THE CAR AT 800 M
The car. Worldwide there are about 800 million registered automobiles. About a hundred years old, this innovation (the gasoline powered car is a vast improvement over its predecessor the steam-powered car) has literally altered landscapes, the way we work and live, and introduced countless huge support industries from the tyre manufacturers to petrol stations to the motel industry to service and repair garages etc.
Movies and TV have idolized the car from muscle cars anywhere from Bullitt to Starsky and Hutch and James Bond's Astons to the cheap cars such as Herbie the Luv Bug (the Beetle) and the Italian Job (Mini). For several generations a car was the ultimate aspirational gadget, what young adults would use to define their identity. It is very rare for a given person to have two or more cars (in active use) - with Hollywood and the ultrarich being the obvious exceptions. Yes, families can have more than one car, but then typically one is the father's car, the other is mother's car, etc. Note that the car also has a lot of vanity features and customization to reflect each personality starting with the vanity license plates.
TELEPHONE 1.3 B
The telephone. And I'm now only talking about the fixed landline, traditional phone. The first home phone connections were sold as serious alert services, such as fire alarms for the wealthy. The original concept of the phone never included an idea that people would use that device for idle chat. Today there are 1.3 billion fixed landline phones in the world. The telephone touched all parts of life, changing just about all of it, from teenagers flirting on the phone, to families connecting to relatives far away, to businesses employing secretaries for busy bosses, to answer their phones.
Gradually phones became customer service tools, so whole traditional commercial areas were drastically altered - going to the bank, now you call them up. Or buying airline tickets, now you call a calling centre. Need to rent a hotel room, car, call up the toll-free phone number. All these were activites we used to have to do in person, in the nearby bank office, or travel agent, etc.
TV 1.5 B
The TV. Invented before the war, but introduced to the mass market in the 1950s, today there are about 1.5 billion TV sets in use in the world. TV changed our home. The living room of today is set around the TV set, and comfortable TV chairs - or suitable reclining parts to couches/sofas are the norm in many a home. The TV transformed the mass media industries soon taking the lead of it, today dominating the media landscape, perhaps nowhere as clearly as the advent of MTV and music video was to music on radio. New industries were born from TV production houses to video rental firms to the whole 35 billion dollar videogaming industry. Old industries transformed like the advertising industry which today is almost driven by the ad spend of given TV campaigns, with the other media almost as optional extras, at least for major acounts.
TV brought aspirations as well, older generations hoped to become TV announcers or presenters at game shows etc. Young generations of today hope to become famous by being on a reality TV show. Originally TVs were intended as family devices, but today it is quite common for a young single person to have two TV sets or more (eg one in the living room, another in the bedroom), so in the industrialized world there are a growing part of the population where TV ownership exceeds given segments of the human population; I believe that shortly (if it hasn't happened already) the USA will become the first country where the absolute count of TV sets in use exceeds the per-capita population.
Televisions at 1.5 billion. Thats a big number. What we also need to understand, is that TV is often shared, especially in Asia where families are also large. So you might easily have 6 or even 10 watching the same TV show. The reach of TV is much beyond the 1.5 billion sets in use.
CREDIT CARDS 1.4 B
Credit cards came along in mostly in the 1970s. Today 1.4 billion people carry at least one card. A dramatic innovation in the use of money, there now are many forecasters in the financial world who suggest there will come a time when traditional cash will disappear totally. Credit cards changed human consumption. Now we don't have to wait to our paycheck on Friday to spend - or have to save several months to be able to afford a new plasma screen TV. We can charge it, and pay it off in installments on our credit card. Plastic money has changed so much of commercial transactions that many businesses now require it. Try renting a car or booking a hotel room with cash only.
