This finding caught me by surprise. Study of US media consumption by Universal McCann revealed that already one in seven minutes of US media consumption is used with mobile. Now, note that this includes parallel use, so if we watch TV and vote on American Idol, we consumed both TV and mobile. But still, gosh. TV, radio, newspapers, magazines, and the internet - and mobile gets one in seven minutes of media consumption. Story was covered in Adweek.
Part of the answer lies in where mobile media is consumed. 82% use mobile phones to consume media at work (ie listen to the MP3 player for example) and 65% while commuting. Here TV has almost no chance to contest for that time and other media also probably less easy to consume except web at work and radio while commuting (print perhaps also as long as you are not driving..) So mobile has some time slots where it has few rivals. But yes, every one in seven minutes. Easy to memorize, one in seven for the 7th mass medium?
Shazam is one of the best examples of creating magic in mobile, and obviously thus creating a mobile service that is unique to mobile, not just replicating something from the previous 6 legacy mass media. For those who don't know, Shazam is the music identification service. You hear recorded music anywhere, on the radio, while sitting in a coffee shop, riding an elevator, anywhere. You want to identfify what is the song and who is the artist. You take your phone, dial the Shazam number, point the phone at the music, and it samples the song for a few seconds and then hangs up the call. In about a minute you receive an SMS text message informing you of what is the artist and title of the song, and on what album the song is as well. Clever, simple very elegant service, works like a charm (as long as the music is reasonably loud or the phone is close to the loudspeaker.
I described Shazam in one of my Pearls back in 2002 and awarded it my Pearl of the Year honor for 2002. I discuss it in the magic chapter of the current Mobile as 7th of the Mass Media book.
Ok, so now time for an update. My dear friend multiple author Ajit Jaokar also is a fan of Shazam and has posted an update of their numbers at Forum Oxford. Ajit reports that Shazam now has 35 million users in 60 countries and they get 1 million "tags" (music identifiation requests) per day.
Ah! Now we get some insights on the numbers. I don't have their current pricing (they started in the UK with 50 pence per tag) Even if we say their global average cost is 30 US cents per tag, that works out to a very impressive 109 million dollars in annual revenues. By their active user base, thats on average 26 cents per actuve user per month so it is not a heavy burden on our wallets - thats only 1.5% of the average monthly mobile phone bill. Yet produces over 100 million dollars per year. Isn't mobile magical?
You don't need fanscy 3G for this. You don't need expensive smartphones. You don't need to use advertising (although Shazam also offers that and also helps sell music etc). A simple service that servces a need that we all have. 35 million users in 60 countries using it a million times per day, 109 million dollars. Beautiful
I'm continuously bumping into the phenomenon of people using two phones at the same time. I think this is one of those not-well understood aspects of mobile as a mass media channel, that compared with the PC based internet (as we call it, the 6th mass media channel) is very well optimized for stationary large-screen two-handed operation. To consume the PC based internet, we have a large keyboard and a mouse to help us navigate the big screen. And the screen is able to capture most of our attention and viewing space.
Mobile (the 7th mass media channel) is very different. On mobile we have a small screen and we tend to be walking or moving when we use it, and we often have other things we also do, so we often multi-task while we use mobile. But now, as half of European phone owners have two phones, and worldwide over 30% of all mobile phone subscribers have two or more subscirptions (often meaning two phones - think iPhone owner who also has a Blackberry) - we see the phenomenon of two phones used simultaneously.
This was not expected. But think about how often this happens. We listen to the music on one phone, receive an SMS on the other phone, and happily respond to the SMS while still wearing the earphones and not pausing the music. We were consuming two services on two separate phones simutaneously. I often in my workshops talk of being able to consume two telecoms services simultaneously, for example while talking to one person, our other phone rings. We see who is calling, decide not to take that call - and the call is diverted to voice mail. What happened? We were on one voice call, while the other voice call was directed to voice mail. No problem at all, for anyone to consume two telecoms services simultaneously.
In my fourth book Communities Dominate Brands, Alan Moore and I introduce Generation C for Community Generation. We talk about Gen C being able to multitask. Since the book, we found that a UK survey by Carphone Warehouse in 2006 that revealed that 48% of British youth admit to sending text messages while talking to someone else. This can be a real person, talking to mom and dad, while holding a phone in the pocket and sending a text message to the best friend. That is multitasking yes, but not using two phones and services. The more amazing part, is to see youth absolutely conveniently carry on one phone conversation on one (mobile) phone while simultaneously carrying on an SMS text message conversation on the other phone. Now we do have two uses of two phones and two mobile services simultaneously.
There are many more examples. Using the mobile internet on one phone and sending text messages on the other. Talking with one person on the phone while voting on American Idol on the other, etc. The point is, that the phone is optimized for one-handed operation. This is actually a very old idea, first suggested by Matti Makkonen (the retired Finnish mobile pioneer who was an executive at Telecom Finland (now TeliaSonera), Nokia and Finnet Group, who recently won the Economist innovation award for inventing SMS text messaging). Matti suggested this over 20 years ago, and I remember he mentioned it to us, when I worked at Nokia and seeked Matti's guidance for my Consulting Department, and he gave lessons to us about what makes mobile distinct from existing channels and tools.
Optimized for one-handed operation. It means we can rather easily learn to use two phones in two hands. This gives the mobile a powerful advantage over other digital mass media, whether the PC or Playstation or Digital TV - we tend to only consume one of those at a time. But we can rather easily consume two distinct mobile phone based services - on two separate phones - from two competing networks even - simultaneously. Or, we can consume mobile services while we are supposedly paying attention to the other older media such as our broadband internet (sixth mass media) or TV (fifth mass media) or a video game (ie recordings, the second mass media channel).
This changes the comparison to "apples and oranges". There are single-use mass media, like all legacy mass media (print, recordings, cinema, radio, TV and internet); and now the newest innovation, there is multi-use mass media, of which mobile is the first (and no doubt, will not be the last mass media channel).
So yeah, mobile is very different from the legacy mass media channels. And the joke that I have on the back of my seventh book, Mobile as 7th of the Mass Media, where I say "...On the other hand, you have your other cellphone." (and the cover illustrations too have me holding one phone in the front cover, while hiding my second phone behind my back, on the back cover) - this is increasingly becoming a reality, not only a joke. Yes, more and more young consumers are fully prepared to consume two separate mobile services on two phones, simultaneously.
Also - if anyone is interested in consumer insights into mobile, remember I have a free "thought piece" on understanding mobile consumers. It is a short white paper, only 2 pages long, but packed with stats and facts. Its fast enough for any exec to have time to read. And you can have it by return email if you send me an email to my regular email address at tomi (at) tomiahonen (dot) com.
Posted at 12:16 PM in 7th Mass Media (mobile), Book - Mobile as 7th of the Mass Media, Books - Ahonen's other 5 titles, Customer Insight, Generation C, Handsets (phones), Humor, Internet - 6th mass media, iPhone, Music, Recordings - 2nd mass media, SMS Text Messaging, SMS-to-TV interactivity, Statistics, Television - 5th mass media, Web/Tech, Youth | Permalink | Comments (0) | TrackBack (0)
(This posting is cross-posted verbatim from Communities Dominate blog)
Trillion with a T. That is 1,000 Billion. Or one million-million. To write it out, that is 1,000,000,000,000. One followed by twelve zeros. Its a big big number. And when you add the dollar sign, that one Trillion dollars - that is a monster of a number. And we now celebrate the newest Trillion dollar industry for the planet - mobile.
KNOWING ME, KNOWING YOU
This is really a big thing. Lets do a quick comparison. Big global industries? I write books, so I am part of the book publishing business, as a little contributor to it. That books business, is part of a bigger industry sector, called print, which also includes newspapers, magazines etc. A very big industry indeed. Employing millions on the planet. But is it a Trillion dollar industry? No. Only about half that. How about television? Television broadcasts in every country. Its a media giant. Actually, combined with radio, the broadcasting industry is still nowhere near a Trillion, only about half that. How about advertising? Surely that is a giant global industry. Yes, its big, but also advertising is worth roughly half a Trillion dollars, in very round terms. Well then the IT industry? No, another half Trillion there.
Lets move beyond of the tech and media industries - lets think big. How about bottled water? Drinks, milk, beverages. Lets make this big. Pepsi, Coca Cola, Red Bull. Tropicana orange juice. Heineken, Budweiser, all the wines from France to Australia. Hard liquor, the vodka martini, shaken not stirred. A good Speyside single malt whisky like a Glenlivet or Cragganmore or Tomintoul. Coffee. Tea. The worldwide beverages industry.. Ok, its big. Yet, its not worth a Trillion dollars in size.
Air travel. Surely that is a giant industry, all those Jumbo Jets and air travel. The Airbusses including that big 580. Nope. Not a Trillion. Air travel is also in the half Trillion dollar range.
Cars. Now we're talking. Yes, the total worldwide automobile industry is worth about over a Trillion dollars in annual sales. Adding all of Toyota and GM and Ford and Nissan and Volkswagen and Mazda and Hyundai and Fiat and Renault (and Aston Martin and Ferrari and so forth).. All cars sold globally every year. Now we have a Trillion dollar industry.
The world total GDP - the total Gross Domestic Product for the planet - is about 40 Trillion dollars. Our economy does not have room for more than a handful of Trillion dollar industries. Look at the countries. Russia, Spain, Canada, Brazil, India, Switzerland - most big countries on the planet - their total national output per year - do not hit one Trillion dollars. Italy, France, Britain are countries whose total domestic output exceeds a Trillion dollars. That is the size we're looking at. All of Japan is 4 Trillion dollars. All of the USA is ten Trillion dollars.
So yes, cars. A Trillion dollars. Or say, the global food industry, yes thats a Trillion there, food. And armaments business (the global weapons industry, isn't this world a crazy place, that we spend a Trillion dollars every year in weapons?). There are honestly only a handful of industries that are Trillion dollar businesses. We have a new one. For the first time in 2008, mobile telecoms became a Trillion Dollar Baby
THE NAME OF THE GAME
Wow. Where did that come from? Ten years ago, wherever you went on the planet, even in the most advanced markets, the mobile phone was only an executive toy. In most advanced industrialized countries like Germany, UK and the USA, mobile phones were toys for the boys, status symbols, expensive accessories for the young and up-coming business types. People who pretended to be important..
In 1998 there was only one exception to that rule, and that was Finland, where for the first time only that year 1998, the mobile phone penetration reached and passed half of the total population. The rest of the world looked at those gadgets with a lot of suspicion and declared, I do not want one, and I think anyone who feels a need to be babbling on the phone all day, is pretty messed up in their head.. Yeah. That was only ten years ago.
In 1998 the mobile phone industry sold 163 million handsets. In 1998 there were 309 million mobile phone subscribers globally. These were impressive numbers for a "high tech" industry (today Apple's iPod or Sony's Playstation would love to have such annual sales and installed base numbers). But yes, in no country other than Finland, was there even one phone subscription for every two people. Today there are over 60 countries where mobile phone subscriptions exceed the total human population..
Its grown real fast. So lets examine our Trillion Dollar Baby a little bit. First, what is that money? This blog posting will give the big picture view to your newest Trillion dollar industry.
The pie can be divided roughly into two slices. The big slice is that of mobile services (the cost of our call minutes, text messages and premium content we consume). And the small slice is the hardware, mostly the mobile phone handsets and the network infrastructure. The services part covers roughly speaking 80% of the Trillion dollars per year, and the hardware is roughly speaking 20% of the industry - a little over 150 billion in the handsets, a somewhat under 50 billlion in the network equipment.
