2012 Mobile Industry Predictions Survey January 3, 2012
Posted by chetan in : 3G, 4G, AORTA, ARPU, Applications, BRIC, CTIA, Carnival of Mobilists, Carriers, Connected Devices, Disruption, Enterprise Mobility, European Wireless Market, IP Strategy, Indian Wireless Market, Infrastructure, Intellectual Property, Japan Wireless Market, Location Based Services, M&A, Mergers and Acquisitions, Messaging, Microsoft Mobile, Middleware, Mobile Advertising, Mobile Applications, Mobile Breakfast Series, Mobile Cloud Computing, Mobile Commerce, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Future, Mobile Future Forward, Mobile Gaming, Mobile Payments, Mobile Search, Mobile Traffic, Networks, Patent Strategies, Privacy, Smart Phones, Speaking Engagements, Speech Recognition, US Wireless Market, Wi-Fi, Wireless Value Chain, Worldwide Wireless Market , 9 comments2012 Mobile Industry Predictions Survey
http://www.chetansharma.com/MobilePredictions2012.htm
First things first. From all of us at Chetan Sharma Consulting, we wish you and yours a very happy, healthy, and prosperous 2012. My thanks to all who participated in our 2012 Mobile Predictions Annual Survey. It gives our community an insider’s view of trends.
2011 was a terrific year for the mobile industry. With all its ups and down, consumers embraced devices, applications, services, and technology with more gusto than ever before. In the waning hours of 2011, we crossed the 6 billion subscriptions milestone. While the first billion took 19 years, this last billion only took 15 months.
Smartphones are selling like hot cakes. We estimate that by the end of Q4 2011, over 60% of the devices sold in the US were smartphones and over 30% of the global sales were for the evolved brethren of the primordial featurephones. Sparked by insatiable consumer demand for mobile data, LTE and HSPA+ networks are sprouting all over the planet with US leading the charge for broadband deployment.
Our annual survey is a way for us to engage our community on the trends for the next year. We put some of the pressing questions to our colleagues and industry leaders. We are able to glean some valuable insights from their choices and comments, some tangible shifts, and get a sense of what’s to come. Executives, developers, and insiders (n=150) from leading mobile companies and startups from across the value chain and around the world participated to help see what 2012 might bring to keep us on our toes. What makes this survey unique is that it draws upon the collective wisdom of folks who are at the center of the mobile evolution.
Fifteen names were randomly drawn for the limited edition of the Mobile Future Forward 2011 book. The winners are:
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Tor Bjorn Minde, Head of Ericsson Labs, Ericsson
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Sunder Somasundaram, Industry Solutions Practice Director, AT&T
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C. Enrique Ortiz, Mobile Technologist, About Mobility
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Russell Buckley, CMO, Eagle Eye
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Marianne Marck, VP – Engineering, Starbucks
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John Foster, President, ZED USA
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Angel Luis Saez, Sr. Director, Orange Spain
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Dilip Mistry, Senior Director, Microsoft Asia
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Phyllis Reuther, Advanced Analytics Lab, Sprint
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Gene Keenan, VP of Mobile, Isobar
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Elizabeth Day, Director of Finance, Trilogy International
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Alan Cole, Research Staff Member, IBM T.J. Watson Research Center
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X J Wang, VP – GM China, Vesta Corp
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Michelle Lee, Director, SK Telecom
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Hemant Chandak, Sr. Analyst, Cisco Systems
Thanks again to everyone who contributed. We will be calling on you again next year. It has been a terrific year for us at Chetan Sharma Consulting and we are looking forward to an engaging and productive 2012.
Be well, do good work, and stay in touch.
Thanks and with warm wishes,
Your feedback is always welcome.
Thanks
Chetan Sharma
Now onto the 2012 Mobile Industry Predictions Survey Results.
1. What was most newsworthy in Mobile 2011?
Android had a spectacular rise in 2011 around the globe. Android OEMs collectively shipped the most number of devices and while margins shrank, they were able to put a united front to iOS. 2011 will always be remembered for the passing away of the industry transformer Steve Jobs. His work directly or indirectly touched billions of souls around the planet, many times over – something rarest of human beings are able to achieve in their life time. Regulatory tussles and significant increase in IP disputes also occupied the headlines. Amazon announced its intention for the mobile space with the launch of Kindle Fire.
2. What will be the biggest mobile stories of 2012?
As we look towards 2012, our panel voted for the continued growth of mobile data as the biggest story followed by Amazon’s entry into the mobile space. Some key questions for the year are: Will Microsoft/Nokia devices will make any meaningful progress? Will RIM survive the year? How does Google manage the fragmentation, decline in margins (for the OEMs), and the IP issues? Will any high-profile security and privacy mishaps lead to more regulatory entanglements? Facebook IPO and its mobile ambitions? How do operators manage the data demand? Which M&As will capture industry’s attention? Will Apple continue to dominate on both smartphone and tablet front? What does Apple do with mobile payments? and much more. Clearly, it is going to be a terrific year.
3. Who will be the most open player in the mobile ecosystem in 2012?
File this in the “perception is reality” folder. Despite all the criticism, Google has maintained its strong position as the most open player in the mobile industry.
4. What applications will define 4G?
Still looking for a killer-4G app? Video, cloud computing, and access will continue to drive 4G demand and growth.
5. What will be the breakthrough category in mobile in 2012?
For a second year in a row, the panel voted for mobile payments and mobile commerce as the top two category that will find their voice. Mobile advertising has become mainstream so it lost its ranking in the top 3.
