From SMS to RCS and OTT: How do operators monetise the messaging ecosystem? periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Caitlin Quinn, Consultant at Cavell, explores how telcos can generate revenues from today’s messaging ecosystem.

Guest author

April 30, 2024

5 Min Read

The world of messaging and business communications is changing. Over the past few years SMS, which was at one time confined to the world of peer-to-peer communications, has exploded onto the B2B scene.

Now, the messaging market is much more than just mobile operators sending SMS’s; it includes everything from OTT players to aggregators and even telcos themselves. So with all of these developments, how is this ecosystem going to evolve, and what can operators do to monetise the space?

According to the Cellular Telephone Industries Associations (CTIA), consumers are sending 2.1 trillion text messages each year. In fact, messaging is becoming all the more important to the telecommunications industry because there is a rising demand for voice communications to be transcribed as messages.

This can be seen in use cases such as the need to have a written record of customer interaction or of voice memos between co-workers. This increased demand for messaging in the voice space corresponds with the growth of AI, as Natural Language Processing (NLP) demands large data sets of written information in order to function.

SMS is only part of the picture however. In the past three - years, OTT messaging applications have experienced a meteoric rise. WhatsApp, Line, Viber, WeChat, and Facebook Messenger now have user numbers globally that may come to rival SMS in the future.

Moreover, another long-standing messaging type, RCS or ‘Rich Communication Services’ has now become a real contender in the messaging market. This is largely due to backing by Apple and Google, who recently announced that they will make sure every phone network in the world is able to adopt RCS.

Following this development will be the rollout of Rich Business Messaging (RBM), the B2B version of RCS, in 2025. Many providers believe that RBM will become a leader in the market due to its reliability and superior features to SMS. These include read receipts, video and audio messages, 2-way messaging, as well as carousel and suggested responses.

With all this excitement and change in the messaging space, enterprises, cloud comms service providers and mobile operators are each trying to understand where messaging might play a role in their future strategy and, most importantly, how best to monetise this growing opportunity.

Messaging has developed as the cloud communications market has matured. In the past five years, cloud-based PBX solutions have begun to adopt wider features sets to assist service providers in differentiating their offering. Now developed ecosystems for integrations exist, with enterprises embedding communications, OTT messaging applications being one such example, into workflows.

Of course, service providers are integrating messaging applications into their offering not solely for feature diversity, but because ‘omni-channel’ communications have become a key purchasing criterion for enterprises attempting to improve their customer service.

Interestingly, too, increased customer demand for messaging is most prominent in the US market. Large US cloud comms providers now consider messaging an essential part of their strategy. However, this trend is not yet being seen as strongly in Europe.

Geography, customer segment, and target vertical all play a role for the operator in how messaging might fit into their current offering. One reason for this is that the messaging market differs by country and region, both commercially and in terms of consumer preference.

For example, in North America SMS and MMS dominate over WhatsApp and other OTT channels. This can be contrasted to many South American and Middle Eastern countries who almost exclusively use WhatsApp.

SMS is also generally not trusted in the Middle East, with many consumers perceiving SMS messages as spam. However, the use of OTT platforms is not uniform either - the CIS region (Ukraine, Russia, Poland, Belarus, Georgia) prefer to communicate using Viber, while in central and East Asia WeChat and Line dominate.

It may not be surprising that this geographic complexity has implications on how operators determine their pricing. For example, since SMS dominates in North America, WhatsApp is cheap, at a tenth of the price of an SMS. This is in contrast to a country like Brazil where since WhatsApp is the popular messaging platform it is priced similarly to SMS.

While there have been some concerns from operators that the rise of OTTs will decrease SMS traffic, research into the market shows that SMS is not going away any time soon. As Bandwidth has recently reported, business respondents sent an average of 26% more text messages in 2023 compared to 2022.

Geography is not the only factor that determines what messaging channel will generate the most value however - what vertical the enterprise/ provider is targeting also plays a role. For example, in the healthcare and financial services sector where patient / consumer privacy and reliability are of the utmost concern, SMS is the preferred messaging platform due to its trustworthiness and high rates of delivery.

On the other hand, OTT messaging is more popular in verticals such as ecommerce and travel, where 2-way communications, multi-media messages and interactivity are more important.

These examples point to the fact that whether a particular messaging channel will generate significant ROI has to do with where and in what vertical the customer plays in. Depending on the size and needs of the customer, operators may be best suited to offer messaging in a variety of forms.

Regardless of which approach an operator takes, they should recognise that there is a level of technical complexity when adding messaging their existing product offerings, both as an add on or an integrated solution.

Some examples of the hurdles operators face include WhatsApp’s ever changing APIs complicating roll out and difficulties determining pricing from MNOs. Due to this, aggregators such as Sinch, Twilio, and Bandwidth will likely continue to play a role in the simplifying the messaging ecosystem for operators in the near future.

Clearly, the question ‘how do operators monetise the messaging ecosystem” does not have a one size fits all solution. Even though the messaging landscape may be complex, there is a large opportunity for operators to drive value by offering tailored messaging solutions depending on their country, vertical and customer segment.


Caitlin has been with the Cavell consulting team for nearly 2 years since obtaining a master’s degree in English from the University of Oxford. Caitlin has had a keen interest in the Telco industry since her undergraduate years, as her degree focused on Science, Technology, and Society. In her time at Cavell, she has already assisted the team by producing key deliverables for their ongoing consulting projects.

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