There are some aspirational dimensions to the credit card, as for the young it is a kind of right of passage - most countries it is illegal for under 18 year olds to have credit cards - and American Express (with its Gold and Platinum etc cards) has pushed these aspirations further. There are then the affinity cards from Manchester United and NY Yankees onto the World Wildlife Foundation. Typical users of credit cards tend to have a few, so if you get one (and use it), very soon you apply for another one and may have Visa, MasterCard and American Express all, plus maybe a couple of specialist cards like one for the petrol station or your favourite department store, etc.
PC 850 M
The personal computer turned from a garage geek's gadget into a mass market device with Apple, about 1980. A lot of computers have been sold, but they also become obsolete very fast - the typical replacement cycle is now three and a half years. So the actual installed base of personal computers in use is well under the famous "billion users of the internet", at about 850 million PCs (because some of the billion internet users access via mobile phone, PDA, or via a cybercafe or campus computer at the university etc). Perhaps surprisingly to many reading our blog, the majority of those are still desktop PCs, it was only last year that worldwide more laptops were sold than desktop PCs worldwide. Still, 850 million PCs. A big number, sure, just passing past the amount of automobiles last year, but still far from say fixed landline telephones.
With the desktop PC while there is the ability for a lot of customization, there is not much identification or affinity to it; with laptops its the opposite. Not perhaps much we can really do to customize the internal (hardware) configuration of the laptop, but often - especially for younger users - the covers of the laptop get plastered with stickers etc. Ferrari even has some laptops authorized to its red colour schemes etc. Very many PC users have more than one PC, but that is because the older ones are obsolete, we tend to use only one, unless one is a work (employer) computer and the other is our personal home computer.
INTERNET 1.1 B
And while the Arpanet was developed by the US military for decades, the internet emerged into the mainstream in 1994 when it was on the covers of Business Week and Time. Very rapid growth resulted and today 1.1 billion people around the world access the internet. The internet "changed everything" according to the mantra, and truly its reach is enormous from investment banking to retail to travel to education to farms and forestry management (forest managers in Finland track every individual tree for example).
You might be tempted to think those access via a personal computer, yet already in China, Japan and South Korea the majority of internet access is via mobile phone. In total over 750 million people access internet content via a mobile phone today - most of those also have a personal computer, obviously - and yes, still today, most of these people put more of their traffic to the web via their PC than their phone, although this is changing fast. And still today, slightly more, about the total PC population or about 850 million people, access the web via a computer.
During 2007 the first cross-over will happen, with more users accessing via phone than PC. Fascinating data coming on that usage as well, the Japanese regulator reports that those who access the web via mobile phone do so more frequently than those who access via a PC. Similar data now coming from several converged (broadband and mobile phone) web services like Flirtomatic in the UK. Its no wonder Google's new CEO Eric Schmidt, says the future of the internet is mobile.
THE MINNOWS, PDA, PS2, iPOD, TiVo, DIGICAM
Then lets mention the minnows. There is a wide range of recent gadgets that are very popular with the press, but are actually minnows in the big pond of life. I am talking about the PDA, Playstation and other gaming consoles, the iPod, the TiVo box (PVR ie Sky+ box), the digital camera, and the camcorder. Adding all of these populations together will not reach a billion, so these really are small potatoes. Yes, these are fascinating, but they are trivial to the big picture in life. They do not support whole industries and while their users can be fanatical about them (the uncle who videotapes everything, or the gaming teenager).
Lets understand their scale. The total shipped PDA population is about 85 million, most which are replacements. iPod is reaching 85 million shipped (and many, probably not the majority) going as replacements so the installed base is smaller. PVRs are now appearing on many high-end DVD recorders and in digital TV boxes, but still total PVR shipments don't break 100 million. The same is true of camcorders, under 100 million total shipped (many as replacements). Gaming consoles have shipped near 200 million units, out of which 150 million are second generation (PS2/Xbox) or newer. The (stand-alone) digital camera has achieved shipments of near 300 million, quite impressive but not in the billion unit (or near) volumes of the big technologies in this blog and yes, those too, in many cases are replacements of earlier digital cameras so the total user population is much less than 300 million.