6. What will be the most popular consumer mobile applications in 2012?
Apps preferences vary by regions depending on a whole range of factors. Messaging and Commerce are the top two categories for the developing world while consumers in the developed nations are likely to gravitate towards commerce and location based services.
7. Which will be the most dominant (unit sales) tablet platform in 2 years?
iOS and Android will dominate the tablet landscape for the next 24 months. A late entry by Windows 8 tablets could make a dent but don’t count on it.
8. Who will make the biggest mobile acquisition in 2012?
2011 had its fair share of block-buster acquisitions, some successful while others were not. Our panel expects Microsoft and Google to continue making the biggest acquisitions.
9. How will the "Apps vs. Mobile Web" debate shape up in 2012?
It seems like the pendulum is swinging towards the mobile web though hybrid solutions are likely to stay with us for a long time.
10. Who will define the mobile payment/commerce space?
The financial companies safely locked in the mobile payments space and while the value chain is fairly complicated and definition confusion abounds, the likes of Visa, Operators and Google will continue to drive the payments/commerce space.
11. Which solutions will gain the most traction for managing mobile data broadband consumption?
Managing data growth and margins drives all strategies at mobile operators these days which in turns drives the value chain. 4G, tiered pricing, and mobile offload continue to be the top solutions if one has the spectrum that is.
12. Which category will generate the most mobile data revenue in 2012?
Messaging, access, apps, and advertising are the four broad categories that drive mobile data revenues around the world. The developing markets rely on messaging while the developed markets are increasingly looking to access as their dominant form of revenue generation.
13. What will help mobile cloud computing gain traction in 2012?
Mobile cloud computing will continue to be defined by enterprise, storage, and media needs.
14. Which enterprise segment will mobile impact the most?
Best buy is becoming the next Circuit City. Other retailers will follow unless they can successful reinvent themselves. Health is more regulatory driven so the progress will be slow though it is ripe for a complete overhaul and developing nations are moving much faster in this space.
15. What will be the dominant revenue model for apps in 2012?
In-app revenue model made good strides in 2011 but the combination of the various available revenue models will be the norm for most application developers.
16. What mode of mobile payments will get traction in North America and Western Europe in 2012?
2011 was the year to set the ground work for growth in the mobile payments space. Given the investment and focus, we are likely to see more movement and consumer involvement in 2012 with proximity based solutions and commerce of physical goods on mobile.
17. What will be the most successful non-mobile-phone category in 2012?
Tablets dominate. Period.
18. Which of the following are likely to happen in the near future?
The is a significant shift in computing taking place right in front of our eyes wherein tablets are replacing laptops and even desktops in the enterprise. European operators have been experiencing tough times while some of the Asian operators are flush with cash, they might make their move in 2012 though regulatory hurdles might prove to be an issue. 33% of the nations will have elections in 2012, maybe which will move mobile voting to the forefront in some nations. Our panel thought there is a better chance of humans discovering water on another planet than rise of another significant mobile OS.
19. Which areas will feel the most impact from Regulators in 2012?
Net-neutrality and market competitiveness will keep the regulators busy in 2012.
20. Who was the mobile person of the year?
Clearly, Steve Jobs was an easy choice but who will replace him 2012? Jeff Bezos has an early lead followed by Andy Rubin and Mark Zuckerberg. Angry Birds representing the developer community will be in for another terrific year. Other honorable mentions were Tim Cook, Paul Jacobs, Sanjiv Ahuja, Dan Hesse, and Glenn Lurie.
A lot to look forward to in the New Year. My thanks to all who participated and we hope you found it useful as you embark on your journey for a successful 2012.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Feb 2012. The next Global Wireless Data Market update will be issued in Apr 2012.
Disclaimer: Some of the companies mentioned in this survey are our clients.
US Wireless Data Market Update Q3 2011 December 12, 2011
Posted by chetan in : 3G, 4G, AORTA, Applications, CTIA, Carnival of Mobilists, Carriers, European Wireless Market, Indian Wireless Market, Japan Wireless Market, Location Based Services, Mobile Breakfast Series, Mobile Cloud Computing, Mobile Commerce, Mobile Content, Mobile Ecosystem, Mobile Event, Mobile Future, Mobile Future Forward, Mobile Payments, Mobile Search, Mobile Traffic, US Wireless Market, Unified Messaging, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 4 comments
http://www.chetansharma.com/usmobileupdateQ32011.htm
Summary
The US mobile market continued its blistering pace of growth and ecosystem restructuring. While China and India lay claim to the fastest growing markets on the planet, the many of the meaningful and impactful trends are originating out of the US market with software at the epicenter of creation, growth, change, evolution, and destruction.
The US wireless data market grew 5% Q/Q and 21% Y/Y to reach $17B in mobile data service revenues in Q3 2011 and is on course to increase Y/Y by 22% to $67B in 2011.
As predicted, Samsung overtook Apple as the leading smartphone OEM. However, Apple will continue to dominate profit share for the foreseeable future.
Smartphones continued to be sold at a brisk pace accounting for 57% of the devices sold in Q3 2011. Operators are averaging 70% of their postpaid sales as smartphones with Android dominating though iPhone leads in mindshare. The featurephone as a device species is on the verge of extinction.