So what of the mobile services. Is that all the stuff we buy for our shiny new iPhone or is it all of that emailing on the Blackberry? Actually just under three out of every four dollars spent on mobile services is basic voice calls. Worth roughly speaking about 600 billion dollars this year. Another approx 130 billion dollars is our mobile messaging. And the rest is mobile "premium data" ie non-messaging data for mobile phones (worth about 70 billion dollars).
I do need to take a pause here. First, that 600 billion in mobile phone voice revenues. Note that it is more than the total fixed landline telecoms business worldwide. The fixed landline business is in a death-spiral. Nobody cares for a home phone anymore. If its an international call (where the big telecoms money used to be), that is all vanishing due to Skype. And the rest of landline calls? Going mobile. In Finland - where this sillyness all began, Finland was the country that launched modern (digital) mobile phone service in 1991. But yes, in Finland, today over half of all homes have abandoned the fixed landline altogether. The EU average is past one in four homes that has abandoned the landline. In America its already past the ten percent level. Nobody uses the landline for voice calls, the homes that still have a landline, use it for their internet connection. We prefer to be untethered. And the country that has been unplugged the longest, is Finland. So many of the trends we'll find in mobile, we can spot first out of Finland.
Oh that reminds me. Did you walk by a telephone booth today? That iconic phone booth which is visible in all city scenes in all countries. Well, all countries but one. Finland has already approved the de-commissioning of all payphones. There is no market for them anymore, when every citizen has a mobile phone. Look closely at the phone booth in your home town the next time you pass one. In a few years, it won't be there anymore. You might want to take a picture and tell your grandchildren about how phones were once tied into these tiny one-person standing-sized houses that we built for them. Your grandkids will find ths story most amusing of how bizarre the old world used to be.
ONE OF US
So then lets move from the money to the people. How many have one? Ten years ago, there was a mobile phone subscription for 5 percent of the planet. Today there are 3.95 billion mobile phone subscriptions (lets call it an even 4 billion, we'll be at 4 billion in January). Even at 3.95 billion today, that means there is a mobile phone subscription for 59% of the population on the planet.
How can we put that number in context? Lets give comparative numbers. There are 800 million cable/satellite TV subscriptions. There are 850 million cars. There are 950 million personal computers (laptops and desktops combined). About 1.2 billion fixed landline phones. About 1.2 people use email. 1.3 billion is the total number of internet users. All television sets on the planet number 1.4 billion and credit cards, there are about 1.5 billion unique holders of a credit card (most are in the Western world and are employed adults, and of the people who do carry a credit card, if you have one, chances are you have several credit cards).
Understand the scale. The other major technologies and subscriptions we have, run in the 800 million to 1.5 billion scale. But mobile phone subscriptions will be at 4 billion just after the New Year.
Its not 4 billion phones, and its not 4 billion unique mobile phone owners. Nearly one in three phone owners has two or more mobile subscriptions (think of an iPhone owner who also has a Blackberry). So my consulting company, TomiAhonen Consulting has been tracking this multiple subscription development - I was the first expert to discuss this phenomenon at an international conference in 1999 - and our latest numbers reveal that the total number of unique mobile phone owners is now 3.05 billion (46% of the planet's population do have a mobile phone, even after we remove the multiple subscriptions).
And some of those with multiple subscriptions have two phones, but others have two or more subscriptions to save money and can only afford one phone (or don't want to carry two phones, Samsung already offers phones that have two SIM card slots, to allow one phone to connect to two separate rival mobile phone networks, at the choice of the individual consumer). Again my consultancy monitors this development and now reports, that there are 3.4 billion mobile phones in use by the 3 billion unique users.
So, globally, nearly half of the planet has a mobile phone and subscription, and out of those, one in eight will carry two phones. 3.4 billion actively connected mobile phone handsets in use, today. Nearly three times as many as fixed landlines. More than twice the number of television sets. And these 3.4 billion mobile phones are in active use and carried by us everywhere we go. As we have discussed here at this blog, nine out of ten carry the phone with them every moment of the day, keeping it within arm's distance 24 hours a day - yes, taking it to the bathroom and yes, taking the phone to bed (or bedside table).
Not only is this a huge industry, it is a dynamic one. It is very difficult to get to terms with the sheer speed of this business. So remember, the total installed base of personal computers, amassed over the past three decades is now at 950 million in use in the world. Now, hold that thought. They sold over 1.2 billion new mobile phones just this year. Oops. Yeah ! (Note that the total sales of new personal computers, laptops and desktops this year, is about 270 miliion.) But over 1.2 billion new phones sold this year.
Then consider that new smartphone in your pocket that you got this year. A new SonyEricsson or Samsung or LG or Nokia N-Series or E-Series or maybe an iPhone or Blackberry? The processor in that phone is as powerful as a laptop of only one generation ago. The full computing capacity (CPU processing power and speed, in-built memory, data storage, etc) of today's top end smartphones is equivalent to the computing power of a laptop five years ago, a top end desktop ten years ago, a mainframe computer fifteen years ago, and a supercomputer twenty years ago.
So the space shuttle was designed on computers that were far less capable than the phone you have in your pocket. And many of us have two such supercomputers in our pockets, that can be "networked" on a private connection via bluetooth in a moment's notice, by us. No networking geeks required.
Imagine a bizarre time-warp. if the designers of the Space Shuttle in 1980 had somehow received a visit by one person from 2008, with two top end smartphones.. "I see you're doing some computer aided design. Isn't that NASA supercomputer a bit slow? Would you like to borrow one of my phones and do the calculation in minutes rather than days? Oh, your friend here? I have another such phone too, you can borrow that. In my time in 2008, its normal for people to walk around with two of these devices. Oh me? I don't use the computing ability, what we call the PDA functions, I use the camera on the phone, send some messages, make calls. Oh, I do use it sometimes to play some songs with it, but my kids love the videogaming ability.."
A supercomputer. I did the specs when I presented for the Canadian wireless industry 20th year anniversary event in 2005, and my then-current Nokia 6680, was specs-for-specs equivalent (in some cases superior) to the performance of the world's fastest supercomputer in exactly twenty years earlier, in 1985, the Cray XMP. Now three years later, that 6680 is a really old phone, forgotten and forlorn, and I've since then retired a further four fmore powerful phones since that one, and carry two high-end smartphones today.
The replacement cycle for mobile phones is now down to 15 months. We replace our personal computer every 3.5 years but we replace our phone after one year and 3 months. In the advanced markets like Japan, South Korea and Hong Kong, the national average replacement cycle is down to 12 months. For those who have two phones, the effective replacement cycle is then 6 months. We have synchronized the phone industry with the fashion industry. They actually do have two seasons of new phones in Japan's fashion catwalks, the Spring fashions come out in February, the Autumn phones come out in September.
THANK YOU FOR THE MUSIC
But this industry is amazing. Take music. Apple launched its iPod in 2001. There were no MP3-playing phones in the world until in 2003, when the first modern musicphones were introduced in South Korea. While Apple iPod sales more than doubled year-on-year and posted 12 straight quarters of continous growth up to the end of 2005, and all of the IT world marvelled at the phenomenal tech darling, very quietly the musicphone emerged and obliterated the iPod's short-lived reign as top dog. Apple iPod sales still grow year-on-year, but in 2006, the iPod saw for the first time ever, two straight quarters of diminishing sales. Oops, what happened? Perhaps the MP3 player market had reached saturation, that must be it.
No it wasn't. It was that the musicphones appeared in major Western markets. The total global market for MP3 players still more than doubled in 2006, and almost doubled again in 2007, but the shift was away from stand-alone MP3 players like the iPod, and into the newer musicphones. In the last great year for the iPod, 2005 while iPod had its last year of four quarters of growth, actually more musicphones were sold than iPods in the world. The next year, 2006, MP3-playing musicphones were outselling iPods by a ratio of 7 to 1. Not only was Nokia's line of musicphones outselling all of the iPod that year, so too was Samsung's musicphones, SonyEricsson's musicphones and Motorola's musicphones (Razr V3's) in 2006. Not every musicphone user has to use his phone for consumption of music, if the numerical advantage is that lopsided. Seven to one? Today iPod sales are flat (about 6% annual growth) while musicphone sales grew another 40%. No wonder Apple had to rush its iPhone to the market.
There is nothing unique about this market carnage with music players and the phone. The same story happened earlier with stand-alone PDAs. And right now? GPS? This year 2008, Nokia became the world's largest supplier of GPS devices. Its only an added feature on premium Nokia phones, and not every user even cares to use the positioning technology. Yet its there on the phone. But when the industry ships 1.2 billion new phones - yes, 3 million new phones ship every single day, Saturdays, Sundays and all holidays included - that gives it an enormous momentum and the ability to devour almost anything it wants. Oh, how about cameras you ask? Yes that too. The first mass market cameraphones were introduced in Japan in 2001, and Nokia has been the world's most common digital camera brand since 2004. Today the phone industry has shipped a cumulative 3 billion cameraphones, and the current installed base is 1.9 billion cameraphones. 57% of all mobile phones in use on the planet are cameraphones already. Oh, the stand-alone camera industry still lumbers along, selling now a little over 100 million stand-alone cameras but did you notice, since cameraphones appeared, two of the four camera giants have quit the camera business altogether. Minolta and Konica, no more in the camera biz. Shame. My first SLR was a Konica, they made great 35 mm film-based cameras three decades ago..
So we get to major cross-over points. So you think the internet is a cool thing - you read our blog here, across the internet. Yes, we all use it. And yes, there are 1.3 billion people who access the internet. But there are only 950 million personal computers. So clearly there are other devices also connecting to the internet. Ha-ha, yes, the light bulb is going on. Yes, those clever little iPhones and smartphones and Blackberries and all other little pocket wonders. Yes, I think I can see it now. Must be 350 million who use a mobile phone to access the internet, right? 1.3 billion minus 950 million.
Not so fast, buster. How about the iPhone owner who also has a Macintosh computer? Uses both the iPhone and the Mac to access the web.... And the Blackberry addict, who also uses the laptop to connect to the internet. Yes, there is overlap. Actually, the number of mobile phone access to the internet is significantly more than 350 million. Again my consulting company has been tracking the numbers from the start of this phenomenon since I first talked about the weird aspects of Japanese mobile internet use in 2000, and now in 2008, we've seen the cross-over point for the planet.
THE WINNER TAKES IT ALL
For the first time now in 2008, there are more people who access "browser-based content" - here a clarification, as there are several definitions of a "mobile internet" and I want to be very clear, I include WAP and i-Mode and other such mobile browser access, in addition to "real internet" access. But yes, accessing Google or eBay or Yahoo on your phone, even if that is via an operator portal, it is for the mass customer base, the same as accessing Google, eBay and Yahoo on a PC. They count it as accessing "the" internet. Google is Google. Yahoo is Yahoo. I don't care about some professional expert's semantic distinctions about what is and what is not "the interent." If a regular consumer in America uses his Motorola Razr via Verizon to access the Weather Channel's mobile web page, that consumer says that the experience was using the internet on the phone. That is all what really matters. What do the consumers say.
And browser-based content is now accessed by more people using a mobile phone than using a PC on the planet. There are 1.02 billion people who access the internet on a mobile phone versus 950 million personal computers connected to the internet. The mobile phone is already the majority of internet access in countries from the most technically advanced such as Japan, Taiwan and South Korea, to countries that are poorest such as India, Kenya and South Africa.
