Recently it seems that everybody has discovered mobile. Google CEO says the future of the internet is mobile. CNN keeps expanding its mobile interests, now sponsoring a mobile movie contest. President Obama used mobile from SMS to Twitter to empower his campaign. After 30 years as Apple Computer, the giant company dropped "Computer" in its name at the announcement of its first mobile phone, the iPhone in 2007. Now just a moment ago I blogged that even in the economic downturn, in Britain total advertising spending on mobile doubled during the one year 2008. This seems to be the hottest story for every industry.
MOBILE IS BIG
And mobile is a giant. Last year mobile telecoms reached global aggregate industry revenues of 1 Trillion dollars, a very lofty size, rare among industries. Fixed landline telecoms is only half that size. The global PC/IT industry is half that size. The worldwide advertising industry is only about half the size of mobile telecoms. At one Trillion dollars mobile is as big roughly as the global automobile industry.
And the industry is powered by the technology of the mobile phone (cellphone). The world currently has 3.5 billion mobile phones in use around the world, connecting 4.1 billion mobile phone subscriptions (some people have two subscriptions but only one phone, switching networks). 3.5 billion actual connected mobile phones is three times as many as total installed base of all personal computers in use around the world (laptops, desktops and netbooks all combined). There are more than twice as many mobile phones as there are total TV sets worldwide. Almost three times as many mobile phones as all fixed landline telephones in use globally.
The revenues of the services in the mobile industry are equally impressive. 1.5 times more people pay to consume news on a mobile phone, as pay for a newspaper daily. Twice as many people pay to download content, news, applications, or pay for premium mobile services like voting for American Idol, as the total worldwide subscriber base of all cable/satellite TV subscribers. The revenues generated by SMS text messaging alone, is as much as all internet email revenues, plus all internet IM instant messaging revenues, plus all internet social networking and chat revenues, plus all internet CONTENT revenues, plkus all internet ADVERTISING revenues - put together. This is just SMS text messaging. Text messaging is the world's most widely used data application with 3 billion active users. Even Americans have fallen in love with SMS, and sent on average 4 SMS text messages per day last year. While an impressive statistic for American pundits, the rest of the world is far further on SMS - many Asian countries report levels 3, 4 even 7 times more than the American level. And SMS is addictive - as addictive as cigarette smoking, so these numbers will just keep on growing.
IS NOT A TALKING DEVICE ANYMORE
So lets talk mobile. The phone in your pocket is not your father's mobile phone. A decade ago, in every market including Finland, the primary use of a mobile phone was to talk. Voice calls were the primary use of all cellphones everywhere. But a funny thing happened on the way to the Carphone Warehouse. The basic celluar phone evolved. It transformed itself. It grew in ability and it also grew up. And in what so often baffles older experts and pundits, the modern mobile phone is no longer primarily a voice calling device. It has become something much more. Lets examine that. I have developed a theory I call the 8 C's of Cellphones, to help undersetand this evolution and growth and transformation.
FIRST C IS COMMUNICATION
The first commercial first-generation cellular phone network was not launched in America, it was actually launched in Japan by NTT in 1979. The first use of a cellphone was communication. This has not changed. The form of our primary communciation has changed in this decade, away from voice calls and into SMS text messages, but the phone is and will continue to be most of all a communication device. The Playstation Portable is an interactive gaming device. The iPod is a music consumption device. The (stand-alone) digital camera is a picture capturing device. These all are pocketable devices that number in the dozens of millions to even hundreds of millions of devices. We love them. But we do not carry them everywhere. Literally everywhere.
But we do take the phone everywhere. Three out of four people use the alarm clock feature of the phone. Thus it is the last thing we look at when we go to sleep and it is the first thing we see when we wake up - we do quite literally take the phone to bed with us - either physically next to our pillow in bed, or on the bedside table. The phone is with us all day, even when we know we are not allowed to use it, like in a theater or the movies. We take our phone with us to be able to communicate - and be reachable - just before, and immediately after that movie or theater piece. And we want our phone to be able to capture the attempts of our friends to call us (with the phone on silent) and to receive SMS text messages sent while we were unable to respond. We even take the phone to the bathroom and yes, we send secret messages while sitting on the toilet. We don't take our iPod or PSP or digital camera to bed and the bathroom with us. The reason is the need of Communication. The first C of Cellphones.
