Mobile 2014 – Highlights and Milestones

Mobile 2014 – Highlights and Milestones

Dear friends,

At the dawn of the Connected Intelligence Era, mobile continues to shape the digital landscape of opportunities and disruptions. 2014 was an incredible year with some key milestones, tectonic plate tremors, and events of significant consequence for the decade. In no particular order, the highlights and milestones of Mobile 2014 were:

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· For the first time since the iPhone was launched, Apple will generate over $100B from the sales of iPhone alone. Samsung has generated over $100B from phones (feature phones + smartphones) in 2013.

· For the first time, US exceeded $100B in data service revenues thus becoming the first nation to do so.

· The Android device ecosystem will suffer its first and most significant drop in profits in 2014 with over 50% decline in expected profits for the year.

· In 2014, the number of cellular connections exceeded the number of humans on the planet (though this can be disputed depending on how one counts the cellular connections).

· The number of smartphones sold in the world exceeded 1.2 Billion.

· The number of phones sold in the world exceeded 1.9 Billion.

· The worldwide revenue from smartwatches was approximately $1.7B in 2014. 75% of this revenue was generated in the US.

· The number of operators making $1B or more from data services reached 50.

· The number of Internet users will exceed 3 billion in 2015.

· The messaging revenue continued to decline in the western markets. The usage was replaced by IP messaging usage but the lost revenue was not.

· Facebook is now operating at a $10B run rate revenue from mobile. Twitter and Yahoo also exceeded $1B in mobile revenue for the year.

· Amazon remained the king of the mobile commerce world with over $15B in revenues from mobile. Profits resembled a lake in the Sahara desert.

· Xiaomi became the leading OEM in China but the profit profile put it in the Amazonian camp.

· The success of Alibaba brought the Chinese giant into the company of giants becoming the 4th biggest technology player by market cap.

· The security breaches were rampant throughout the year especially in the US. Pretty soon it will be hard to find a qualified person without their credit and/or personal data compromised.

· The IoT hype machine was in full gear in 2014. The bulk of revenue was concentrated in the industrial/enterprise market.

· Apple introduced the Apple Watch, which is expected to be in the market in Q1 2015. It will define what the wearables market looks like for the next couple of years.

· The FCC had a blockbuster IPO, I mean, the spectrum auction, with almost $45B collected in the proceeds.

· The noise from the Net-neutrality wars reached its peak with President Obama weighing on the future of the Internet.

· The Sprint-T-Mobile deal fizzled before it could be announced but that didn’t stop big M&As to surface in both North America and Europe. Expect the big mergers to continue in 2015.

· Facebook completed the blockbuster acquisition of Whatsapp, which surprised many, but just like the acq. of Instagram, it will prove out to be a very savvy deal and leave the imprint of Mark Zuckerberg as one of the smartest and the gutsiest CEOs out there.

· There were several key industry leadership changes most notably the promotion of Sundar Pichai as the number 2 at Google and the placement of Satya Nadella as the CEO of Microsoft.

· T-Mobile continued to make waves with its uncarrier moves and the price wars have pretty much ensnared all the operators now with everyone expected to experience revenue and/or profit declines in Q4 and beyond (at least in the short-term).

· China Mobile’s customer base exceeded 800M, which is almost twice the size of the western European market.

· The Indian mobile subscription base is expected to exceed the 1B mark in 2015.

· The Chinese device OEMs accounted for approximately 40% of the device sales in 2014 making it the most powerful bloc in the smartphone space by volume.

· The average data consumption continued to increase a good rate in the US with an average smartphone consuming over 2.2 GB/month by the end of 2014. Other LTE markets around the globe experienced similar or higher growth rates.

· In the western markets over 90% of the devices sold are now smartphones. Globally, the number was 65%.

· The noise around 5G has started to pick up around the globe with Japan and Europe being the loudest.

· 75% of service revenue in Japan now comes from data and digital services.

· 20% of the data service revenue in Japan now comes from digital or 4th wave services.

· IBM and Apple signed a historic deal to bring iOS to the enterprise putting a big dent in the windows enterprise ecosystem.

· NTT DoCoMo, KDDI, China Mobile, and AT&T generated > $1B from 4th wave services in 2014.

· In India, just like President Obama in the US, Narendra Modi ran an effective digital and social media campaign and uprooted its dynastic opponent in the biggest landslide victory in decades.

· There were at least 38 companies who generated $1B or more from 4th wave services.

· Brazil soccer world cup, Seattle Seahawks super bowl victory, and Sochi Olympics provided mobile moments for the industry when the usage spiked beyond everyone’s expectations.

· Ebola dominated the headlines for much of the year. Mobile couldn’t do much this time around but hopefully we will be better prepared next time.

· Mobile has become the universal language of protesters around the globe. Clashes/protests in the US, Hong Kong, Egypt, Palestine, Italy, etc. – mobile played a crucial role in connecting and organizing people.

· HBO’s decision to offer a standalone service was a major milestone in the industry. Will it open the floodgates in 2015?

· Apple introduced Apple Pay, which is starting to change the financial ecosystem and has laid the foundations for potentially significant disruptions in the coming years.

· Google accelerated the market development for connected car with almost every OEM planning to release some flavor of autonomous car before the decade is out.

· Uber was by far the most fascinating 4th wave company to watch in 2014 for it disrupted with color and flair around the globe.

What was the highlight for you this year? What are you looking forward to next year?

Your feedback is always welcome. See you in 2015.

Best wishes for a terrific new year.

Chetan Sharma

Disclaimer: Some of the companies mentioned in this note are our clients.