Paging the Stats Police: Business Week sloppy stats miss 135 Billion dollars

I hate sloppy journalism. I've met over a hundred journalists and I know most are very dedicated to their job, and are experts at doing research and getting their story right. All of us professionals are totally dependent on the research and writing ethics of journalists to get their stories right. That is why it so upsets me when a major global publication, like Business Week this week (Nov 7, 2005), prints a story with such blatantly wrong numbers.

On page 20, in its big story about cellphones, Business Week writes "There are now about 2 billion mobile-phone users in the world, and market penetration is above 50% in advanced countries." Sounds reasonable, yes. Except that the fact is, that only ONE country in the advanced countries - Canada - is anywhere near that low number. Canadian cellphone penetration is at 48%. Even USA penetration is now at 64%. The NEXT laggard country after these two stone-age wireless societies, is France with 74% penetration rate. The Western European AVERAGE penetration is now 95%. This March the UK became the 30th country in the world to reach 100% penetration, and the UK is hardly an "advanced" country in cellphones. The advanced countries like Sweden, Italy, Israel, Singapore etc are already at 110% penetration rates and the world leaders Taiwan and Hong Kong are past 120% penetration rate.

As regular readers of our blog know, the 100% penetration is not counted by households - the metric used for example for broadband penetration or digital TV penetration. No, the 100% penetration is measured against the total population (per capita) thus in the UK at 100% penetration rate there is one cellphone for every 1 year old baby that cannot talk and doesn't know numbers; as well as a cellphone for every 101 year old great-grandparent who no longer can hear and has forgotten numbers. How can it be? These don't actually use those phones, but an increasing part of the young employed adult population has two or even three phones and subscriptions. Yes, the stats don't lie. And yes, even the most advanced countries like Hong Kong and Taiwan at 120% penetration, are still GROWING.

I don't get upset if a journalist writes a story with a small error. We're all human, those things happen and its ok. An error of 10% or even 20% of magnitude is reasonable in a very rapidly changing environment such as mobile telecoms and would never get me bothered to blog about it.

But come on. Business Week said 50% when the real number for advanced countries is more than 100%. They got the numbers wrong by a missing HALF of the total number. These are not secret numbers, they are regularly published by the market reserach organisations, the national regulators, the industry associations etc and easily available for a little bit of research. Shame on you Business Week!

I can imagine what happened. The authors - who shall remain unnamed simply because they got half the story right (luckily they did mention that the world already has 2 billion cellphone users) probably researched only their backyard - ie USA and Canada - and then jumped to that faulty conclusion, that if this is true for North America, it must be true for advanced countries in Europe and Asia as well...  Sloppy journalism. Sloppy! Shame on you Business Week.

Now why bother? Is it relevant? Lets put the numbers in context. The actual population of the developed countries (North America, Western Europe, Japan and the Tiger Economies of Asia-Pacific, and Australia and New Zealand) is about 955 million people. Their actual cellphone penetration (remembering the USA is the biggest country among these, with the second lowest penetration rate) is 760 million phones and an average penetration rate for the whole western world thus of about 79.6%. (and for context, the global per-capita cellphone penetration is now 30%)

So even if we don't argue about which countries are "advanced" in mobile telecoms (probably the top 15 countries) but we take ONLY the average level, and give Business Week its maximum latitude for its error. Even so, when they say 50% penetration (478 million) they miss out on 282 MILLION people!!!  Note the scale, its almost exactly the size of the USA total population. I wonder if Toyota would like to read a story where a Business Week journalist forgot to add USA sales of its cars to its total business?

Multiply that 282 million cellphone users by the Western world average ARPU (Average Revenue Per User) of about 40 US Dollars per month, you get annual service revenues of 135 BILLION dollars !!!  Yes, this Business Week technology journalists forgot to count economic data that would be more than all revenues earned by the Hollywood movie industry including box office, video rental, DVD sales etc; plus the worldwide music industry sales; and the global videogaming industry software and hardware... COMBINED. Lets read a story about the global size of the media industry and foret to count music, movies and videogames. That journalist would risk being fired for such incompetence. Note that with the ARPU, I am again at the minimum level of the error. It is even bigger if we add the further billions involved in the handset costs for those 282 million cellphones.

Shame on you Business Week! Do your homework before you write your stories. Some business people actually believe your writing.

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