SECOND C IS CONSUMPTION
Eleven years ago, in 1998, the digital cellular phone grew to adopt a new ability: consumption. The phone became a media consumption device, in addition to being a communication device. It became a multi-purpose digital device. This was nothing new, we can use a PC for communciation (email, Skype calls etc) and also for media consumption (reading NY Times or watching YouTube videos). But for the PC it was to be assumed, the initial concept of the personal computer was a device with no purpose, that the box shipped with no programs, that the owner would install the appropriate operating system and then an application or perhaps a series of apps, to turn that dumb box into a word processor or a spreadsheet calculator or an accounting machine etc. The PC started its life with an inherent ability to adapt to multiple needs. The phone did not. It started its life and spent its first 19 years as a single-purpose communciation device. This change is a radical change. The cellular phone became the newest mass media device. As I coined the term 7th mass medium, the mobile phone followed print the first media channel, and recordings (2nd), cinema, radio, TV and the internet (6th mass medium) to be the newest mass media channel for us.
The first paid downloadable content for mobile phones was the ringing tone. This invention came from Saunalahti (now part of Elisa) in Finland and available first on the Radiolinja network and initially only on 5 models of Nokia phones. Today essentially all mobile phones of all brands accept downloadable user-installed ringing tones. The ensuing ringing tone industry has grown every year for the past 11 years and reached 6.2 Billion dollars of total value in 2008. Note this is about four times as much as the total music revenues of the iTunes store worldwide, and yet it is no longer even the only type of music content sold to phones. The total mobile music industry is worth over 11 billion dollars today.
Please understand how dramatic this is. The Apple iPod launched in 2001 and was hailed as a radical innovation that enabled digital sales of music, via the internet, direct to consumers, using the iTunes store. The total value of iTunes music sales is not even 2 billion dollars worldwide. But music sold to mobile phones is also all digital, and totalled 11 billion dollars in total value in 2008. Out of a music industry whose value is about 26 billion dollars worldwide, mobile today accounts for 42% of the total global sales!
The same patterns repeats across all media content types. Videgaming, television, news, jokes, cartoons, magaazines, movies, books are all sold to mobile, to varying degrees of success. The total global media content sold to mobile phones was worth 70 Billion dollars last year. Thats twice as big as total hollywood box office revenues, or twice as big as total videogaming revenues, or twice as big as all DVD sales of movies and TV shows globally. But it all started with the first downloadable ringing tone, eleven years ago, in Finland.
THIRD C IS CHARGING
The next year, 1999, we saw the birth of mobile payments, m-commerce and mobile banking. These were commercially launched by Smart and Globe in the Philippines. Today in many advanced markets like South Korea and Japan, half of all mobile phone users make payments on phones. But its not just advanced markets. In Kenya, 20% of all banking accounts today are mobile phone banking (or money-transfer) accounts.Lets put this in context. 2.2 billion people on the planet have a banking account, and about 1.7 billion people have a credit card. But every mobile phone on every modern digital network, can handle mobile payments and can act thus as a mobile banking account. And this is not just "micropayments" like paying for a coca cola from a vending machine. No in countries from the Philippines to South Africa it is quite common to have your total paycheck paid directly to your mobile phone banking account.
The Spanish banking industry has gone so far, that today in Spain you can offer mobile phone based digital signatures to sign contracts. Legally binding digital signature, via an SMS text message on your phone. Estonia is scheduled to become the first country where national elections are held where SMS voting is going to be allowed. (Can you imagine how much of a landslide President Obama would have gotten last year, if the USA had allowed SMS voting, in the year when the Democratic candidate had collected cellphone numbers and already communicated with supporters via SMS, and the Republican candidate did not even send emails through the early part of the campaign)
So the digital identity on a mobile phone is considered that robust that you can vote on it, and it is accepted as your signature, and entire paychecks can be paid to your account. How long is there a viable market for plastic? Visa already today in South Korea asks new customers, "do you want plastic with the credit?" They will automatically enable the new Visa card functionality onto your phone, but they do offer the old-fashioned plastic card to be mailed to your home address, in case you need to visit old-fashioned countries where plastic credit cards are still the norm, like the USA, Germany, UK etc. Do you want plastic with the credit? Makes you think?
