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January 16, 2008

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Comments

Krzysztof

Hi Tomi,
Brilliant and colorful summary!
Pls send me Thought Piece and SMS about 3G in BCN
Cheers
K.

Giff Gfroerer, i2SMS

Tomi,

SMS in the United States is certainly picking up. Our company generated more interest in the final two months of 2007 then the previous ten months combined.

The iPhone has generated huge amounts of interest in the mobile arena, most likely due to the unlimited data charge thus allowing consumers to surf without the question being asked if they want the service or not. Their UI is nothing short then brilliant. Some pundits will lay criticism for the iPhone's use GPRS and the simplistic features. However, when battery life and an uninformed public are taken into account, the iPhone was exactly what the US needed to jump-start the mobile industry.

As always, thanks so much for your thoughts, comments and statistics.

Dean Bubley

Hi Tomi

Some great stuff here - SMS stats in particular are always fascinating.

But.... as always, we don't quite see eye-to-eye on everything.

I'm really unconvinced that "already 30% of all internet access in 2007 was exclusively from mobile phones" - I reckon the number's more like 5%.

30% of 1.3bn = about 400m - so where are they?

There's maybe 20-25m mobile-only users in Japan, 12-15m in India, 3-5m in China and hardly any in Korea. I can't see the rest of the world contributing another 350m given high PC penetration & usage in N America and W Europe. Most prepay users in emerging markets don't get Internet access, either. [I've put my sources/analysis on my own http://disruptivewireless.blogspot.com]

Curious about your thoughts on who these mobile Internet pioneers are...

Dean

john

i Think SMS remains a major growth area for mobile operators. However, revenue growth is only a fraction of the growth in messages

Tomi T Ahonen

Hi Krzysztof, Giff, Dean and john

Thank you for writing

Krzysztof - thanks. I've written to you already via email

Giff - Yes, I hear that a lot (SMS picking up dramatically in USA) from my various contacts. Its a very healthy sign for the American cellular telecoms industry to move past the essentially 1G era of "just voice". And yes, the iPhone has now strongly energized many parts of the American industry from telecoms to the IT industry to the mass media and advertising. I was there in October doing the keynote at Mobile Monday San Francisco and the energy and enthusiasm for mobile was clearly more than I've witnessed before in North America. That speaks of good things for the whole industry. We needed the "sleeping giant" to wake up to this opportunity.

Dean - I'll answer you separately next. It'll be a bit longer reply (as you no doubt knew and expected)

john - Yes, I agree. SMS traffic is growing at alarming rates (50% year on year) but revenues also grow, as you say, a fraction of that of traffic. SMS revenues grew by something like 23% last year, under half the growth rate of traffic.

Thank you for writing

Tomi Ahonen :-)

Tomi T Ahonen

Hi Dean

Ok. We've been doing this before at many venues and debates and discussions, but seriously, Dean, I think its about time you start to accept the facts. Every trend is away from "your position" and towards mine.

What did I say. 30% of all internet users access exclusively from mobile; 33% access from mobile and fixed; 37% access from fixed exclusively. Is this really difficult for you to accept. At least previously Dean you offer some facts and research to support your view, now you give none.

So. Lets start with some undisputed facts. 1.3 billion internet users. 900 million PC users. So right there we know there is at least 400 million internet users who are unaccounted for in the PC stats. And as you know perfectly well, this discrepancy between less PC users and more internet users has been growing this whole decade. And that mobile internet use started in 1999 when NTT DoCoMo launched iMode in Japan.

Some of the missing user numbers are from internet cafes and university campuses etc, but an increasing number of the missing numbers are mobile users. Not just in South Korea and Japan, but all over, from USA and UK to Finland and Sweden to Italy and Spain to South Africa and Brazil to Russia and Poland to China and India.

So lets dig a bit deeper. PCs. Most are desktop PCs, the rest are laptops. There is a trend to more laptops and older desktops are increasingly replaced by laptops.

