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How’s This For Early Prediction: Hillary Wins in 2016 (thats not bold but get this) by more than 12 points! Biggest landslide since Reagan beat Mondale in 1984. Yeah, here is the why - Ammended

(yeah this is another of my hobby topics, nothing to do with mobile or tech - or well, it has a little bit but not really worth reading if you are at this blog for my tech industry numbers and analysis. This blog is massively long detailed 2014 analysis of what the 2016 US Presidential election is all about, and this before the 2014 mid-term election is even done and we don’t know who the Republican candidate will even be.)



NOTE - blog has been ammended after the US Midterm election results to remove one element that I counted as a key to Hillary's win in 2016 (the part about Narwhal, Obama's get-out-the-vote engine). I am keeping the original text as written a week before the election so you can still read it, but striking out the text so it clearly is no longer relevant. Rest of this blog (and my forecast) still stands.

 

So lets talk 2016. The short version: Republicans will face a total drubbing, Hillary Clinton will walk all over them and win by a modern-era record landslide. Her margin of victory will be bigger than we’ve seen any first election of a President and biggest margin since the Gipper’s re-election over Walter Mondale, yes I mean the total wipeout that Ronald Reagan gave the Democratic challenger in his re-election vote of 1984. And I am totally convinced not only that Hillary will win and win by a landslide. I am even willing to call it, that this election will end with a result of 56 to 44 or better. Hillary’s margin of victory yes, will be at least 12 points in the electorate. And yes, I am fully aware that in his historic ‘landslide’ first election of 2008, Barack Obama only won by 7 points over John McCain (53 to 46 percent of the vote).

As to states won, roughly speaking Hillary win all states Obama carried in 2008 plus win about 6 to 10 more states than Obama’s landslide against McCain (excepting for the home state or states of the rival candidates, whoever those will end up being). I know perfectly well that US Presidential elections tend to be tight and close, Obama beat Romney only by 5 points and that was seen as surprisingly big victory. George W Bush beat John Kerry in 2004 by 3 points and actually lost the popular vote to Al Gore by 1 point in 2000. I know the general elections tend to be close and 2008 was an anomaly and the last time we saw a double digit blow-out was back in 1984 when Reagan was at his pinnacle of support in his re-election.

But I have done very deep analysis and thinking. I am confident in my view and I want to post it now, a week before the 2014 Midterms when several of these things are not yet obvious. I am certain that Hillary Clinton will win in 2016, she cannot be stopped. Some others also feel that way but I have not seen many argue that she’d win by double-digit margin. This blog is based on a lot of sound reasoning but probably many things you might not have thought of (yet) and some things many pundits will not even think of until long into the last weeks of the race two years from now. If you are also a political junkie and have followed US Presidential election, this may be of interest. Its the second longest article I’ve ever published on this blog (after that monster-long article exposing all the different ways in which Nokia was being mismanaged by its previous CEO Stephen Elop). I hope to give you plenty of insights that you can then use to monitor and analyze the election cycle as it starts now in early 2015. I think several of the observations I have here, you will find useful if you ever get into a discussion about US politics, because this upcoming 2016 election will be historic, but how historic, many pundits have not yet weighed in on all these matters. If politics is not for you, feel free to skip this and come back next time and I’ll have the usual techie-mobile topics to cover. (follow me over the fold to the full article)

 

iPhone 39.3 M units in Q3... sorry I missed this news a week ago

Oops, I missed this somehow while was travelling.

 

So Apple gave its Q3 results (talking calendar quarter of course so its July-September numbers) and this includes the first few days of sales of the new iPhone 6 models. How was it? 39.3 million units. Thats up 12% from Q2 and up 16% from the same period one year ago. That is not good enough, as the market is growing far faster, so iPhone market share is again down (year-on-year). Because of the iPhone launch pattern of one launch date per year, the quarterly sales move up and down a lot, so the Apple view should always be considered with the annual view. But yes, market share now in Q3 is about 12.4% which is down from 13.3% a year ago same period. Apple's iPhone market share year-on-year has now fallen 8 consecutive quarters, down from the peak market share of 23.9% in Q1 of 2012 to essentially half of that, 12.4% today.

For the full year iPhone is heading to approx 14% market share (down from 15.5% in 2013 and 19.5% in 2012). Yes, its the most profitable handset manufacturer by a huge margin, good for Apple investors but as the iOS once represented essentially a quarter of the global smartphone market, how long will programmers care about an OS that is headed to single digit market share by end of the decade (same level as where the Macintosh PC has traditionally been, and incidentially also the same level where the iPhone is when measured as market share of the total handset market, not just smartphones. Yes, nice growth but not as fast as the industry. Market share keeps falling. When will it stabilizea d to what level. I expect around 9% in a couple of years. The large screen phablets will not restore iPhone to growth, they may stall the decline for a quarter or two. Then it again continues. But for Apple to achieve a stabilization of its market share erosion year-on-year, would require roughly 64 million iPhone sales for the Christmas Quarter now. Even that would only give a market share annually of about 14.5%. And it would require a herculean jump from the 51 million iPhones sold last year in the Christmas quarter. I think more reasonable is something nearer 58 to 59 million.

Ok, iPhone sales up with the launch of the new models, as usual. The sales boost not enough to reverse the continuing slide in market share. The company is doing fine, but iPhone is headed to ever more obviously a niche luxury product for the rich.

Bloodbath Q3 Snippets from the Smartphone Wars

So a few quick notes from Bloodbath wars.

Huawei reported Q3 numbers at 16.8 million smartphones. That is up 8% from Q2 and gives a preliminary market share of 5.3%. Huawei's handset business is profitable.

Microsoft reported 9.3 million Lumia sales for Q3 which is up 21% from the transition-quarter Q2, and gives Microsoft a preliminary market share of 2.9%. They may pop back into the Top 10 depending on how Sony and Motorola do. Microsoft of course is still making huge losses with its Lumia unit. MIcrosoft is also now in the process of removing the Nokia branding of its Lumia smartphones so new models will be identified as MIcrosoft Lumia (only, no Nokia). For all the Microsoft propaganda about its 'growth', note that this ex-Nokia smartphone unit hasn't even recovered to the level of smartphone sales it sold in Q2 of 2012, more than 2 years ago. So don't drink too much of that cool-aid. The Lumia unit is not in 'growth' it is in 'recovery' and has far to go before it would have its head above water-level. 

Xiaomi reported very strong continued growth, another 24% from Q2 and hit 18.7 million units of smartphones sold and has a preliminary market share of 5.9%. Xiaomi is profitable of course.