And I do want to be clear about this, so I'm sorry if you've heard this before. But the number of users is not the same as usage. So yes, heavy usage - and most of the internet traffic and most of the time spent on the internet - will continue to be on PCs, not on mobile phones. At least not early on. Probably the usage and data traffic on phones will increase over time. Still, lets be clear, the user number is not the same as usage or total time spent online or the amount of traffic. Nevertheless, the first step has been taken. More people now access browser based "internet content" using a phone, than using a PC. And this is a strong trend, there is no going back.
THE DAY BEFORE YOU CAME
If you have a consumer-oriented website, especially if you are a global brand - shouldn't you now be taking steps to make sure your site is also suited for mobile phone based internet access? Isn't it time to register for a dot-mobi domain for yourself (Bank of America had a million visitors to its mobile site), and to instruct your web designers to test and optimize your websites to serve also mobile phone access? It does change things. Not so many of the "cool" but data-hungry graphics and animations and videos that the designers like to stick on the welcoming page. If you access on a mobile phone and are in a hurry, and you are charged for the data transmitted, the last thing you want is for a heavy data file to load.
Before, we didn't need to care. The mobile phone internet was a weird peculiarity "only in Japan" (and then South Korea) and unless you were a major consumer brand operating in those countries, you didn't need to care. But now, 2008, its become the predominant form of internet access on the planet. Now we all have to care. Even if the majority of internet access in "laggard markets" like the USA, is from legacy internet methods like a personal computer.. If nothing else, think of the iPhone. In a couple of years, the majority of all phones will be more capable internet devices than the iPhone is today. Time to prepare. Time to smell the cellphone. Its not the dumb little brother of the internet, mobile is actually the newest mass media channel (the seventh mass media as we say).
WHEN ALL IS SAID AND DONE
And while we're on the internet, you use email, yes? A giant global communication system. There are as many people using email, as there are total fixed landline phones. A very big communication system indeed. But now there is a new kid on the block. I'm not talking about SMS text messaging (that is the biggest data application on the planet, far larger than email, I'll talk about it later). I'm talking about MMS.
MM-what? Picture messaging. MMS the Multimedia Messaging Service that has a potential reach today of over 1.9 billion phones (meaning the phone itself, and the network it is connected to, support MMS picture messaging). If you want to send commercial messages - ie advertising - or news or entertainment content that is of multimedia type (pictures, sounds, videos) then MMS is a system that is out there. It has a reach that is twice as large as the installed base of all computers. And it is 35% bigger than the installed base of television sets. Did I get your attention?
"But nobody uses picture messaging. I don't use picture messaging. Its a stupid technology." Ha-ha, yes, I hear you, but remember how you felt about SMS text messaging just a couple of years ago? Lets examine the evidence, shall we? Nearly half of Asians send picture messages...
..Oops? "Excuse me, Mr Ahonen, what did you say? Did you say nearly half of Asians?" There are 640 million mobile phones in China alone. If half of those send picture messages, then the active MMS user base just in China, is more than the total population of the USA..
Yes, almost half of Asians, 48%, use the MMS messaging system and mostly send and receive picture messages with it. Now, toss in 25% of Europeans who use MMS.. We don't need many older people like you and me, and we don't need many Americans to use MMS picture messaging if we have half of Asians and a quarter of Europeans doing it. The numbers come out at ... drumroll.... suspension rises ... more drumroll... how big will it be... drumrolll.... the active user base of MMS picture messaging is 1.3 billion people today.
Yes. This year 2008 for the first time, there are more active users of MMS picture messaging, than there are active users of email. Still think MMS is not relevant?
Again lets not misunderstand this. The definition of "active user of MMS" in most networks is someone who sent one MMS in the past month. We're not looking at massive amounts of traffic (yet). But we are looking at enormous reach, and a radical new way to communicate on our phones. If you want to reach an audience and you have a picture or video, you can reach 1.4 billion TV sets, or 1.2 billion email users, or now, you also have the choice of 1.3 billion people who already use MMS multimedia messaging. More than that, in the Developing World, MMS has a far wider reach than TV or the legacy PC based internet. MMS is rapidly becoming a favoured method for mobile advertising for example. We've reported on many examples ranging from Blyk to the BMW winter tyres campaign we discussed earlier.
ON AND ON AND ON
Then lets talk text. SMS text messaging has been the biggest data application on the planet for many years already but it keeps on growing dramatically. Now we have passed the 3 billion active user level. 76% of all mobile phone subscribers are active users of SMS text messaging. 3 billion texting users is obviously three times the population of computers on the internet, and twice the number of television sets and 2.5 times the number of email users.
Its so powerful, SMS text messaging is not only replacing email use, and single-handedly killing the voicemail traffic, SMS text messaging is now replacing voice calls. Not only in poor countries - in India for example 30% of mobile phone users never initiate voice calls at all - but use text messaging. It is also in wealthy countries, where SMS text messaging is found to be far faster to reach the person with the message we want, than using a voice call - and SMS texting is also the more discrete (secret) method of communicating, useful in anything from sending secret notes in school, to sending a joke to a colleague while in the same meeting, to sending important messages to the boss, while sitting in the taxicab sharing a ride with your biggest competitor. In all of these cases, a voice call is totally inappropriate, but an SMS text message works just fine. And only SMS works this way with 3 billion people. A Blackberry wireless email would only work if the other person also has a Blackberry (or is sitting at the PC with the internet connection live and has email notification enabled). Yes, the shift from voice calls to texting has been reported in countries as far apart as Ireland and New Zealand.
Three billion people send SMS text messages. I was preaching the SMS story to totally hostile audiences in America back in 2000. Now, after season after season of American Idol, and then the Obama campaign, finally now, in 2008 the American view is shifting and willing to accept, that perhaps, yes, SMS is something special. The rest of the world knows this. The Finnish Prime Minister says on his voice mail, don't leave me a message, send me an SMS text message instead.
And as we discuss the Trillion Dollar Baby, yes, SMS is a significant part of that. Mobile messaging is worth over 130 billion dollars this year. The vast majority of that - over 100 billion - is basic person-to-person SMS text messaging. The majority of the rest is premium SMS (ie American Idol votes etc) and MMS picture messaging. Wireless email and Mobile Instant Messaging form a tiny sliver of about 5 billion out of that. Tiny yes, but even so, five billion is more than what the legacy internet earns out of all messaging revenues it can generate. And mobile messaging is worth 130 billion dollars this year, growing at rates of 35% per year.
And to all those who pray at the altar of the RIM, singing hymns to the addictive nature of 24 hour email in their pockets, clutching their Blackberries, like a bizarre cult. Yes the Crackberry is a nice device. But the email ability of the Blackberry is a crutch for digital immigrants. It is a crutch. The real power in messaging is in SMS, not wireless email. In fact, the email ability of the Blackberry is a red herring. It is the "non-email" messaging on the Blackberry where the truth lies. The biggest user group after enterprise customers to use Blackberries - are heavily SMS-addicted youth who want a good keyboard for their texting addiction. That is why they sell far more Blackberry handsets, than the total number of Blackberry subscribers in the world. It is a great SMS text messaging device, that happens to also do email. Not unlike the Nokia Communicator series (which long pre-dates the Blackberry and has a far larger user base globally, while being far more expensive than the BB) which was the first mobile phone with the real internet and email, from back in 1997.
Hey, I'm not against my Canadian friends over at RIM, they've done a great job moving their iconic emailing smarphone to a wider appeal with inbuilt cameras, good screens, etc. Just the notion that wireless email "like the Blackberry" - that is my gripe. Email is like so last decade. It will not be the paradigm on mobile. SMS text messaging is the biggest data application on the planet. There are 50 times more active users of SMS text messaging than users of wireless email on the Blackberry and all similar devices and services.
Oh, about those aching thumbs? The world average is about 2.5 SMS sent per subscriber, or nearly 4 SMS sent by active user. The world leading country continues to be, of course, the Philippines, which has led in this category since national statistics were first reported. The average Filipino mobile phone user sends 25 SMS text messages every day. That is the average user. Heavy users among the youth from South Korea to the UK, send 100 SMS per day on average. That will put a cramp on your thumb really fast..
MONEY MONEY MONEY
So three out of four mobile phone subscribers use SMS text messaging actively. That is a very large number and we are now nearing the limits of literacy. Yes, there are people for example in Africa, who are illiterate, but who still use SMS text messaging for example to retrieve payments, that are transmitted using SMS (Look at M-Pesa for example, the mobile phone based mobile payments system "we are not a banking service" which is in reality a mobile phone banking service but Vodafone, its parent, has to be very careful with the local banking regulations, so M-Pesa is not a banking service. M-Pesa is the mobile payments system that would be 20% of all banking accounts - please do note that M-Pesa is not a banking service - and M-Pesa is used predominantly by people far too poor to afford opening a real banking account in Kenya).
Oh, you thought 20% cannibalization of the local banking industry is surprising? Yes, in the developing parts of the world, where every economically viable person has a mobile phone, but does not have a PC or television set or credit card or indeed, a banking account - mobile phones become the digital wallet. It is normal for employees to be paid their full salary to their mobile phone ("non-banking") account. This is commonplace already not only in Kenya but in South Africa, the Philippines, etc. And then the payments system expands to cover the phone in many other areas. We've seen mobile phone operated vending machines all around the world, no problem. But more serious payments are handled by phone. In India you get a 5% discount if you pay your utility bill using your phone, because it is more efficient for the utilities to handle the payment transfers electronically than using cash payments. In South Korea half of the population already makes payments using a mobile phone. In Japan 17% do so. In Finland, on Helsinki's public transportation system, of the single tickets sold to the trams, 58% are now paid by mobile phone. In Estonia, if you park you car, you better have your phone, because the parking meters don't take cash, the only way to pay is with a mobile phone. I believe its the first case of a local payment function, that has shited 100% to mobile payments. It won't be the last.
GIMME GIMME GIMME
We have the newest Trillion dollar baby, and it is growing really fast. In this blog posting I only focused on the big picture items, and didn't even touch upon the content and services that are in this space. I'll do that in a separate blog posting soon. But yes, now the numbers to remember for 2009 - there are four billion mobile phone subscribers on the planet. That means 3 billion unique mobile phone owners, who carry around 3.4 billion mobile phone handsets everywhere they go.
The industry sells 1.2 billion new mobile phones every year. The phone in your pocket is as powerful as a supercomputer only 20 years ago or the laptop that is 5 years old, and the capabilities and functions grow at breathtaking speed, partly because the replacement cycle globally is down to 15 months. There are 1.9 billion cameraphones in use today.
For the first time now, the majority of internet access is from a mobile phone, no longer from a personal computer. Also for the first time, MMS multimedia messaging, or known as "picture messaging" has more users than the total users of email.
Meanwhile, SMS text messaging continues its climb as the biggest data application in the world, used now by 3 billion people.
Mobile messaging is worth about 130 billion dollars. Mobile voice is worth about 600 billion dollars. The mobile data and content industries are worth about 70 billion dollars. The total mobile services industry is worth about 800 billion dollars. The handsets business is worth about 150 billion, and the network hardware rounds out the remainder, a bit under 50 billion, to bring our total to one Trillion (1,000 Billion) dollars.
