What do I mean, by 'next four billion'?

I spoke in Amsterdam on Thursday at the big Picnic event and in my keynote address I talked about "The Next 4 Billion". What do I mean by the next four billion?

First, those who regularly follow mobile technology, know the relevance of 4 billion as a number. That was the total global count of mobile subscribers on the planet at the start of the year 2009. To put it in context, there are 480 million newspapers printed daily; 800 million automobiles registered on the planet; 1.1 billion personal computers including all desktops, laptops, notebooks and netbooks; 1.2 billion fixed landine phones; 1.4 billion internet users; 1.5 billion TV sets; 1.7 billion unique holders of a credit card of any type; and 2.1 billion unique holders of a banking account of any kind. But 4 billion mobile phone subscriptions. Kind of puts it in context.

As I have been predicting, last year the total count of mobile phone subscriptions grew past its last remaining rival for total global technology adoption, FM radio, at 3.9 billion units. So in an absolute sense, this year mobile has become the most widely spread technology on the planet, something achieved in record time of only 30 years. It was only in 1979 that NTT in Japan launched the world's first mobile phone network into commercial production, so this December we as an industry get to celebrate our 30 year anniversary. And as Chetan Sharma Consulting just reported a couple of days ago, the total global mobile phone subscription penetration per capita, has reached 64%. Oh, and that subscription growth has not stopped, currently the world is at about 4.3 billion mobile subscriptions.

So, that is what was the first four billion. The rapid growth of what has become the most widely adopted technology on the planet. Now, what about the topic of the "next 4 billion", that does sound a bit strange. The world total human population is only 6.7 billion people. Shouldn't I be saying, "the next 2.7 billion". Or do I really mean to suggest that there will be more mobile phones than human beings on the planet, not only phones to exceed babies and great-grand-parents, but over 100% per-capita subscriptions in the poor countries of the planet, all through the Developing World? Where we have issues with not just poverty, but lack of electricity, infrastructure, and even high percentages of illiteracy. Am I being serious?

PLANET WILL REACH 120 PERCENT PENETRATION

The concept of multiple subscriptions in the industrialized world is no longer in doubt. We see the phenomenon all the time by businesspeople for example having both a Blackberry and an iPhone, etc. So today, in the Western World, it is no longer controversial to suggest that there can be more mobile phones than humans. In Europe the majority of employed adults have two phones and that trend is seen in all markets of the Industrialized World, even in the USA, which lags seriously in mobile phone adoption, today over one in six American cellphone subscribers has two phones.

I have been reporting on this phenomenon since it was first discovered in Finland over a decade ago, and was the first author to discuss it in a book, explaining the fundamentals of the concept of the multiple subscription, and gave early numbers in my second book, m-Profits in 2002. At that time it was very controversial and many pundits and experts dismissed multiple subscriptions and doubted severely if most even advanced countries could achieve beyond 100% penetration rates.

So I have been very close to examining and analysing the phenomenon of multiple subscriptions and how it impacts our industry. And I have been then reporting on the overall global trends, such as the ratio of how many of the total subscriptions are unique phone users - out of 4 billion total mobile subscribers at the end of last year, 3.1 billion were unique phone owners, and the remaining 900 million were second and third subscriptions. I also reported that the total installed base of mobile phones in use was 3.4 billion, so 600 million subscriptions are only SIM card prepaid subscriptions, where the owner has a single phone and swaps between two or sometimes three networks, by inserting the appropriate SIM card.

Where Europe today is at 115% penetration rate, and even the USA is past 90% penetratation rate per capita, and leading countries like Hong Kong, Italy, Israel, Portugal and Singapore are past 130% penetration levels - and still growing; the question has been whether the Developing World countries would ever reach those levels of penetration rates. And still quite recently I had felt that there had to be a ceiling level for the less developed countries, that was significantly below that of the advanced countries, and that this theoretical ceiling would be well below 100%.