And a word about Nokia the networking company. They are dropping hints that they might come back to handsets as soon as the exclusivity period with Microsoft using the Nokia brand is over. That would be nice.

Also in the rubbish bin: Amazon. They write off most of their investment in smartphones and now sell their Fire smartphones in bargain bins. (Told you so?)

Full Q3 numbers of course will be done when we have all the data (expect it early to mid November)

My prediction of the 2014 US Elections: DEMs hold Senate with 2 seat margin, GOP loses house seats and Governorships

(This blog has nothing to do with tech). So yeah, regular readers know one of my passions is the US elections. And we're now ten days from the 'Midterm' elections that occur at the half-point of any 4 year US President's term. At this election there is thus no President to vote for, but Senators, Governors, and various elected officials from Congress to Mayor etc. The election is on Tuesday 4 November. I'm of course monitoring the campaigning and just want to post my thoughts here less than two weeks from the election on what I think will happen (and why).

So a bit of the basics. This year 2014 was (and still is) technically going to be a 'bad' year for Democrats. There are more registered Democrats than Republicans, but Republicans vote more reliably than Democrats. The Democrats tend to show up well for Presidential elections but not for the Midterms. So there is usually a significant drop-off in the Democratic turnout (or actually of both, but far more so for DEMs). At the last Mid-terms (2010, two years after Obama was first elected in 2008) the Republicans (aka GOP, the Grand Old Party) had a big 'wave' of enthusiastic 'Tea Party' supporters (extreme right wing) and they got such a good election result that they took over the House of Representatives which they still today hold in majority. But the DEMs hold the Presidency until at least 2016 and they hold the Senate right now with a nice 55 to 45 margin (there are 100 Senators, 2 for each of the 50 states).

And why is this relevant? The US law-making is structured so, that any law has to pass both houses, so the House can write the law, then send it to the Senate who also agree with it. Only if both 'houses' agree, the law is then sent to the President for his signature. Equally the Senate can write the law but then has to send it to the House of Representatives for approval before it can be sent to the President for his signature and only after that it becomes law. The House is now controlled by Republicans. They hate Obama, and they want to pass laws that would limit what Obama can do, or undo things he's done so far, like repealing Obamacare the new healthcare system. But as long as the DEMs control the Senate, if the DEMs just don't approve that law the House of Representatives has written, it will never even get to Obama's desk. So that has been pretty much most of the past 4 years, the GOP passing all sorts of silly laws that have zero chance of acceptance by Democrats, but now the Republicans can go back home to their voters and say 'we passed this law but the Democrats are blocking it.'

That would change if the GOP gets hold of hte Senate, then they could send laws to Obama and then try to bully him to sign the laws even if he doesn't like them. Or if two thirds of the Senators and House Members agree, it is then a law that doesn't need the President's signature. 

So if you've 'enjoyed' gridlock in US government like the threats of government shut-down and not paying its bills etc, if the Republicans get to the Senate too, that kind of power-games could greatly increase. Or its also possible that the President and the Republicans reach a compromise like Bill Clinton did back when he found himself in this situation late in his Presidency, and they actually did get good laws passed when both were willing to compromise.

So, anyway, currently the Democrats hold the Presidency and one of the two chambers, ie the Senate. And the Republicans hold the other chamber ie 'Congress' (aka The House). Now ten days from today the election is mostly about who will control the Senate for the next two years. And here still more details. The Senate term is 6 years, so one third of the Senate is voted for any election that runs every 2 years. So sometimes a Senator is in the Presidential election year, but then the next time that Senator's re-election will be in the 'Midterm' year and so forth. Meanwhile Congress only has a 2 year term so they have to be re-elected every election every two years.

In many states, members of Congress have been able to manipulate their election 'districts' so, that in a given State that has say 40% Democratic support and 60% Republican support and 5 Congressmen, the 'normal' distribution would be 2 Congressmen for DEMs and 3 for GOP. But they've re-drawn the voting districts so, that the DEM supporters are all bunched together. So now one Democratic Congressman or -woman will win that one district by for example 80% but then there aren't enough DEM supporters left and the GOP safely wins the remaining 4 seats. And these seats are now all heavily Republican so they also become ever more 'pure' not having to think about compromise - the Tea Party thrives in such situations.

Senators however, have to get votes from half of the state (2 Senators per state). So while there still can be this kind of 'gerrymandering' shenanigans, the Senators tend to be much more 'mainstream' and not as extreme as the members of Congess can be. And as the USA is rather evenly split, slightly more Democrats than Republicans but in mid-terms Republicans vote more reliably, the rough balance of this election should be close to even. No real panic for DEMs.

Except that this was a rare election for the Senate that happens by coincidence to greatly favor the GOP. There were a couple of very well-liked DEM Senators who suddenly announced they are quitting after many terms. So seats that used to be 'safe' are now 'open'. And worse, this year's Senator class includes the Obama wave of 2008 (six years ago). So many first-time Senators elected with Obama are now up for re-election. And those were often Democrats who were competing in states that usually vote reliably Republican. So recently the polling has been very consistently suggesting that the Democrats will lose many Senator seats. And the averages of those polls, as reported at Real Clear Politics, have had a consistent prediction that the Republicans will win enough seats to take over the Senate.

And I do not disagree with those polls. I am reasonably satisfied that the consensus is accurate and based just on polling and public opinion, if the election was held today, the Republicans would take perhaps 7 seats and have a 51-49 majority in the Senate.

The movement in the last days is also problematic for the Democrats ie looking good for Republicans, if you subscribe to the theory that in tight races, the last days will tend to break for the 'normal' condition of that State. If it is Connecticut, that is a reliably Democratic state so the last voters will tend to vote more Democratic than Republican. If the state is Kansas, that is a reliably Republican state and by the same logic the last decisions will tend to favor the normal voting condition in that state. And again, there are many Democratic seats now contested, which are in normally-Republican states (like Alaska, Arkansas, Louisiana and North Carolina). These freshman-Senators had the luck to come in with Obama's big election wave but are now quite vulnerable.

SITUATION NOW

So ten days to the election, there are a few tight races that will decide is it going to go one way or the other. It think by now its almost certain that DEMs will keep the Senate seats they have in New Hampshire (Shaheen) and North Carolina (Hagan). These are very tight contests and the Democrats are up by just a point or two but also their leads have been rather consistent. With the advantage I'll discuss in just a moment, these will turn from very tight to close races that DEMs will win.

