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Smartphone users suffer from app fatigue

Smartphone users suffer from app fatigue

26-09-2016 | Insight

It’s impossible to imagine cell phones these days without chat apps. Trend investors Jack Neele and Richard Speetjens think they will have more and more uses. “Asia is at the forefront, using chat services for e-commerce, to order tickets or a taxi, for instance.” Investors are focusing more and more on the potential of messaging services.

  • Jack  Neele
    Jack
    Neele
    Portfolio Manager Robeco Global Consumer Trends Equities
  • Richard  Speetjens
    Richard
    Speetjens
    Portfolio Manager Robeco Global Consumer Trends

Speed read

  • Chat apps have more and more uses
  • Chat services are becoming increasingly popular among investors
  • All-in-one apps are the wave of the future

“So they've done it after all,” complained a WhatsApp user on social media. The chat service had just announced that it would open up its network to businesses, thus allowing advertisements. According to Whatsapp, business service messages are an example of the new applications. These could be used by an airline, for instance, to inform passengers of a delay or by a bank to notify customers of suspicious account activity. However, it is also possible to send messages directly that contain special offers or promotions.

Until recently, the chat app banned business and commercial use of its service, and it continued to do so, even after Facebook acquired it two years ago for USD 19 billion. Users were afraid of being bombarded by advertisements.

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Chat apps for e-commerce

“It's no surprise that WhatsApp is being used for more than just messaging. In Asia, chat apps have already evolved to be used for e-commerce in order to make a profit. Chinese app WeChat can be used to buy movie tickets, make restaurant reservations or order a taxi. KaoTalk from South Korea and and the Japanese Line can also do more than send messages”, says Jack Neele, manager of Robeco Global Consumer Trends Equities.

“Where the US normally leads the way in technological developments, they are lagging behind Asia when it comes to chat services. Two years ago, Facebook founder Mark Zuckerberg surprised everyone with his multi-billion dollar acquisition of WhatsApp, but he recognized the potential of such applications early on.”

“Chat apps are a growth segment in the Internet market. Tencent accounts for 50% of China's mobile Internet traffic, most of which comes from the company's app WeChat. Earlier this year, Line went public for USD 1.14 billion making it this year's biggest technology public offering to date.”

Interesting trend for investors

Chat apps are an interesting option for commercial use due to their tremendous reach. Earlier this year, WhatsApp recorded its one billionth user, making it the world's most popular chat app. With 900 million users, Facebook Messenger is a close second. Snapchat has 200 million users. With 700 million users, WeChat is a major player in China. Most of Line's 218 million users come from Japan, Taiwan, Thailand and Indonesia. KakaoTalk (unlisted) has over 100 million users.

Investors are focusing more and more on the commercial potential of chat apps. Speetjens: “Investors are interested in what further potential chat apps may have in addition to just sending free text messages, photos and videos clips. They are curious as to how these Internet companies will be able to make money with them.”

‘All-in-one app is the wave of the future’

Please, no more apps

Increasingly clear which chat service will come out on top Facebook Messenger and WhatsApp are the leaders in Europe and the US and WeChat in China. "Their huge lead over the rest makes them almost untouchable", says Neele. “Apple has a reasonably solid position with iMessage, but it is not a leader. In terms of electronic payments, it does have a real advantage with ApplePay.”

Internet giants such as Google and Alibaba are the large companies which lack popular chat services. Speetjens: “Google Hangout was a flop. Alibaba is aimed more at e-commerce and cloud-based services. Snapchat is still the only independent messaging service.”

Neele and Speetjens expect to see more and more services integrated into a single app. And not just because this will be profitable. They think smartphone users are starting to show signs of 'app fatigue'. They don't want to download a separate app anymore and create login credentials again for each new service. An all-in-one solution is the wave of the future.”

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