PC access. Not all PCs are even connected to the internet. Yes, its an ever shrinking part of all PCs but still there are some, mostly in Africa, Latin America and other parts of the developing world, where given PCs are still stand-alone, used by smaller businesses etc. So of the total 900 million PCs, the actual internet connected population is (slightly) smaller than 900 million.

Then desktop PC internet access. Most of that is by fixed connection, dial-up or broadband. But there are service providers for example in India and Pakistan that offer wireless internet connections via mobile networks to home/office PCs. There is some of the internet access even for these modems that are mobile network based. And now with HSPDA ie 3.5G there is a powerful rival for broadband access, such as M1 in Singapore for example, who is targetting clearly the home broadband users of Starhub, with very compelling internet modem pricing. Similar services offered from Spain to South Korea on HSDPA for home/office internet use.

So of the desktop PCs, it has become possible to connect their internet access via the mobile networks a couple of years ago, and now with HSPDA there is a clear trend to connect ever more this way.

Then there are the laptops. On a laptop there is a compelling reason to get a wireless modem or data card to allow the internet connectivity to be as mobile as the mobility of the laptop computer. For example I've had my 3G data card for my laptop since 2003.

Which brings me to broadband connections. On Broadband there are limitations to the fixed landline telecoms network and numerous rivals from cable modems to WiMax to HSDPA. Informa just reports this January 2008 that 20% of all broadband internet connections worldwide are wireless. Obviously not all of those are mobile, but a significant part are. For example in South Korea the two rival wireless broadband offers are both on national coverage of WiBro (a variant of WiMax) and national coverage of HSDPA.

So out of the 900 million PCs, some (very few) are not connected to the internet at all. Some (few) of the desktops use a mobile network modem especially now HSDPA. And of the laptops a significant part has mobile connectivity as you yourself have reported as you've analyzed Vodafone's 3G data for example.

It is absolutely certain the total fixed internet connected PC population is less than 900 million - and the trend is away from fixed to mobile connectivity.

Dean, the trend is clearly AWAY from your position, even with PC based internet access, closer to my position.

Then of the mobile users. You say you can't find the users. You mention "hardly any in South Korea". Why? South Korea is - as you well know - the world's most advanced digital country where all internet connections were upgraded to broadband and now they already offer 100 Mbit/s high speed broadband as a standard. But also as you know, I released my fifth book, Digital Korea, last August (with a launch party in Seoul).

As we were meeting with the government officials I met up with NIDA experts who gave me their latest study which showed how dramatically the Koreans are moving away from fixed internet connections to mobile connections. NIDA's numbers for 2007 showed that 15% of all homes with internet access had only mobile access, while only 1% of homes with internet access had only fixed access. The rest had both fixed and mobile access.

I don't buy your position at all, that there are no mobile-only internet users in Korea when already 15% of homes have abandoned the fixed/broadband internet connection for a purely mobile internet connection.

I also think your Japanese numbers are too low as definitely are your Indian numbers. But that is not enough to make up for the numbers.

So, where do we start. USA and Canada are the most extreme region at one end - where PC penetration is highest, fixed internet connectivity has been around for the longest; while mobile phone penetration is the lowest, 3G mobile is lagging and mobile data plans are very nasty, etc.

Northern Europe is the next most "PC friendly" part of the picture where PC penetration is high as is mobile penetration. Southern Europe (Italy, Spain etc) is already much more mobile-friendly, where PC penetrations are severely below mobile phone penetrations.

Then comes Eastern Europe and Russia where the picture is already very distorted in favour of mobile. The Asian Tiger Economies, Australia and NZ and Japan come next. Then comes China. Then India. Then the rest of the developing world, Latin America, Rest of Asia and last Africa.

So if the USA and UK are not among the most eager to migrate fixed internet access to mobile internet access, even Italy and Spain will be ahead of those, with Russia, Australia, China, India, Africa etc far far ahead of those migration numbers.

So lets explore the big picture. There are 3.3 billion mobile phone subscriptions. The numbers from Real Networks (an internet company, not a mobile telecoms company, by the way) say 25% of all mobile phone subscribers access the internet on their phones. Out of 3.3 billion that is 825 million.