Mobile Ecosystem Complexity
As expected, Amazon entered the mobile tablet space with a killer value proposition - $200 for a tablet, something the market sorely needed. While other OEMs tried to compete with Apple on performance (and have been retreating from the market one by one), Amazon is entering the battle on its own turf – a hardware platform built on Android with a slew of services to underwrite the device discount. Incumbent OEMs just can’t compete with that strategy without a complete rethink of their product strategy. What happens when Amazon’s strategy migrates to handsets? While Kindle Fire is not a serious threat to Apple iPad, and the current version has a lot of deficiencies, Amazon has carved out a nice market for itself that will continue to grow in the coming days. In some sense, with its tight integration of commerce, cloud, and advertising, it has out-maneuvered even Google.
Amazon’s impact will be felt by many others in 2012 as its strategy becomes more apparent. Retailers will be facing the brunt of the wave that Amazon represents i.e. etailers supplanting physical retailers. Don’t be surprised if Amazon purses Apple like stores to showcase its merchandize and puts a dagger at the heart of retail.
Google has done a masterful job of shepherding Android through the turbulent platform waters and make it the dominant mobile platform in terms of shipments.
Microsoft and Nokia finally introduced the Windows devices and it has at least given them a fighting chance in 2012, though a far more competitive offering would be needed to make any significant market share or revenue share inroads. Microsoft’s Xbox/Kinect integration remains its best card for 2012.
In a severe case of corporate schizophrenia, HP first launched webOS devices, then backed away, then thought of re-launching only to give it away to open source. Similarly, RIM faces critical test in 2012 and all its hopes are pinned on the new OS that is expected to come to the market sometime next year.
Mobile is changing the way we spend
It is very clear that mobile will be at the center of the human evolution for years to come. Mobile collapses time and distance and as such impacts every facet of our lives. While we have come to know the mobile phone as a communications device, their role in our daily lives has been expanding. From checking emails, paying for tickets, sending money transfers, taking pictures of your kids, watching soccer World Cup live, checking commodity pricing, to emergency response to mHealth (mobile Health), mobile devices have become an essential tool to help us navigate our day.
Mobile also plays a key role in how we go about the most basic transaction in a given day that keeps the economy humming – spend. We discussed this and more in the paper “How Mobile Will Change The Way We Spend” that was released last quarter.
What to expect in the coming months?
All this has setup an absolutely fascinating 2012 in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems.
As usual, we will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.
Against this backdrop, the analysis of the Q3 2011 US wireless data market is:
Service Revenues
- The US Wireless data service revenues grew 5% Q/Q and 21% Y/Y to $17B in Q3 2011. The mobile data services revenues for the US market are on track to reach $67B in 2011.
- Verizon and AT&T had a good mobile data quarter accounting for 62% of the increase in data revenues in Q3 2011.
- For the quarter, AT&T and Verizon accounted for 69% of the market data services revenues and 62% of the subscription base.
- Verizon maintained its #1 ranking again just edging past NTT DoCoMo who came in at number two with $5.95B in data revenues for the quarter. AT&T maintained its #3 position with $5.6B in data revenues. Sprint and T-Mobile maintained their #6 and #8 rank in the top 10 mobile data operators list for Q3 2011.
ARPU
- The Overall ARPU increased by $0.31. Average voice ARPU declined by $0.49 while the average data ARPU grew by $0.80 or 4% Q/Q.
- The average industry percentage contribution of data to overall ARPU was 37.6% in Q3 2011 and is likely to exceed 40% by Q1 2012. As expected, Verizon became the first US operator to eclipse the 40% mark with AT&T and Sprint close behind. (for reference, all three major Japanese operators are now above the 50% mark).
- The top three operators were neck-and-neck in data ARPU each recording a 39%+ performance. T-Mobile ended the quarter exceeding the 30% mark for the first time.
- We expect data revenues to exceed voice revenues in the US market in early 2013.
Subscribers
- Helped by the growth in connected devices, the overall net-adds increased by 4.9M with Verizon accounting for almost 50% of the growth.
- For the eight straight quarter, AT&T reported more net-adds from connected devices than postpaid subs. AT&T now accounts for 43% of connected devices in the US (w/ cellular subscription of some sort).
- Overall, AT&T has 43% of the connected device share of the market. The connected device segment growth slowed down to 8% Q/Q and is still up 32% Y/Y.
- Sprint added more than a million subscriptions while T-Mobile added 126k.
Applications and Services
- After unseating Philippines as the king of TXT messaging last quarter, US TXT messaging continues to grow albeit at a slower pace. Philippines is seeing a sharp decline in per user messaging due to IP messaging. Some of the European operators are also experiencing the pain of declining SMS usage. As expected, this transition will continue around the world at different rates. In the US, while the change is underway, we don’t expect any dramatic declines like the Philippines market in the near-term.
- The market is finally starting to see activity in the mobile commerce and payment services as well as in various industry verticals like healthcare, retail, and education.
- Q3 2011 again saw tremendous activity in the mobile commerce and payments space with lot of announcements from the operators, Internet players, and startups as well as the retailers and the ecommerce players. All are vying for a piece of the mobile wallet. Much more to come in the next 12 months.
Handsets
- Smartphones continued to be sold at a brisk pace accounting for 57% of the devices sold in Q3 2011. Operators are averaging 70% of their postpaid sales as smartphones with Android dominating though iPhone leads in revenue and mindshare.
- Nokia’s position in the market improved slightly with the launch of WP7 devices. While it is fairly clear that Windows will acquire the #3 spot behind iOS and Android, the journey to a substantial and competitive market share is still ways off.