WRONG AGAIN

But numbers are my buddies. And they keep telling me stories, correcting me where my logic and reasoning bring me to faulty conclusions. The facts on mobile phone penetration rates for the Developing World have now brought very interesting evidence. Consider the range of countries and their current phone penetration rates: Ukraine is at 140%, Russia is past 130%, Chile has passed 120%, Colombia is at 110%, Malaysia, South Africa, Argentina have all reached 100% penetration rates for mobile phones. And all are growing strong. Now while these are not by any means the poorest of the countries of the world, they are all part of the Developing World, so they are definitely different from Western Europe or from North America in terms of economic resources. And where they lead, their neighbors do follow with somewhat consistent time lags. So what happens in Argentina, should also soon happen in Brazil; what happens in Malaysia, should soon follow in Indonesia; and so forth. And yes, Brazil is past 80% penetration rate and Indonesia is past 70%. The pattern seems to hold.

SUBSCRIBERS 4.001 BILLION TO 8.0 BILLION

 

Obviously those of the Developing World countries that are more affluent will reach 100% penetration levels first, as Malaysia, Chile, South Africa, Russia etc have already done. But the mid-countries like India, China, Indonesia, Egypt, Brazil will get there too, it will just take a bit longer in the next decade; and the very poorest nations like Zimbabwe, Afghanistan, Somalia and Bolivia will grow to far beyond 50% penetration rates.

So yeah, the planet is at 64% penetration rate now. We will essentially double that in the next decade. The mobile industry? by far, by far, by FAR the biggest economic opportunity for you, our reader, in your career and lifetime. But the next four billion won't buy iPhones or smartphones, they will not have contract accounts. They will be on prepaid accounts and cheap phones. But they will join the digital online connected society, with their simple or older phones. That is what I spoke about in Amsterdam.

So here is the big news. The next 4 Billion will not be like you and me. They will not be wealthy enough to own a PC and have a broadband connection and read blogs or do any Twittering on a PC. Over 95% of the next 4 billion will be in the Developing World, and while there will be of course an emerging middle class who may aspire to own a netbook, those tend to be wealthy enough to already have a subscription today. Those next four billion will be either those who do not have any connection today, at all, or else are second and third subscriptions to those who already have one today. Either way, the behavior of those new subscribers is distinctly different from what the mobile industry has grown accustomed to in the past decades.

SIMPLE OR SECOND-HAND, YET CONNECTED

The phones. Lets start with the phones. The next four billion will need ultra-cheap handsets. Phones that are very simple. But which have very good battery life - as electricity is not a reliable resource in the Developing World. The phones need to be more rugged and sustain more dust, dropping, handling, and are expected to last for much longer than in the hands of users in the Western World. Think of the ubiquitous Renault cars and Toyota pick-up trucks in Africa. Simple, robust, indestructible. That is what a phone needs to be.

And they are often shared. So we get the phones that are designed for family use, so a phone has multiple personalities, with passwords, separate memories. My messages and phone log and address book to be distinct from that of my parents or my siblings. With the phone even ringing in a different way depending on who you try to call, so we know who the call is for. That kind of innovation. Phones developed for the next 4 billion.

And there will be an enormous flood of second hand phones into this market. When the population is too poor to be able to afford even the simplest basic phone, they will be happy to use a second-hand phone. Some will be the hand-me-down phones from the kids, who migrate to the cities to find work, get their phones, then two years later, they upgrade their phones, and send the older phones back to their parents in the vilvage. Hand-me-down phones. Second hald phones. And others will be imported as used phones from wealthier countries. Brought in from rich parts of the world like Dubai and Abu Dhabi or Singapore or Western Europe etc. Where we have a glut of recently very advanced phones. Two year old phones.

Note some startling facts about this second-hand market. One, it is all GSM. Forget CDMA or any other technology. This segment is all prepaid customers, if they have a second hand phone, it is with a SIM card, meaning... GSM. And if it is GSM, then they will prefer the brand they most associate with good phones in these markets - Nokia. It will be a bonanza for two and three year old N-series and E-series smartphones, Nokia Communicators and mid-range featurephones. Walk by any big market in Indonesia for example and see all the used handset dealers, and look at their models for sale. You will be hard pressed to find many Motorola Razrs but miles and miles of Nokias in all sorts of European branded liveries, an Orange Nokia here, a Vodafone Nokia there, a T-Mobile Nokia next to it. And that sustains a healthy Nokia refurbish/customization after-market, the new covers, new keypads, SIM-unlocking services, etc.