THE GOLIATH, MOBILE PHONES 2.7 B
Now we have context. 800 million cars, 850 million personal computers, 1.3 B fixed landline phones, 1.4 billion credit cards, 1.5 billion TV sets. How many mobile phones in use today? In use today, yes, 2.7 billion (technically 2.7 billion in January, not December). They sold 950 million phones last year and the total worldwide mobile subscriber base grew from 2.1 billion to 2.7 billion. Three times as many mobile phones as automobiles or personal computers. About twice as many mobile phone owners as those of fixed landline phones or credit cards. And almost twice as many mobile phones in use as TV sets.
Phones are very aspirational. We project our personalities via the interchangeable covers, various decorations, stickers, and the massive industry of ringing tones. We customize our phone services further with ringback (waiting) tones, welcoming tones and background tones. Young people assign the same kinds of value to their emerging personality, their own perceived coolness etc, through their mobile phone, like older generations did with their first car.
Phones are replaced every 18 months (and this is still shrinking). America, USA and Canada are dead last in the industrialized world, with much of the developing world passing them in phone penetration, yet even USA reached 75% penetration. That is per capita, not per household penetration as used for fixed landlines and TV sets for example. And yes, per capita means counting all babies and deaf great-grandparents, not only the adult population. The Western European average per capita penetration is already 110%, leading countries like Italy, Taiwan, Hong Kong and Israel have penetration rates at about 140% (yes this is per capita). And yes, over 100% penetration rate means that some in the population have more than one phone (and are charged for using both/all)
In the industrialized world, everybody who can talk and knows numbers, and can still hear and remember numbers - has a mobile phone. A recent story from Los Angeles tells us that a homeless person was accidentially dumped into a garbage truck, and faced being crushed. He used his cellphone - I kid you not - to call the emergency number and was rescued. When the homeless carry this technology, everybody has it.
And the non-industrialized world? Catching up really fast. China adds 6 million phones every month, India adds 7 million phones every month. Bear in mind that the total phone population in countries like Finland, Norway, Denmark and Portugal - each countries with 120% or more penetration rates - is less than 6 million units total. China and India both add that amount every month.
Africa is in a hurry to increase phone penetration after the OECD study found that increasing mobile phone penetration results in the greatest benefit to the GDP of an emerging country. Better benefit than providing computers, electricity, roads etc. You don't need a literate population to have benefits from phones, but you do need literacy for personal computers. You can use phones without electricity as the many hand-cranked battery rechargers in use in Afghanistan for example will testify.
CONTRAST THEM TO THE PHONE
But wait. The phone can't actually transport us like a car can (although all car owners around the world now have a phone in the car with them as they drive) but consider all of the other technologies mentioned. Computers? The phone is a small computer. Nokia has started to call its top-end N-Series smartphones as mobile computers, not mobile phones. In fact a typical high-end smartphone can match the performance of mid-range laptop computer only five years ago.
Internet. I already mentioned that already three countries have seen the tipping point, more people now access the web via mobile phone than via PC in China, Japan and South Korea - and obviously all internet content in those countries is formated for the small screen rather than the PC screen. This is an inevitable trend and the future of the web is definitely on mobile.
MESSAGING IS BIGGEST DATA APP ON PLANET
Consider the biggest application, messaging. On the internet there are about 1.5 billion e-mail boxes, maintained by about 800 million people. But two thirds of mobile phone users are active users of SMS text messaging. Thats 1.8 billion people texting. More than twice as many people are active users of SMS as are active users of e-mail. Even Americans are catching this - proven to be addictive - service. Last year over 42% of Americans were active in SMS already. Meanwhile a British survey found that SMS is preferred over voice calls. Not among the youth, among the whole population.