- As predicted in the last update, Samsung overtook Apple in smartphone sales and is unlikely to relinquish the title despite a blockbuster iPhone 4S launch in Q4.
- 37% of all smartphones sold globally in Q3 were sold in the US making it the most attractive market for the OEMs.
- Smartphones now account for over 80% revenue of all phones sold in the US.
- In the vertical vs. horizontal platform battle, the ecosystem is shifting towards horizontal domination in the near-term (units sold) while a majority of the profits reside in the vertical column.
- 87% of the tablets use WiFi only (some have inactivated cellular chipset) meaning the operator channel is not a necessary distribution channel. Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category. As expected, Verizon announced family data plans for 2012. Other operators will quickly follow or may even preempt Verizon.
- Verizon added another 1.4M LTE subscribers making it the leading LTE operator in the world. AT&T’s LTE plans are gathering steam and Sprint plans to offer LTE in 2012.
- iPhone finally arrived at Sprint. Sales of iPhone 4S have been brisk which is likely to make it the top selling device for the most important quarter of the year.
Mobile Data Growth
- While the spectrum debate rages on, in addition to the network and backhaul upgrades, policy management and data offload have emerged as top two solutions that operators deploying around the world. Signaling management solutions like Diameter routing are also getting good traction. However, a long-term video solution is still elusive. As we have been saying in our Yottabyte series of research papers, a comprehensive solution strategy is needed to effectively manage margins/bit.
- We will have the 3rd edition of our “Managing Growth and Profits in the Yottabyte Era”research out early next year.
Global Update
- Race to a billion – India’s net-addition rate declined significantly in Q3 2011 while China kept its current pace. We expect that China will be the first country to exceed 1 Billion subscriptions by mid-2012. For India, the event will now occur in 2013.
- For more details, please see our Global Mobile Wireless Market Update released in July 2011.
Mobile Future Forward
Our annual mobile thought-leadership summit - Mobile Future Forward was a grand success. Our thanks to all those who attended as well as to the speakers, sponsors, and well-wishers for making it happen. Planning for 2012 summit are underway and we will keep you posted as plans develop.
More information at http://www.mobilefutureforward.com
Mobile Predictions Survey 2012
As is the tradition, we are running our annual Mobile Predictions Survey for 2012. Will appreciate your input in understanding the trends and news stories that will make 2012 another big year in mobile. Winners of the survey get our fabulous limited edition Mobile Future Forward 2011 book that contains 19 essays from the global leaders in the mobile industry. (Mobile Predictions Survey Results for 2011 here)
Your feedback is always welcome.
Thanks.
Chetan Sharma
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Feb 2012. The next Global Wireless Data Market update will be issued in Apr 2012.
Disclaimer: Some of the companies mentioned in this paper are our clients.
New Paper - How Mobile Will Change The Way We Spend – A Mobile Future Forward Paper August 5, 2011
Posted by chetan in : 3G, 4G, AORTA, CTIA, Connected Devices, Enterprise Mobility, European Wireless Market, Indian Wireless Market, Mobile Advertising, Mobile Applications, Mobile Breakfast Series, Mobile Cloud Computing, Mobile Commerce, Mobile Content, Mobile Ecosystem, Mobile Entertainment, Mobile Future Forward, Mobile Payments, Mobile Search, US Wireless Market, Wi-Fi, WiMax, Wireless Value Chain, Worldwide Wireless Market , 1 comment so farHow Mobile Will Change The Way We Spend
A Mobile Future Forward Paper
The Mobile Future Forward 2011 Book will contain 18 essays from thought-leaders around the globe and is going to be distributed exclusively to the Mobile Future Forward attendees on Sept 12th. The book is published by FutureText, UK.
The essays from the Mobile Future Forward speakers and industry luminaries are:
1. How Mobile Will Change The Way We Spend – Chetan Sharma, President, Chetan Sharma Consulting
2. The Mobile Cloud Connected Enterprise – Abhi Ingle, VP, Advanced Mobility Solutions, AT&T
3. Mobile and Health Possibilities – Subba Rao, CEO, Razi Health
4. Buying a Mobile Device in 2014 – Frank Meehan, CEO, INQMobile
5. Surviving and Thriving in the Age of Mobile Internet – An MNO Game Plan – Manoj Leelanivas, SVP and GM, Juniper Networks
6. Mobile Future Forward Interview with Steve Elfman – President, Sprint Nextel
7. Is Mobile Local Advertising Finally Poised to Take Off? – William Hsu, SVP and CPO, AT&T Interactive
8. Implications of a Connected Society – Danny Bowman, President, Sprint Nextel
9. Big Data and Mobile – Braxton Woodham, Head of Engineering, AVOS
10. Broadband for All – Sanjiv Ahuja, CEO, LightSquared
11. Wireless Competition and Innovation – Stephen Bye, CTO, Sprint Nextel
12. The Future of the Personal Information Economy: Enabling Success Across the Mobile Ecosystem – Ken Denman, CEO, Openwave
13. T-Commerce – Carving Out and Extending E-Commerce – Ramneek Bhasin, SVP and GM, TheFind
14. The Case for Building a Mobile Broadcast Content Delivery Network – The Critical Piece to Fulfilling Mobile Data Demands of the Future – Erik Moreno, SVP, FOX Network
15. Connected Devices – Redefining the Channel – Biju Nair, Chief Strategy Officer, Synchronoss Technologies
16. How Mobile Can Turn Retailers Into Media Companies – Dale Nitschke, CEO, Ovative Group
17. The Future of (Mobile) Communications – Carlos Domingo, CEO, Telefonica R&D
18. Competition and the Evolution of Mobile Markets – Chetan Sharma, President, Chetan Sharma Consulting
Download (http://www.mobilefutureforward.com and click on the White paper image)
Executive Summary
In his 1943 paper titled “A Theory of Human Motivation”, the famed philosopher Abraham Maslow theorized his observations of human needs and curiosities. His pyramid came to depict the human hierarchy of needs. If we map the physiological, safety, love, esteem, and self-actualization needs onto how much we spend as a community, it correlates rather well. As you would expect, human spending behavior is tightly tied to the basic needs. The amount of money we spend on these basic needs might vary by demographics or region but in aggregate, we tend to spend the most for the things that are the bottom of the pyramid – shelter, food, and water.
