Another high-flying Canadian startup backed by deep-pocketed U.S. venture capitalists has hit an impressive milestone – although it admits it’s still a long way off from generating profits or meaningful revenues.
Kik Interactive, a Waterloo, Ont.-based instant messenger service started in 2009, said Thursday it now has more than 100 million registered users – a 233-per-cent increase in 12 months, and ahead of rival BlackBerry Messenger (BBM). “We’re probably one of two Canadian companies ever to get 100 million regular users,” said Ted Livingston, Kik’s 26-year-old founder and CEO.
Kik’s news came on the heels of a $100-million financing for Ottawa e-commerce software firm Shopify Inc.
Kik is one of several instant messenger services, or “chat apps,” to pick up where BBM left off after the smartphone maker pioneered the mobile-only chat service, an application than enables smartphone users to send rapid messages to one another while bypassing their carriers’ texting service.
For years, BlackBerry Ltd. resisted making its hugely popular BBM available on other platforms, leading to the emergence of rival chat apps that could be used on Apple and Android devices. As those platforms took off and BlackBerry waned, the rival apps surged – including market leader WhatsApp, which boasts 350 million users. BlackBerry finally launched a cross-platform version of BBM this fall, but it now lags its upstart rivals.
These chat services have been tabbed the “killer app” of mobile computing and, along with social media giants such as Facebook and Twitter, are redefining how people communicate in the mobile age.
As a result, Kik and its peers have generated a lot of buzz despite the fact they have little revenue to show for their efforts so far. Kik has raised $32-million (U.S.), mostly from heavyweight U.S. venture capitalists including Foundation Capital and Union Square Ventures. Japan’s Line is reportedly considering going public, while Snapchat, a messaging app than enables users to send photos and videos, announced this week that it had raised $50-million in startup capital, on top of $70-million raised previously.
It’s too early to know whether chat apps can replicate the “network effect” of other internet firm such as Google and Facebook, which built huge user bases first and generated revenues later. Chatting is a more ephemeral way of communicating, and users typically “chat” with a smaller group of people than the network they maintain on Facebook, which also serves as a repository of their photos, videos and conversations. Chat content, by contrast,“is pretty much irrelevant five minutes later,” Boris Wertz, a Vancouver-based venture capitalist said in a recent interview.
Kik has attempted to keep its users – primarily American teens – by creating a platform in which they can play games and trade content with one another.
Despite the paucity of revenues, chat apps have had a measurable impact on wireless carriers by providing their customers a no- or low-cost alternative to text-messaging. British research firm Informa Telecoms & Media recently forecast that carriers will see annual text-messaging revenue decline from $120-billion (U.S.) this year to $96.7-billion in 2018 – a 19 per cent drop – as chat apps and other so-called “over-the-top” applications such as Skype gain in popularity.
Canada’s three main wireless carriers say they haven’t felt much impact as declining voice and text revenue have been offset by rising data charges as customers increasingly use smartphones to access the internet.
“What these services have done is helped change peoples’ behaviours and use of these devices and technology in fundamentally different ways” from just a few years earlier, said Brent Johnston, vice-president of mobility solutions with Telus Corp.
Kik had a bumpy start after BlackBerry – Mr. Livingston’s former employer when he was a co-op student at University of Waterloo – sued him weeks after he launched Kik in fall 2010. He had previously told the company he was launching a BBM-like service for non-BlackBerry devices and told the company he would abandon the idea if it instead made BBM available on other devices.The two companies settled two months ago, but as a result, Kik isn’t found on BlackBerry smartphones and has a much lower profile in Canada.