$38.3M: Ain't That a Kik in the SMS
Kik, aka the Western WeChat or the WhatsApp for teens, revealed this week that it has raised $38.3 million in funding and acquired a GIF-generation startup, Relay.
I wrote about the over-the-top messaging app nearly a year ago when it crossed the 100 million subscribers mark, noting that it's achieving a level of innovation the wireless operators have only ever talked about. A year later and, guess what, the story is still the same. (See Operators Can't Kik the OTT Habit.)
There is no shortage of OTT messaging apps on the market, but Kik is a particularly interesting one. First, it really understands its target demographic -- the under-25 crowd -- and lets them register with a username, or an identity, rather than their phone number. Second, it innovates on services as evidenced by its Relay acquisition. Everyone loves a good gif. And, third and most importantly, it is monetizing its service in other ways than charging for it or bombarding users with mobile ads.
It's doing so primarily through in-app games and, recently, Promoted Chats, which lets its users chat with brands like Seventeen Magazine, Funny or Die, and Vice. The brands use Kik's technology to build "chat robots" that Kik users can then chat with for promotions and games. Kik charges the brand about 20 cents per chatter and says that 70% of its branded messages are being read within an hour, bringing in new revenue.
According to the Wall Street Journal, Skullycandy gained 307,000 chat users on Kik in the past three months through these promoted chats, tripling the number of followers it has gained on Twitter over the past five years. The brand used the chats to promote its headphones through a game that ultimately led to auctioning off a ticket to the latest Hunger Games movie.
Kik is obviously doing pretty well on its own right now in its ambitions to grow larger in the crowded US market for OTT chatting apps, but could there still be room for a wireless operator in the mix? Kik has around 185 million subscribers, a big number, but one that pales in comparison to other OTTs like Snapchat at 100 million monthly users and Tango with 250 million users. It also pales in comparison to the wireless operators that could extend their user base even further.
Beyond their reach, operators have subscriber data that could prove useful to Kik, although -- again -- Kik seems to understand its user base pretty well. Really, most of the advantages would be to the wireless operator looking to spice up a stale SMS business, but a partnership could be advantageous to both given the level of competition in the market.
At the least, Kik makes for a good case study in innovation, as do many of its OTT peers. Hopefully this time next year, I'll be able to blog about an operator that has realized that as well.
— Sarah Reedy, Senior Editor, Light Reading