In the aftermath of our first RCS summit, Capacity’s Natalie Bannerman examines one of the key talking points of the mobile industry, RCS. How close are we to full-scale adoption and exactly how disruptive will this technology be?
Rich Communication Services (RCS) promise to be more than an upgrade to SMS but a revolution in text-based messaging. The RCS protocol enables a range of capabilities from within their native messaging service that previously would have required a separate over-the-top (OTT) app.
Such features include group chat, file sharing, high-res photo sharing, video calling, mapping directions, location sharing, typing indicators, read receipts, even such things as booking a flight or restaurant, all from your built-in messaging service turning into a fully-fledged platform.
According to the GSMA, the market for older SMS-based business-to-customer messaging is already forecast to be worth $74 billion by 2021 and, as RCS increasingly comes into play, this is forecast to jump to $90 billion. RCS’s richer features provide further growth of up to 30%.
Despite all the potential of RCS, the global penetration of the protocol sits at around 12%. This is because only 55 operators, 11 original equipment manufacturers (OEMs) and two mobile operating system (OS) providers support the Universal Profile, the GSMA’s standard for RCS.
Does this level of adoption justify the claim that RCS is a legitimate communications vehicle?
“No, not yet,” says Nick Lane, analyst and founder at Mobilesquared. “Our data shows that there were around 500 million RCS users at the end of 2019, but I would refer to a lot of these users as passive – they have RCS but are not really using it to communicate. It’s when the business messaging element of RCS starts to have more widespread launches – that’s when RCS will take off.”
Synchronoss CMO, Mary Clark, says that 84 global mobile operators have launched RCS and the GSMA forecasts an additional 24 operators will launch services in Q1 of 2020 “so the pace of rollout is clearly picking up”.
She adds: “Keep in mind that RCS was practically non-existent just two years ago. Now there’s hundreds of millions of consumers in more than 80 markets with RCS applications on their phones,” she said. “In the past, RCS was written off as a technology that was ‘never coming’. The global rollout of RCS has disproved this notion and shows that it’s a legitimate communications vehicle.”
It was during the keynote panel session of the RCS day at the 2019 Messaging and SMS World conference in London that I first heard the idea that multimedia messaging service (MMS) could fill the gap in the market until RCS is more widely adopted. MMS of course has its own set of challenges and the impression from the market is that MMS is no RCS.
“MMS to RCS as a technology cannot be compared because RCS is so much more than SMS with images,” says Silvija Renuša, senior product manager for RCS at Infobip. “With RCS, brands can also share carousels, call-to-action buttons, location and files. RCS is going to be become a marketplace where retailers and other organisations will be able to have branded, personalised and promotional interactions with their customers.
Clark adds to this sentiment, pointing out a number of problems with MMS. Why hasn’t it been embraced in the same way as its SMS predecessor?
“One of MMS’s key flaws is the lack of interoperability between countries,” she says. “MMS messages often fail when sent across border, and still cost a fortune. MMS is unreliable and isn’t a viable medium for communicating multimedia messages. The accepted preference of using OTT apps to send multimedia message proves it.”
Lane takes a different view on the subject, pointing out that in some markets, demand for MMS is growing. But he sees this as showing a hunger for further MMS development: it is confirmation of the demand for richer communications.
“I would go the other way and say that the rise in MMS confirms the demand for richer messaging channels is already here – and reveals that the need for RCS business messaging (RBM) is more pressing than believed,” he explains.
If you listen to most analysts and researchers in the mobile space, RCS will bring with it a virtually limitless set of opportunities for businesses and enterprises.
“It encourages more conversational interactions with customers able to communicate with brands in the same way they would with friends and family,” says Jay Patel, CEO at IMImobile.
“Importantly, it also offers the security of ‘blue-tick’ verification and the providers’ official branding, along with an improved ability to measure success metrics such as click-through and engagement rates.”
