Carriers Lost Round One Against WhatsApp. Can They Rebound?
The day after Mark Zuckerberg spent up to $19 billion on WhatsApp, the world’s wireless carriers suddenly had a lot to say about their own big plans for Internet-based mobile messaging.
Third-place U.S. carrier Sprint announced that its competitor app, Messaging Plus, was going to be pre-installed on most of its new Android smartphones.
French carrier Orange bragged that its Internet messaging service, Libon, would start letting users communicate with other people in their phone book, even if the app isn’t installed on the other end.
Germany’s Deutsche Telekom, meanwhile, called on other European carriers to get more aggressive about a longstanding plan to link to each others’ customer bases with a common Internet messaging technology.
If you sensed a bit of nervousness in that flurry of announcements, you’d be right.
Since the smartphone revolution took hold, application makers like Facebook have mostly offered digital applications that add to the basics of what a phone can do—things the carriers couldn’t dream of doing better on their own.
But by spending so heavily on WhatsApp, which had already eaten into lucrative text- and photo-messaging revenue for carriers around the world, Facebook was now forcefully encroaching on the basic services that have always been the carriers’ bread and butter.
If the most important Internet company of its generation can undermine the basic services that carriers have relied on to profit from their infrastructure investments, it’s not so hard to see a future when those carriers provide barely any services at all. If you operate a mobile network, there’s already a dreaded name for this kind of company: the dumb pipe.
“A service like WhatsApp, to be honest, that’s something we could’ve and should’ve come up with before,” the CEO of Orange, Stephane Richard, told Bloomberg. “We’re well decided to catch up.”
But there’s good reason to believe the carriers might not pull off credible competitors to startups offering Internet-based communications services. They’ve already tried, just as outsiders like WhatsApp were taking off. Despite plenty of cash, tons of engineering smarts, and a big base of existing users, there just isn’t much to show for it.
Just ask Alex Samano. He’s the guy who used to run Bobsled, T-Mobile’s competitor to services like WhatsApp and Skype. Launched in 2011, Bobsled was the only serious attempt by a U.S. carrier to build an Internet-based communications service on par with those offered by startups.
Bobsled eventually attracted about 3 million monthly active users, Samano said, and most of them weren’t regular customers of Bellevue, WA-based T-Mobile (NASDAQ: TMUS). But last year, after a tumultuous period at T-Mobile that included a spin-out and a failed takeover bid, Bobsled was sold off to the technology providers who’d supplied the app’s features.
“We had a good team. I think we gave a lot of things a shot,” said Samano, who today runs a financial planning startup called Life Dreams. “But we couldn’t iterate as fast as we would have liked to find that angle—you need one thing that latches on, you need that one feature.”
Attempts to build Internet messaging competitors haven’t gone terribly well overseas, either. Joyn, an initiative that is supposed to give carriers a common technology infrastructure for seamless messaging across any mobile network, has faced delays in getting enough carriers to sign on.
And early last year, Spain’s Telefonica decided to dump its mobile phone-based messaging and voice service, called Tu Me, and focus instead on a broader service called Tu Go. Apparently more of a Skype competitor, Tu Go is aimed at tablets and laptops as well as smartphones.
On paper, you might have thought T-Mobile’s Bobsled had a decent chance of succeeding. Unlike some foreign carriers, T-Mobile wasn’t worried about cannibalizing its text-messaging revenue with a free, Internet-based service because U.S. carriers were already selling subscription plans with unlimited amounts of messaging traffic.
As the fourth-largest U.S. carrier, T-Mobile had also embraced its role as the scrappy alternative to market leaders Verizon and AT&T. And Bobsled had the inherent advantages that a carrier messaging app can wield over outside competitors, including the ability to tie into the carriers’ messaging networks for cheap.
“That is a humongous asset that still, today, nobody else can leverage,” Samano said.
By early 2013, Samano said, Bobsled had accumulated about 4.5 million raw users. Around 3 million of those were monthly active users, and more than 1 million were registered as weekly active users.
The bulk of Bobsled’s users were attracted by its voice-calling app, which allowed people to get around high long-distance charges in other countries—it had big user numbers in Mexico and Greece, Samano said. The text- and image-messaging services had also begun to pick up numbers as the Bobsled team started combining the two applications into one service, he said. But it wouldn’t last.
After AT&T’s $39 billion bid to acquire T-Mobile flamed out with federal regulators in 2011, parent company Deutsche Telekom combined T-Mobile with MetroPCS and began looking to unload its shares in the new company. John Legere was brought in as CEO, and the new leadership sold Bobsled last year for undisclosed terms.
Today, Bobsled is owned by Burlingame, CA-based HD Messaging, a small company that provides the technology behind Bobsled’s messaging app. HD Messaging also bought Natick, MA-based Vivox, the company that was providing Bobsled’s Internet-based voice service, and will be combining the voice and messaging features for new versions of Bobsled later this year, HD Messaging CEO Jonathon Linner said.
(T-Mobile still has a business relationship with Bobsled, sharing revenue with HD Messaging and serving as a distribution channel for the app. HD Messaging also licensed the Vivox technology and brand name back to a group of Vivox employees who have continued operating its video-game business under a new corporate entity.)
So, why didn’t Bobsled fly? … Next Page »