Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) Google owns Android, the most popular mobile OS in the world. It also owns Gmail, which has 1.4 billion monthly active users (MAUs). But despite that reach, Google has repeatedly failed to leverage those strengths to dominate the social and mobile messaging markets.
On the social front, services like Orkut, Latitude, Wave, Buzz, Jaiku, Dodgeball, and Google Plus never gained traction against Facebook (NASDAQ:FB) or Twitter. On the messaging front, it launched Hangouts, Google Plus Messenger, Google Talk, Google Voice, Duo, and Allo -- which confused users with their overlapping messaging, chat, and video call functions.
By the beginning of 2018, Google trimmed down that selection to Hangouts, Duo, and Allo. It seemed like Google was finally on the right track, but it recently announced the development of another messaging service called "Chat" to succeed its SMS-based Android Messages.
Many investors are probably confused about what these apps do, and why Google keeps launching new messaging services. Let's take a closer look at these efforts to find out.
What do Google's four messaging apps do?
Google launched Hangouts in 2013 to consolidate its communication services and compete more effectively against Facebook's (NASDAQ:FB) Messenger, WhatsApp, and Apple's (NASDAQ:AAPL) iMessage. Google is currently changing Hangouts into an enterprise-oriented rival to Slack, while carving out Hangouts Chat as a consumer-facing service.
In 2016 Google introduce Duo and Allo. Duo is a video call app similar to Apple's FaceTime, while Allo is an "AI-powered" mobile messaging app loaded with chatbots and special camera features.
Duo has been moderately successful as a cross-platform app, with a quarter of all calls being made or received on iPhones. Allo, however, isn't pulling users away from Facebook Messenger, WhatsApp, or other mobile messaging apps.
That's why Google recently announced that it would "pause" the development of Allo to focus on the development of Chat. But Chat isn't a mobile messaging app like WhatsApp -- it's a carrier-based one that organizes SMS messages on Android devices.
However, Chat will also support the new carrier-based "Rich Communication Services" (RCS) standard, which is aimed at replacing the SMS standard. RCS messages let users send text messages with enhanced graphics, multimedia, and other modern chat features.
Why is Google betting on SMS?
Google's decision to double down on SMS/RCS comes at a time when usage of carrier-based messaging services is fading. Back in 2015, Facebook Messenger and WhatsApp users already sent triple the number of messages across those platforms than they did via SMS since mobile messaging apps didn't incur messaging fees.
That ratio likely rose over the past two years. Between June 2015 and Sept. 2017, Facebook Messenger's MAUs surged from 700 million to 1.3 billion. WhatsApp's MAUs climbed from 900 million in Sept. 2015 to 1.5 billion by the end of 2017.
Meanwhile, Facebook's expanding social ecosystem, which had the snowball effect of pulling in more users, supported that growth. Google, which repeatedly failed to crack the social market, lacked that foundation.
Google previously integrated SMS messages into Hangouts, but it discontinued SMS support for the app last year, presumably to streamline Hangouts and push SMS users toward Android Messages. That split seemed unnecessary, since Facebook Messenger and Apple's iMessage both let users send mobile and SMS messages from the same app.
Why Google is making the wrong move
Google claims that Android Messages has "100 million" MAUs, which it will presumably funnel toward the new Chat app. That number sounds impressive, but it represents a mere fraction of Facebook Messenger and WhatsApp's MAUs.
Chat also won't have end-to-end encryption since it's based on SMS. Facebook Messenger, WhatsApp, and iMessage all offer end-to-end encryption -- which is becoming a crucial feature for privacy-minded users.
Google probably thinks that it can plant some roots with the remaining SMS users, then "upgrade" Chat to a full-fledged app that bundles together mobile and SMS/RCS messages. But that's a silly strategy that simply recreates the old Hangouts.
The bottom line
Investors have been concerned about Alphabet's rising expenses, and Google's clumsy, impatient, and fragmented strategies for many key markets -- like social networking, mobile messaging, e-commerce, and streaming media -- don't inspire much confidence in its long-term plans.
I highly doubt "Chat" will fare any better than Google's prior messaging efforts since it's based on a fading technology, ignores the competitive threats, and fragments its communications ecosystem while confusing users.