But the Republicans will take back several Senate seats that have been considered close. I think they'll take back South Dakota (open seat), Louisiana (Landrieu), Arkansas (Pryor) and Alaska (Begich). There are three Republican seats in play, which were all surprises (were not supposed to be competitive, ie were supposed to be safe for the GOP) ie Kansas, Kentucky and Georgia. In Kansas the Democratic candidate dropped out, so that the contest would be between the Republican incumbent and an 'Independent' candidate that the DEMs hope will then mostly vote with them, not voting with the GOP in the Senate. This Kansas vote I think will end up going to the Republicans so Roberts will keep his seat. The thing I talk about next here, will not apply to the Independent challenger.

I PREDICT GOP PICKS UP ONLY 4 SEATS IN THE SENATE

So what of the last, and essentially the tightest races? I think Democrats will hold the Colorado seat (Udall) and the Iowa seat (open was held by Democrat) which will be won by Democrat Braley. And I think Democrats will then stun the GOP by stealing two seats that were supposed to be safe GOP, the Georgia (open, was held by Republicans) and biggest insult to them, Kentucky (McConnell). Why Kentucky is insult? Mitch McConnell is the Senate Leader of the Republican party. So after these changes, the Democrats would have 52 seats and the Republicans 48 and the Senate control would stay safely with the DEMs.

WHY WOULD THE POLLS BE SO WRONG?

Ok the polls are very tight in these races, one or two, maybe three points is the margin currently, so I'm not predicting huge upsets, but yes, for this many Democratic 'wins' when they are so vulnerable, yes, this needs some explanation.

I base this on the 'ground game' ie the GOTV - Get Out The Vote - part of the campaign. This has always been a strong suite for the Democrats. Usually Republicans have more money, and will do heavy TV ads and robocalls etc, but the Democrats have more volunteers and on election day especially, have more 'troops' to help get-out-the-vote. 

But surely that is factored into the polling data? Yes, it is. By 'normal' models yes. The pollsters have their own mathematical models by which they adjust the raw polling data, to then reflect how well do the various parties get their voters to the polls on election day (and as I said, DEMs are usually worse at this on Midterm elections than the GOP).

RETURN OF THE NARWHAL

So what then? Ah, its that Narwhal project from Obama 2012 campaign. Obama doesn't need Narwhal anymore but of course Obama wants to ensure his last 2 years are not living hell on Capitol Hill, so he much prefers that the Senate stays Democratic. So he's long ago given the Narwhal system to the Democratic party for use in these Midterms and no doubt, for Hillary's 2016 campaign and the future forever after.

What is/was Narwhal? I wrote two deep analysis of it after the 2012 election. Read the details here. But briefly, Narwhal was the largest-ever database and analytics system designed for use in elections. Massively expensive, it was one of the largest computerized database systems on the planet so rivaling say the IRS tax systems of the USA, or the spying tech used by the US spy agencies, far larger than say banking or credit card loyalty system data etc. 

Narwhal collected data on all viable voters in the USA. If they were registered or not. If they had a preference by party. If they had voted before. If they had expressed any indication of support for either party or candidate. And then Obama's team contacted personally each candidate that might be willing to support Obama (only removing those who were clearly fully Romney supporters). And Narwhal collected two attributes for every registered voter: The score of how much they liked or disliked Obama - on a scale of 1 to 100. And the score of how likely were they to vote on Election day, also on a score from 1 to 100.

Can you imagine how incredibly powerful this database then became? Narwhal also had the contact info, mobile phone numbers, snailmail addresses, Facebook accounts, Twitter handles etc etc etc. And they entered into Narwhal the info of who had voted. So with early voting, and then election day voting, they kept updating Narwhal on real-time data on who has already voted and who is yet to vote.

So for example on election day, Narwhal directed the volunteers to hit the most beneficial voter contacts. If someone had voted, no sense wasting the call or visit. If the voter was a Romney supporter, no sense in wasting the contact. If the voter had not voted, but Narwhal had a high probability that this voter will vote still today (such as will vote on the way home from work) and is already a high Obama supporter, then that person doesn't need a reminder contact today. Again no wasted effort.

Then Narwhal had left those who were leaning towards Obama or unsure, and were not quite certain if they'd bother to vote on Election day. Those people were reminded and contacted and if necessary, the Obama team arranged carpooling transport to help them get to the polling place, etc.

If you are reading this from a modern digital/social/mobile marketing background, you might think this is quite 'reasonable' and perhaps 'normal'. It is totally not. You know what Romney's team did? What every other campaign in history has done? What Obama's own campaign still was doing in 2008? They did it the old-fashioned way. They monitored how the voting was happening, and then they directed phone calls (in the case of Team Romney, these were not humans calling, it was robocalls ie recordings) to those counties and districts, where the population was more Republican than Democratic.

No accuracy or intelligence. Some calls went to numbers of people who had already voted. Some would go to the wrong people (ie calling a Democrat accidentially, from the Romney campaign, urging them to go vote) and most people don't listen to the robocalls when they notice its a recording anyway.

Yet Romney's Project Orca was able to direct more Republican voters to the polls. They were able to see success. The Romney campaign DID achieve more votes against Obama than what the McCain campaign had done four years before. The Romney campaign did believe, based on what they observed and measured, that they were winning the election.

But Obama's team knew. The Narwhal system is also the world's most accurate election forecast measurement system far far more accurate than the largest consumer polling done by Gallup or Nielsen or any consumer polling organizations. Narwhal accurately predicted the outcome of every state election and got even the percentage split always within one percentage point. No other forecaster was that accurate. So Obama's team knew as the last months of the campaign were running, exactly what was the score, and they knew on election day exactly how it was going. They were not freaking out at all. They were calmly confident, they were going to win almost as many states as Obama won against McCain four years before, in that landslide election. And Obama did this when the economy was so bad, no incumbent before had ever managed to win under such bad economic conditions. And Obama the law professor non-businessman was going to win easily over Romney the megamillionaire businessman when the Economy was the biggest worry on the minds of voters in 2012.

Thats Narwhal. Thats why DEMs will now eke out wins of a pecentage or two in elections they were supposed to lose by a point or two.  And yes, the Republicans have not yet built their Narwhal clone. 

