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Billions of users, $5.6 trillion in global economic impact

· May 26, 2017

This is part of a series of posts on the impact of Rich Interaction Applications (RIAs).

Applications such as iMessage, KakaoTalk, LINE, Signal, Skype, Snapchat, Threema, Viber, WhatsApp and WeChat have become increasingly popular with consumers around the world. A new study finds that a 10% increase in the global usage of these applications has led to an increase of US$5.6 trillion in GDP across 164 countries over 16 years (2000 to 2015).

These interactive applications that are so popular today actually trace their origins to instant messenger services like AIM, ICQ or Live Chat, which were installed on almost every computer during the early days of the public Internet. The common thread between these different applications is that they facilitate rich interaction such as photo/video sharing, location, payment and chat between individuals, groups and enterprises. Therefore we at WIK, a German-based international research institute, have decided to call them Rich Interaction Applications (RIAs), a term that captures more accurately the range of functions they can perform.

Indeed, a variety of specialized applications has emerged to cater to the needs of individual groups such as families and youths (Disney MIX – although no longer available) or the elderly (Care Messenger). Others like Hike (India), Jongla (Nigeria) and 2go (South Africa) predominantly serve local markets. All of these applications have a variety of functions, and providers of RIAs have to develop and adopt new features continuously to keep up with or stay ahead of the competition. Correspondingly, the WIK study surveys 139 RIAs, mapping the specific functions they offer today, and it shows that the most advanced RIAs feature more than 20 functions.

With more and more functions offered, consumers’ usage of RIAs comes ever closer to capturing all activities commonly done on the Internet. This idea shaped WIK’s econometric analysis of the impact of RIAs in developed and developing countries. According to our estimates, each 10% increase in RIA usage has added on average US$5.6 trillion in GDP (0.33% of GDP), exceeding the economic benefits of basic telecommunications services across 164 countries studied from 2000 to 2015.

This is a conservative estimate of RIAs’ economic impact given that only part of the impact from these services is measurable as GDP. Moreover, the increased usage of RIAs over the 16 years’ time span suggests that their annual economic impact has also increased over the period, and can be expected to continue to increase going forward as more and more consumers have access to high-speed (mobile) broadband connections.

The multi-sided interaction on RIAs enables new local value creation. For instance, local merchants gain access to new markets and can advertise their products and services globally with almost no barrier to entry and very little monetary risk. The integration of payment and money transfer functions with RIAs enables remittance payments at substantially lower cost; for India alone, these savings could amount to US$4.4 billion annually. RIAs also generate significant social benefits. For example, standard RIA functions, including video and voice recognition, are often considered superior to specialized applications in supporting disabled people. RIAs can also play an important role in disaster relief as an increasing number of them offer broadband-free access. Thus, up to 80% more people can receive potentially life-saving information when it counts.

Moreover, RIAs can help to reach the United Nations Sustainable Development Goals on health and education by providing crucial health information even in remote areas and empowering community health workers. By using RIAs, community health workers can learn more, take more responsibility and consult experts when required. By delivering audio and video-based teaching aids, RIAs can also have a significant impact on education in developing countries. For instance, an Indian education project using these functions doubled the effectiveness of reading education when compared with schools counting on traditional learning materials.

Consumers use many RIAs alongside each other because of the unique ways that these apps satisfy users’ individual communication needs. As these needs differ according to various sets of relationships, consumers are selective about the specific RIA they use to communicate with a specific set of relationships. Thus, they use the technological seams between the applications to navigate their social spheres. The vast array and low (or, generally, no) cost of RIAs and the portability of contact data mean that consumers can and do subscribe to multiple RIAs. Also, consumers can switch easily to new RIAs. The Internet Protocol-based nature of RIAs means that consumers use RIAs across their different devices — increasingly, on mobile devices and even devices without broadband connectivity to the world beyond that community.

The WIK study also finds that consumers do not use RIAs and communications services as like-for-like substitutes; more often than not, consumers use them complementarily. As a result, RIA use has a substantial positive impact on telecommunications providers’ businesses. This finding is also underpinned by the fact that there is network complementarity with applications, in particular RIAs. In addition, RIAs drive consumers’ willingness to pay for Broadband Internet Access Services (BIAS), giving telecommunications providers more opportunities to earn revenue and finance new infrastructure. Research shows a significant correlation between RIA usage intensity and the willingness to pay for broadband and the likelihood that a consumer will purchase a new contract with his or her broadband provider.

The WIK study concludes that the spread of high-speed broadband, the decreasing cost of devices, and the continuous evolution of RIAs are likely to drive new functionality and uses. For example, speech interfaces may be just the first step in a new wave of innovation. Therefore, it can be expected that the positive socioeconomic impact of RIAs will continue to grow in a conducive policy environment.

Dr. René Arnold is Head of the “Markets and Perspectives” Department at WIK. 

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DisCo is dedicated to examining technology and policy at a global scale.  Developments in the European Union play a considerable role in shaping both European and global technology markets.  EU regulations related to copyright, competition, privacy, innovation, and trade all affect the international development of technology and tech markets.