Over time, entrepreneurs have used technology to drive fundamental changes in consumer behavior for e.g. Microsoft with personal computers, Google with search, Apple with devices, Facebook with social connections. Of course, the web of interconnection, the various vertical industries that map against the human needs is very complex and as new technology cycles come into play, inventors get busy with enhancing performance sometimes by manifold to keep up with the insatiable demand and appetite to do more.
It is very clear that mobile will be at the center of human evolution for years to come. Mobile collapses time and distance and as such impacts every facet of our lives. While we have come to know the mobile phone as a communications device, their role in our daily lives has been expanding. From checking emails, paying for tickets, sending money transfers, taking pictures of your kids, watching soccer World Cup live, checking commodity pricing, to emergency response to mHealth (mobile Health), mobile devices have become an essential tool to help us navigate our day. As we alluded to earlier, it is not just the traditional phones that have cellular connection these days; we are slowly but surely moving into an era where a majority of electronic devices from small tags to giant billboards will have a communication channel that both machines and humans can interact with.
Mobile also plays a key role in how we go about the most basic transaction in a given day that keeps the economy humming – spend.
In this paper, we will take a look at how the connected universe of devices and sensors are going to impact the way we spend and how all this creates new opportunities to meet the basic human needs.
Your feedback is always welcome.
Thanks
Chetan
Mobile Breakfast Series – Mobile Commerce and Payments June 29, 2011
Posted by chetan in : Mobile Breakfast Series, Mobile Payments, Mobile Wallet, Smart Phones, US Wireless Market, Wi-Fi, Wireless Value Chain, Worldwide Wireless Market , add a commentWe held our 7th Mobile Breakfast Series Event earlier today. The topic of discussion was “Mobile Commerce and Payments.”
The killer views of the Olympics and the Sound
Mark Young did a great job moderating the panel
The panel expertly delved into the intricacies of the mobile commerce/payments opportunity
The 2011 Mobile Breakfast Series is sponsored by Amdocs. A big thank you for the support.
At the end of every year, we do a forecast survey. In the last survey, Mobile Payments and Commerce were considered the top two categories for growth in 2011. Given the activities thus far – Google Wallet, ISIS, number of startups – Payfone, BilltoMobile, existing players like OpenMarket, financial guys across the board – past few months have been full of significant activity. The mobile commerce developments are right behind the AT&T/T-Mobile proposed merger and Microsoft/Nokia partnership in terms of news coverage.
I remember back in 2001/2, I was writing my 2nd book with my good friend and co-author Nakamura-san who was CTO at NTT DoCoMo and while doing some work for DoCoMo and AT&T, we were exploring ways the mobile device will be used for commerce not only for digital goods but also for physical things. MCommerce has been around for the better part of the last 12 years in some form and fashion, in fact today it is a multi-billion dollar market already. Mobile payments are in different states of maturity and experimentation depending on the region. Do you know the value of US payment distribution - $75 Trillion out of which only 5% is based on cards which accounts for almost $3-4 trillion Total Transaction Value. Paypal is expected to process $4B in mobile payments this year generating over $70M in mobile payments revenue.
OpenMarket processes a significant amount of mcommerce business in the US today. As you will hear from the panelists, they are starting to see good traction from merchants and things are moving from digital to physical. However, things are very complicated – it is a highly regulated segment and changes don’t come every so often. The payment networks are from pre-Internet era and yet they maintain their complete dominance of the ecosystem. So, this sets up a very interesting next few quarters and a perfect time for us at Mobile Breakfast Series to assemble a stellar panel to unwind the realities of the evolving landscape.
Our panelists were:
Mark Young, VP - Strategy, NBC Universal and Digital Networks (moderator)
Rodger Desai, Founder and CEO, Payfone
Jim Greenwell, President & CEO, BilltoMobile
Andrew Lorentz, Partner, Davis Wright Tremaine
Michael Goo, VP - Mobile Strategy, T-Mobile
Joe Megibow, VP - Mobile and E-Commerce Optimization, Expedia
Mark has been involved in mobile for a long time and has been at the center of commerce on mobile since the ringtone days at Moviso. Rodger and Payfone have been in the news lately for some raising money and some key partners like Verizon and American Express. BilltoMobile has been involved in mobile payments first in Korea (under Danal) and lately in the US with all the operators for doing payments. Payments is a heavily regulated industry so players in the ecosystem need to have a firm grasp on regulatory winds to ensure their future revenues. Andrew with his deep background in the space was perfectly suited to bring up to speed with pending and existing rules. ISIS has been in the news throughout the year and Michael Goo has been representing T-Mobile to help define the operator strategy in payments. Expedia is one of the largest ecommerce companies and they are seeing some tremendous growth in mcommerce. Joe is right in the middle of all the craziness and his analytical mindset gave audience some great insights.