I did my analysis on this blog last year about the impact of the Narwhal project to the final election outcome in terms of votes added. I wrote this "Team Obama powered by its Narwhal machine, made twice as many contacts, hit three times as many of its own registered voters (or voters leaning Democratic), achieved four times as many contacts with its own voters, and the real number where it matters, ended up activating five times more voters than Team Romney, powered by its Orca machine." (emphasis in the original). Here is the full analysis including all numbers. So the direct impact of Narwhal vs Orca was a net gain of 8.1 million votes to Obama. Obama's actual margin of victory was only 5 million votes. If Romney had kept Orca but Obama didn't have Narwhal, we'd now know the US President as Mitt Romney whose razor-tight election victory would have been 51% to 49%. Instead Obama won by 52% to 47%. The technical edge of using this advanced super-targeted voting-day activation machine is worth about 3% of the vote on election day. Based on that, I am calling it that DEMs will keep Colorado and Iowa (as well as New Hampshire and North Carolina where they now have a slight lead) and Democrats will stun the Republicans by stealing two seats both in reliably-Republican states, Kentucky and Georgia.

Obviously this is just my hobby-guess. We'll know in ten days. But I will be watching the voting come in and lets see how I did in my first-ever public forecast of a Midterm election (I've done a few of US Presidential elections of course in the past). After November 4, if the Senate new balance is 52 to 48 in favor of the DEMs, my forecast would have been correct.

Also based on the same reasoning, I predict many gains in Governorships and some gains in the Congress but not enough for DEMs to re-take the Congress. Republicans will still hold majority in that chamber.

(there were several techincal errors in the original posting which were kindly pointed out by reader Baron95. I have corrected those)

Quick Links to the Most Popular Major Statistics in Mobile and Digital

Welcome to the Communities Dominate Blog. As this blog is the largest free source of statistics and data on the mobile and digital industries, some may just want the link to the latest stats, I am now including this link to the most popular of the major stats, permanently placed here on the top of the blog. The latest mobile industry total stats are here (including subscribers, handsets, revenues, services and mobile internet). Here are the latest smartphone market share stats including installed base.Then we also have the unique owners of smartphones regionally. Here are the app store economics numbers. Then we have the complete stats on computer platforms (PC/tablet/smartphone). If you want cameraphone and digital picture stats they are here. And the biggest industry players of the mobile industry are here. Some prelim AR (Augmented Reality) stats are collected here. Those looking for a few of the specifics, here is the famous 'we look at our phones 150x per day' stat. And here is the 'pictures' version of how Nokia died. My latest 4 year forecast highlights and annual mileposts are here. For those who want my latest 2016 version of TomiAhonen Almanac wih 100 tables and graphs of the industry stats (note ordering page shows older version, we ship the 2016 edition of course) and latest version of TomiAhonen Phone Book is here. And PS - any journalists & bloggers & infographic makers & consultants - you may freely quote any stats published on this blog. Enjoy!

Remember that 150x per Day Statistic? Now there is a survey of how many times we look at our phones (corrected)

Ah, I love statisics. Regular readers of this blog remember I was the first to break the 150x per day statistic we got from Nokia, and then that particularly even number came back again and again from different sources such as T-Mobile, AT&T and just a few weeks ago, from Australia's Telstra. Always the quoted number, very 'even' 150 times per day and never accompanied with any published survey info. The situation got so bad that I did my 'feasibility' analysis here, showing that yes, for all mobile phone users based on other published mobile phone user and usage data, that 150x per day was indeed plausible and in fact probably very close to the truth. And I kept begging the industry to go survey the actual users. There even was some controversy when Mary Meeker published the 150x number referencing me haha.

Well guess what? Now we do have a measured number. This time its not for all phone users (smartphone and dumbphone as the 150x number was). This is only for smartphone users (but now smartphones account for more than half of all new sales globally, so soon the world will have more smartphones in use than dumbphones so the smartphone-only stat is increasingly relevant. And while we are on that, I am projecting that roughly year 2019 the world will see the last dumbphone sold. The 'installed base' will then continue to have a dwindling number of dumbphones still used, in particular in Emerging World markets well into the next decade but the days of dumbphones are counted).

So what is our new number? Tecmark in the UK surveyed 2,000 smartphone users and found the average person looks at their smartphone 1,500 times per week. How does that compare per day? The study counted specifically the average at 221 times per day. This is not just an interesting headline-baiting 'gut feel' number, now its a real measured number. 221 times per day means that for every waking hour, we glance at our phone on average once every 4.3 minutes of every day. The same survey also found that the average UK smartphone user looks at their phone for 3 hours per day - thats 18.8% of total waking hours we now have our eyes on the small screen.

So this is massive news. Memorize the new number now, its 221 times per day. And for those who think that is preposterous, if you want to see how we get to such immense numbers, here is my blog from last year when I examined how can we get to 150x per day. That helps you understand what all kinds of things we were already doing.

(This article has been updated and corrected on 9 October 2014. An earlier version had the number as 214 times per day, when early reporting only gave the 1,500 number which I divided by 7. Now there is reporting on the actual daily number, 221 times, which the article now reports)

Mobile is the Magical Measurement Machine - Role of Mobile in Big Data Future: now cameraphone used in anything from measuring bra size to counting trees

I saw a couple of interesting Tweets last week that reminded me, that I should do an update of how mobile is in one of its magical abilities, as a measurement tool. As I teach in my workshops around the world, among its many amazing powers, Mobile is a Magical Measurement Machine. And yes, we now have fresh evidence that mobile can achieve cool and weird measurement achievements, from faster and more accurate measurement of trees, to accurate measurement of bra sizes for women.

AUDIENCE MEASUREMENT

Obviously mobile being digital and interactive, it can be used to measure its own consumption. So we can measure the amount of downloads of our app or ringtone, the response rate to our message or the click-through rate of a given banner ad etc. That yes, mobile’s own content can be measured and some of it is collected to absurd level of accuracy, automatically by the system. The value of a single domestic phone call in our network in our home town, that runs a minute, can cost say 10 cents in the Industrialized World or something like 3 cents in Emerging World. Yet the billing system will often measure that call’s duration by second. So the increment of detail is collected up to the value of one sixth of one penny in say Europe and America, and down to value of one twentieth of a penny in many Emerging World countries. And for that ridiculously low-value activity we collect the full phone number of the caller, including country called from, network called from, the physical location of the call typically to the accuracy of a neighborhood in the city, then the duration of the call, and then the called number, that person’s network and country, and if it was within our network, also the neighborhood of the city where that caller was when he or she received the call. Plus plenty more details are collected in case its a specialized call type like a premium or free call, etc. And all this data is collected for every one of us 7.6 Billion mobile phone accounts on the planet of 7.2 Billion people, for every one of our 3.3 calls on average placed per day, automatically. And yes, if its a short local call, the value of that call is less than the cost of one paperclip.