Think about that for a moment, and then re-evaluate your plans to communicate via e-mail, whether you do it for commercial reasons, advertising reasons, personal communications or business contacts. E-mail is opened in 24 hours and replied to in 48 hours. SMS is read within 15 minutes on average and responded within 60 minutes. 65% of e-mail is spam, less than 10% of SMS is spam. E-mail is so last year (or last decade actually). If this seems wild to you, remember something our bosses used to swear by, called fax? Nobody communicates by fax anymore. Soon e-mail will face the same fate, an outmoded form of slow and tedious communication that reaches so few. Voicemail? Stop using it and get with the times. The Finnish Prime Minister for example has a voicemail greeting saying he doesn't listen to voicemail, send him a text message instead.
Credit cards? Many mobile operators offer full branded credit card functionality on their phones from South Korea to Norway; in South Korea five separate credit card services are available on the three mobile networks. The biggest advantage that mobile banking and credit on phones have over credit cards, is that there is no age limit to having a phone. So a youngster may be ineligible for an actual credit card, but will usually be allowed to sign up to a pay-monthly (postpay) phone account. This functions as short-term credit, if you can pay for example at McDonald's by mobile phone as you can at all McDonald's restaurants in Slovenia for example. Eat your burger today, pay for it next month when the phone bill comes in. With credit transfers between subscribers (sending money to your phone) as invented in the Philippines six years ago, young people today have their first access to consumer credit and digital money via their mobile phone.
Imagine the near future. It exists in South Korea of course. Visa in South Korea will ask its Korean customers do they want the optional free plastic card mailed to them as well; this in case the Korean credit card user expects to travel abroad where they might need the old-fashioned plastic card for credit. In South Korea almost 100% of credit card based point-of-purchase sites accept payment via mobile phone credit (and charge) cards. Thus the locals no longer carry the plastic. Oh, and your phone can replace your keys as well, in Japan they're already building apartment buildings where door locks are operated by mobile phone.
TV? Last year was the big launch of various TV broadcast services direct to mobile phones. Yes we've had streaming and video clip download TV services for mobile for five years, but the true cable TV digital set-top boxes, inbuilt into the mobile phone - as well as video quality recording (in-built TiVo or Sky+) - into the mobile phone were introduced. Again South Korea leads. Two years from launch almost 10% of South Korean phone users watch digital broadcast TV on their phones. Meanwhile TV broadcasters and producers are discovering the mobile phone and interactivity. While Pop Idol (American Idol etc) formats have typically been the top-watched TV shows from Australia to Norway, and thus commanded top dollar in advertising revenues, the Pop Idol formats have earned a windfall of over 700 million dollars out of text messaging votes.
2.7 billion users. Every one of those can be reached via SMS text messaging. Imagine the reach of your blogsite or website. You can reach a maximum of 1.1 billion people if you use the web. But using SMS, you can reach two and a half times more people. Not to mention that SMS reaches them immediately, while they might not access the web until next week.
Oh, lets not forget the minnows. PDA? All smartphones have at least basic PDA functionalities while top smartphones like the Communicator are the most expensive PDAs on the market totally thrashing lesser PDAs in their range of full ability. Gaming consoles are converging to mobile units, from the playstation side PSP and from the phone makers starting with the now-discontinued Nokia N-Gage. The world's most played videogame? Snake. iPod? Last year sold under 45 million iPods. But last year sold over 300 million musicphones. I will return to this topic when Apple release its final numbers for the Christmas season, in about a week, but yes, that battle is totally over, with musicphones outselling iPods at more than 7 to one. And yes, many many surveys find that people are using their musicphones to listen to MP3 songs and to buy music directly to their musicphones. But yes, more of that in a separate blog soon.