HAPPY NEW YEAR
For anyone wanting to quote any of the numbers, except where mentioned specifically, all others information source is TomiAhonen Consulting report 7th Mass Media 2008. If you'd like a free 20 page excerpt of that 212 page report, send me an email to tomi (at) tomiahonen (dot) com, and I'll send you teh excerpt of the report. All of the numbers and any passages in this blog may be freely quoted - I will appreciate it, if you will include a link to the blog so your readers can find this article too, for background, if you're reporting this story.
Posted at 04:23 PM in 7th Mass Media (mobile), Advertising, America, Asia, Cameraphone, Developing World, Digital money, Europe, Fashion, Handsets (phones), Internet - 6th mass media, iPhone, MMS picture messaging, Music, Newsmedia, Print - 1st mass media, Revenues, Smartphone, SMS Text Messaging, SMS-to-TV interactivity, Statistics, Television - 5th mass media, Voice calls | Permalink | Comments (1) | TrackBack (0)
Mobile content. You might think of it as the news alert that arrives on your phone. Or the videogame that you may download to your phone, or the vote that you made in American Idol, or the MP3 song that you listen to on the MP3 player on your phone. Yes, cameraphone pictures, mobile blogs, user-generated videos, even advertising is appearing on our phones. There are so many different forms of mobile phone content, that it may be odd to think, that only ten years ago there was none. None.
It is exactly ten years from the first downloadable content that was made available to mobile phones. Before there was an iPhone, before there were N-Series and Walkman phones, before the Razr and the Blackberry. Before any of the operator portal services such as Vodafone Live and even before Japanese NTT DoCoMo's radical i-Mode. It was the autumn of 1998 when the first downloadable content was launched commerically for mobile phones. People laughed and most said it would never be a "real business". The first content was the humble ringing tone, launched by Saunalahti (now part of Elisa) and first downloaded on the Radiolinja (now also part of Elisa) network, onto only five models of only Nokia phones, that had that peculiar feature, that they accepted "user-installed" ringing tones. The mass-market phone model that was most popular at the time, was the Nokia 5110 and that phone was the most used to consume mobile content in its first year. I remember, I was there working for Nokia as a young executive, and used one such downloadable ringing tone as a surprise gift to a friend back then, in late 1998. I thought it was cool, but I never ever thought it would become a billion dollar business, nor that such ringing tones would be sold much beyond us mobile-crazy Scandinavians. I was imagining "real" music on phones some day, yes, but ringing tones as content.. cute but certainly only a fad, and not for all countries, was my gut feeling. How wrong I turned out to be.
MUSIC THE FIRST CONTENT
I spoke with Saunalahti (then re-named Jippii) CEO Harri Johannesdahl about the ringing tone business back at the time when we were setting up my Consulting Department for Nokia, and by then had changed my mind. The money was amazing. I discussed the business case very enthusastically in mobile internet conferences from Ft Lauderdale Florida to Singapore. The ringing tones were sold at 3 times the premium over person-to-person SMS text messages. So one ringing tone in 1998-2000 cost about 45 cents. The actual transmission cost - using SMS as the bearer - was about one penny, so even after the mobile network operator (carrier) took an enormous cut in its profit - something like 9 cents in bulk at the time, it still left a phenomenal profit margin of 78%...
The total costs of setting up the business was so modest, that Saunalahti broke even after 10,000 songs were sold. In fifteen months they had sold a million songs and for the internet service provider, that Saunalahti/Jippii was at the time, more than half of all of their revenues were generated by this "silly" mobile music concept. Like Japanese Cybird would become famous in 2001, when Wired Magazine told the world of the Japanese internet provider to turn profitable by making its money on the new mobile industry, actually the very first company to manage that was of course Saunalahti in Finland two years prior to that. As we would see, ringing tones would propel famed artists to enormous profits - such as 50 Cent with his hit In Da Club, which in 2003 earned more as ringing tone than all other music formats combined - and most annoyingly of course the Crazy Frog - to the tune of 500 million dollars of global sales of their ring tones and related services in 2005 - one ringing tone earning more than all of iTunes global sales that year.
I've been explaining in my books and blogs and presentations that mobile is the newest mass media channel (the seventh mass medium) and today it is no longer such a surprise that mobile has unique benefits, and is a powerful engine to drive revenues - so strong that internet companies (like Sulake, the owners of Habbo Hotel) and television broadcasters (like Britain's ITV) use mobile to drive extra revenues. So with hindsight, it is no surprise today that the ringing tone innovation made soon billions of dollars of revenues, and then spawned several other unique music formats that only mobile can provide (such as ringback tones, background tones and the mobile karaoke). Also it is no surprise that mobile also started to cannibalize other music formats, such as full-track MP3 song downloads and music videos. But still, the scale of the growth has been enormous. Music on mobile phones today, at the end of 2008, is passing the 11 billion dollar annual revenue level. When we bear in mind, that the total global music industry is only worth 30 billion dollars - it means that more than one in three dollars spent on music globally, is spent on the mobile phone. If you thought the iPod and iTunes was the future of music, sorry. iTunes globally is worth about 2 billion dollars annually. Mobile phone based music (including ringing tones obviously) is five time bigger than iTunes.
i-MODE TURNS TEN NEXT YEAR
As ringing tones were below the radar and spread very stealthily in Scandinavia, the second big innovation in mobile content was NTT DoCoMo's i-Mode, which launched in 1999 with a big splash. This was the prototypical mobile operator (carrier) portal service, and brought essentially every form of digital content to the Japanese market. There were news, games, music, pictures, games, jokes, horoscopes, games, puzzles, games, advertising, games, adver-games ...and did I remember to mention games? DoCoMo's i-Mode could have been a quirky "Only in Japan" phenomenon, had its content been all local domestic Japanese content - of which there is an abundance, naturally. What is very amazing, is that right from the start, NTT DoCoMo was able to entice several global media brands to launch on this weird mobile phone innovation in Japan. Disney was there on day 1. So was CNN. And MTV joined also on the first day of i-Mode in Japan. There were dozens of major Western brands on the launch of this weird Japanese experiment. And its nice to recognize my very dear friend Voytek Siewierski, the Polish-born, USA trained, "gaijin" (foreigner) who used to be an Executive Director at DoCoMo HQ in Tokyo, who managed to conduct these negotiations. Can you imagine how hard it would be to convince such USA-based media giants to bring their content to "cellphones?" a decade before the iPhone? Heroic job, Voytek !
Again, today, it is no surprise that of NTT DoCoMo's customers, almost all use i-Mode. More than half of Japanese mobile phone owners download games to their phones, etc. But back in 1999 there was no precedent to this. They built it, and hoped they would come. And boy did they come. The revenues to NTT DoCoMo out of only the Japanese domestic market for i-Mode, have been so enormous, that since 2001, DoCoMo has been the world's largest internet company by revenues (and the largest in profits by several orders of magnitude compared to any "traditional" internet companies). I believe this year 2008, Google will finally catch up with DoCoMo and become the biggest internet company on the planet, by revenues (but not by profits).
And yes, did the mobile phone games take off indeed. You might not have paid much attention, because up to last year, half of all mobile gaming revenues worldwide were generated in only two countries - Japan and South Korea (both videogaming-mad countries in general). But its not just the domestic market and mature customers with advanced gaming consoles. It was also the business model pioneered by i-Mode which drove the early success of all content in Japan and very much so gaming. NTT DoCoMo made a content revenue-sharing deal where they only took 9 cents out of every dollar. The Japanese rivals (KDDI and J-Phone, which is now Softbank) both soon copied the model and South Korea was the first foreign country to adopt a similar revenue-sharing level as Japan. For contrast, at the same time, most European and American mobile operators (carriers) talked of 50:50 deals in content. You can understand that content owners were far more eager to deploy onto the services in Japan (and South Korea) than the rest of the world, under those terms. But it was not just Japan, obviously. Gaming took off in many Asia countries very rapidly. In the Philippines for example they passed the half million game downloads milestone in 2001. Hong Kong based Artificial Life celebrated the sales of the four millionth download of the virtual girlfriend for your mobile phone, V-Girl, across the several countries where they offer the service.
While Japan innovated with the overall content revenue-sharing deal, South Korea took the next, even bigger step, for mobile phone gaming. They invented what EA (Electronic Arts, the world's largest videogaming producer) calls the "Asian Model" for gaming revenues. The Koreans offered the gaming experience for free, and offered personalization features at a premium cost. Even though typically only 10 percent of all gamers are willing to buy these premium content elements, the economics of mobile telecoms are such, that the numbers are so huge, that this is easily the most lucrative gaming model. I've chronicled some of these with for example the Kart Rider case study in my fifth book Digital Korea. EA now says they will base all their future multiplayer games on the "Asian Model" and have already launched some titles on this principle. But back to mobile gaming? Now as Taiwan and China and Singapore and Hong Kong and Malaysia and Thailand are getting heavily into mobile gaming; and as Europeans and Americans also are increasingly getting the mobile gaming bug, the total value of downloaded and networked videogames on mobile, are reaching the 10 billion dollar level globally in 2008.
THE ADVENT OF ADVERTISING
Well, as there is content, there is an audience. And where there is an audience, there is advertising. While NTT DoCoMo was still figuring out how to enable advertising onto its service (which they resolved by launching a joint venture with Japan's largest advertiser, Dentsu, to form D2 in June of 2000), the innovation switched back to Finland. The Finnish commercial TV broadcaster, MainosTV3, launched the first ad-funded and totally free news service to mobile phones in the spring of 2000. The daily news summary was provided via SMS text messaging, and the subscriber would also receive one SMS advertisement every day. By the time I was chairing the world's first mobile advertising conference in London a year later in February 2001, there were mobile advertising concepts already in many countries such as Germany, the UK, USA and Spain.
Where is mAd today? While many analysts suggested a slow-down in mobile advertising for this year, the reality turned out to be the opposite. The returns, the success rates of mobile campaigns, are so much greater on mobile than on any other advertising channels - good campaigns get 20% to 30% response rates (not click-through rates), and peak campaigns get 30% conversion rates, such as the BMW winter tyres campaign we talked about earlier at this blog. As the facts are seen, this is a one-way street. The advertising dollars come in, to trial mobile advertising, and then while other budgets might be cut in the economic downturn, not mobile. When you go mAd, you never go back.
While mAd is almost as old as gaming and music, it has had a slow and troubled growth. But this year 2008 mobile advertising will pass 3 billion dollars in total revenues. And a revealing number was given by Juniper, who said that 1.5 billion individual people will receive at least one mobile advertisement this year. Put it in context, there are under 500 million newspapers sold daily. There are 900 million personal computers connected to the internet. There are 1.3 billion internet users. And 1.4 billion TV sets. But 1.5 billion people will receive ads on phones this year. How many more will receive them next year? On the one hand, companies such as Admob report delivering over 4 billion mobile ads per month; while on the other hand companies such as Blyk are educating the advertising industry how to move beyond banner ads and SMS spam into true engagement marketing, as pioneered by my blogging partner and c-author Alan Moore the CEO of engagement marketing specialist firm SMLXL in the UK. And the innovation is not ending. In India of all places, they invented the adver-game, a fully advertising sponsored mobile game. Again this has been spreading like wildfire.
MOBILE, TV AND VIDEO
Then in 2001 another innovation happened in Europe, with simultaneous inventions. In the UK, MTV Networks Europe launched the world's first television programme that allowed live viewer voting. The show was Videoclash, and viewers were given the choice of two videos, and to pick which should be shown next. This is genesis to the concept of SMS-to-TV programming, and the very real parent to what then evolved into American Idol, Big Brother and all other reality TV voting on TV. The same principle then was evolved into all forms of real time live television gaming. How big? Just the SMS-to-TV programming is worth over 2 billion dollars today worldwide and many cable TV channels get from 80% to 100% of their income from SMS interactivity. In a very real sense, the convergence between broadcasting and mobile started with this innovation in the UK by MTV.