But how much time is left for the trusty old coin? A payment system thousands of years of age. Estonia became the first country where one form of coin-based payment was made obsolete by mobile payments. Today if you park your car in Tallinn, you can't pay for parking by coins or cash (nor by credit card). Their system only accepts payment by mobile phone. It has already started. Mobile is not only cannibalizing credit cards and digital money, it is cannibalizing coins, the oldest form of money.
If every economically viable person on the planet has a mobile phone, and we get our paycheck directly to the phone, then how long until they decide its too expensive to mint coins. We may see mobile money make coins obsolete. But that is still far away. But consider it a possible scenario, and you heard it here first, at the Communities Dominate blog.
FOURTH C IS COMMERCIALS
In 2000 we then get advertising on mobile phones, first launched in Finland to support an SMS based daily news service by MTV3 the Finnish commercial TV broadcaster. Advertising has grown very slowly on mobile phones and there are dramatic differences between countries. Japan, South Korea and Spain have been global leaders in developing the early mAd opportunities but later in this decade the UK has also joined the leaders in the cellphone advertising opportunity.
Early ads on mobile were clumsy and often annoying interruptive concepts copied from the internet (spam SMS text message ads and banner ads) or featured ill-fated concepts such as "location based spam ads". Recently a more compelling ad concept, "engagement advertising" has been deployed, based on the principles of Alan Moore who coined that term and co-authored the book Communities Dominate Brands with me (the signature book of this blog, obviously). Well-executed Engagement Marketing campaigns on mobile tend to get response rates of 25%-30% where typical internet interactive ad campaigns get 2% levels of click-through rates (bearing in mind also, that a click-through rate as a metric is far inferior to actual response rates).
While the total ad spending on mobile is still modest, after the advent of a compelling ad concept, now with engagement marketing, mobile advertising is growing fast. Companies from Admob to Buzz City report dramatic growth rates globally. Last year it was reported that 1.5 billion unique people had received ads on their phones. Thats three times the size of the daily circulation of all newspapers, and as many as all TV sets in the world - while all TV networks do not show advertising. Quite literally, more people watched ads on their phones last year than on their own TV sets. And how is the growth rate? I just reported earlier today that last year the UK advertising market for mobile doubled in size in just one year.
FIFTH C IS CREATION
In 2001 we get the next new ability of the phone - creation. The Japanese network J-Phone (now Softbank) launches the first commercial mass-market cameraphones and a related picture messaging service, Sha-mail. While the camera industry did its best to belittle the modest quality cameraphones, the consumers fell in love with them. Soon the camera feature was the must-have ability and phone makers started to compete on who had more megapixels.
Today more than two thirds of all phones in use are cameraphones and their sheer numbers are mind-boggling. Excluding older cameraphones that have been replaced by newer models, the installed base of cameraphones in active use passed 2 billion last year. The traditional camera industry was caught totally off guard and lost out in this dramatic shift. Today professional news journalists at CNN for example all have a high-end high quality 3G cameraphone as their back-up camera and communication device. And what of the big camera makers? This decade saw two of the Japanese giants, Minolta and Konica exit the camera business altogether. From 2004 the world's best-selling camera brand including all film based and digital cameras, has been Nokia.
The ability to have a creation device in every pocket has had a dramatic impact to picture and film industries. Ever since the 7/7 underground train bombings of the London Tube, today all breaking news stories on TV will feature first pictures and videos by amateour paparazzi on such services as CNN's i-Report.
SIXTH C IS COMMUNITY
No surprise here, at the Communities Dominate blog? Yes, Communities, or social networking is also on phones, from Mobage Town to Flirtomatic and from Frenclub to Itsmy. Every major internet-based social netwokring service from Flickr to YouTub to Facebook has a strategy to go mobile, while the hottest tech story right now, Twitter, is natively also on mobile, of course.
Launched commercially in South Korea in 2003, social networking on mobile has in only three years grown bigger than its older internet-based sibling by revenues and today towers over internet based social networkign services generating more than twice the revenues worldwide. Mobile Social Networking is also the fastest-growing bilion-dollar industry in the economic history of mankind. This industry sector broke the billion dollar barrier in only two years from launch, and reached 6 billion in four years from launch. I am awaiting independent verification of how big it grew to last year, but my company TomiAhonen Consulting estimated it at 8.9 billion dollars for 2008.