Oh, its important to mention that a mobile phone user will not connect to the internet via a wired connection. So all of the mobile phone users who do access the internet on their phones, access only wirelessly, where a growing minority of PC users do access wirelessly.

If there are "less than" 900 million PC users who access via fixed internet; and there are 825 million mobile users of the internet, then in rough terms the one third/one third/one third split of "only fixed access, both fixed/mobile access, and only mobile access" is reasonable (by mathematics, not by actual usage obviously). And this split should be slightly skewed in favour of fixed connections and not in favour of mobile connections. My numbers of 37% fixed, 33% both and 30% of mobile are very consistent with the Real Networks numbers.

Why is this important. If we can trust the two numbers, 900 million and 825 million, we cannot have an overlap of say 700 million. Because it would leave 200 million PC only, and 125 million mobile only, and the total user numbers would max out only at 1,025 million internet users. To get to 1.3 billion, the overlap between PC/fixed and mobile has to be about 430M/430M/430M, plus-minus of about 50 M each.

Then lets see if there are any stats to support the Real Networks 825 million mobile internet user position?

Lets start with installed base of devices. 3.3 billion subscriptions equals 2.6 billion actual unique mobile phone users (according to Informa 2007). Thats 2.6 billion definite phone owners (some of the multiple subscriptions have only a SIM card). But today 2.4 billion of those phones are GPRS capable or faster. So out of all phones that have reasonable speed and price internet capable phones, 825 million is only 34%.

I do not have a study of how many GPRS capable phone owners do use mobile internet on their phones, but I do have a study on 3G phone owners. TNS reported in October 2007 that about half of all 3G phone users use the internet on their phones. Out of 400 million 3G phones in use today, thats about 200 million for you. If the "non-3G" unique phone owners are 2.2 billion, and out of those, 2 billion have "non 3G" GPRS/2.5G phones, and we're looking for 625 million users of the internet, thats 31%.

If 50% of 3G users access the internet, it is reasonable that a smaller percentage - but much more than zero - will also use the internet. For example iPhone users are all 2.5G users. And as you know, recent data reveal that the biggest traffic to Google before Christmas came from iPhone users.

So I would argue the 825 million user number is reasonable as a percentage of 400 million 3G users and 2 billion non-3G users with GPRS or other 2.5G phones.

But lets find more facts to support the position. Is Real Networks' 25% number reasonable and within reported stats? Telephia reported in May 2007 that 19% of British internet usage and 17% of American internet usage had migrated to mobile access. (Note that these are the countries at the PC-end of the spectrum) This is consistent with earlier research by Comscore Matrix which reported in Octber 2006 that 34% of Italian and 26% of Spanish internet users accessed via mobile. A related study of Asian users by Mindshare in six Asian countries found that 49% of Asian mobile phone owners download content to mobile phones. That is obviously not the same as internet use, but illustrates that the Asian mobile phone owners are eagerly adopting mobile data services.

These three studies all are well in line with the Real Networks number of 25%.

Then again, the trends. The number of PC sales has been stagnant the past two years but has grown dramatically for mobile. PC devices are migrating from desktop to laptop (more attractive to mobile data cards) and all internet migrating to broadband where now HSDPA and other high speed mobile networks are competing with broadband providers both on data capacity and data pricing, very competivitely. The trends on the PC side favour my position, and are totally against your position, Dean.

The on the phones. Mobile phones have become much more friendly for internet use, with large colour screens and ever faster speeds. Mobile networks have reduced prices of data plans and increased mobile internet speeds. Content owners offer ever more compelling content to mobile internet. All trends suggest mobile internet use is growing dramatically.

But finally, I want to point out a perception issue. If you take Flirtomatic, the service offered in the UK both on the web and WAP. If you ask a web user of Flirtomatic, do they use the internet, the user will definitely equate Flirtomatic web use as internet use. But if you ask the Flirtomatic WAP user does he/she use the mobile internet, most would not think of it as such. Perhaps some think it is WAP use (many would not) and more likely they would understand it as use of an operator's portal services, such as Vodafone Live. Even so, many would not select any of the above, and only understand that they do use Flirtomatic on the phone.