But most of us would tend to think, if "television" and "mobile" were put into the same sentence, that it means we are watching television on our mobile phones - as is today possible on almost all networks around the world. By coincidence, that too was launched in 2001, but in Finland. It was again innovative commercial television broadcaster MainosTV3 in Finland, who teamed up with a video transmission specialist company in Finland called Sopranos, who produced the world's first television clips, that could be viewed on a mobile phone. MainosTV3 offered highlight clips from the nightly TV news through this innovation. In 2001 there was exactly one phone model in the world, that had the colour screen and a powerful enough CPU to handle the tiny video clip - this was the brand new Nokia 9210 Communicator (the first colour Communictor) - and to watch a 30 second clip, would take about 2 minutes for the grainy poor quality and lousy sound clip to download over the fastest cellular technology of that time, called HSCSD (a technology that was called a "2.1G" technology, far slower than so-called 2.5G and 3G technologies we have in use today).
As the networks got faster, and other technologies came online like digital broadcasts to mobile phones from South Korea, more "true" and live TV became possible on mobile. Today mobile TV and video tends to be divided into four groups - video clips, streaming video, broadcast TV to mobile, and SMS-to-TV interactivity - and the four groups combined are worth about 10 billion dollars globally in 2008. And two other ways to look at it. There are 900 million personal computers, that can show television/video content. There are 1.4 billion TV sets in the world. But there are 2 billion mobile phones with a colour screen and at least 2.5G network connectivity, meaning they can display "streaming" ie live TV and video. Or to put it another way, this year we'll sell 300 "multimedia" mobile phones - phones with a colour screen and some media player such as Real Player. That is more multimedia phones sold than all TV sets sold this year (plasma screens and any others), and more than all PCs sold this year (laptops and desktops combined).
LIKE MERGING AN AIRPLANE WITH A SUBMARINE
Then back in Japan, 2001 saw yet another bizarre innovation. I remember myself doubting this when I first heard of it, but J-Phone (later Vodafone KK, now Softbank) decided to launch a mass-market series of cameraphones. The first resolution was less than VGA and the screens were of very modest quality, and the in-phone memory ability to store pictures was miniscule as well. In just over a year, 40% of J-Phone's customers had snapped up cameraphones. As we've seen, the cameraphone has been the biggest tech hit of this decade. Over 3 billion cameraphones have been sold since 2001 and about 2 billion are currently in use. Compare that with about 200 million iPods shipped since their launch in 2001, or under 30 million PSP's (Playstation Portables) and you get the scale of this pocket wonder. The big cameramakers misjudged this innovation, and of the four giants, only Canon and Nikon remain in the camera business, Konica and Minolta no longer exist in the camera market; and the world's bestselling camera brand, since 2004, has been Nokia.
Cameras are obviously not "mobile content", but pictures are. Again it was J-Phone, with its Sha-Mail, the pioneering picture messaging service, that led to what we now call MMS picture messaging, the global standard for multimedia messaging between mobile phones. Its easy to misunderstand the vastness of MMS, when it sits in the shadow of SMS text messaging (the most used data application on the planet, with 3 billion active users in the world at the end of 2008). But a third of the the mobile phone subscribers on the planet does send MMS picture messages - that is 1.3 billion people for those who are counting. Comparing that with 1.2 billion active users of email, and suddenly MMS is very interesting indeed (and one truly has to wonder about the mathematical abilities of those in charge at Apple, why has this simple software element not been added to the iPhone).
Here in Asia, MMS is used by 48% of all mobile phone owners and about a quarter of Europeans use it. Obviously we don't send picture messages every day like we do with SMS text messages; picture messages are sent at a rate of a few per month. But worldwide, you can reach a larger audience if you put your content (or advertising) on an MMS picture message, than if you put it into email. That should give many people pause. Email has been around for three decades, MMS is less than seven years old. Already bigger and growing much faster in user numbers. No wonder innovative companies such as Blyk are building "engagement marketing" on the MMS platform. And its not just person-to-person messaging or advertising with pictures. We also love to upload our pictures from our phones to social networking sites such as Flickr and Cyworld. The pictures content business on mobile phones (including buying pictures as screen savers etc) is worth over two billion dollars this year worldwide.
OTHER INCLUDING ADULT
Yes, there is lots more in mobile content. Yes, there are the jokes, cartoons, horoscopes, daily greetings and religous sayings; etc. There is a big billion-dollar industry in mobile gambling alone. Mobile education services are another that is nearing a billion dollars globally. Search is there on mobile phones. News services are another big category. The NTT DoCoMo innovations of sending "CNN News Ticker" style news feeds to the idle screen of the mobile phone was so popular that in its second year, it earned.. 160 million dollars in news content revenues. One service alone, on mobile, on one network only, in only one country. If I was a newspaper or radio station or 24 hour news broadcaster, I'd pay attention. (The DoCoMo news ticker is the first case study in my new book, for good reason).
And yes, of course adult entertainment is there as well on mobile, but not that big as the music, gaming and TV sides of the business. Adult content is less than half those, at about 4 billion dollars worth worldwide. As many media analysts have said, any new mass media starts making money with adult content, and then becomes more mature when it discovers its own other opportunities. That mobile has so many larger media formats than adult entertainment, suggests that mobile is far more mature than the internet for example, where adult entertainment is still the second largest content revenue source after advertising revenues.
There is still one more category I have to mention, when considering the ten year anniversary of mobile content. The youngest of this group, but the most exciting. It is "communities" or "mobile web 2.0" or "user-generated content" or "mobile social networking." As we say in Finland, a favoured child has many names. Yes, social networking on mobile phones. Anything from user-generated videos to dating services to chat to blogs to multiplayer online gaming to virtual worlds. This was first launched in South Korea in 2003 when SK Communication's recently-purchased Cyworld online social networking service launched its mobile version. From that fateful moment, the growth of mobile social networking has been breathtaking in all markets. I've talked about SeeMeTV and Itsmy and Flirtomatic and MyNuMo and Self Central and of course Cyworld here at this blog and my other blog www.communities-dominate.blogs.com. Three year old Flirtomatic went from 200,000 subscribers last year to one million this year. Over half of those are mobile users. And like their CEO Mark Curtis says, on his mobile service they make so much money, that they have abandoned the monthly subscription as "unnecessary". On UK SeeMeTV the creator of just an average video earns 27 dollars in his "royalty" paid to his/her account, when others view his/her video (tell that to people uploading videos to YouTube or CNN I-Report). Top video creators earn literally thousands in income from a video shot on a mobile phone. Cyworld is a whole world in itself, as if on another planet, where instead of air, they breathe money. Cyworld earns 300,000 dollars every day - every day - out of just the personalization the users make inside the virtual world. (I was so proud and honoured to have SK Communciation CEO Dr Hyun-oh Yoo write the Foreword to my previous book Digital Korea). Note South Korea's population is smaller than that of Britain, and far less wealthy. Mobile social networking is a giant cow that milks money, honey.
How much money? In two years from launch, mobile social networking passed the billion dollar annual revenue level (a world record for a new billion-dollar industry). Just two years later, or four years from launch, it passed 5 billion dollars in annual revenues. This year it passed 9 billion and next year will easily cross the 10 billion dollar level of annual revenues. From zero to 10 billion dollars in six years. Mobile social networking is by far the fastest-growing billion dollar industry ever. For comparison, the online internet side of social networking is three times as old, and still hasn't passed a billion dollars in total revenues - where most of that is advertising revenues. Few internet-based online social networks have found profitable business models and the internet pundits regularly ponder about how will the MySpaces and YouTubes and Flickrs and Facebooks ever become profitable (or even survive in this economic downturn). But the mobile social networking sites are making oodles of cash, and many have already become profitable in this very short time. Like I say, its time to wake up, and to smell the cellphone.
71 BILLION IN TOTAL
The mobile content industry is now ten years old. In the past ten years, mobile content has turned into a global giant industry worth over 71 billion dollars of annual revenues. That is as big as all hollywood box office revenues, plus all global music revenues, and all videogaming software revenues - put together. Hollywood and music are 100 year old industries. Videogaming is a 30 year old industry. But mobile has already grown bigger than all three, combined, in only ten years. This is a juggernaut. Its a runaway train. Its the opportunity that will suck in every cliche that pundits can think of.
HOW NOW BROWN COW?
To succeed in this space, you should not copy your existing content formats and try to squeeze them onto the mobile phone. Yes, we can of course take the existing web page, and squeeze it to the phone screen. Yes, we can chop up movies into 5 minute clips and offer them on phones. Yes, we can do the headline news, and offer them on SMS alerts. But that is copying existing legacy mass media. Television did not succeed by showing "cinema" content on the TV screen. Yes, movies were always a part of television, but TV innovated and created. Talk shows, 24 hour news, Game shows, Music Videos, Reality TV. You can't do those in the cinema. They are not copies of an older media. They are content invented for TV. Now we have to do the same with mobile.
Mobile is a new mass media (the seventh). Not the dumb little brother of the internet. Mobile is a superior mass media platform, with seven unique benefits. And yes, it can be done. I have a rapidly expanding collection of examples of true mobile content innovations here at this blogsite. Obviously I have 16 case studies in my latest book, Mobile as 7th of the Mass Media, to show how to go beyond the copy, and into the creative and innovative. Remember, mobile content is not a "struggling industry" like the internet, where content owners hope to find "eyeballs" and then desperately try to sell advertising. We get 71 billion dollars of revenues, and 68 billion of that - 96 percent of it - is content that is paid for by the end-users. We have a far healthier industry than the internet. You can make money in mobile.
NOW IT IS TIME FOR A FREEBIE
So, as my last free contribution to your success on this topic today, I have a nice early Christmas gift to you. My company TomiAhonen Consulting has just released a big industrial report on the full state of mobile as the 7th mass media channel. And as I like to do with all of my consulting, I give you more. This time it means, that I have a 20 page excerpt of that report, free, with tons of stats and numbers of the state of our industry today. So, if you'd like the free 20 page excerpt, send me an email to tomi (at) tomiahonen (dot) com. I will send you the pdf file by return email.
For any fellow bloggers, press professionals, analysts etc, who want to quote a reference to any of the numbers in this blog posting - except for the few where I list a source, all others are source: 7th Mass Media Report, TomiAhonen Consulting, Dec 1, 2008. You may of course freely reference these numbers in your blogs, stories, white papers, reports etc. In fact, I hope you do, because it is good news, that this industry is so healthy, considering all the bad news coming out of Wall Street, Detroit, etc. But yes, its time to celebrate. Mobile content is ten years old today, and in that time, it has evolved into a giant industry worth 71 billion dollars in annual revenues globally. Nice job ! And thanks to the humble ringing tone (ha-ha, still makes me laugh, they were profitable after the first 10,000 downloads...).