We do, yes this industry, collect enormous value of data on items up to that level of meaningless value, as the cost of a paperclip. Even paperclip makers do not collect that kind of detail, they don’t bother to track their business to less than boxes of paperclips. The telecoms billing system for mobile is the most complex and detailed and powerful data-collection machine ever devised, at whole orders of magnitude more detailed and powerful than the data collection systems at banks, credit cards, loyalty card programs etc. And they also collect incredible amount of detail about our behavior. But nothing comes close to the data that the 600+ mobile operators/carriers in the world do, automatically and in their normal daily business. But thats not what this blog is about. That is just a comment on the fundamentals. There is nothing as powerful as the mobile telecoms billing systems to collect consumer data. It is not by any means ‘optimized’ to collect the most useful data, most operators/carriers are woefully inept at capitalizing on the data they can collect, and they are utterly hopeless at monetizing that ability. But lets not kid ourselves into thinking that some online web service can hope to collect the same level of detail as accurately and thoroughly as mobile telecoms can. Not even Facebook or Amazon (while they can collect enormously valuable information far better than anything that existed before the internet).

I led the project that created the world’s largest multi-operator billing system early in my career when I still worked for the carrier/operator side of this business in Finland in the 1990s. So I got very deeply indoctrinated into what all data we can collect into our ‘CDR’s (Call Detail Record)s and explored early ways to expand that ability such as adding the number of data items that could be collected into the same CDR string as we as an industry back then were going from numeric to hexadecimal etc. (the same two digit ‘code’ if using only numbers gives you 100 choices, or 99 choices and ‘none’ ie zero, while hexadecimal uses the same two digit space but expands the data items collected to 256 choices ie 255 actual items plus zero). So yeah, I rolled up my sleeves and got my hands dirty doing really that level of project, a multi-operator (multi-carrier) billing system across systems from multiple vendors and produced the world’s largest multi-operator billing at the time, a world record. And later when I was leading Nokia’s Global 3G Consulting Department, that knowledge was very valuable in what kind of data a carrier/operator could capture - about its own services or those services it co-developed with partners.

USE MOBILE TO MEASURE OTHER MEDIA

I kind of forgot about the billing for a while, as the mobile internet and related mobile data capabilities brought us vast new technical abilities. But then about ten years ago, I got back into looking at data collection, when it became obvious to me, that mobile could be used to measure other media. Some of the early uses were for example from New Zealand, where a TV station ran a contest to let viewers win nice prizes including cars. What viewers had to do, was to send in an SMS text message whenever they spotted a given logo on the TV screen. Now, the consumers had to pay regular consumer-rate SMS costs for these messages (they were not like votes on American Idol where we pay extra, ie ‘premium SMS’) but still, as the TV station flashed those codes several times per day on its two channels, a consumer might quickly run up surprising SMS costs on the phone bill. So to compensate the TV station also sent by return an equivalent value in digital content, so if you sent say 10 messages, you had earned enough credit that you could then buy a ringing tone etc. This meant, that the consumer felt the service was essentially ‘neutral’ in its costs.

What did the TV station learn? Gosh, this was far more powerful than anything that Nielsen boxes could ever hope to capture. Now they knew not just if the TV was on, but was the consumer actually watching the TV show. Because we don’t share our phones with others, not even our spouces, they got perfect viewer data on whether one family member watched the whole time or one left, and another came in to watch. They could flash the logo at the beginning of a TV show and the end of it, to discover if the same person watched the show from beginning to end. They could run the logo on the ad break, and see - measure - accurately - how many of the viewers of a given TV show actually stay to watch the advertising. And as TV shows program sequential programming, ie they hope that we stay after a popular TV show to watch the new show that comes right after it, they could also measure that. In other words, of all who watched the TV show from 8 to 9, how many stayed on to watch the next show that starts at 9. And the sample audience was enormous, far far bigger than any Nielsen or other TV audience survey ever before in history. Massively bigger meaning the sampling errors were reduced to infinitessimally small.

That was when I became convinced that mobile is the most accurate measurement tool for any media. This can just as well be done for radio or newspapers or magazines or even billboards and cinema. Even the internet can use mobile to measure its audiences. And about this time, Tony Fish's company AMF Ventures also came to the same conclusion, when they compared the accuracy of media measurement. They said that on TV about 1% of the audience can be measured accurately. On the internet about 10% of the audience can be measured accurately (we use multiple accounts, delete our cookies, sit behind firewalls, use multiple devices, access from many locations, and many people share the same PC especially for home PCs in families with kids). But on mobile AMF Ventures found that 90% of the audience can be measured accurately. No, mobile is not perfect but it is awefully close. And nothing else is anywhere near as good. Mobile is a whole order of magnitude more accurate than the internet, two orders of magnitude better than television. And let me just mention here Tony's brilliant book My Digital Footprint if you want to read the best book on what mobile data is, and what it can do by someone who really understands this industry, not by some misguided American 'big data' dude who is clueless about the true power of mobile.

CONSUMER MEASUREMENT

But it then went beyond mass media, and my next astonishment came from Japan, Lars Cosh-Ishii of Wireless Watch Japan told me about a Marlboro campaign, about 8 years ago. Marlboro which sponsored Formula 1 and Ferrari at the time (this was when Michael Schumacher was still driving for Ferrari) had a very special competition, every time you opened a pack of Marlboro cigarettes, under the lid of the box, there was unique code which you needed to send to Marlboro via mobile messaging. The codes were unique per cigarette package of 20 cigarettes. And every time you sent another code, increased your chance to win a prize. The grand prize was a visit to Maranello Italy as Ferrari’s guest, a factory tour, of course seats at the Monza Grand Prix, and meeting Michael Schumacher.

Cool contest, yeah. But can you see what Marlboro was doing? It never knew its end-users personally, nor how they consumed the cigarettes. Now as they got per mobile phone number, the unique codes per box, they knew what type of cigarettes you smoked. They knew how much you smoked. But they also knew if you bought Marlboro by the Carton (you personally sending in all codes of the packs of cigarettes in one carton) or bought the packs individually. They could then further tabulate data on whether you tended to buy your cigarettes from a vending machine or a store, and how many differrent stores you might use, when they cross-tabulated user data by store-data of where the given cartons of Marlboro had been shipped. Etc etc etc etc etc. The most thorough and valuable and accurate consumer data ever collected in the cigarette industry.