So some of your doubts about mobile internet use, Dean, may be that many of the users themselves dont' even know. Take WAP Push for example. In many cases where a user receives a WAP Push type of SMS text message, and they respond to it, they don't even know that they have moved from SMS to WAP. The network knows. But the user easily thinks that the user has just been involved in SMS.

Dean - you attack these numbers often. You have previously given some numbers to defend your position. But now the data is becoming overwhelming. Clearly there are about 800 million who access the internet via mobile and under 900 who access via PC (of whom some access via mobile). That means that we are very near the point when more access is from mobile than fixed.

You don't seem to like that fact. But all trends are in that direction and you know it Dean. Where exactly are the 400 million? I can of course do a total country-by-country analysis but I doubt you'd pay for my time for that, ha-ha..

1.3 billion internet users. Under 900 are by PC. That means over 400 are something else. Some of those are from internet cafes and university computer labs. Those were estimated to be about 50 million two years ago. 825 million are mobile phone users. You do the math. The numbers in the middle who are mobile users are something between 300 million and 500 million.

Thanks for writing

Tomi :-)

alex

Tomi's top-down and Dean's bottom-up analysis for the "mobile-only Internet users" differ by an order of magnitude, so something is not right.

So let's do some math.
The 825 M figure proves only how relatively few "PC only" Internet users there are: 1300 - 825 = 475 M
It has no impact on the "Mobile only" figure, which was disputed by Dean. So no point to argue about those 825 M here.
"Mobile only" is given by about 1300 - 900 = 400 M, so let's look at the 1300 and 900 M figures.
1300 M "Internet users" seems quite reliable and undisputed.
Tomi lists factors why PC Internet users are less than 900 M.
What I am missing is family usage of household PCs. Isn't this is a strong factor also in Western countries? E.g. young children often have own mobiles but use Internet on family (and school) PCs.

How many PC and persons do we have per household?
Maybe Tomi or someone has better figures. I'll just make a guess for Western countries (which skew PC statistics) to get a feeling for the numbers:
300 M housholds
2 PCs per houshold
3 PC Internet users per houshold
-> 900 M PC Internet users with 600 M PCs
Let's count the remaining 300 M PCs with 1 Internet user.
-> all together 1200 M PC Internet users
-> 100 M "mobile only" Internet users

As said, I'm not claiming this is a substantiated estimate, but it seems to me that shared family PCs could explain a much lower figure for "mobile only" Internet users as Tomi estimates.

(Tomi, this is not about whether there is a trend from PC to mobile or not - I am just trying to establish the current state of affairs, without judging a trend.)


Tomi T Ahonen

Hi alex

Thanks, good points. But by that same analysis, we get also the dual use by one PC internet user. So the family has for example 2 PCs and 3 users in your example. But the dad also uses a PC at work (is one user on two PCs). The child has a PC at school (is also one user on two PCs). Maybe the mother is the only one of the family for whom the family PC is the only PC.

I see where you're going, but then the absolute math won't square up. If there are 1.3 b total users and about 800-900 M each who access from a PC and who access from a mobile, then there will be rougly 300-400 M who must be PC only, and another 300-400 M who must be mobile-only.

I took a quick look for another debate we have with Dean about this same topic at Forum Oxford, and dug through a dozen countries and their mobile user internet access. These are from the 2007 Netsize Guide quoting 3Q 2006 national statistics by Informa. The numbers range from 71% in Austria (Mobilkom Austria) and 67% in Denmark (TDC) to 19% in Poland (Centertel) and 21% in Switzerland (Swisscom) in Europe. So of all European users between about 20% and 70% of all mobile phone subscribers are already active users of the mobile internet. Remembering that European mobile phone subscriptions already exceed 110%, we do get many countries in Europe where the mobile internet user numbers are greater than total PC penetrations in those countries.