The TiVo box ie PVR/DVR/HDD (Personal Video Recorder/Digital Video Recorder/Hard Disk Drive videorecorder) like Sky+. First phones appeared last year in South Korea with built-in PVR functionality and now are becoming a standard feature on TV-phones. The digicam? My new Nokia N-93 has Carl Zeiss optics and optical zoom, better than many mid-range snapshot stand-alone digital cameras. In 2005 already half of all phones sold were cameraphones so cameraphones outsell digital cameras by more than 4 to 1 and for the vast majority of the planet, not their primary digital camera, not their primary camera of any type, but their only camera is their new cameraphone. Mainstream top end cameraphones now feature 3 megapixel resolutions while the top-end Samsung has a 10 megapixel resolution. And for the video camera. The amateour mass-market digicam is now the cameraphone. We see it daily, just now with Saddam Hussein's hanging, something is caught on video. Not by videocam, but on a cameraphone. For the minnows, the big shark gobbling them all up without much even trying, is the mobile phone.
WHAT OF RADIO
Tomi you skipped radio. Yes I did. There are more radios in use than there are mobile phones, although that time will come around 2008-2009 when this last champion will be also crushed. I've seen recent radio stats of anywhere from 3.2 Billion to 3.8 Billion. The problem with radios is that they "cluster" with a few users, particularly Americans and Europeans. We have dozens of radios. There is one in the HiFi at home, another in the boom box. A third in the car. A fourth in the kitchen clock. A fifth in the bedroom clock-radio. Some of our phones, walkmans, TVs etc have built-in radios. They now sell digital radios for us, many have smaller portables and many variants of still functional older versions of all of the above.
But outside of the industrialized world, radios are rare, barely more prevalent than TV sets. So in terms of the number of users, worldwide, there are less than 2 billion people who have a radio. But out of those, the 700 million Americans and Europeans then have something like three radios each on average. Very many of the radios go unused. Many of us don't listen to radio (voluntarily, so ignoring the radio that may play in the taxi cab for example). And while we may switch from the kitchen radio in the morning to the car radio on our way to work, etc., we don't listen to more than one radio at any one time (typically). And for the young, this has all but been replaced by MTV and other music video sources.
Oh, PS, yes, many phones today ship with built-in FM radios, digital radio is coming next to a phone near you. And you can access hundreds of streaming web-radio services on your mobile phone.
And if anyone mentioned the wristwatch? You must be an old fogie. 73% of the population now uses the mobile phone as their portable clock. Not all of those have abandoned their wristwatch, but look at the under 30 year olds around you, more than not, they don't have watches anymore. That is why Seiko and Casio are rushing SMS-alert watches to recapture this segment of a market slipping away.
SO HERE IS THE BIG PICTURE
2.7 Billion phones in active use. There is a subscription for 40% of the planet's population. Maybe 10% of those are multiple subscriptions (in Europe and Industrialized Asia mostly) so perhaps 2.4 Billion people or 36% of the planet's population actually carry at least one phone.
During 2006 they sold about 950 million mobile phones. More phones sold last year than the total installed base of personal computers in use. Out of the 950 phones sold last year, two in three had built-in cameras, 30% had MP3 players. Four out of five had colour screens. All 950 million could access the web (at least via WAP), and all 950 million could send and receive SMS text messages. Over two in three were high speed (at least GPRS/EDGE/CDMA2000 1xRTT); while one in five phones sold last year was a 3G phone.
WHERE IS THE MONEY
The mobile telecoms industry earned 725 Billion dollars last year. 135 Billion of that was mobile data revenues (the majority of which is SMS text messaging but over 45 billion dollars was mobile content revenues). The mobile data industry is rapidly cannibalizing other industries - global music industry earns 16% of its revenues from mobile phones (mostly ringing tones); videogaming earns 14% of its global revenues from mobile.