As i mentioned, mcommerce is not new but mobile web and apps infrastructure along with new methods of interactivity like the NFC are making things simpler for the consumers that it is moving from novelty to convenience to actual dollars.
The panel was just full of great insights and nuggets. The highlights of the discussion was as follows:
- For Expedia, the majority of the mobile traffic comes from iPhone, roughly 60-70%, Android is around 25%, Conversion rates are much higher on iPhone, The order size on Android is 10% lower than iPhone.
- From a traffic perspective, iPad traffic is double the iPhone traffic though the device penetration is 1/10th. Conversion rates are much higher
- Two years ago, the mobile traffic was around 2% when Expedia didn’t have any mobile site. Now it is almost 6% with 10% on Saturdays, Average transaction ranges in the $200-300 range.
- Given the traffic dynamics on iPad, it is a unique category in of itself – something we have argued before – it is a new category in terms of consumer behavior.
- Most of the traffic for Expedia is from mobile web as SEO and paid search drive traffic to web, difficult to do deep linking, as such mobile web revenue is 5/6 times the app revenue.
- In a multi-device, multi-network world, consumers expect the services to just work across the board with same user experience.
- Fandango drives impulse purchases of movie tickets using “near me” feature of apps 2-4 hours prior to the show vs. 8-12 hours traditionally.
- Charlie Fodie who is on the board of Payfone expects the interchange in payments to go away over time. This will be indeed disruptive, the question is the timing.
- Only 25% of consumers have credit card in their profile with their operator in the US. 30% still pay $9-10B in cash/year to the operators by walking into the store.
- Payfone sees an opportunity by doing auction based underwriting in real-time to minimize the transaction fee.
- The uniqueness of the device can be used as its fingerprint for authentication. Payfone uses the SS7 network for authentication messaging.
- Consumers are unlikely to put $1200 plane ticket on their operator bill. The mind shift is not there, maybe things will shift, but not there in the short-term.
- Operators are exploring using the consumer data as a way to refine advertising, open it up to the ecosystem.
- Durbanization of all forms of exchange fees is near.
- Payfone allows transactions over WiFi on operator bill as well.
- In Korea, 80% of people do payments using mobile so the blueprint to get more people involved with mobile payments is there
- Verizon has a $25/mo limit on carrier billing. A Canadian operator has $500, so on a 6M sub base they have a $4B cash flow thus essentially becoming a bank. The mindset is quite different compared to the US operators
- Merchants are not bought into mobile payments yet. They want to see more adoption before they start investing more aggressively with NFC and other forms of payment.
- Industry is underestimating fragmentation, consumer confusion, regulatory headwinds, consumer adoption once friction is removed, and how soon all ecommerce will become mcommerce.
- Industry is overestimating how much of the space is going to be defined by the western markets
The panel was full of key insights that impact strategy in this space. I was thankful for the speakers to have made the time, especially the ones who traveled great distances to be with us to share their insights.
Next, our focus moves to our annual mobile thought-leadership summit – Mobile Future Forward on Sept 12th in Seattle. It is shaping up really nicely with some terrific speakers. You can take a look at the info here.
The goal of the event is to look a bit into the future 2-5 years out and see what’s on the horizon. We are deep into the planning stages of preparing another successful event. I want to thank our partners of this initiative – Qualcomm, Ericsson, AT&T, Openwave, Millennial Media, Real Networks, and Synchronoss Technologies.
Hope you can join us. It will be worth your while.
Until then, enjoy the summer.
US Mobile Data Market Update Q1 2011 May 9, 2011
Posted by chetan in : 3G, 4G, AORTA, ARPU, BRIC, Connected Devices, Indian Wireless Market, Mobile Advertising, Mobile Applications, Mobile Breakfast Series, Mobile Commerce, Mobile Content, Mobile Ecosystem, Mobile Future, Mobile Future Forward, Mobile Gaming, Mobile Payments, Mobile Search, Mobile TV, Mobile Traffic, Mobile Users, Mobile Wallet, Speaking Engagements, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment|
US Mobile Data Market Update Q1 2011 http://www.chetansharma.com/usmarketupdateq12011.htm
The US wireless data market grew 4% Q/Q and 23% Y/Y to reach $15.4B in mobile data service revenues in Q1 2011 and is on course to increase Y/Y by 22% to $67B in 2011. Of all the segments, the connected device category registered the highest growth at 9.6% Q/Q while the postpaid subscriptions growth was almost flat for the quarter. Connected devices (including tablets, M2M, telematics, eReaders, etc.) now account for 8% of the subscription base. For the first time, the smartphone sales crossed the 50% share mark in the US. Also, the US now accounts for approximately one-third of all smartphone sales in the world. The Big News - AT&T’s proposed acquisition of T-Mobile The big news during Q1 2011 was of course the blockbuster announcement of the acquisition of T-Mobile USA. We had pondered on the viability of 4 operators in the US market in the past. All the major mobile market eventually settle with three main players controlling the market. So, the news wasn’t a surprise as we had expected something to break loose and conform to the natural market evolution. T-Mobile US has been under tremendous pressure for the last 2 years being unable to expand its postpaid base despite modernizing its network/backhaul and introducing a slew of impressive handsets. It was getting squeezed both from the top (Verizon and AT&T) and from the bottom (MetroPCS, etc.) while duking it out with Sprint in the middle. The decision window was closing as Deutsche Telekom had to decide if it wanted to invest in LTE or not (in the US market). Given that the parent business has been under pressure as well, it decided to take the most attractive available option. The proposed merger will obviously have an impact on the market structure. The market power will get concentrated in the top 2. The HHI3 Index will go from .22 to .31 but the HHI3 value will be at par with UK, Canada (though the Canadian market is not a good proxy for a competitive market), and some of the other markets. The biggest task for the US regulators will be to analyze the impact on the consumer interest and service pricing on a market-by-market basis. Putting things into perspective, this move is not unusual for a developed market. On average, the top 3 operators in the developed markets around the world control 94% of the market. The proposed merger roughly resembles the merger that took place in UK last year when T-Mobile and Orange, the number 3 and 4 player (each having approximately 19% of the share) respectively in the market merged to form Everything Everywhere and become the number 1 player in the market with 38% market share. However, if we look at the history of competitiveness in the US mobile market, the market and revenue concentration will be at its highest in the history of the US wireless industry. Such a move is likely to have an impact on the ecosystem