Today we see this all the time. That is why Pepsi asks us to scan the QR code on the bottle or their advertisement, why there are SMS codes under the bottle top, etc. Its a variation of that same idea, but yes, mobile is a magical measurement machine. One of the ways we can measure, is if we incentivize our audience to participate in some interactive campaign or contest and we can collect amazing data from them on their consumption. And what comes next? This is what Omo the detergent from Unilever did in South Africa in 2013. They ran a similar ‘text to win’ campaign with every package of Omo detergent purchased. As they knew the size of the detergent package and the frequency of that specific housewife’s purchase pattern, they started to send reminder messages a little before the current package ran out. Was it successful? Try this: 60% increase in repurchase rates!!!!! That is why Winston Wang, the Director of Innovation at Anheuser Busch InBev (the world’s largest beer brewer) says “Mobile is measurable like nothing before.” And it is what for example author Peggy Anne Salz now writes in her latest book, The Everything Guide to Mobile Apps that app developers should use SMS (and MMS) to engage with their users.

MEASURE IDENTITY

Well, we all know how much I love SMS and mobile messaging but we can do far more with mobile as the magical measurement machine than just ask our audiences to interact with us. Obviously we can spy on them with apps. I am not going to bother with that here now. But let me show some more magical things we can do. I was just in Sweden earlier this year to watch the Stockholm Marathon (to support my nephew running in it) and stayed at one of the Clarion Hotels right in downtown Stockholm. That was one of the first hotels where they let you use you smartphone (if it has NFC like now finally Apple is also bringing to iPhone 6) for operating the lock on the door to your room. No need for plastic key card. That is one level of measurement, we can assign digitally (and even turn on and off remotely) the access rights of a key to a hotel room (or office or rental car or our home). Assa Abloy the world’s largest lock-maker has been offering NFC phone operated locking equipment for many years now.

And then really, seriously, mobile is powerful at very simple levels too. It need not all be Sci Fi iPhone 9 time-travel and teleportation stuff. We don’t need to go for NFC or an app. Somethings can be so very simple. Like the pharmacist chain in the USA, Rite Aid. they noticed that all of their customers had mobile phones. So they created a parallel number for their loyalty card. You could register your cellphone number as the alternate number to the loyalty card, and then stop carrying the plastic loyalty card. As there are no identical mobile phone numbers in use on the planet - yes the mobile phone number is the nearest thing to a universal identity number - Rite Aid lets you now just quote your mobile phone number at the cash register, to collect your loyalty card benefits. The flip-side is, that Rite Aid now has a direct channel to your pocket, and will for example send you reminders when your prescription is running out. So understand how powerful mobile can be, and that we don’t need to always make it Augmented Reality or NFC or QR Code or something fancy. Even just the basic mobile phone number has incredible value and can help identify us. In other words, to help measure the loyal customer behavior...

And what can we do with this? Gosh, if the phone is that accurate it can identify us, it can be used for example as legally-binding signature for contracts, as they do in Spain and Turkey for example. Yes sign a contract by sending an SMS text message! How efficient is that? How much faster than faxes or couriers. Then in Norway you can file your taxes by SMS! Again, how much better is that than any alternative (as long as your tax return is not very comples with international holdings and various trusts and corporations etc haha). And the ultimate was in Estonia. The first national election where you could vote by SMS! Every eligible voter in Estonia when registering, could opt in to register one mobile phone number as their official voting phone, and then use that to do the vote. Of course this is safer easier faster and more accurate than any other paper or machine we have for voting. Why isn’t every country doing this?

TRAFFIC SPEED

So lets go back to Sweden, I was there a couple of years ago delivering a keynote to the Location-Based Services industry event in Malmo and learned of another interesting measurement. In Sweden the traffic authorities noticed that they can get extremely accurate traffic data by monitoring the speed of handset movement from one cell site to the next. Blackberry was one of the first to deploy a commercial system that generated this type of data for municipalities. So rather than install radar guns at various points on the roads, they could just take grouped data of say 10 mobile phone numbers at a time, take the average of what speed are they moving from one cell site to the next. Any which moved at walking speed or say bicycle speed are removed, and the remaining numbers are averaged. We get essentially perfect average speeds on highways in current real-time data. With a little bit of tweaking, this kind of measurement can get essentially a perfect traffic picture for any city (with obviously the help of at least one major operator/carrier which would need to provide access to this type of data).

Note we are not spying on the consumers, nobody’s privacy is invaded, nothing is pushed or sold at the consumers. We don’t need to know even the real phone numbers of the people, so the carrier can create virtual phone numbers or virtual identities, just so, that the one same phone number is tracked on one journey, and when it is moving clearly on highways, we measure that movement. If that one phone suddenly slows down while most others on the same route continue at normal speeds, we know that one driver now pulled off to a petrol station or something else, so we stop counting that phone for hte highway average speed. But if there is an accident, then all cars on those lanes suddenly stop, that is cause for traffic monitors to find out what happened and send a police helicopter to go take a look etc. There are plenty of commercial applications of this type of technology, for example many car insurance companies are now starting to offer ‘pay as you drive’ insurance plans that then monitor the actual driving behavior (with GPS and cellular data obviously and with sensors both in the car, and synchronized to the driver’s mobile phone number).

CREDIT SCORE

That all is still very obvious and not that ‘magical’. Now lets get to the magic. The first really cool or weird, depending on your viewpoint, way to use mobile telecoms data for amazing measurement is with an American data analytics company called Cignifi. They say they can calculate a credit score based on our mobile phone behavior. Note, they are not trying to spy on our calls or messages by reading them or listening to us. They really do it by the communication pattern. So, a person with a healthy credit status will behave in a certain way, in terms of incoming calls, outgoing calls, returning calls, etc. A person who is on the brink of bankruptcy behaves very differently, clearly avoiding certain calls, not returning certain calls, and calling some numbers frequently etc.

Now, I have no knowledge of how accurate Cignifi is in reality, but they claim they can calculate an accurate credit rating by analyzing just the last month of phone records data. The Cignifi system is already being used in Brazil and Tanzania. But imagine specifically that problem for a credit card company or a bank. In the Emerging World there is considerable need for credit, there is plenty of new affluence but there is very little ability to prove credit-worthiness. Issues of identity, address, employment, taxes, etc are all murky at best. So where we in the West can rather easily see how an adult person will have collected ‘credit score’ data like changing jobs, making payments on some credit instruments or having history with salaries, bank accounts etc that kind of info is very rare in the Emerging World and very many truly credit-worthy potential customers can not be accurately assessed. Until mobile. Mobile is a Magical Measurement Machine.