Then if we look at only real developing world country mentioned in the Netsize Guide. In India mobile internet use ranges from 3% with Bharti to 59% with Reliance. It makes perfect sense that in the developing world where you have a very hard time getting a fixed landline even connected, of course most internet users will connect wirelessly, mostly through mobile networks. The ratio in India is about 6 to 1 more mobile than fixed landline connections to the web. This pattern repeats all through Pakistan, Bangladesh, Indonesia; all of Africa; all of Latin America.

alex, I am very confident in these numbers. The big picture numbers bear it out - I've been tracking these stats and they are consistent with both a top-down and a bottom-up analysis. And the "balancing math" how much is overlap and how much are users only on one or the other method, they too are reasonably consistent.

Of course I'd love to see some big industrial analyst company come up with total counts worldwide. But even looking at what Informa was able to provide for the Netsize Guide for 2007, in many countries they didn't have the mobile data user numbers or if they did, at times it was numbers that are pretty meaningless for this purpose.

Thanks for writing

Tomi Ahonen :-)

Tomi

Tomi

I think there may be some middle ground here.

And I think that it is around the difference between:

- accessing the real Internet
- using a browser for any network-based application

I've tried to do 2 sample matrices for these, breaking down total user numbers by device type(s) and access mechanism(s). Also I've split out WiFi & cellular as I suspect that consumers surveys may confuse people about the difference between "mobile" and "wireless"

http://disruptivewireless.blogspot.com/2008/01/mobile-vs-fixed-internet-users-2-its.html

I can quite believe that 25-30% of total browser users are phone-only, or phone-mostly, because of walled gardens. But in terms of 'real' Internet access, I reckon it's more like 11% who are "phone-primary", and lower still for people who _never_ use a PC.

Dean

Andreas - news of the future

Do you have a reliable reference for those numbers (e.g. number of mobile phone subscribers?

Tomi T Ahonen

Hi Dean (posting as Tomi? Are we schitzophrenic, no we are not, ha-ha) and Andreas

Dean - yes, I think we really do see this very much in a similar way on the big picture, and the argument is more on the semantics and precision - which I do admire in your careful approach to all things relating to our industry and its metrics.

I fully acknowledge that for "my numbers" to hold, I have to include WAP usage (and iMode etc). Then we are in the realm of walled gardens. Not that all WAP is walled gardens, but most still currently are.

So if we take the view of "classic" existing TCP/IP internet use via a mobile network connection, the 11% number seems very solid. But yes, if we include the WAP users, then the larger user number is valid.

I also appreciate it greatly Dean that you do the sanity checks etc. And I think I could be more precise, to mention WAP in my numbers so it is clear what definition I use.

I know I've read your blog entries about the numbers at Disruptive Wireless and at Forum Oxford. I was somewhat distracted as the Sprint Nextel story breaking this past week, so I only had time to respond at Forox, but I will be coming to your blog as well to continue the dialogue there as well.

Andreas - the total mobile phone subscriber numbers were from Informa, two major reports last year, the multiple SIM card report which came out in the spring and the 3.3 B number and related stats which came out end of November.

Thanks for writing

Tomi Ahonen :-)

meera

How would you say the Indian market is faring? Could you tell me if mobiles are eating into laptop sales - by how much? Any statistical evidence to show this trend?

jaspreet

Dear Tomi,

GREAT WORK !!!!

Can you please email me your thought piece for the "Mobile Telecoms Industry Size 2008"?

I am really interested in reading it.

Great Thanks Tomi.

Kind Regards,
Jaspreet

Erika Beede - Goomzee

These are GREAT statistics. Thanks for sharing your findings!!!

Darren

This was a very interesting article Tomi and reinfoirces just why brands need to start incorporating mobile as part of their marketing mix. Its no longer looking at the potential mobile has to offer, it's now looking at the great opportunity!

Darren

Pravin Tamkhane

Hi Tomi,
I must say, it is the brilliant post, great analysis and you really made us to look at the BIG opportunity!

Pravin

Collet Kudze

Tomi,

A lot of insight in this blog indeed.
Am just wondering if you have any statistics for Asia , Middle east and Africa.
It would be interesting to see how the digital divide reveals.