Posted at 09:07 AM in 7th Mass Media (mobile), Advertising, Asia, Book - Mobile as 7th of the Mass Media, Books - Ahonen's other 5 titles, Cameraphone, Cinema - 3rd mass media, Engagement Marketing, Europe, Gaming, Handsets (phones), Internet - 6th mass media, iPhone, Marketing, MMS picture messaging, Mobile Social Networking, Music, Newsmedia, Revenues, SMS-to-TV interactivity, Statistics, Television - 5th mass media, video, Virtual Worlds | Permalink | Comments (0) | TrackBack (0)
I picked up the monthy UK consumer magazine on mobile phones called What Mobile, and its end-of-the-year awards issue. The magazine awarded the phone of the year for the Apple iPhone 3G. This is how What Mobile described the winning selection:
The winner comes as no surprise. The iPhone 3G may not be everyone's cup of tea, but the vast majority of consumers are smitten by its gorgeous interface and stunning looks. We also loved the device, awarding it a fivce-star rating and Editor's Choice Award in our September review. The elegant touch menu is a joy to use and the Google Maps function is impressive but in our view the biggest improvement is the App store, offering hundreds of ways to customize and enhance the handset. And the iPhone 3G clearly has a place in our readers' hearts, as swarms of you voted for it. We couldn't agree more - its a deserved winner.
The three runners-up for phone of the year were the Samsung i8510, the Nokia N96 and the SonyEricsson C902.
First, without any doubt or reservation, this is a worthy award for the iPhone 3G and a remarkable achievement in only its second year as a phone maker for Apple. Very very great respect and my sincere congratulations.
But note what the award is, and what it is not. The phone of the year award is not automatically the "best phone" but more the most significant phone. The first (2G) iPhone was very much a dud outside the USA, and in the UK - and in the same What Mobile magazine reviews a year ago, the original (2G) iPhone was found to be very severely lacking and got only 3 out of five stars in the review. The current iPhone 3G is a vast improvement yes, and like What Mobile writes in their award recognition, it is loved by the UK consumers.
So lets do just a bit of digging in the same issue. I think this is revealing.. What Mobile is famous for having a total survey with evaluations for all major models of phones in the UK. For each phone they list the main characteristics, a short summary, and three separate evaluations (each on a 5 star rating scale). So where it awards the phone-of-the-year award on page 35, the same issue on page 47 gives this evaluation of the iPhone 3G among many other phones in the review section:
Verdict: We were never convinced the GSM only iPhone was the best thing since sliced bread, but always knew the user interface was top-notch. It was always lacking something, which was 3G. Now the 3G version has arrived, with the addition of a GPS receiver that gets a fix in seconds. Amazing. The user interface is still amazing, but the biggest improvement is the App Store, allowing you to hugely expand teh userfullness of the iPhone.
So far, that sounds like a fantastic endorsement of the iPhone 3G, and if What Mobile ended there, it would indeed be a most remarkable and all-around solid superphone. But What Mobile continues its review saying:
Battery life is still a concern though, and you'll have to like iTunes because its use is compulsory. Don't expect good photos though, or seemingly normal features like MMS and filer transfers.
Then the magazine gives its star ratings on the three categories by which it compares all current phones. No surprise at all, that in usability, the iPhone 3G scores a perfect 5 stars out of 5. On performance it scores only 4 stars, and worst of all, on features it scores 3 out of 5 stars (a combined 12 out of 15)
How does that compare? Out of the 73 current phones in the issue that were compared, this time no phone got a perfect score of 5 stars on all 3 measures, but five separate phones scored an almost perfect score of 14 out of 15 stars. These were two Nokia models and three Samsung models. Thus the magazine rated at least 5 phone models available in the UK currently as significantly better handsets than the iPhone 3G. Of those five, one model matched the iPhone 3G for usability, but outscored it on both other scales, with 5 stars also for performance (1 better than the Apple) and 4 for features (also 1 better). This was the Samsung miCoach, a mid-range feature-phone (not even a smartphone).
I don't mean to dump on Apple or the iPhone 3G. But now when we go back to the reasoning of why the magazine gave the award to the iPhone 3G, do notice they said:
..but the vast majority of consumers are smitten by its gorgeous interface and stunning looks.
So the iPhone 3G won at least partly because it was the prettiest phone.. Now, I don't have any problem with that - I love the looks of a Ferrari or Aston Martin in cars for example, and totally accept that those cars are worth more partly because they are particularly pretty cars ha-ha (as well as many other reasons). But lets be real - this is a great award for Apple, for not the best phone this year, but an above-average smartphone that is stunningly beautiful. A smartphone with still serious deficits, and in a market where many phones are better than it. There is something to be said for a minimalist approach yes, but the next version of the iPhone cannot ship anymore with merely a 2 megapixel camera, no flash, no video recording, no MMS compatibility, etc.
I have written and spoken very much about the iPhone at the Communities Dominate blog, and at various conferences around the world (and write about it in the new book..). So now we are at the verge of hearing the final numbers for that 2008 fiscal year for Apple (which ended Sept 30). I'm pretty sure they have passed 10 million in sales. Lets examine the relevance of that magic number.
I gave my first opinion of the iPhone announcement only some minutes after it was announced at the CDB blogsite, on 9 January of 2007, saying it was "welcome innovation fusion" to the industry, but warned the industry was not as easy as those of the PC and MP3 player markets; and also expressed my concerns about the lack of a separate keypad.
I followed that with an Open Letter to Apple, still on the 9th of January, warning them that the killer app for a modern smartphone "is not voice nor music" but that the only killer application for our industry currently is SMS text messaging, and that it was not well understood in America, at Apple's home market.
Then, one day later, on Oct 10, 2007, I wrote what many considered the best competitive analysis of the chances of the iPhone in the telecoms industry, in my major analysis entitled Handicapping the Race. I totally stand by that early analysis and made what I think turned out to be very valid early observations, such as "In Europe.. the lack of 3G will be a serious flaw.. by year end (2007) this phone will be almost obsolete in Europe by then." As it turned out to be; only the 3G iPhone would capture Europe's interest this past summer. The response to the original iPhone was quite muted in only a few European countries compared to what it achieved in America in the summer of 2007. I also praised Apple for its powerful marketing, brand loyalty, passionate customers and innovation. I also warned that the first generation (2G) iPhone was not perfect, and that it might well end up, that a later iPhone variant would be the real success, as I wrote one day after the iPhone was announced:
But Apple is not infallible. Sometimes its first step is not enough - remember the Lisa, the predecessor of the Macintosh PC? A great computer at the time, and revolutionary in some ways, but did not take the market by storm. Only the Mac did. Same for the Newton, a great and innovative early PDA but its timing was off and other PDA makers took over what Apple pioneered.
I also was quite correct in guessing how the first iPhone would be received worldwide, writing:
Expect the most glowing reviews and opinions from the American press; and the most critical reviews and opinions from the Northern Asian and Northern European press.
It turned out to be true. The American IT and telecoms press loved the first iPhone, the rest of the world was more mixed and even lukewarm in their reviews. Finally, as to Apple's stated aim of 10 million sales in the first full fiscal year of the iPhone ie Oct 2007 - Sept 2008 - this is what I wrote:
With the launch and aim of 10 million sales comes a certain corporate-wide commitment by Apple to make it happen. I would say they will do it. But it will come at a serious cost to profitability. Note that this expands Apple's portfolio and helps a PC maker move into the mobile internet - the future, so this is also a clever move by Macintosh, to gain a foothold into the mobile computer market of the next decade. Good move by Apple. A lot of worries by major handset makers. An exciting time for the industry. But I want to see a family of iPhones before the end of the year.
So with that, yes, right from the start, I said this phone could well hit 10 million sales. It would not be easy, and it would be costly. It would particularly hit the profitability of this product. I was certainly assuming one of the marketing cost impacts Apple had that it could use - which I mentioned in several comments - was to drop the price of the iPhone in 2008, to help boost sales if the 10 million was turning into a tough target. It was not Apple's only marketing option, naturally; you can boost sales also with advertising, sales support campaigns, new designs, etc. But yes, that the price was slashed to 199 dollars in 2008, tells the story, that yes, Apple had to take a huge cut in its profitability for this product, to be able to reach its stated goal.
I followed that long analysis posting with several more, including the "definitive" blog about the iPhone prior to its launch, that I released a week before the iPhone hit the market, in late June 2008. That article discussed the market strategies for the three main regions, America, Europe and Asia, in my lengthy and detailed posting entitled: Crunching the Numbers for the iPhone. At this point, over five months of analysis of the original 2G iPhone had been prepared by thousands of pundits around the world, but nobody really had used the real product. I ended that analysis with this comment about what I clearly felt would have to be the 3G iPhone in the summer of 2008:
The phone to fear, the ultimate superphone of its age, the one striking fear into the HQ's of Nokia, Motorola, Samsung, SonyEricsson and LG, is the first re-designed iPhone, after feedback from users in Europe and Asia. That truly re-designed "iPhone II", that may be released in the summer or autumn of 2008 at the earliest, that is the must-have smartphone. I can't wait to use that iPhone. This first iPhone is more like the Lisa for Apple PCs, an important step along the way, but the next iPhone is like the Macitosh, a true masterpiece.
(Emphasis was in the original posting.) And compared to the first and quite flawed 2G iPhone, the 3G iPhone is far better, yet still, surprisingly incomplete (as I've blogged many times). But yes, pretty good guesses and insights on the day the iPhone was announced, one day after it was announced, and a week before it was launched..
The iPhone postings attracted enormous responses at the CDB blog. I promised then that I'd return to discuss the performance and whether this 10 million level would be reached. I am very confident, from many sources, that Apple was on target to hit and exceed that level of sales. I am very confident that on October 21, Apple will announce it has passed 10 million sales. And that will be greeted by Apple investors with a great sense of relief and satisfaction. And it is quite a great achievement, certainly. But we do need to then put this number in context and dig a bit deeper what it may mean for 2009.
10 MILLION IS ONLY 0.8 PERCENT OF MARKET
Yes. That number is right. If Apple sold 10 million iPhones in the past 12 months, it has captured zero point eight percent, 0.8% or four fifths of one percent, of the total mobile phone market worldwide. Understand that the Macintosh PC has been fighting in the 5% to 12% range of the PC market most of its life for the past twenty years or so. Now, the iPhone has not that. Nowhere even in the "same ballpark". There is a whole order of magnitude between those. The Macintosh series of PCs was a relevant player to the market with high single-digit market share. But the iPhone is totally irrelevant to the big picture of the mobile phone market. Not even one percent. A fraction of one percent. So while Apple celebrates 10 million sales (or whatever actual number it will be, 11 or 12 or even 15 million units), it is tiny. TINY. In the picture of mobile phones.
Please do not misunderstand me. I said from the start, that no matter how well or poorly the iPhone sells, it is an innovative product that will drastically alter the whole industry. The mere launch of the iPhone was a revolution to the industry. That has not changed. BUT the NUMBER of iPhones sold, at 10 million is totally irrelevant because of the size of the industry.
To put it in context, Nokia sells 10 million new phones every single week of the year. So yes, 10 million is a major milestone for a brand new phone-maker that has just entered the market; but it is still small potatoes. Very very very small potatoes.
Yet, the iPhone is not fighting for mass market phones. Its not fair to compare, say a Ferrari sales number to that of Volkswagen or Ford or Toyota. Ferrari is an exclusive premium sports car, in the luxury bracket. So too is the iPhone. It is what we in the industry call a "smartphone". So a far more relevant comparison is to see how it fared in that market.
HOW OF THE SMARTPHONE MARKET
The news is far better. The market size is smaller. Gartner says 190 million smartphones are sold this year 2008. So out of that, 10 million is obviously just over 5%. That is quite impressive indeed, and within this more tightly-defined market, the iPhone is nearing the performance of the Macintosh in the PC market. A far cry from the best that the iPod managed at its peak days in the music player market, but still certainly impressive.
