Messaging Apps Seek to Speak to Different Markets

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Makers of messaging apps are struggling with a core problem: how to monetize what has become an increasingly popular service that consumers are expecting to access for free.

Snapchat has managed to achieve a multibillion-dollar valuation without generating a dime in revenue by scaling its free disappearing photo service to claim some 60 million users. How that scale will lead to a steady revenue stream is still under wraps at the company’s Venice headquarters. Others have chosen to abandon the consumer market entirely, opting instead to serve businesses looking for ways to communicate privately and securely.

Two new apps built in Los Angeles, Invisible Text and Privatus, are evidence of this growing divide.

Dez White, founder of free ephemeral messaging app Invisible Text, is betting on the consumer market. Santa Monica’s Side Four has developed an iPhone app called Privatus designed to allow lawyers to communicate privately with clients.

White, 30, founded celebrity gossip blog MouthtoEars.com seven years ago after working as a fashion stylist. She came up with the idea for Invisible Text after too many sources feared coming forward because they didn’t want to leave digital fingerprints on the information they were passing to her.

Invisible Text, which allows users to send timed-to-disappear text messages, photos, documents, or audio and video files, launched in August and claims about 70,000 users. It also lets a sender delete a text submitted through the app before the recipient opens it.

White, who runs the business from her Miracle Mile home with the help of two full-time developers, has just launched a series of “Invisible” apps to speed the growth of adopters. The new apps are designed to enhance the privacy of mobile communication among consumers and their phone, email and social media contacts by moving those conversations to her platform.

Revenue would come through paid features embedded in the apps that will allow people to either chat by video, download emoticons or send an ephemeral email to someone who hasn’t downloaded her Invisible Email app.

White, who said she has been backed by $2 million from private investors, plans to spend half of that funding on a national print, digital and billboard marketing campaign to help get the word out about all of her apps.

But a $1 million national campaign in a crowded global marketplace might not bring the kinds of numbers needed to survive, said Brad Spirrison, managing editor of Appolicious.com, a Chicago website that covers the app market.

“You have to have something that there’s a big appetite for,” Spirrison said. “And there’s a lot of companies trying to do it.”

For every established name in the messaging market, he said, there are probably 20 knockoffs with service that isn’t as reliable. And forget about trying to appeal to the general population.

“These apps have minimal value if they don’t have some critical mass in a particular area or among a particular cohort,” he said.

That’s one aspect of customer acquisition White said she has targeted.

“We’re working on our teen market,” she said.

But the entrepreneur has a long way to go if she hopes to match Snapchat’s estimated 60 million users, most of whom are teens. A November study from research firm Global Web Index concluded that 10 percent of 16- to 19-year-old Internet users outside of China communicate with Snapchat. Eighteen percent of the same demographic uses Santa Clara’s WhatsApp, a nonephemeral service with 500 million users that Facebook bought in February for $19 billion.

White does have some celebrity muscle in her corner as she tries to promote her product. Socialite Paris Hilton, comedian Andy Milonakis and Tennessee Titans linebacker Shaun Phillips have all tweeted about their use of Invisible Text.

Divided market

The chase for scale has led recently to messaging apps dividing into two general camps: the ephemeral, including Snapchat and White’s apps, in which messages disappear; and anonymous, like Whisper and Rumr, where the identity of the poster is shielded.

Both have their appeal among consumers, but in the search for revenue, Spirrison said, anonymous apps might be operating at a disadvantage.

“For apps that sell themselves on privacy, ads are inherently a conflict of interest,” he said.

Spirrison argues that apps should make sure customers know exactly what they’re getting themselves into when they start using the product, particularly since the term “metadata” is rather ambiguous.

“What would offend is if it’s used in a way people didn’t realize,” he said.

Spirrison said app developers can also try to drive revenue by targeting niche communities in the business sector looking for secure messaging options.

That’s the path chosen by Side Four, which recently enlisted Alhambra’s Ideal Legal Group to test out Privatus. The mobile software encrypts data on individual devices that can only be decrypted by using a private key.

Evie Jeang, Ideal Legal’s founder and managing partner, said the four-attorney firm has been using the app for the last three months. She said no other firms are testing it out.

Side Four executives declined an interview request.

But Jeang, an international divorce attorney, said Side Four could be making money soon.

“I’m going to make sure more law firms follow the trend,” she said. “I’m positive my firm won’t be the only one.”

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