
Free daily-limited SMS
sending, resumable file
transfers, greeting cards,
multiplayer games
imo.im
Imo Chat was founded in 2007 and is based in Palo
Alto, California.
IM multiplatform
7
-
Kakao Corporation
(Kakaotalk)
Kakotalk was founded in 2006 and is based in Seoul
Pure player / Instant
messenger
66
Advertising, Digital items,
and game center
Kik Interactive, Inc.
Kik Interactive, Inc. was founded in 2009 and is
based in Waterloo, Canada.
Pure player / Instant
messenger
30
-
LiveProfile
The company was founded in 2007 and is based in
New York.
Pure player / Instant
messenger
-
-
Meebo
The company was incorporated in 2005 and is
headquartered in Mountain View, California.
IM multiplatform
-
-
MySpace
Myspace developed MySpaceIM in 2006 as an
addition to its social platform
Social Network
instant messenger
-
-
NHN Corporation
(KOSE:A035420)
Created in 1999, NHN Corporation operates Internet
search portals primarily in South Korea and Japan.
LINE was launched on June 2011.
Instant messenger /
Gamers community
40 (25mm in
Japan)
Advertising, Digital items,
and game center
-
6

7. Major actors (3/4)
Nimbuzz
Pinger
Nimbuzz B.V. was founded in 2006 and is based in
New Delhi, Indi
IM multiplatform
Pinger was incorporated in 2005 and is based in San Pure player / Instant
Jose, California.
messenger
220
Advertising, Freemium model,
agreement on revenue
sharing with IM companies.
-
Advertising
Pinterest
-
Social Network
instant messenger
10
-
Samsung Electronics
ChatOn was introduced by Samsung Electronics in
September 2011
Handset vendors
instant messenger
-
-
Shape.AG was founded in 1999 and is based in
Stuttgart, Germany
IM multiplatform
-
Freemium : IM+ 3.0 Lite, a
free ad-based version and
IM+ pro for 8.99€
600 (not only
mobile)
Paying regular phone calls
worldwide
11
-
200
-
1
-
110
Freemium : Gold & Silver
versions, social game, virtual
goods
Shape.AG
Skype (Microsoft)
Startphone Limited
(Hyves)
Tencent (WeChat)
TextMe
textPlus, Inc.
The company was incorporated in 2004 and is based Pure player / Instant
in Palo Alto, California.
messenger
Hyves was in 2010 still the most popular social
network in Holand with 10.6 million Hyves users and
Social Network
a 68% penetration. As of November 12, 2010,
instant messenger
Startphone Limited operates as a subsidiary of
Telegraaf Media Groep.
Tencent is a leading Chinese internet company.
WeChat was initially launched as Weixin in China in Pure player / Instant
January 2011. The app has recently been launched in
messenger
Thailand.
San Francisco based TextMe was originally launched
Pure player / Instant
in March 2011 as a free, texting-only application for
messenger
Ipod
The company was formerly known as GOGII, Inc.
Pure player / Instant
textPlus, Inc. was founded in 2007 and is based in
messenger
Marina del Rey, California.
7

8. Major actors (4/4)
Touch
Touch was primarly known as PinchChat
Pure player / Instant
messenger
13
-
Twitter
-
Social Network
instant messenger
-
-
Valve Corporation operates as an entertainment
software and technology company. The company was Instant messenger /
founded in 1996 and is based in Bellevue,
Gamers community
Washington.
54
-
Valve Corporation
Viber
Viber was launched in 2010
Pure player / Instant
messenger
100
-
VKONTAKTE
VKONTAKTE is the first russian social network.
Social Network
instant messenger
-
-
100
$0,99 for the app and a
subscription of $1,99 per
year
Whatsapp
WhatsApp funded was founded in 2009 and is based Pure player / Instant
in Santa Clara, California.
messenger
Windows Live
(Microsoft, Inc.)
Windows Live Hotmail App.
Pure player / Instant
messenger
-
-
Yahoo!, inc.
Yahoo! Messenger was originally launched under the
name Yahoo! Pager on March 9, 1998.
IM / Search engine
-
Advertising
Yandex
Yandex, the first russian search engine, launched an
IM platform on August 2008.
IM / Search engine
-
-
400
-
YY
YY Inc., through its subsidiaries, operates an online Pure player / Instant
social platform in the People’s Republic of China.
messenger
Sources : OTT companies websites, blogs, Wikipedia, Press releases
8

