Benchmarking the Growth and Evolution of the Mobile Ecosystem
The underlying principle of mobile industry revenue curve is that at 70-90% penetration on a curve, the net revenue of the curve in a given country starts to flatten out and approach its peak. The curves are different for every country based on competitive, regulatory, and economic forces that dictate how consumers spend on communications or household IT resources. But, the consistency of the curves was unmistakable, country after country, showed the same pattern first starting with voice, and then with messaging. Access at the time was still a growth engine, it still is for the most part. That study led to the birth of 4th Wave thesis.
The 4th Wave thesis surmised that if the industry is going to run out of steam on the first three curves, we better start investing in the 4th curve. But, what would that curve look like? It was also clear at the time that the digital services will start to dominate the mobile industry landscape which led to some predictions that the 4th Wave revenues will be bigger than the first three wave combined. As we approach the five-year anniversary of the 4th Wave thesis, 4th Wave is already dominating the US mobile market and other markets are on the cusp. In 2014, the 4th Wave revenues exceeded the access revenues and a year later, in 2015, the 4th Wave revenues exceeded the revenue from all the three curves combined.
The 4th Wave thesis captures the underlying shifts in industry dynamics that the value is shifting dramatically from access to applications. The quality of networks, the power of devices, the sophistication of applications and services have upended the industry landscape. The competitive dynamics are changing right in front of our eyes, predictably, but dramatically. Consider the fact that Uber is valued more than T-Mobile and Sprint combined, Facebook is valued more than AT&T or Verizon, and Google is valued more than all the US wireless operators combined. The success of the 4th Wave economy is not limited to a handful of Internet players from the US but rather it is a global phenomenon and it is happening across all industry verticals.
So, how does one value an operator vs. an app, a leading device manufacturer vs. a new wearable entrant. If you had a dollar to invest, where would you invest? Infrastructure, devices, platforms, or in services? It was clear that the industry needs a better way to benchmark progress of various companies as well as understand the competitive dynamics. It is also useful to understand the positioning of these companies in a very complex ecosystem. We need to assess a corporation’s strengths across multiple key dimensions in various sub categories and understand how these companies are prepared to compete in the 4th Wave economy.
This paper introduces the notion of a 4th Wave Index that looks at 29 key variables across four key dimensions: Infrastructure, Devices, Platforms, and Services and calculates the 4th Wave index. It is a useful benchmarking exercise to see if companies are slipping competitively or are making progress. Additionally, the model provides a view into what it will take these players to move from aspirants to challengers to leaders. The paper also recaps the progress on the 4th Wave and how various companies have performed in the last five years. It is our belief that through dialog and discussions, we can further refine the 4th Wave index and get a better view of competitiveness, valuation, and the future viability of leading players as well as emerging new entrants across industry verticals and geographical boundaries.
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