CAMERA AS MEASUREMENT INSTRUMENT

Again, I could go on and on about this, but lets move to the less obvious sensors. We can of course imagine using the network data, the location-data, the telephone and messaging history data to create inputs for our measurement. But what about the other sensors on the mobile? We can use the microphone (there are security systems built around voiceprint). Shazam was the first company to use the mobile phone microphone to listen to music and then compare that to their database of recorded music, to identify the song that is playing. And so forth and so forth. So lets move to the camera. Now we really do get magical stuff.

My first fave camera-as-measurement example came from Japan a few years ago, when NTT DoCoMo introduced its cameraphone calorie-counter. Their engineers had created an artificial intelligence based system that identified the 1,000 most popular dishes eaten in Japan ranging from sushi to a Big Mac at McDonalds. And the system very accurately identified what was on your plate just by snapping a picture of the food you were eating. Then the system automatically calculated the rough amount of calories in that dish you were eating. Wow, this is cool. This is magical. You can just take a picture of what you eat, and the system collects the calorie-count for you. Mobile is the Magical Measurement Machine.

BUY WHAT SHE IS WEARING

So then even more Japanese cameraphone magic. Our Alan Moore (co-founder of this blog and my co-author to the signature book to this blog, Communities Dominate Brands) writes about Tokyo Girl (aka Girlswalker) the youth teen mobile magazine in Japan, in his latest book No Straight Lines. The service is just amazing on every level but let me just skip to the cameraphone magic. They run twice a year the fashion show in one of Japan’s largest indoor sports arenas, packed with screaming teenager girls all crazy about the latest fashions. So, one of the gimmicks is, that when the fashion model walks on the catwalk, you can snap a picture of the dress with your cameraphone, and click-to-buy the item, in your size, in the color you want. How magical is that? If you like something the fashion model is wearing, just point your phone at it, and buy (obviously these girls have the Osaifu Keitai mobile wallet on their phone, as I explained in my blog about mobile money around the world. This is what the iPhone 6 is bringing now to America, Japan has had it for literally 10 years).

But yes, how is that possible? Teens at the back of the stadium pointing a cameraphone at the stage will only see specs, how can it possibly identify the model on the catwalk and get us the right clothing? Its a trick! They don’t use the camera, it only seems like it. They are synchronized to time. The show producers know which model, wearing what clothes, is on the stage at any given point. If you click then, you are served the link to the clothes of who is scheduled to be on right now. They don’t need to ‘see’ who is on the stage. But teenage girls don’t need to know this. They just know, take out your phone and be ready to snap a picture when nice clothing is on the stage, you can buy it on the spot.. Isn’t that cool? We don’t necessarily even ‘need’ accurate camera images to use the camera as a sensor haha.

MEASURING FOR BRA

Which brings me to my two newest fave stories. First lets go to naked women... Apparently (I don’t know as I’m a man) 80% of women wear ill-fitting bras and they mostly do it because measuring for the right bra is a cumbersome procedure with strangers measuring you very intimately. So cameraphones to the rescue! An American company called ThirdLove has developed an app that requires taking a couple of pictures of the chest of the lady (naked, in private, via selfie, without discomfort, at home) after which it then calculates the exact proper bra type. The app was built by an ex NASA engineer and the company includes some ex Google staff, it seems pretty sold. Apparently women hate bra shopping so much they’d rather have their eyebrows waxed haha... (Again, I can’t comment, we men don’t have either of those problems). So. Measuring by the camera sensor? That is magical. We can measure food, we can measure ladyparts and if you think thats too touchy-feely, you want something robust to measure. How about industrial forestry?

MEASURING TREES

Finland is one of the big forestry, pulp and paper producer nations in the world (70% of Finland’s surface area is forested). At one point in the 1980s, we said in Finland that the Times of London, the New York Times of the USA and Pravda of Russia were all printed on Finnish paper. If your tennis racket or hockey stick is made of wood, there’s a good chance that wood came from Finnish woodmills. Nokia was once selling toilet paper (among its many product lines before it decided to focus on telecoms). Some of the world’s largest paper and woodmill companies are Finnish with operations from Canada to Indonesia. Now trees are particularly ‘non digital’ goods. Most things that come out of factories can be marked in some way that can include bar codes or NFC chips or something but trees, gosh, they just grow in the forest. So if you are a forest manager and need to run your business professionally, you do need to know about your tree inventory and their age, when to cut the trees etc. And measurement in the past meant sending experts into the forest to count. A tedious manual process.

So enter the cameraphone. Finnish company Trestima has built an app that uses the camera to take pictures of the forest to be measured. What normally would take a whole day of inventory work can now be done by 40 minutes of work taking pictures. The system is smart enough not only to detect the types of trees and their ages and their density, but also far more accurately. Accuracy is more than doubled compared with traditional methods. Mobile is faster, easier and more accurate. By using the camera. Mobile IS the Magical Measurement Machine.

As we head to the information age and we approach ‘big data’ etc, there will be lots of ways we can collect data and many sources for it. But mobile is the most prevalent sensor network today (3 times more mobile accounts than total internet users globally). Facebook is nice but SMS is 4 times larger by active users than Facebook. Cameraphones have ever more powerful sensors the Nokia 808 Pureview and Lumia 1020 have their monster 41 megapixel sensor if you wanted really sharp detail like say magnifying tiny print on a page. This is called ‘megapixel microscopy’ ie using the mobile phone camera as a magnifying glass. Similarly now the Samsung Galaxy K Zoom and for example Sony’s accessory lenses for the Xperia, offer 10x optical zoom - thats a genuine ‘binoculars’ effect in your pocket, every day, everywhere you go. There are infrared and microscope attachments to smartphones already.

If current cameras can do this kind of magic, where are we in a few years. The number of sensors on the mobile phone make it an incredibly powerful instrument for collecting data. The connectedness allows it far more utility and power. We are very early on that journey to what all the mobile phone can measure. And as management discovers the power of mobile as a measurement machine, it will embrace it, because anything that can be measured can also be managed.

Survey of Global Market Today for Mobile Wallets and Mobile Money - In aftermath of Apple Pay launch

Yeah the old joke still holds true: to see what will be in the next iPhone, just look at a 4 year old Nokia flagship smartphone. And so it goes with NFC and with mobile wallets. So yes, lets do an update about where mobile money, mobile payments and mobile money stands today, as the tech world is suddenly mesmerized by the latest iMagic called NFC.