If you think of selling apps to the wealthiest parts of this second four billion, forget about the iPhone or Windows Mobile or Android. No, the market is primarily Symbian, on Nokia smartphones, and the only viable secondary market is the Blackberry, for this second hand GSM market. No other smartphone has the penetration currently, to hope to reach the after-market is scale to sustain any apps market.

And remember, it is a market, large part of whom are illiterate. The UN estimates that the amount of illiterate people on the planet is 800 million. Bearing in mind that of the 2.7 billion who are yet to have their first phone, about half are under the age of 15 and thus most of them are too young to be counted in the UN statistics for illiteracy, its probably nearly half of the remaining un-phoned population who are old enough to own a phone, but are illiterate. And of course, beyond those 800 million are several hundred more millions of people who are barely literate. Not literate enough to handle the menu structures of a modern mobile phone, say to install MMS settings or to re-set WAP settings or to install a ringing tone.

Illiterate customers? Well, you can toss away the printed user's guide haha, useless to this segment. What it needs is what Nokia has started to do, is to pre-install user guides as video guides hard-coded to the memory of the phone. Even as the phone is passed along to new users as second-hand, the guide goes with the phone. And if well designed and produced, will assist with visual guides that even if you do not speak the right language, you can still understand most of the phone basic features.

And it means there is an enormous opportunity to provide basic services that work on the voice principles such as IVR, Interactive Voice Response systems, the voice guided and keypad menu driven 'customer service' calling center systems that we all hate. But imagine if you were illiterate, then being able to listen to the options and even if you do not know the numbers, that you can speak to the system and make your selection - that is a godsend. You can become connected, even if you happen to be illiterate.

Then really simple things become most valuable. The in-built light of the phone is now a safety feature, giving light in the darkness, when there are no street lights and robbers and many dangerous animals hide in the night. The in-built FM radio is often the very first FM radio that family has ever had. That is the level of income that we are now looking at, where the customer cannot afford to buy a newspaper, cannot afford a cup of coffee. Does not own a TV set, indeed the family does not own an FM radio. But has to get a mobile phone, and then, if that phone also comes with an FM radio built-in, wow, it changes so much of the life. Truly enriching the experience.

MICROJOBS AND MICRO-ENTREPRENEURS

Then we get again amazing stories. For example the young teenager who goes to school and is the first literate member in his or her family. The parents, grandparens, uncles and aunts cannot read. So the uncle wants to install a song onto their family phone, a ringing tone.  Yes, this is an universal need and desire, people in Africa can be just as passionate about music as we can be. And so there is that love song that they played at their wedding. The uncle does not own a CD player, an MP3 player or even a cassette player, to play the recording of that song which is so meaningful to him and his wife, their song. But the song is now available as a ringing tone, and he has heard it, and wants 'the' song, their particular song, to be his ringing tone. But the uncle cannot read, he does not know how to go to a site to select the right song and then to do the settings to get it onto his phone. So he pays the teenager kid a small payment, like half a dollar, to get the ringing tone installed on the uncle's phone. Obviously the uncle also pays the dollar or two that the ringing tone costs, that will be deducted from his phone account, he understands that. But he cannot read, and he needs the assistance of someone literate, to do the actual installation of the song. For the teenager, fifty cents is easily a week's worth of money. A microjob. The kid can capitalize on the digital economy, even though the kid does not own a personal phone, by helping his parents, grandparents, uncles and aunts, do their basic messaging and other written actions on their phones. And make some money in the process. Isn't this wonderful?

And there are the various micro entrepreneurs, who do things such as renting a phone for the village, when the village itself is out of radio coverage, but a nearby farmer has found that when you climb up into a tree, you can get cellular coverage in the tree. So he has gotten a mobile phone, set up a ladder to the tree, and uses a timer to measure how many minutes you call, and in effect has set up a small business as a payphone operator.