9. Fundraising & private placements (1/3)
From 2003 more than $300mn have been leveraged by
over-the-top (OTT) instant messaging services providers.
These start-ups have interested institutional and corporate
funds. Thus, Jabber was funded by France Telecom, Intel
and Webb interactive Services before being sold to Cisco in
2008. KakaoTalk was funded by WeMade Entertainment
Co., a South Korean online game developer and Tencent
which develop QQ IM, the leading instant messaging
service in China. More recently the company has been
funded by Yahoo! following the signing of a partnership
between the two structures concerning the Japanese
market.
Private Equity firms invested large amounts in several
rounds. For example, Mangrove Capital Partners
participated in 5 funding rounds for Nimbuzz and Kleiner,
Perkins, Caufield & Byers and Matrix Partners supported
textPlus during 3 rounds.
This shows that they have a huge interest and that they
trust in the long-term development of the sector.
9

10. Fundraising & private placements (2/3)
Target
Closed Date
may-24-2011
Fringland Ltd.
(Fring)
apr-30-2009
nov-27-2008
aug-09-2007
jan-04-2011
GroupMe Inc.
aug-25-2010
Investors
Size ($mm)
North Bridge Venture Partners; Pitango Venture Capital; Veritas
Venture Partners
North Bridge Venture Partners; Pitango Venture Capital; VenFin DD
Holdings Limited; Veritas Venture Partners
-
10,0
-
North Bridge Venture Partners; Pitango Venture Capital; VenFin DD
Holdings Limited; Veritas Venture Partners
Betaworks; First Round Capital; General Catalyst Partners; Khosla
Ventures; Lerer Ventures; SV Angel
Betaworks; First Round Capital; Lerer Ventures; SV Angel
10,6
0,9
ICQ Ltd.
1996
IM+ (SHAPE.AG)
Feb-13-2012
Finam Global
Jabber, Inc.
mar-19-2003
France Telecom Technologies Investissements SA; Intel Capital; Webb
Interactive Services Inc. (OTCPK:WEBB)
oct-15-2012
Yahoo Japan Corporation (TSE:4689)
apr-15-2012
Tencent Holdings Ltd., Investment Arm; WeMade Entertainment Co.,
Ltd. (KOSE:A112040)
81,1
aug-26-2011
CyberAgent Ventures, Inc.; DCM; Korea Investment Partners Co. Ltd.;
Maverick Capital, Ltd.; WeMade Entertainment Co., Ltd.
19,2
Kakao
Corporation
Shalom Management
12,0
10
7,2
-
Kik Interactive,
Inc.
mar-07-2011
RRE Ventures LLC; Spark Capital; Union Square Ventures
LiveProfile Inc.
apr-01-2011
Lightspeed Venture Partners
8,0
1,1
Source : Capital IQ, MergerMarket
10

11. Fundraising & private placements (3/3)
Target
Closed Date
déc-20-2010
Meebo, Inc.
avr-30-2008
Investors
Size ($mm)
Draper Fisher Jurvetson; JAFCO Ventures; Khosla Ventures; Sequoia
Capital; Time Warner Investments
Draper Fisher Jurvetson; JAFCO Ventures; KTB Ventures; Sequoia
Capital; Time Warner Investments
27,5
25,0
janv-18-2007
3,5
Mangrove Capital Partners
mai-18-2010
Myriad International Holdings B.V.
12,4
juil-01-2008
Mangrove Capital Partners; MIH Holdings Ltd.
15,0
juin-18-2007
Holtzbrinck Ventures Gmbh; Mangrove Capital Partners; MIH Holdings
Ltd.
10,0
août-29-2006
Mangrove Capital Partners
-
2005
Startphone
Limited (Hyves)
Sequoia Capital
déc-31-2011
Pinger, Inc.
9,0
déc-19-2005
Nimbuzz B.V.
Draper Fisher Jurvetson; Sequoia Capital
Mangrove Capital Partners
-
févr-23-2012
T-Venture Holding GmbH
7,5
déc-06-2006
DAG Ventures, LLC; Kleiner, Perkins, Caufield & Byers
8,0
-
Van den Ende & Deitmers Venture Capital Partners Buyer Funds:
Crossmedia Fund
GRP Partners; Kleiner, Perkins, Caufield & Byers; Matrix Partners; The
Raine Group LLC
18,0
janv-31-2011
GRP Partners; Kleiner, Perkins, Caufield & Byers; Matrix Partners
15,0
déc-09-2009
Kleiner, Perkins, Caufield & Byers; Matrix Partners
8,2
avr-08-2011
Sequoia Capital
8,0
Jan-2008
oct-16-2012
textPlus, Inc.
WhatsApp Inc.
-
Source : Capital IQ, MergerMarket
11