But again, before we get overly excited, we do need to look a bit at the competition there. The American press tends to look at their home market and think that the natural rival of the iPhone is the Blackberry. That is not true. The Blackberry is at almost diametrically the opposite end in the smartphone field, geared at business executive users for their wireless email use that is a magnificent messaging phone; the iPhone is a multimedia and internet -optimised device, far more like the N-Series of Nokia.
But yes, lets look at smartphone market shares. I don't have the numbers for the third quarter of 2008 as of yet, but the second quarter of 2008 have been discussed by Gartner. During that quarter, RIM, ie Blackberry, outsold the iPhone at the rate of 5 to 1. And in the same period, the Nokia smartphones (mostly N-Series like the N-95 and N-82) outsold the iPhone at a rate of... get this.. 15 to 1. Even in the smartphone market segment, that 10 million level does not get you far. And incidentially, this latest quarter for which we have numbers, worldwide, three other manufacturers sell more smartphones than Apple - they are HTC, Sharp and Fujitsu. Apple is not in the top 5 for smartphones even. For all the hype about the iPhone, how much coverage do these brands get? Did you even know there is a better-selling smartphone from Sharp or Fujitsu, than the iPhone? They do outsell the Apple worldwide...
Of course if we expand the market to look at featurephones, ie musicphones, etc, then we have the giants Samsung, LG and SonyEricsson (and Motorola) joining the game, and all having their "equivalent" models in similar price ranges and of similar specs, outselling the iPhone by factors from 5:1 to 10:1.
I do want to be very clear about this. Yes, 10 million is impressive, but Apple is a tiny spec in the sea of 1,500 models of mobile phones sold worldwide, and they have in the past 15 months taken now less than one percent of market share in the world.
ITS STILL VERY IMPRESSIVE FOR THE NOVICE PHONE MAKER
With all that negative "anti-Apple propaganda", lets then turn to the sunny side. Many said it was an aggressive and ambitious target. There were plenty of pundits in 2007 who said Apple would fail to reach 10 million in one year, especially considering how expensive the iPhone was.
Big giants of the industry were struggling, we've seen Motorola lose massively in the game over the past few years. So yes, going from zero to 10 million is very impressive. I then also want to point out this number. The big five makers - Nokia, Samsung, LG, Motorola and SonyEricsson - capture about 80% of the worldwide phone market. But there is a huge drop to the next "biggest" player who fight for that sixth largest supplier slot. And here it gets interesting.
We have to see the final numbers, as these fluctuate among a dozen players all selling in the 8 million to 25 million range, but Apple is very possibly in the top 10 of global handset makers (already). Bearing in mind, there are about 30 makers who are in that group, including HTC, RIM, Sharp and Fujitsu, but also such unfamiliar brands as Kyocera, Huawei, TT and ZTE. In this race, behind the big five giants, RIM is the sixth-largest handset maker in the world, and Apple is barely at the fringe of being in the Top 10. In the fourth Quarter of 2007 they were the tenth-largest maker, but fell out of the Top 10 in the first half of 2008. Now with the 3G iPhone and more aggressive pricing, its very likely that Apple is once again in the top 10.
THAT is a big achievement indeed, whether they are ranked 9th or 11th or 13th. It means that in their first year, Apple has fought ahead of about 25 handset makers in the world, and are certainly one of the makers to watch. And obviously they are growing their modest share, so expect this ranking to improve over the next year, as the iPhone 3G (and its successor phone sometime next year) will be available in far more markets than the original 2G iPhone.
HOW FAST TO TEN MILLION
Now, a contrast. Canadian Research in Motion (RIM) makes the Blackberry. They got into the phone business in 2001 and have grown a steady and fiercely loyal user base with wireless email on their iconic phones. In seven years, they have achieved a global subscriber base of 19 million who use both their phone and the Blackberry wireless email service (as of mid-2007, three quarters of that subscriber base was in North America). There is a difference between a "Blackberry subscriber" who uses the phone and their service, and the total user base of Blackberry phones. RIM sell more phones than only to that subscriber base; in fact in Europe the biggest Blackberry user base is teenagers and young adults who are addicted to SMS text messaging, and love the BB's keypad for texting, but who never even use the email function of the Blackberry. RIM reported that they sold 6 million handsets in the second quarter of 2008, so they sell about 24 million devices per year. This in seven years from launch.
Taiwan based HTC made PDAs and other electronic gadgets. It moved into the mobile phone space in 2002. It was the first phone maker to use Microsoft's Windows for Mobile operating system and has grown its market steadily in the smartphone space, and currently sells about 12 million phones per year. This level of sales achieved in six years.
12 million in six years, 24 million in seven years? But Apple does 10+ million in one year. Certainly achieving 10 million sales in one year is a considerable achievement.
AT EXPENSE OF PROFITABILITY
When Steve Jobs announced the aggressive 10 million sales target in 2007, I am certain it was made with a lot of analysis and understanding of the market, as well as Apple's internal strengths and abilities. I am also certain, that since Apple announced a strategy of an exclusive partner network programme, and attempted to pursue that in 2007, but abandoned that in 2008; there must have been a drastic change in facing the reality of the mobile telecoms market, compared to the assumptions made when the iPhone launch was still being planned and the original strategy made.
The original network deals included a revenue-sharing element - where Apple would gain a revenue-share out of the data traffic of iPhone users - something no other major handset maker has been able to achieve. This requirement by Apple was also its big hurdle in 2007, with many fruitful network negotiations crashing on this one Apple requirement. They had only a handful networks under contract at the end of 2007 with this arrangement.
Apple finally abandoned this requirement in 2008 and now have a vast range of countries where the iPhone will be sold; and indeed in many countries like Italy and Australia, there are several network operators who will offer the iPhone. It is no secret, that Apple has radically altered its strategy.
The original strategy did include the requirement of selling the iPhone at an "unsubsidised" cost of 499 or 599 dollars depending on the model. In all of its early markets, like the USA and the UK, the rival smartphones are all heavily subsidised. So rival phones, say like the Nokia N-95, in many markets sell for zero dollars (to qualified buyers willing to sign two year contracts). The argument was that since Apple would be gaining from the revenue-sharing, then the mobile operator partner would not be willing to subsidise the phone.
When Apple was willing to abandon the revenue-share requirement, then the mobile operators were also willing to handle the iPhone as they would other similar smartphones, and depending on the market, offer severe subsidies to iPhone buyers. (Note that in some countries subsidies are illegal, like in Italy; and in other markets the subsidies have been extinguished by all telecoms operators as harmful to the industry, such as in South Korea)
Nonetheless, the net result is that firstly, Apple was unable to secure the network deals to get any chance of 10 million unit sales with the original strategy. Part of that strategy, that was told to Apple investors, was that Apple would gain out of the revenue-sharing of the telecoms traffic. Note that in the big picture of the Trillion Dollar industry of mobile telecoms, 85% of the money is in telecoms traffic (voice calls, SMS text messages, and various wireless data services), and only 15% in the hardware (mobile phones, data cards, USB dongles etc). Even a small share of the far larger pie, could have been a remarkably lucrative benefit to Apple. Mobile telecoms as industry maintains EBITDA margins ("profitability") of 35%. The IT sector has profitability rates in bad times in the single digits and in good times barely in the teens. This was a major goal for Apple and now it seems clear, that this avenue for profit generation by the iPhone has been abandoned (the current contracts probably continue for a few years, so for example AT&T in the USA and O2 in the UK will probably continue to deliver some revenue-share to Apple until those contracts are renegotiated).
The other element is the lower payment to Apple per phone sold, obviously. So much like I predicted, Apple was able to achieve its goal of 10 million sales, but that goal would be achieved by cutting seriously into the profits of the iPhone.
Still, all in all, a great first year by Apple. It did truly shake up the industry. The iPhone has helped Apple move from a stagnant PC industry and a stalling MP3 player business, into the still strongly growing mobile phone industry. Now Apple is a legitimate and very desirable premium handset maker with a very strong brand. They have enormous potential and opportunity here.
I would hope someone at Apple HQ bothers to read my Open Letter and release an iPhone with a real (slider) keypad/keyboard; that would greatly enhance the phone. And for the next model, yes a better camera and adding the flash. But video recording has to be there now, out of the box; and the iPhone has to support MMS picture messaging - MMS is poised to become bigger by user base than total worldwide email users, near the end of this year or early next year. The iPhone is the only smartphone that is not compliant with the global standard for MMS picture messaging (shame!). These little improvements will make the next iPhone far better and it could start to aim to double its market share, and start to battle RIM for the position of the 6th largest handset maker if Apple really wanted to succeed in this space..
But now, the iPhone is an established model in the smartphone category. Now Apple has to conform to the industry game rules, and no matter how much they hate it, they have to start to increase their range of models, speed up the product introduction cycle - one new model per year will not get them from 10 million to 20 million. Look at RIM, they release a new Blackberry at least every quarter. Nokia releases a new phone model every week. And while its impressive to add fantastic features to the iPhone, the easiest way to add satisfaction and customer acceptance, is to remove the glaring deficiencies in the current model.. But Apple is hearing all that from all of their "real" customers (the network mobile telecoms operators/carriers, who buy the iPhones and sell to their subscribers ie end-users). They want to win. They will adjust. I wish they'd just do this sooner rather than later, so that we can get to the real advantages of Apple's innovation and leadership. Perhaps the next phone (next summer?) is finally the superphone that everybody truly loves...
(And for anyone who is interested in understanding the mobile market, I've got the primer for you. Send me an email to tomi (at) tomiahonen (dot) com, and I'll send you my 2-page Thought Piece crammed with stats and facts about the mobile telecoms industry)
Yeah. I've said it again and again and again. This SMS phenomenon is NOT a fad. It is NOT going away. it is NOT being taken over by the Blackberry wireless email or mobile instant messaging. It is ADDICTIVE (proven in university studies to be so) and it will continue to grow. Grow in users. Grow in messages sent. Grow in revenues. I told you so. I told you so. I told you so....
And I've pushed the mobile services industry as the best place to be to make fast money today. And the facts keep coming in, year after year, with phenomenal numbers.
This was a humongous industry and just expanding wildly.
Informa has released its mid-year report for what 2008 numbers will look like. You can go check it out at the ITU website, so this is really the "official official" number set for this year. And yes, mobile data is going to pass 200 Billion dollars of revenues in 2008. Wow.
That breaks down to 130 Billion dollars in SMS text revenues and 70 B dollars in non-SMS mobile data revenues. Is this a cool industry or what?
Now.. some context. The global videogaming software industry (excluding console sales) is worth 20 B dollars. The worldwide music industry is worth about 30 B dollars. Hollywood movies generate about 30 B dollars of box office revenues. The global book market is worth about 60 B dollars. Guess what. You put all four of those industries together, and you're just slightly larger than SMS text messaging in worldwide revenues this year...