Or like the phone ladies of Bangladesh, who bicycle around with phone to all networks, and arrive to your village on a set schedule every day. If you need to make a call, you know she will be there at a set time. You tell her which phone number you want to call. She knows which network that is, and gives you the appropriate phone. Then she times your call and charges you by the minute. Makes a good living on the premium she charges, being in effect a 'mobile' mobile operator. I love these stories, how dramatically our industry can change the lives of those who never had connectivity before.

NO LAPTOP TO EVERY CHILD

I appreciate and applaud Nicholas Negroponte's (who also spoke at Picnic) initiative to promote one laptop for every child, but it is a futile attempt. Personal computers are a very inefficient way to provide connectivity and web access to the Developing World. First of all, a basic simple PC is not enough. We see how quickly our PC becomes obsolete. It is a horrible waste to consider the investment, even if it is 'only' one hundred dollars per laptop. The PC is pretty useless without software, so then the kids, especially as they grow up and should try to use those in their work - will need to purchase software and install that, and do that to what will be in effect an obsolete device. And then what good is a PC if you do not have internet connectivity. Broadband is very rare in most of the Developing World and expensive and unreliable. And even at a hundred dollars, such a laptop is far more expensive than a basic mobile phone.

No, the internet will not reach the rest of the world through cheap laptops, notebooks, netbooks and such devices. The internet to the next four billion will be almost exclusively on mobile. We just heard at Amsterdam from Vodacom in South Africa who reported that even in that very wealthy part of Africa, the regular users of the internet who access by phone outnumber those who access by any type of PC, by six to one, and outnumber those who access at internet cafe type of shared PCs, by five to one. These numbers skew even more to phones, the more poor the nation is.

The future of the internet, the next 1.4 billion users (currenltly there are about 1.4 billion total users of the internet), will be very strongly mobile phone based users.

That has important implications. If you want to build education services, to teach something for example, then the mobile is the natural platform, that most of your students will have access to. Basic phones, obviously, not iPhones and downloadable apps. Or if you want to deliver news services, or small business services like banking and credit and payment services, or say credit checking services, or whatever, then the phone is your platform, the only viable platform, not the PC.

It means the users will be accessing digital content on the three basic technologies that most phones today can support - SMS, WAP and MMS. Those are what you have to consider, not iPhone apps or 3G videos or bluetooth etc. SMS, WAP and MMS. The three standard methods to reach the next four billion. Very basic services but can be very compelling. Babajob of Bengaluru India won the Mobile Monday Jury award for best service in the world. A localized job-finder service, that runs on basic SMS and WAP in India.

If you want to deploy games, music, advertising, even social networking, and want it to be a success for the next four billion, then you build it on SMS, WAP and MMS. For all those who were dubious of my statement, please understand. The total internet user base is now 1.4 billion. Not all of those use email. But lets be generous and say 1.2 billion people have at least one active email account. So the active users base is 1.2 billion and the maximum reachable potential is 1.4 billion. All other internet services, like search or social networking or IM instant messaging are far smaller than these in total users.

Then compare, SMS has 3.1 billion active users, out of a total today of 4.3 billion mobile phone subscribers in September 2009. MMS has 1.4 billion active users with over 3 billion phones that can receive MMS messages, and WAP browsing on the phone, has 1.1 billion active users, out of an installed base of 3.4 billion phones that have a browser. All of these are growing their user bases at rates faster than 20% per annum! Internet user numbers are stagnant, barely 5% growth rates past few years. If you think that Google ad-words search is important or say advertising in Facebook, or indeed email as a digital communication platform for your business, understand the scale of mobile. And then remember, the next four billion will not own PCs, they will only be able to connect via SMS, WAP or MMS. Isn't it about time for you to get involved with these three globally giant communication methods? SMS text messaging, WAP basic browser services on phones, and MMS the multimedia messaging service often called picture messaging, which is a very potent advertising and media format. To reach the next four billion, these are your tools.