Additionally, RCS has the potential to convert five billion messaging users globally to the new platform over the next five years, making it “the single biggest medium in the world”, adds Kerstin Trikalitis, CEO at Out There Media, one of the first companies to launch live RCS-enabled marketing campaigns.
“On the revenue side of things: RCS has the potential to capture 20% of the global digital advertising spend, which currently stands at $300 billion. That means that RCS could amount to a total of $60 billion by 2023,” says Trikalitis.
Overall, “RCS will create bigger and more plentiful revenue streams for the mobile and messaging ecosystem,” says Lane. “In a few years digital business models will be emerging as messaging providers explore innovative pricing models to meet the needs of the brands and businesses.
He adds: “With it comes a shift in brand spend – away from mobile banner ads and desktop display where the click-through rate is low and return on investment is average at best, to a channel with supercharged engagement levels – even at this early stage.”
Any opportunity comes with obstacles and roadblocks. Aside from the slow rate of deployment, I am curious to know what other challenges lie ahead.
According to Renuša, general awareness of RCS as well as the pricing and business model are areas of concern. “There are still a lot of discussions taking place on how RCS should be priced by enterprises.”
Trikalitis says that time to market for mobile operators is where her worries lie. “Operators globally have to adopt RCS at a much faster pace and have to work together to ensure interoperability,” she explains.
Lane considers having Apple as a mobile OS provider can be considered a roadblock, but that’s due to its having limited active users. However, once RCS has achieved the required scale “the issue of Apple will recede, but not go away”. He predicts Apple will support RCS over the next 12-20 months.
Clark says that the lack of buy-in from digital brand owners should be considered an obstacle because “the challenge is for creatives to demonstrate these capabilities to brand owners as means to secure buy-in”.
By the end of 2025, the industry expects 5G to have 2.6 billion subscriptions, covering up to 65% of the world’s population and generating 45% of the world’s total mobile data traffic, according to the Ericsson Mobility Report from November 2019.
In countries where mobile is predominately prepaid, bandwidth and data requirements might be impacted by RCS, “but as trials and early commercial models have already shown, mobile operators have been happy to zero-rate the data for RCS campaigns and the consumption of videos”, says Lane.
For the most part, RCS data should be no different from any other mobile channel, meaning the RCS itself won’t have a significant impact.
“It’s the behaviour habits of consumers and businesses around video that will make an impact – but it’s worth noting that data and bandwidth will expand over time to meet increased demand for video related services,” adds Clark.
Trikalitis has a rare position in a mobile advertising data monetisation agency, so I wanted to know whether she sees the biggest market for RCS in the wholesale or enterprise space. It’s neither.
“We see the biggest opportunity in the digital advertising space, as RCS represents a true alternative to Google and Facebook for advertisers,” she explains. “The combination of scale, targeting and richness makes RCS the perfect medium for brands to interact with their audiences.”
Trikalitis adds that, together with her company’s mobile operator partners, they are positioning their efforts in this space “using our mobile advertising platform, Mobucks, that enables targeting at scale in combination with richness and interactivity for our RCS campaigns,” she says.
So RCS, though still in its early stages, has all the makings of the next big disruptor in mobile and messaging, bringing with it a host of new opportunities ripe for taking.
“A centralised app for communication can shift the paradigm and enhance the mobile experience of every end-user,” says Clark.
Early adopters such as Vodafone have been testament to this. In 2019 it rolled out an RCS campaign during a public holiday, with others over SMS and MMS. Vodafone found 80% of customers opened the RCS message, with 25% responding, in comparison with a response rate of 1% for just SMS and MMS.
Similarly, on the enterprise side, Out There Media’s first large-scale commercial RCS campaigns with Disney and McDonald’s via the Vodafone network returned a 73% read rate and an 82% engagement rate.
“RCS should be a game changer,” says Lane. As messaging in general is becoming even more centralised and a part of daily digital lives, “then brands have a channel taking them to the heart of each and every customer”.