Yes, the TomiAhonen Consulting latest tracking numbers based on regionally latest SMS stats (and sampling the biggest countries and biggest mobile operators) for global SMS user base is 2.7 Billion active users of SMS text messaging or 78% of all mobile subscribers (which are 3.5 Billlion today). So there are more than twice as many active users of SMS text messaging than all users of the internet. Far more than twice as many users of SMS text messaging, as users of email. Nearly three times as many active users of SMS on their mobile phones as the total worldwide installed population of personal computers, including all laptops and desktops combined. This is a monster industry (and its still growing at breathtaking speeds)
I love this industry. And mobile data? Lets compare that 70 Billion mobile data number with the fixed internet content industry. Remember that internet has existed as a media outlet for twice as long as mobile. PriceWaterhouseCoopers Global Entertainment Media Outlook 2008 said that in 2007 the combined mobile and internet content industry was worth 80 Billion dollars. I don't have a breakdown for that report, but other sources split the content revenues roughly 6:4 in favour of mobile with more content revenues but its my only source for 2008 reported numbers on 2007 data. And PWC is a very good source. Lets assume this 6:4 was the split in 2007, so mobile content was worth 48 B and internet content worth 32 B. I've seen other sources measure the internet content at less than that, at about 25 B dollars in 2007. But lets be generous, use the biggest number, 32 B dollars. And lets assume, that the internet content revenues grew at the same rate as internet users (an unfairly positive assumption, as it is mostly poorer users joining the internet today, in the less developed parts of the world, but anyway, lets give it the best case assumption). So perhaps the total value of internet content this year is 42 B dollars..
But yes, today Informa tells us that that mobile content is worth 70 B dollars. Almost twice as much money as in this scenario with a very generous growth rate for internet content. Wow, mobile is so cool to be involved with. Who makes all this money? I chronicle companies who are pioneering this space in my book and will discuss at this blog, from Flirtomatic to Cyworld, from MyNuMo to SeeMeTV and from Blyk to Qik.
I told you in my second book in 2002 that this was the hottest opportunity. Billionaires - not millionaires, billionaires have been made in this industry since then. Why are you waiting? And yes, my sixth book is exactly the answer to how to do it. Send me an email to tomi (at) tomiahonen (dot) com and I'll send you the 30 page excerpt of the brand new book entilted Mobile as 7th of the Mass Media (subtitled Cellphone, cameraphone, iPhone, smartphone).
I want to start blogging at this site with the very basics. Why to call it the 7th Mass Media (yes, it is grammatically incorrect, it should be either seventh mass medium, or seventh of the mass media)? I started to develop this thinking after I saw a Nokia presentation about the role of mobile in the media space, at the 20th anniversary of Cellphones in Canada, where I was delivering the keynote (on the next 20 years, ha-ha, that was quite a challenge for any expert, consultant, futurist or pundit.. That was in 2005.) So this thinking to me is already 3 years old. My first major presentation of the 7th Mass Media was my keynote to i-Mobicon, the annual digital convergence conference in South Korea in December 2005. I also presented this thinking in Helsinki Finland at IIR's annual (Tele) Connector conference and in Tokyo Japan at the 3G Mobile World Conference around that time, so the thoughts have been receiving a lot of exposure to the most advanced mobile telecoms markets right from the start. And I've received enormous support from those markets around this concept as well, right from the start.
So lets start off first, with the numbering. What is this seventh mass media all about?
Print is the oldest mass medium and thus the first of the seven, dating back to the printing press and thus to the end of the 15th century. Print started with the Gutenberg Bible, and then onto other books, and soon pamphlets, then newspapers, and magazines. All based on the same idea of production (a printing press) and paper as the actual "technical" medium, and based on a buy-to-own model. Print introduced advertising with newspapers and subscription models with magazines.
It took 400 years for the first "new media" to appar. Recordings appeared in the last decade of the 1800s to give a new mass media opportunity. What we now know as the music industry, can trace its roots to that moment. Yes, we had musicians before recordings, but the careers of Elvis, the Beatles, Madonna etc could not have happened without the recording industry. Music is not the only successful media concept in recordings. Videogames, personal computer programs, movie rentals and now DVD sales, etc are all part of this mass media opportunity in recordings. The concept is still buy-to-own, but there also is a rental part to recordings, in particular with movie rentals. The industry had a further "burden" of the player (originally literally called the record player). So its not that we only want to sell you a Playstation 3 game or a DVD of Desperate Housewives or a song as an MP3 file, with recordings, differing from print, you had to also buy a playing device. And these almost always were unique to one form of media. A record player could not be used to play an VHS video cassette, etc. Although very recently advanced DVD players will also play music CDs etc. Oh, recordings introduced us to the performing artist (pop star) as distinct from the creator of the music (the composer ie songwriter)
Soon after the recordings came the third mass media channel. Cinema, around 1900. This introduced us to multimedia, and became rapidly the most influential media in the first half of the 20th century. The media consumer did not have to own a "cinema player" but rather movies were shown in cinema theaters and audiences would have to "pay-per-view" to pay every time when seeing a movie.
The fourth of the mass media, radio, once again introduced something new from its introduction from after about 1910. Radio was a broadcast medium. Everyone received the transmission simultaneously. This was the fastest media. It also allowed easy consumption while moving, ie cars soon had built-in radios as standard features. (remember this is still the time before the c-cassette so there was no practical ability to listen to recordings in cars). Radio also required buying the receiving device (a "radio" ha-ha) like with recordings, and eventually the then-world's largest consumer electronics company, Philips decided to combine a portable radio with a portable cassette player-recorder (they called it a "radiorecorder") and today many portable radio units are also CD players and/or cassette players, bringing a lot of convergence between two media categories. Even convergence is nothing new..
The fifth mass media channel is the current giant and champion, television. Introduced commerically to mass audiences in the 1950s (early TV trials and devices were offered already in the 1930s), television was the first time a new mass media appeared with no inherent innovation. We already had moving pictures and sound in the cinema. We already had broadcast in radio. Television just took these two powerful ideas and combined them, to soon dominate over cinema and over radio. In the 1930s families would collect around the radio receiver (often called "the wireless") to listen to the favorite drama or music performance or comedy or the news. Two decades later families would collect around the TV set to do the same.
The sixth mass media is the internet from the 1990s. The internet introduced three powerful concepts - it is the first interactive media, it offers search, and it enables social networking. These are all radical innovations. Interactivity meant that for the first time readers could post comments, send feedback emails, chat and discuss, and do this in real time. Secondly the internet allows searching. For any media owner, this is a powerful way to give audiences access to archival content. It is hard to remember what searching was like before the internet. All major magazines like Time and the Economist etc would release an annual index issue, to help researchers find a lost article. Libraries had "card catalogs" with a cardboard based card, physically describing every book in the library (because a book might not be in the library bookcase when a visitor was interested in that book title). The card catalogs were a crude way to allow research into what a given author may have written, or who all might have books of similar titles, etc. But every library had these card catalogs only of the books they happened to carry. And these were not linked or in any way cross-referenced. Obviously today nobody goes to a card catalog. All searches start with Google or your search engine of preference, on the internet. And last, but not least, of the internet's innovations in media, was social media. The ability to allow online collaboration and commenting by social groups and digital communities. Everything from blogs to citizen journalism to multiplayer gaming. Social networking or "web 2.0" or digital communities is a massive change in society (what Business Week in 2005 called the biggest change in society, since the industrial revolution)
There is one more feature of the internet which is very relevant to mass media discussions. The internet was the first "inherent threat" mass media channel. Inherent threat means that the internet could challenge any previous media and cannibalize it (potentially yes, but not necessarily always successfully). This may seem obvious, and on quick analysis, one might assume all new media are inherently threatening. Yes, when TV was introduced, many accused it of soon killing cinema. Similarly radio was seen as a threat to the music recording industry. But this is not across all media. Consider a magazine with pictures (print media). You cannot show pictures on radio (until now they have some digital radio concepts which allow transmission of images as well). So yes, you could try to move a news story or whatever from a print media to radio, but you cannot show the pictures. Radio cannot cannibalize all of print. But the internet can. It can show the text, and the pictures of any print content. This is true across all previous five mass media channels. TV can cannibalize cinema yes, but you cannot deliver a physical CD recording of Elvis's music through the TV signals. Yes, we can show Elvis singing at the Ed Sullivan theater on Broadway, and yes, after video recorders were introduced (again by Philips, several years before Sony's Betamax) in the 1970s, it became possible to record a TV show. But if you have a record player, or a CD player, and want to play a CD of Elvis, then there is no way to send that CD via the TV signal. You would need to send the songs, and have a recording CD player, to create your own CD at your end, in the best case (today). In the 1950s when TV was introduced, nobody even imagined home recording devices for TV content.. But the internet today does offer the ability to cannibalize all of the previous six mass media. It makes the internet very potent, three unique benefits that cannot be replicated in the earlier 5 media, and also being an inherent threat media channel.
That brings us to mobile, the seventh of the mass media. Mobile phones were commercially launched in Japan in 1979, but they were only voice devices. SMS text messaging became a practical data application when the first person-to-person SMS was sent in Finland in 1993. Even that was not the start of mass media on mobile phones. It wasn't until Radiolinja (in Finland) launched the first downloadable content to mobile phones - the downloadable ringing tone - exactly ten years ago, in the Autumn of 1998. So mobile is the youngest of the mass media channels. That makes it also one which is not very well understood. The first innovative markets were in obscure countries of weird languages - Finland (and Sweden, Norway and Denmark in Northern Europe); and Japan, when NTT DoCoMo introduced the iMode service in 1999. The big media empires tend to be based in the USA - television, radio and advertising centered in New York City, and Hollywood leading the cinema industry in Los Angeles. But Americans happened to lag in cellphone adoption, network quality, telecoms pricing, service innovation; and most certainly in adopting mobile as a media channel. It wasn't until the hype around the Apple iPhone, that the American media giants woke up to the cellphone.
So. What do we know about mobile as a media? I will discuss this topic at great length here at this blog. Obviously my previous five books have all added to this knowhow, and now my brand new book, Mobile as 7th of the Mass Media is centered on this topic. But lets briefly summarize mobile as a medium.
Like the internet before it, mobile is also an interactive medium, with search and social networking abilities built-in. Like TV and cinema, mobile can do multimedia. Like print, the screen on mobile can show printed content (and images). Like radio, the speaker on the phone can play sounds. And most modern phones have in-built ability to store content, whether MP3 files of songs, or video clips and pictures from the cameraphone, or videogames, etc. So mobile can do recordings as well. Like the internet before it, mobile is thus also an "inherent threat" mass media channel.
But mobile is actually far more powerful than any of the six legacy media channels. First, the numbers. There are over 3.5 billion mobile phone subscriptions on the planet today (growing far faster than the internet or TV or radio etc). There are over twice as many mobile phones as TV sets, three times as many active users of mobile phones than active users of the internet; and four times as many mobile phones as personal computers of any kind, laptops, desktops and servers combined. Worldwide there are more radio sets, but when counting owners of radios, there are far more people who have a personal mobile phone, than have a radio (or multiple radios, as we in the Western Wrold have our home HiFi stereo set with radio, another bedside clockradio, then we have our kitchen radio, and the radio in the car etc etc etc).
Furthermore, where the internet introduced 3 unique benefits; mobile matches those, but adds now seven unique benefits, that none of the legacy media can match.
I will discuss those in my next essay. If you can't wait, I have my Thought Piece on Mobile as 7th Mass Media channel, and it has those seven of course. Send me an email to tomi (at) tomiahonen (dot) com and I'll send you the Thought Piece (together with the excerpt of my book).
Posted at 04:13 PM in 7th Mass Media (mobile), Advertising, Cinema - 3rd mass media, Internet - 6th mass media, iPhone, Music, Newsmedia, Print - 1st mass media, Radio - 4th mass media, Recordings - 2nd mass media, SMS Text Messaging, Statistics, Television - 5th mass media | Permalink | Comments (2) | TrackBack (0)