By far the biggest business opportunity of our lifetimes, the mobile telecoms industry grew by 16.8% last year - many times the rate of global GDP growth, but the sheer economics of these numbers mask enormous success. The growth in dollar terms, from 2005 to 2006, was 105 billion dollars. Yes you read it right. The growth alone last year made new money for the industry worth 105 billion. Why were you not in, sharing in that enormous growth pie? This is not hype-money of investor hopes. This is real revenues, billed to customers, faitfully paid. Honest dollars. A 725 Billion dollar industry which grew by over 100 Billion. Before the decade is over, mobile telecoms will be bigger than the global automobile industry, or the global armaments industry, or the worldwide airplane manufacturing business. And yes, mobile telecoms service business, not counting handsets sold or networks, is already twice as big as the global IT (computer-side, not counting telecoms) industry.
Data service revenues in mobile (so if we ignore the phone as a voice device, and only consider the data services side of this gadget), at 135 billion dollars in 2006, are as big as - the total internet content industry, plus the internet advertising revenues, plus the global videogaming revenues, plus hollywood box office revenues worldwide, plus the global music industry, combined.
Remember the car? Before the car there was no Motel 6, no Exxon/Esso. Think of how much the fixed landline phone and TV changed the way we work and play, and how many new industries they spawned or changed. Think of the credit card, PC and the internet, how radically our world today changed. And how much money could be made from anyone from the guy manufacturing leather wallets (credit card slots were not in wallets in the 1960s) to the coffee shop manager (witness Starbucks and laptop users).
The phone is bigger in its reach than the car, TV or internet. It will make bigger changes in the next decade than any of these did. The phone adds the combined utility of the fixed telephone, internet, computer, credit card, and TV. The phone will impact your life in more ways than we can imagine, because of its multi-functionality aspect, and its reach. And because it will cannibalize some or all out of every other pretender on this list except the car. But even for the car, how many unnecessary trips have been cancelled, or the driver re-routed when we were able to reach the driver on the cellphone in the car. Honey, could you stop by and pick up Mary on your way...
Whatever your business or interest, going mobile now will give you a competitive advantage. But going mobile next year will be a desperation move to stay in the game.
Don't miss out on this. Mobile is the biggest opportunity going. Where is your business? Where is your mobile strategy? Talk to Alan or me if you'd like some assistance in finding your place, opportunity or market space (oh, and you can get a rapid start by reading our book).
FREE INFORMATION - for those who would like to understand the basics of the mobile telecoms industry, its current size, replacement cycles, second subscriptions, mobile content revenues, SMS texting usage etc, I have written a concise 2 page Thought Piece on Size of Mobile Industry. Send me an e-mail to tomi at tomiahonen dot com and I'll send it to you for free.
UPDATE 5 - I've added the updates to where these numbers will go during 2007 and a rough time-table of when you can expect to see 3 billion subscribers, 100 billion in SMS texting revenues etc. See it here: Coming to a Headline Near You
UPDATE 4 - We now have official verification in April 2007 of this finding (the 2.7B number) by the trusted source of telecoms subscriber data, Informa. Please see this posting 2.7 Billion now verified by Informa
UPDATE 3 - I've added now my latest thoughts on how powerful Mobile will become as the 7th Mass Media. Not the dumb little brother of the internet, but rather mobile to the internet is as superior as TV is to radio. Read it at Mobile as the 7th Mass Media
UPDATE 2 - I have developed my thinking about how content migrates from the lecacy (fixed PC based) internet to the mobile internet. The latest installment of that thinking is here: As Web Content Migrates to the Mobile Internet
UPDATE 1 - Since I wrote this blog entry, Apple released its iPhone. If you'd like to read a handicapping of how that "new entrant" will fare in this cut-throat market, please read the blog, Handicapping the Race: iPhone markets and rivals.
UDATE Dec 10 2008 - I've just published my annual statistical review about the overall size of the mobile industry for end-of-year 2008. All new numbers so if you are interested in the "big picture", you may want to read this blog entitled Trillion with a T: Newest Giant Industry is Mobile
NOTE - that blog covers all of the topics in this, older blog posting, so unless you want to read about the history of mobile, I suggest you hop over to the newer blog where the current numbers are discussed.