depending on the regulatory policies. Last month, we published a first of its kind in-depth study on competition in mobile markets -“Competition and the Evolution of Mobile Markets - A Study of Competition in Global Mobile Markets”. The paper presents the analysis and an in-depth analytical framework to study the competitive landscape in the global mobile markets. Transparency as a competitive advantage An unfortunate side effect of an industry moving too fast is that regulations are often behind the curve (we discuss the role of regulators in our Competition paper mentioned above). Q2 will see a lot of heated debates around privacy and competition. Current regulatory framework in the US seems ineffective to meet the demands of the digital age. The indecision and a weak regulatory framework can be harmful to the ecosystem. While the industry has done a poor job of explaining targeting and relevancy and the associated consumer benefits, by over reacting, regulators can mess up the potential for better services. It is not the mechanics they need to regulate but the “transparency” of services and policies in plain English. Regulating transparency seems to be a more effective way. The ecosystem players will do better if they use transparency not as a threat but as a competitive advantage. The new troika - AAG A couple of years back, I gave a talk about the changing mobile ecosystem and what it means to compete in an environment where the ecosystem stacks get reshuffled every few months. I wrote about that in an essay that was published in the Mobile Future Forward book last year. While innovation is coming from all angles - fast and furious - the troika of Apple, Amazon, and Google is leading the way right now. Their interests are clashing in multiple dimensions - device, user data, cloud, advertising, local, commerce, books, etc. In a fast changing environment, either you define the market or be defined by it. The journey from being an arch-rival to a frenemy (and vice-versa) can be a short one. A significant shift As we mentioned in our last research note, 2010 marked the milestone of the start of a new computing and communications era. For the first time in the US, the smartphones shipments exceeded the traditional computer segments (that consists of desktops, notebooks and netbooks). Smartphones and the connected devices now account for 51% of the computing devices revenue in the US (devices include desktops, notebooks, netbooks, tablets, eReaders, and conventional feature and smartphones) The growth in of connected devices The connected devices category is the fastest growing segment of the market and while the ARPUs are low, due to the higher margins this segment will prove to be the most profitable in the coming years. By the end of 2011, connected devices will be commanding double digit market share. However, not all sub-segments are going to be successful in the operator channel until multi-device data pricing plans are introduced. Apple’s iPad has been, as expected, a runaway success. Several other tablets launched in 2011 but none has come close to being a credible challenge. OEMs will do well to segment the market and price accordingly rather than follow Apple in performance and pricing. Market is fairly young and there is tremendous room for growth. Another trend that is obvious is the development of an alternate ecosystem. 85% of the tablets use primarily use WiFi for connectivity meaning that OEMs need more diverse distribution channels. Operators who start to bundle multiple devices by single data plans and data buckets are going to see a better yield in this category. We do expect multi-device or family data plans to start being introduced in the US market in 2011. Also, the $200-250 Android tablets will start to emerge during the second half of the year to broaden the choices for the consumers. Turmoil in the OEM land Another headline grabbing event in Q1 2011 was that of Microsoft’s partnership with Nokia. Nokia’s lack of a credible response to Apple and Android has left the company scrambling for survival. Nokia still dominates the unit sales but the domination of Apple and the Android OEMs has taken away significant profits and ecosystem mindshare. Industry is awaiting the first release of the Windows phone from Nokia which will have a lot riding on it. If the release of iPhone 5 coincides with this release, the Christmas selling season will be interesting. The OEMs that have impressed the most are HTC and Samsung. The collapsed release cycles and the fierce pace of introduction of new devices have caught many of the traditional players unprepared. These things have a tendency of going in cycles so we expect the pendulum to swing again in the next 12-24 months. There is a fight for the #3 spot and it is likely that Windows will fill that void. However, for developers, iOS and Android are the only platforms they need to worry about right now. Verizon finally got its iPhone and as expected it didn’t make a big dent into the AT&T’s financials. Platforms - Horizontal vs. Vertical Over the past few quarters, we have seen a fascinating battle brew between the horizontal (Android and Windows) and the vertical (Apple, RIM, Nokia) device platforms. In the US, in the smartphone category, the horizontal platforms (primarily Android) has been gaining significant share since Q1 2010 and now have over 65% share of the new devices sold while the vertical platforms’ share has declined to 35%. However, the revenues and profits are still dominated by the vertical platforms. What to expect in the coming months? All this has setup an absolutely fascinating 2011 in the communication/computing industry. Convergence is everywhere and is leading to a fundamental reset of the value chains and ecosystems. We are going to be discussing the ins and outs of how the industry is going to evolve in the next decade in our Sept 12th mobile thought leadership summit – Mobile Future Forward which is bringing exceptional industry thought-leaders, inventors, and doers to brainstorm, discuss, and debate what’s next. Hope you can join us. As usual, we will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings. Against this backdrop, the analysis of the Q1 2011 US wireless data market is: Service Revenues
ARPU
Subscribers
· Sprint is on good comeback adding over million customers. Sprint extended its streak of positive net-adds to four quarters by adding over a million subs for the second straight time since Q1 2006. · T-Mobile however continues to be sandwiched between the top three and the next three and is having a hard time adding postpaid subscribers. Applications and Services
Handsets
Global Update
Your feedback is always welcome. Thanks. Chetan Sharma We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in Aug 2011. The next Global Wireless Data Market update will be issued in Jun 2011. Disclaimer: Some of the companies mentioned in this paper are our clients. |
Mobile Breakfast Series – The Universe of Connected Devices April 28, 2011
Posted by chetan in : Carriers, Connected Devices, Devices, European Wireless Market, Mobile Applications, Mobile Breakfast Series, Mobile Content, Mobile Ecosystem, Mobile Future Forward, US Wireless Market, Worldwide Wireless Market , add a commentEarlier this month, we hosted our 6th Mobile Breakfast Series Event in Seattle at the picturesque Columbia Tower Club. The topic is something that has been occupying everyone’s attention lately with some terrific growth numbers.
