WHAT IS RCS?

RCS is a new messaging standard that will replace SMS on your phone. Essentially it is the next generation of SMS. Instead of SMS, the new RCS app that will feel more like Whatsapp and Facebook Messenger and other messaging apps out there.

RCS stands for Rich Communication Services. It has all the familiar features of those messaging apps and functions in a similar way. You will be able to DM people, create groups, see if people are online, see read receipts etc. It will also have similar add-ons such as being able to do VOIP calls and video conferencing.

The fact that it will have this functionality is, of course, no coincidence. SMS as a messaging platform has not improved much since it was launched and therefore there is no surprise that it has lost market share to much more user-friendly better products.

Of course, in the beginning, the Internet-based messaging products emerged as a way to save money versus sending text messages, however, the user experience combined with the network effects have made the messaging apps the clear favorite with consumers.

To put this in context people send approximately 100 billion messages just on Whatsapp and Messenger (combined) per day and global SMS usage peaked at 20 billion messages per day. There is a lot of catching up to do.

What is RCS right now?

RCS messaging is Google’s and to some extent the operators fighting back against those messenger apps, in particular against Facebook’s Messenger and Whatsapp. Google has united 11 phone makers and 40 operators to support RCS which I will refer to as the RCS group. That is a reach of 1.8 billion people.

Not only does RCS support similar functionality to the messaging apps, it also supports chatbots (which is why Botpress is taking an interest in this). This means that RCS will have similar functionality to the chatbot functionality on Facebook messenger. It will support quick replies and carousels and other graphical widgets that require less typing and make the user experience better.

Although the specifications for RCS have been in development since 2008 and RCS has, in fact, been supported by most operators since 2012, Google has recently enabled this functionality on Android phones. It has also launched with a handful of business partners (enterprises) who have launched RCS services - in the most part chatbots.

Who is really behind RCS and why?

While it is a great step forward to introduce rich communications to SMS messaging, how will the switch to RCS play out?

Let’s start by looking at the current state of play.

There is one market where SMS still dominates and that is for businesses as another email-like alternative. What I mean by this is businesses can securely send messages to their clients over SMS knowing that it works for everyone. There is a good side to this, 2 factor authentication type use case for example, and a bad side, spam / outbound for example (just like email). Of course how SMS works exactly differs from operator to operator and region to region depending on norms, costs and regulations.

A relevant development for the RCS group is that Whatsapp and Apple recently released “for business” services. It’s hard to argue that this is a major threat to SMS existing use cases given that SMS is now is hardly a channel that users would choose to communicate with companies on as the experience is bad.

It does however again draw attention to just another way in which operators are completely losing the battle to the messaging apps from an initial starting point of complete domination of the end user for messaging. Aside from messaging it worth noting that they had (have) the ability to dominate mobile payments as well (which is a key for dominating business to consumer messaging but have failed to do so).

It is of course worth asking whether it is in the operator’s interests to try to dominate in these types of applications at all, given that each operator has a limited user base. Unlike the likes of Facebook and Google, the operators cannot pursue users in markets adjacent to their existing registered user base so their market for these products is limited. While Facebook may make on average $20 per user per year, this may not make sense for mobile operators who are directly charging most users more than this per month for their services, and much more on average. And competing with Facebook beyond messaging would require a huge investment and refocusing of the business model.

Of course, they have the problem that voice and video over IP is eroding their revenues and perhaps there is some hope that making SMS great again will allow them reclaim some of the lost revenue. Alas, it is largely a vain hope as users will not switch to RCS if it is more expensive than the messaging apps they are currently using (and may not even have good reason to switch which we will discuss later). The operators are caught in a space where they are selling a highly commoditized product (data and voice calls) with no real network effects and therefore need to either compete on economies of scale (to the extent that is possible) or via the confusopoly of their contracts (making contracts more complicated than they need to be so they are hard to compare to competitors)

It, therefore, turns out that the company with the biggest incentive to make RCS work is Google. If Google can get RCS to work on mobile and consumers become dependent on the service, the mobile operators and device makers will need to support the standard or risk losing customers who see it as a “must have”. Google will then have access to the massive messaging data trove by “helping” the operators comply with the new standard with software services such as Jibe.