12. Exit opportunities (1/2)
There are some good exit opportunities. Most of leading internet,
telecom and handset vendors are present on the market and do not
hesitate to spend hundreds of millions dollars to acquire leading
independent actors.
Note that ICQ has been acquired by AOL in 1998 for $407mm and
sold ten years later for less than the half to Digital Sky Technologies
Limited, the largest Internet company in the Russian-speaking and
Eastern European markets.
There is no multiple, EBIT or revenue available on major databases
(Capital IQ, MergerMarket, etc.)
12

13. Exit opportunities (2/2)
Closed date
Transaction Type
Target
Buyer
Size ($mm)
Nov-21-2012
IPO
YY, Inc.
-
-
June-04-2012
Acquisition
Meebo, Inc.
Google Inc. (NasdaqGS:GOOG)
-
Augt-21-2011
Acquisition
GroupMe Inc.
Skype, Inc.
80
Nov-12-2010
Acquisition
Startphone Limited (Hyves)
Telegraaf Media Groep NV
(ENXTAM:TMG)
60,69
May-08-2011
Acquisition
Skype, Inc.
Microsoft
8 500
July-08-2010
Acquisition
ICQ LLC (AOL Inc.)
Digital Sky Technologies Limited
(DST)
187,5
Oct-31-2008
Acquisition
Jabber, Inc.
Cisco Systems, Inc.
(NasdaqGS:CSCO)
-
Dec-18-2007
Acquisition
Gadu-Gadu S.A.
Naspers Ltd. (JSE:NPN)
155
Aug-30-2005
Acquisition
Teleo, Inc
Microsoft
-
June-05-1998
Acquisition
Mirabilis Ltd. (nka: ICQ Ltd.)
AOL Inc. (NYSE:AOL)
407
1997
Acquisition
MSN Messenger
Microsoft
400
Source : Capital IQ, MergerMarket
13

14. Telcos’ response (1/2)
As we seen in the first part, the messaging industry is
approaching a watershed moment. Ovum firm believes that
global SMS revenues will plateau in 2014, meaning that
operators need to implement a strategy now so that they
can to cope with the subsequent decline in revenues.
OTT companies became a real threat for operators. $14bn
(11%) have been lost in SMS revenues to OTT players in
2011. In the report Counteracting the Social Messaging
Threat, Ovum firm estimated that social messaging services
would cost telecom operators $23,2bn in SMS revenues in
2012 (18,1% of 2011 revenues) and $54bn by 2016 (42,2%
of 2011 revenues).
Global mobile traffic revenue 2011 ($bn)
620; 58%
128; 12%
Sms
Data
Voice
315; 30%
initiative to deploy inter-operator RCS services. The GSMA
(RCS project association) aims to provide customers with
instant messaging or chat, live video sharing and file
transfer across any device, on any network, with anyone in
their mobile address book. It will permit operators to face
OTT competitors that cannot offer a global solution.
Mobilization is global and the project is now supported by
many major industry actors including operators such as
AT&T, China Mobile, Orange Telefonica, Vodafone and
Deutsche Telekom and handset vendors such as HTC, LG,
Nokia and Samsung.
The solution is now available under the consumer brand
Joyn. It has been launched this semester in Spain by
Orange, Telefonica and Vodafone, in Germany by Vodafone
and in the USA by MetroPCS.
In addition, operators in France, Italy and Korea have
committed to commercial launches. Deutsche Telekom
announced it will start supporting Joyn in Germany from
December this year and Orange will begin to deploy Joyn in
France from June 2013.
Source : Juniper Research
In 2007, a group a group of leading telecom operators have
formed the Rich Communication Suite (RCS), a global
14

15. Telcos’ response (2/2)
Telefonica was the first operator to declare war on OTT
services providers with the application TU Me. The app is
free to download and allows users to send texts and
pictures, make calls by using their data allowance.
Services which offer similar functions, such as Skype, often
need Wi-Fi to make it work and, while Wi-Fi is an option
here, the 3G connection enables users to be a lot more
mobile when communicating on the move.
Orange has maybe find a solution, with Libon’s freemium
business model. There is a free version and a paid version
without advertising, automatically renewed because of 2.69
euros per month (charged to iTunes account, so Apple
keeps 30%), with more features including 1 hour of calls to
30 international destinations.
The challenge will be to convince users to abandon services
they are accustomed to using and move to a paid solution.
Telefonica has been fallowed by other operators like TMobile with Bobsled, a similar application that also offer
free voice calls within Facebook.
Orange Telecom have just launched Libon, a mobile
application which allows users to send messages, chat and
call in voice over IP, 3G or WiFi, including in countries where
it does not have its own mobile network. (This service is
available in 80 country whereas Orange is operator in only
33 of them).
Operators become OTT themselves. Their services compete
directly with OTT companies like Whatsapp but operators
will need to identify new revenues because even if voice
calling and text messaging are still growing, the revenues
and margins are in decline.
15