Ok, that is the written version of what I talked about in Amsterdam. If you want to quote any of the numbers in this blog, and need a source, except where explicitly mentioned, the source is Tomi Ahonen Almanac 2009. And if you do not know the size of the industry, I have a convenient 2 page summary of the major data, called a 'Thought Piece' about the mobile industry size. I am happy to email the free 2 page pdf file to you if you send me an email to tomi at tomiahonen dot com, asking for the Thought Piece on Mobile Industry Size.

Comments

[Giff Gfroerer, i2SMS]

Tomi,

You limit the "next 4 billion" to the developing world. What I am seeing in the states also would include the lower income group...those that do not have a PC in the home, but now have a mobile device. These folks never thought of the Internet, or went to the public library to access if they did. Now they are accessing via a mobile device.

This was an area I never thought would pay the extra $10 or $30 for the data package...but they are. That was an interesting revelation here in the states...

As always, thanks and
Cordially yours,
Giff

[brendan]

Tomi,
I agree with you wholeheartedly. There's a lot of opportunity out there, but its not the easiest to get access to them. there are some interesting developments of people (even Microsoft!?!) looking at this challenge in a different way. Funnily enough I met with some people today who are working to try and access this market in South Africa, and blogged about it here;
http://bit.ly/6DbNt

[Walter Adamson]

The built-in light and the FM radio - thanks for the wake-up call about getting our minds back to the things that matter and setting out the framework for this massive opportunity. It does seem like the sea of innovation is shifting to these shores.

Walter Adamson @g2m
http://walteradamson.com

[Robin Jewsbury]

Thanks Tomi for these figures. I've updated my counter site http://phonecount.com to reflect the 4.3 billion phone subscribers - my previous source for this number had it higher.

[mozami]

I just came across a service running in Kenya and soon to start in Rwanda that turns individuals into what you've called "micro-entrepreneurs" using text (sms) based micro-jobs. This isnt something that will happen to/with the next 4 billion subscribers, its underway right now. See their website at http://www.txteagle.com

[Marat]

Hi, Tomi! Glad you're back to evangelizing the developing markets!

Latest moves by internet giants in that direction - MSFT's OneApp, Google SMS services in Africa (http://www.readwriteweb.com/archives/google_launches_sms-based_services_for_africa.php). Definitely, they are taking heed of your advice, Tomi!

[jeux en ligne]

An excellent article and argument, we certainly need to rethink the discount rate for future sustainability! Also, you presented what can potentially be a pretty confusing topic in a very lucid and easily understood manner!

[Tomi T Ahonen]

Hi Giff, brendan, Walter, Robin, mozami, Marat and jeux

Thank you all for writing. I will answer each individuyally.

Giff - thanks. Good point about Americans, but actually, we are very close to total 'reading age' population penetration in the USA. There was the story a couple of years ago, of the homeless person having a cellphone and using it in an emergency. So the penetration rate the past 2 years has really shot up and is nearing 'total' penetration rate. Not quite there, but very close also for the US, so the big 'billion' numbers will not come from the Industrialized nations.

brendan - thanks, we agree obviously. Great link !

Walter, thanks. And of the FM radio, you may find my new blog today (nov 30) on non-FM radio, via the voice service, in India, to be very interesting too.

Robin - thanks. Actually, the ITU has since come out with the 4.6B number, so your site was more close to the truth than my blog was, sorry about that confusion..

mozami - thanks. You make a very good point, that the micro-employment is happening already today. I did not mean that it is a new opportunity 'only' for the next 4B, but I did want to point out, that the next 4B will be very different from those in the Western World today, and in that way, such micro employment opportunities will be an increasingly important part of that future. Thanks. We do agree. Sorry I was not more clear that this is reality today in not just Africa but Bangladesh, Sri Lanka, Philippines etc.

Marat - thanks! Yes, happily ever more of the story is now spreading. But we could still use more of the electronic echoes, haha...

jeux - thank you so much. I try to present this complex issue as clearly as I can, and obviously I have had many many times to write and re-write and refine the story in my 9 books and many more books-worth of text here at this blog...

Thank you all for commenting

Tomi Ahonen :-)