Collet Kudze

Tomi T Ahonen

Hi meera, jaspreet, Erika, Darren, Pravin and Collet

Thank you all for the kind words. I'll respond to those with specific comments or questions.

meera - Good question (mobile eating into PC sales), we don't see global numbers yet of that. The only local market to report that was Japan with 2006 numbers, by which for the first year ever, PC sales declined in Japan while phone sales kept growing. I am expecting some advanced markets (like South Korea, Italy, Israel, the Scandinavian countries) to start to show that kind of trend soon, perhaps even from 2007 data, probably from 2008 numbers. I'll blog about it definitely when such numbers appear (if they do, ha-ha).

The overall sales of PCs have been rather flat the past four years, but in 2007 the PC industry expected growth, so its not "game over" by any means anytime soon. And there is of course within the PC industry the shift away from desktops onto laptops as the form factor, and the expectation was that perhaps in 2007 we would have the first year ever that more laptops were sold than PCs worldwide.

Darren - yes, it seems that the marketing/advertising industry has woken up to mobile over the past year or so. I've had several good workshops with advertising and media companies specifically on that dimension over the past 18 months. There is a buzz about it, ha-ha.

Collet - About the digital divide. Good question. There are numbers, but it gets awefully difficult for me to gain access to all that data for a timely analysis (I don't have a deep reserach budget to buy all the expensive reports from the industry analysts), in particular as the develping world is growing so incredibly fast in this space. I do occasionally post about the digital divide related topics but more on a country-specific or industry sector-specific way.

I might be able to do a posting about the issue a bit later, as I do obviously have a lot of customers in Africa, Latin America and developing countries of Asia. There was a great article about it in the Economist I think a week or two ago, and I'd definitely agree with their summary that its a chance to leap-frog technologies, going straight from no telecommunciations, to cellular (and digital) mobile telecoms, without the fixed networks and analogue mobile phones that the Western World built earlier. Some of by best examples of industry disruption comes from the developing world, such as the mobile bank accounts in Kenya or paying your utility bills by mobile in India etc.

Thank you all for the warm sentiments

Tomi Ahonen :-)


Tilly

Hi Tomi,

I think you're research very enlightening - do you have any views on the growth in SMS advertising? I am doing my thesis on this and would like to know your thoughts.

Kind regards.

Tilly

Hi Tomi,

I think you're research very enlightening - do you have any views on the growth in SMS advertising? I am doing my thesis on this and would like to know your thoughts.

Kind regards.

Tomi T Ahonen

Hi Tilly

Sorry I missed out on your comments in the summer, so this is very delayed, but yes. Good question.

Two points - there is mobile phones advertising, which has a very strong future, and then there is SMS text messaging as the mechanism to deliver the mobile advertising. There we have some early problems with spam SMS, and this area will exist for a while but be mostly annoying and will eventually disappear (mostly, never quite completely).

The far better concept is user co-created advertising on mobile, which can be done via SMS. You'll need to study Blyk to see how it can be done. If you get the users to co-create the advertising experience - we embrace what we create - then the recepients of the ads will love it. When SMS is used this way, it is a winner with a long future.

Finally, there is the chance to use SMS as a trigger to launch other more advanced advertising methods for mobile such as MMS picture messaging and WAP pages etc.

Thanks for writing

Tomi Ahonen :-)

Lilu

Hi, Tomi!
I send my email > manak@inbox.lv for receiving Thought Piece
Thanks

David

Hi
I just came across to your blog and reading yur post this is quite very impressive me For a quick review of the context. There are about 1.3 billion fixed landline phones. So there are 2.5 times as many phone subscriptions as there are fixed landline phones. In Europe about a quarter of the homes have abandoned the fixed landline altogether and all family members use only their mobile phones (In Finland its more than half, even in the USA its already one in ten households where they have cut the cord). Contrasting with internet use, about 1.3 billion people use the internet worldwide. Or the other major technologies we could consider and compare, there are about 850 million automobiles in use worldwide. There are 1.5 billion TV sets in use, and 1.4 billion people own at least one credit card globally. But there are 3.3 billion mobile phone subscriptions.Thanks a lot for sharing this.

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Oh wow, this got every one going - fascinating input mixed with a good read.

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    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Hong Kong but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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