The Wainhouse Research Blog
News & Views
on Unified Communications & Collaboration
Between Q4 and Q3 2016, the U.S. standalone audio conferencing market declined by 1 billion minutes. Over the same period in 2015, the U.S. market declined by 535 million minutes. Therefore, the U.S. almost doubled its quarter-over-quarter decline between Q4 2015 and Q4 2016. In contrast, Western Europe gained almost 100 million minutes in Q4 2016 – with Germany and the Nordics being the only countries that declined. Asia Pacific declined by 87 million minutes in Q4 2016, with much of the loss being evenly distributed across all countries except South Korea, which grew. It appears the U.S. market has accelerated the erosion of standalone minutes as audio minute volume transfers to Personal Web-based Conferencing (web conferencing with integrated audio) and UCaaS (with integrated audio conferencing).
In the U.S., almost all the volume loss – 980M minutes – came from the “Big 4” providers – AT&T, BT, West UC, and PGi, and at a similar proportional rate for each.
Worldwide, Currency in U.S. dollars, All numbers in millions
In contrast to audio conferencing, Personal Web-based Conferencing (PWC) – e.g. WebEx, iMeet, GoToMeeting – seem to be powering forward, with every region indicating revenue growth in the 4th quarter of 2016. However, annual growth – full 2016 over full year 2015 – shows a slightly different picture for PWC. For the full year, the U.S. and Hong Kong declined -3% in PWC revenues. While it’s likely that both countries grew license volume, a decline should give us pause. The reason is that the U.S. is the leading indicator for conferencing trends – if the U.S. declines, it’s likely other markets will follow suit in the next one to two years.
So Where is the Market Going?
The data would indicate that the U.S. is one to two steps ahead of most other local markets. By way of background, a few years ago, U.S. standalone audio conferencing minute volume began to transition over to PWC and unified communications, which has integrated audio conferencing (typically VoIP) built in. When this “offset” began a few years ago, we saw standalone audio minutes and revenue begin to decline. However, with PWC revenue declining in the U.S. and a loss of 1 billion minutes in Q4, the data may indicate that the transition over to UCaaS is growing at a faster pace – with fewer users making a transition step with PWC and going directly from standalone to UC audio conferencing.
But Wait, PWC is Still Growing
PWC is still growing. A 3% U.S. decline still indicates a 6-10% increase in license volume, which is from a fairly large base of users (it is likely the absolute number of users in the U.S. grew to a healthy volume in 2016). A decline in revenue is likely more an indication of the one-two punch of both slowing license volume growth and declining prices (e.g., via organizational use licenses with one fixed price and unlimited users). Additionally, it is important to note that for the full year 2016, Western Europe and Asia Pacific grew 6% and 17%, respectively.
A few things to consider for standalone PWC: a) LogMeIn just acquired GoToMeeting (G2M) which has had phenomenal revenue and license growth, and they have their own organic join.me services which has been a rocket ship of growth. It is likely they will drive new demand for G2M and grow the overall market; b) Amazon bought Biba and recently rebranded it as Chime. It is hard to tell if Amazon Web Services buyers are the right target for Chime, but either way, Amazon usually figures stuff out and is successful with most of their endeavors (e.g., think ahead to conferencing that is voice-assisted by Alexa in the enterprise), and; c) Cisco has re-coded WebEx into the Spark platform and is powering forward with an entire Spark ecosystem – fleshing out interdependent features for enterprise collaboration. For standalone audio – it is going to be a different story. Sure, there will be local markets where standalone audio continues to dominate as the de facto conferencing media, but the larger trend is that standalone audio volume and revenue will decline – primarily at the hands of UC, secondarily at the hands of PWC.
For a deeper dive into the data see: Q4 2016 CSP SpotCheck report