SEVENTH C IS COOL
By cool I mean fashion. The Apple iPhone. Need I say more? The phone has gone from being an utilitarian business tool, into a fashion accessory. Brands such as Prada, Armani and Dolce&Gabbana have released premium phones. Nokia has its jewerly-luxury brand Vertu. The first major fashion brand to go onto a phone was Benetton on NTT DoCoMo in Japan, in 2006.
EIGHT C IS CONTROL
There have been individual niche services to use a mobile phone as a remote control device for many years, from turning on the heater in your sauna (useful in Finland where cold days can be -30 degrees and a hot saunabath can be the perfect antidote to waiting in the blizzard because you missed that bus) to the remote control tea-kettle that they had in Britain, controlled by SMS (I wonder how well that "innovation" actually sold, ha-ha). But the point is that we can control almost anything with digital interfaces, by using our phones. Some exotic uses do exist yes, but now it is going main stream. In 2007 they had started the construction of apartment houses in Japan and South Korea, where the locks are operated by your mobile phone. Replacing our keys soon too.. South Koreans now sell household robots which you control using the phones. Rinspeed in Switzerland produced a prototype car which is controlled by an iPhone.
INCREDIBLY RAPID CHANGE
The first 19 years of its life, the mobile phone was only a communication device. First a rich kids' toy for wealthy executives like investment bankers and lawyers which gradually spread to the adult employed population and then total adult population, teenagers, grandparents. The communication method evolved and the voice calls went from unreliable poor quality analogue systems to crisp sharp quality and secure digital systems. Voice calls got voicemail as a companion to capture lost calls. Then SMS text messaging appeared to expand the options in communication and we started to observe a shift of voice call traffic away from the fixed landline phones to the mobile phones, even as fixed landline calls were cheaper. Note that this all was organic growth within the same industry.
Now this past decade (or 11 years actually) suddenly the cellular phone has grown by leaps and bounds, entering totally different types of industries and taking on radically different capabilities. The change has been enormous in a very condensed period of time. That means that the industry is still a child, learning. It makes mistakes. It does not fully understand what its abilities are But it is evolving and growing and maturing fast. This industry is learning to partner, learning to share, learning to collaborate. That is not easy and different countries, different players and different industrial sectors will see different rates of change. But all of them are evolving.
It also means that the inventions and innovations happen in many markets and many ways. Consumption for phones was invented in Finland, Charging in the Philippines.Creation in Japan and Community in South Korea, and while not inventing it, Cool was greatly popularized globally by the iPhone from America. We do see innovation all around the planet. This is not an industry that is only driven by Finland or by Japan..
Any one of these seven new abilities of the Eight C's would be big news and traumatic and dramatic change for the industries involved. But look at the impacts. Media content industries. Soon half of all music revenues will be generated on mobile. All other media content industries show dramatic migration to mobile. None are safe. And none have migration of money in the opposite direction.
Banking, credit cards, your salary. Headed to a phone. Advertising? Onto the phone. And please don't be a luddite about mobile advertising saying you won't put up with it. The Croatian ad service Tomato Plus reports 92% satisfied customers receiving on average 5 or 6 mobile ads every day. Advertising will be on every phone on every network in some way or another. And the good news is, that using engagement marketing methods, the ads can be far more appealing than the interruptive ads we are accustomed to on TV, radio, print and even the internet.
The cameraphone. Social Networking on mobile. Even fashions and now remote control funcitons are coming to a pocket near you. It is no longer just a communication device, and certainly the cellular phone is no longer just a voice calling device. In just over a decade, the phone has expanded into the most versatile multi-purpose device on the planet, with 8 legitimate use. The Eight C's of Cellphones. I guess it is time to smell the cellphone.
I HAVE MORE FREE INFO
This blog story is an abbreviated version from Chapter 15 of my latest hardcover book, Mobile as 7th of the Mass Media, a very widely praised book giving you 322 pages of why mobile, why today, why media and what next. Chapter 15 is entitled Eight C's of Cellphones, and subtitled Capabilities from communication to cool. It has as its case study Camera Jiten, the magical cameraphone dictionary service from Japan.
If you'd like to read a free 30 page excerpt of the book, please send me an email to tomi (at) tomiahonen (dot) com. The excerpt includes two full chapters (but not Chpt 15), the Foreword and one case study (Flirtomatic). Or if you want to buy the book, its Amazon page is Mobile as 7th Mass Media on Amazon and its publisher page where you can also buy it directly is Mobile as 7th Mass Media at futuretext.