Going over the top: Who is going to profit from the rise of WhatsApp and Viber?

The apps are costing phone providers billions.

Smartphone owners now have so many apps at their disposal for communicating with friends across the internet for free, it's like they're confronted with a selection box of assorted digital chocolates. Dozens of companies are jostling for their attention, waving about treats such as voice calling, supersized emoticons (or stickers), gaming and more.

But popular technologies aren't created without ruffling feathers. The mobile carriers who have traditionally been the gatekeepers of our voice minutes and our text bundles have, by virtue of the unlimited data plans that facilitate these apps, loosened their grip on us – and they're losing money: an estimated £9bn in 2011 and rising. Meanwhile, Facebook and Google aren't going to let start-ups muscle in on their territory.

WhatsApp, the most popular of the so-called OTT (over-the-top) apps, has already been linked with two potential purchases; first by Facebook, and then by Google – for a rumoured $1bn. These rumours have been denied, but the whirl of interest surrounding WhatsApp and its OTT cousins is indicative of a marked change in our chatting and texting habits.

WhatsApp, which allows users to send free messages, has been around for four years. As both the sender and recipient need to be running the app, it has meant a relatively slow take-up. But the growth of these apps tends to snowball. It's said that 97 per cent of Spanish smartphones have WhatsApp installed, for example, while WeChat is beloved of the Chinese, Kakao Talk the South Koreans, Line the Japanese. But local is becoming global; more than 250 million people worldwide now use WhatsApp, and more than 175 million use a voice and text app called Viber.

The competition is frenetic; all these apps are looking to become the universal messaging choice. (Apple's iMessage and Blackberry's BBM work only on the manufacturer's own devices.) The apps mark their differences in various ways; WhatsApp, for example, is straightforward, ad-free and costs a few pence a year, while Line's games unlock sticker packs, turning communication into a game.

All this information flows back and forth for free, provided you don't exceed your phone's data allowance. Once you've spent time using these apps, the absurdity of networks offering text and minute bundles becomes hilariously apparent. Some people in the UK are still paying as much as 12p per text, while OTT messages scamper unmetered under the radar. Many customers are concerned only about the data package, because it caters for nearly all their needs – and this isn't good for the mobile carrier; it becomes little more than a dumb data pipe.

"It's an ongoing concern for those guys," says Ernest Doku, technology expert at uswitch.com. "They're forced to allow customers to leech these data services – and this doesn't make them any money." Few will weep for the carriers' predicament; some might say that they had it coming, with tables of complex tariffs (Dolphin? Red XL? Full Monty?) making it difficult for consumers to compare. Indeed, the explosion of interest in OTT apps in Japan was driven by the carriers' misguided policy to allow their customers to send SMS messages to people on the same network. This was sorted out only in the summer of 2011. In many countries, OTT has been encouraged by restrictive practices.

SMS and traditional voice calls aren't about to disappear, but SMS revenues are diminishing and we're told it's affecting carriers' ability to invest. In fact, OTT can offer a revenue opportunity; each time a voice-calling app calls a landline, the carrier receives a termination fee. But this offers only a crumb of comfort. "The carriers are trying to adapt to the new model," says Doku. "The 3G infrastructure isn't always able to handle the volume of data – but the arrival of 4G will carve out an interesting situation, because there will be new differentiators in terms of coverage and speeds on offer." Where 3G has struggled, 4G will cope with text, voice and video traffic, but traditional calls and texts will become an anachronism. Get a fifty quid Android phone running Viber, and you can contact any smartphone in the world, unmetered, at no extra cost.

No wonder that Facebook is flexing its muscles. Three weeks ago, British users of its communications app, Facebook Messenger, were suddenly able to make free calls to friends.

Additionally, Facebook has been placing restrictions on competing apps by preventing them from accessing your list of Facebook friends to check if they're already using the app – a critically important feature for any new OTT pretenders. Voxer and MessageMe have found themselves punished in this way. Facebook has observed our appetite for OTT, and seen that it's not just about us saving pennies; we love the way they make communicating a richer experience.

Making money is, however, proving to be a problem, and the rumoured $1bn price tag for WhatsApp raised a few eyebrows. But its existing 250 million user-base would be tremendously useful to Google, which has long planned a free, cross-platform messaging service. But "free" is a misnomer, of course.

None of these services are truly free; you pay with information, or time spent looking at adverts. The question that's going to face consumers is this: would you rather pay a few pence for calls and texts, or allow Google or Facebook to take that responsibility in return for some of your data? As ever, the trade-off between our money and our privacy is a deeply intriguing one.

Life and Style
love + sex
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
News
people
Voices
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
Life and Style
ebookNow available in paperback
ebooks
ebookPart of The Independent’s new eBook series The Great Composers
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Gadgets & Tech

    Recruitment Genius: ASP.NET Developer / Programmer - SQL, MVC, C#

    £35000 - £45000 per annum: Recruitment Genius: This distributor and wholesaler...

    Ashdown Group: HR Advisor - Bedfordshire - £30,000 + Excellent package

    £28000 - £30000 per annum + Bonus, Pension, 25days hol, PHC +: Ashdown Group: ...

    Recruitment Genius: Bookkeeper / Credit Controller

    £20000 - £24000 per annum: Recruitment Genius: The successful candidate will h...

    SThree: Trainee Recruitment Consultant

    £18000 - £23000 per annum + OTE: SThree: SThree are a global FTSE 250 business...

    Day In a Page

    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot
    Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

    Poldark star Heida Reed

    'I don't think a single bodice gets ripped'
    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn