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A2P Messaging – Fast Becoming the Preferred Marketing Channel

January 10, 2019

The share of voice for today’s big brands in markets such as retail, banking, media, telecoms, healthcare, and travel is fiercely competitive as they strive to build and retain customer loyalty. Brands are rapidly moving away from email and embracing A2P messaging because it’s a convenient channel better suited to two-way customer communication. By 2020 the global A2P SMS market is expected to reach *$70 billion (USD), growing at a CAGR of around 4%. The levels of engagement by customers for brands using this channel indicate that 98% of A2P messages are read – as opposed to 20% of emails. Customers clearly prefer short more personalized communications.

Common uses of A2P bulk messaging include notifications, alerts and mobile contextual marketing messages such as flight alerts, banking updates or new offers from merchants.

Growth in Revenues & Opportunity

In their Mobile Messaging Traffic and Revenue Forecast: 2017-22 Ovum is forecasting that P2P SMS messaging will generate 3.4 trillion messages, as opposed to 1.4 trillion messages for A2P, however, the revenue generated by A2P will exceed the P2P messaging revenues. Operators need to be mindful of this level of growth and be poised to take full advantage of this growing market demand. As the market evolves it makes good financial sense for both MNOs and specialized companies to develop partnerships or alliances that enable deployment of A2P messaging across networks. A clear benefit of these partnerships/alliances will be no upfront CAPEX or OPEX investments. It will be interesting to see how Google develop such partnerships that optimize this channel once they launch their MVNO in 2019.

As more and more Over the Top (OTT) applications are used by customers, brands have recognized the value of integration with applications like WhatsApp and FBMessenger in order to reach customers directly through messaging applications of choice. In addition, A2P SMS offers businesses a sure way to connect with their customers who may not use any of the above specific platforms. Many businesses are also turning to Rich Communication Services (RCS) which offers them the best of both worlds as consumers respond better to images than plain text.

Image source = Zion Research

Costs and Monetization of A2P

Currently, the cost of delivering A2P messaging varies across the globe from $0.10 US cents in Japan, between $0.02 to $0.03 cents in South Asia markets and in European markets between $0.01 to $0.02 cents. In the USA A2P messages can be sent using a Toll-Free number, however, costs are normally applied to both inbound and outbound messages. In the USA Amazon messaging prices for outbound messaging for both Transactional and Promotional SMS is $0.00645, for inbound messaging prices are $0.0075.

It seems that operators are unclear on what to charge as standard and global variations clearly reflect this discord. Monetization of A2P could be a real opportunity for operators if they work closely with Communications Platform as a Service providers (CPaaS). Much like Google does with their online search engine, charging advertisers for the use of specific regions, time slots, and PPCs. Google’s use of multiple price points creates a more dynamic pricing framework which also could work for MNOs.

Compliance and A2P

Since the enforcement of the EU’s GDPR legislation on 25th of May this year operators and those who utilize A2P messaging now face potential regulator fines of up to 4% of global turnover for infringements. A potential fine of this amount may not deter some of the more belligerent companies who will continue to use A2P on a non-consent basis. However, this type of non-compliant behaviour is an excellent reason for network operators to step up their security measures. Current studies indicate that 75% of millennials prefer to communicate via SMS, so as A2P messaging usage continues its fashionable growth amongst young adults, we are likely to see future generations adopt this method of communication as the norm. However, although A2P SMS may be a growing market segment and a revenue generator for mobile network operators, customer security has crept up the list of things they now need to treat as a priority to help both safeguard customers and improve customer loyalty.