We were doing some math earlier this year and the chart above illustrates how fast the mobile ecosystem is subsuming the computing ecosystem as they become one and the same.
As you might have noted in our 2010 US market update, connected devices is the highest growing category in the market at 55%. It is creating new revenue streams and enabling new verticals to get mobilized. It is also disrupting the traditional ecosystems. This made it a perfect time to discuss the topic in-depth.
Our panelists were:
Tyler Davidson, VP, Amdocs
Martin Fichter, VP - Product Management Americas, HTC
Mike Mulica, President and Head of Strategy, Synchronoss Technologies
Ilja Laurs, Founder and CEO, Getjar
Erik Kling, Director - M2M, Vodafone Global Enterprise Group
Wilson Rothman, Deputy Technology and Science Editor, MSNBC.com (moderator)
As always, we try to bring players across the ecosystem to have a good discussion from multiple angles. Our panel didn’t disappoint.
First a bit about the panelists to give you some background on their viewpoints. Erik Kling is deep into M2M and Vodafone is pursuing a very aggressive M2M strategy worldwide with some smart value proposition to the enterprises. That can put some of the domestic operators at a disadvantage. Tyler Davidson focuses his energy on managing customers but also thinks deeply about the management of media in the connected world. The rage of apps is carrying from smartphones to tablets and other connected devices as well and Ilja Laurs knows a thing or two about apps – running the largest independent app store and being quite successful at it.
HTC just crossed Nokia in revenues which was just unthinkable even last year. HTC has run a very effective strategy in devices and Martin Fichter is one of the guys who is making things happen in the US market. If you have an iPhone, you have been touched by Synchronoss Technologies. They activate the iOS and other devices. A billion $ company you might have never heard of. Mike Mulica has deep experience in the mobile space and is driving the strategy of connected devices and related software forward. Last but not the least, our moderator Wilson Rothman has been covering gadgets most of his adult life and is a darn good moderator.
The highlights of the discussion was as follows:
- M2M is getting good traction in consumer electronics, telematics, and medical. Vodafone is doing a ton of business with the medical/pharma companies who would like connected devices without the worry of roaming, certification, etc. Within a year, Vodafone’s M2M group has grown up to 200 people and they are hiring at a rapid pace if anyone is looking.
- Other M2M areas that are evolving are: security, remote access, home monitoring, etc.
- Connected devices are accelerating the move from voice to data
- The fact that AT&T is advertising M2M Vending machines on TV shows it is serious business.
- HTC passed Nokia in market cap on the back of Android and the 4G devices. For tablets, WiFi is a preferred route rather than operators as that’s what the demand is.
- With connected devices avalanche coming our way, WiFi is going to be extremely important, need better technologies for WiFi/Cellular migration.
- Consumers chose a device or a service first and the operator is now an afterthought.
- Operators need an open environment to operate but want to create a preference for them – it is like “controlled openness” like Microsoft so they can certify devices and apps that go on their network
- All this connectivity does need billions of $ of investment so there is a need for a toll for these services. However, we need to reduce friction with security, payment, and plans.
- Apple doesn’t want to be an operator but does want a free ride like NetFlix and YouTube.
- WiFi is not only necessary, it is essential for the survival of the industry.
- Amazon launching an app store is a good thing for the industry, puts pressure on Google a bit.
- Companies like Skype would pay the operators for better bandwidth but the process is a bit cumbersome.
- Battery Life. Enuff Said.
We also announced that our annual thought-leadership summit on mobile - “Mobile Future Forward” will take place on Sept 12th in Seattle. We have some terrific speakers lined up which lead to some fabulous discussion. Stay tuned for more information early May.
My utmost thanks to David Smith, SVP at Enterprise Ireland for his notes from the event. It helped refresh my memory and pointed out things that I had missed amidst running around.
Thanks all for coming and making it a successful outing. Our next Mobile Breakfast Series is going to be on Mobile Commerce and Payments in late June. Stay Tuned for details.