For Google, their failure to dominate social media and messaging looms large. For a company whose business model is to know everything about everything and then set the AI free to turn information into ads, this is a huge gap in their portfolio. Their coveting of the Facebook data trove has become more acute with every failed initiative they have launched against Facebook, from Google Plus to Allo.

The problem Google has, the discovery that they have made, is that it’s really hard to get users to move from one chat platform to another without a compelling reason why they should do so. Just launching a me-too product (such as Allo), which is what they have been trying to do, is not sufficient to get consumers to move. There are network effects to overcome and switching costs (even if you put the app on their phone).

Google has launched RCS because it has some real advantages over messaging apps. The question is whether these advantages will be enough to make RCS successful.

What are the advantages of RCS over messaging apps?

There are a few potential advantages of using RCS for consumers over messaging apps:

  • Businesses and users will have a verified identity so that users can be sure of who they are dealing with. In most places, the number is tied to a passport or company account.
  • It will work even when an internet connection is not available (which mostly means when people are traveling).
  • It is a trusted as secure by consumers even though it does not have end to end encryption like many messaging apps do (only messages in transit are encrypted).
  • SMS fallback works with everyone everywhere and is a natural fallback.
  • Brands would have more control over branding as SMS and RCS are not branded apps.

Will RCS succeed?

Some of the advantages above can be replicated by the messaging apps if they turn out to be game changers, and some can’t be.

RCS will not have the main advantage of SMS at the outset, and that is SMS works with everyone everywhere.

While 1.8 billion people is a good start, it is not everyone, everywhere which means that companies have the same issue as when they message people over messaging apps, there is no guarantee that the person the message is being sent to will get the message. Of course, RCS does have the advantage that if the recipient of the message does not have RCS, it will naturally fallback to SMS so the person will get the message. The problem is that SMS will not give the user any RCS user experience advantages and there gives them less reason to use it.

Even if RCS was on all phones would that mean that users would switch to RCS because they could connect to everyone? The answer is no for frequently contacted people as users are already connected to all their contacts and have set up groups and have a history and don’t want to move for no good reason. For infrequently contacted people it could be a good way of connecting however so it’s likely there will be some but comparatively small personal use of RCS. RCS would need to offer some kind of big incentive to generate a switch en masse which is not evident right now.

For business communication, RCS can be more successful. Businesses are already using SMS and would definitely adopt another important messaging channel. The fact that they can be verified users (instead of having to communicate with phone numbers) will also be an incentive to use this channel.

It is also true that it likely makes sense for the business channel to be separate from the personal messaging channel because users do not want to clutter than messaging app with messages from businesses in the way that happens now with SMS and email.

It is possible to combine business and personal messages, wechat is a good example of this, but it would take some major modifications to the UI of the messaging apps. It is possible this could happen on RCS, especially if ubiquitous KYC and payments services were introduced on the platform, along with other compelling reasons for users to use it alongside their friends.

Brands may also have a reason for preferring RCS to messaging apps, as RCS is likely to be more brand neutral (like sms and email) than the messaging apps. Of course what matters more to brands is the effectiveness of a channel i.e. usage and click through rates, so having more control over the brand message is less of a reason to switch.

RCS also has some basic chatbot functionality which makes it relevant to Botpress. Like Facebook Messenger, it supports carousels and quick reply buttons. This type of functionality can be useful for some use cases, although as Facebook found out, the uses are more limited than they originally recognized.

Our view is that for chatbots to truly take off, the UI needs to be radically modified for chatbots, far beyond what RCS or other messaging platforms offer. Without a radical change of the UI, including the incorporation of voice assistants the use cases will be limited. Even if they are limited, however, the experience for these use cases versus SMS will be a lot better. For example, having a quick reply button rather than typing is a response is definitely better.

The problem with RCS on this score is that because it is designed by a committee and needs to be implemented by the operators, it will not be able to react quickly to changes in thinking that we see coming about chatbots.

Summary

RCS is coming and will definitely be an improvement over SMS. It will be appealing to businesses but will not displace the messaging apps for personal messaging. On the number of messages sent rather than the number of active users statistic, RCS will continue to rank far below the messaging apps. Business will still need to continue to provide services to many messaging channels as long as those apps are used by billions of people and it is profitable for the businesses to use them. Bot frameworks of course will all incorporate RCS.

At the outset, it is not clear that RCS will be a runaway success however it will be an important channel for businesses to use in the future and will become more important as more operators adopt the standard.