Do you think NFC was amazing in the new iPhone 6 series smartphones now, and the Apple Watch? Sure, why not. Except that Nokia had NFC on its flagship five years ago. And like just about everything in this industry, that NFC too was first done on a mobile phone... in Japan. 10 years ago. Oh, you then argue that no Tomi, you don’t understand Apple, its the ecosystem and the mobile wallet. Fine, Apple launches Apple Pay, its mobile wallet in the USA in 2014, a country with established banking, credit card and ePayment industry. And some of those players are included as Apple partners (some banks, some credit card companies) but not all, such as Paypal was not part of the partners. What about Nokia? It launched Nokia Money not in the advanced nations of the Industrialized World where we don’t desperately need yet another payment mechanism. No, Nokia launched Nokia Money first in India - the world’s second largest nation by population, the third largest handset market, and the world’s largest country if measured by the size of how much of its population is unbanked. Nokia Money was not designed to run on NFC at the time, it ran of course on SMS, still today the most used form of mobile payments that works on all phones, not just smartphones. Nokia Money partnered of course with some local India banks and grew rapidly in India achieving 13% market share.

(Then Nokia’s new CEO, Stephen Elop, killed the Nokia Money project and decided to abandon Nokia’s announced commitment that all its smartphones would have NFC - this because his beloved Windows Phone could not support NFC even as Nokia’s supposedly ‘obsolete’ Symbian of course could. Elop made a total of 33 strategic blunders in the disasterous 35 months he was in charge at Nokia. Can you imagine if Steve Jobs was running and he could have reported that look, we have NFC and we have mobile wallets which Apple will only do years from now - gosh Steve Jobs would never have killed those amazingly forward-looking leadership positions Nokia held. In fact no sane CEO would have destroyed Nokia's leadership positions. I discuss several of Elop's biggest strategic mistakes in this blog: Worst CEO ever).

So yeah. Now that Apple decided finally to give us NFC and mobile wallets, suddenly the US based tech press is very eager to talk about mobile money. Paypal is in the news as it is going to be spun into its own company. Starbucks reports that 14% of its US revenues come from loyal customers who have installed the Starbucks mobile wallet (using the payment mechanism of QR codes). Square just announced that it has added SMS functionality so that Square users in the USA can now send money also to those mobile phone owners who haven’t installed the Square app. And almost anyone who digs even modestly into mobile payments, finds the astonishing stats from Kenya, around their seven mobile payments systems led by M-Pesa (which runs on SMS and USSD). So whats the story in balamory? Lets ask the guy who wrote the world’s first book on mobile money and payments. Wait, that would be me (Pearls Vol 3: Mobile Money).

44 MILLION NFC MOBILE WALLET USERS IN JAPAN

So yeah. I do love talking about the simple technologies that work everywhere, especially SMS, but lets leave M-Pesa and others for later in this blog. The excitement now is Apple Money running on NFC on iPhone 6 models. How radical and clever is this technology? Does it have legs, can it become big. Well. Lets see.

Japan’s largest carrier/operator NTT DoCoMo introduced FeliCa branded Osaifu Keitai (mobile phone wallet) running on NFC literally ten years ago, in 2004. As always with new payment systems early on its a bit of a chicken-and-egg problem, not enough users and not enough payment devices and not enough point-of-sales terminals. But its been steady growth and today there are over 500,000 retail points where you can use FeliCa (or its plastic card based cousin, Suica, similar to Octopus, Oyster etc NFC payment plastic rechargable cards). So yeah, every Seven-Eleven, every McDonald’s, every petrol station, every train ticket machine, etc accepts FeliCa in Japan. The vast majority of handsets sold in Japan have had NFC chips on them, and the active user base has kept growing. The latest numbers I’ve seen are 36 million Osaifu Keitai users on NTT DoCoMo, 5 million more users on rival KDDI network’s Osaifu Keitai Au and yet another 4 million more on the third network, Softbank’s Osaifu Keitai. All use the same FeliCa compatible NFC technology so any retail cash machine has only to be upgraded once and all three network mobile wallets will be supported.

So Japan has 45 million active users of NFC based mobile wallets. They have of course major Japanese banks involved and major international credit cards like Mastercard. Japan is the 10th most populous nation at 126 million people. As a percentage of adults (who have essentially 100% mobile phone ownership) 44% are active users of NFC based mobile wallets today. Note, Japan obviously is an industrialized nation that had widely used reliable banking and credit card systems in place when FeliCa Osaifu Keitai was launched in 2004. If you want to project this to the USA, it would suggest roughly 104 million US adults once the same level of NFC phone penetration rate and a single nationally compatible mobile wallet standard was deployed (and most daily retail outlets also be upgraded to this one standardized NFC payment system).

Incidentially Japan is by no means the only NFC mobile wallet success story. In neighboring South Korea, the largest operator/carrier SK Telecom has 12 million active users of its Syrup mobile wallet. Rival carriers/operators have their own, KT’s Moca wallet for example has 2 million users. The total stats are very similar to Japan, about 41% of South Korean adults are NFC mobile wallet users (and essentially all consumer retail points of sale accept NFC payments). In fact South Korea was the first country where the credit card industry stopped issuing plastic cards as standard components of credit service, now Visa, Mastercard etc ask consumers do they want the free plastic card mailed to their home address. The credit card is always automatically enabled onto the mobile wallet by default.

 

NFC based mobile wallets also exist in Taiwan, Singapore etc and are being rolled out now in China. China’s national payments provider UnionPay just launched an NFC based system with Samsung smartphones as the launch devices. We don’t have a lot of reporting on the value of the payments transactions but SK Telecom of South Korea reports that the annual payments processed on Syrup are just shy of 1 Billion US dollars in value. In very rough terms we could estimate that about 60 million active NFC mobile wallets are in use in Asia and their annual transaction volume is likely in the scale of 5 Billion dollars. The vast majority of purchases are of relatively low value, from train tickets and soft drinks at vending machines to convenience store purchases, fast food restaurants and petrol station fill-ups. Berg Insight reported last year that NFC based mobile wallets existed in 13 countries around the world. And once a mobile wallet is deployed, multiple branded cards can be installed upon that wallet from credit cards to bank debit cards to loyalty cards. SK Telecom reports that its 12 million Syrup mobile wallet customers hold a total of 45 million separate cards on those accounts, so the average Syrup user has activated 3.75 virtual cards on the mobile wallet.

So yeah. Cool. So far I’ve been focusing on NFC based mobile wallets but there are plenty more mobile wallets on other technologies. How many globally? Grand View Research counted 230 million mobile wallet accounts globally which procesed 611 Billion dollars worth of payments last year. But as Gartner reported, only 2% of global mobile payment transactions are currently on NFC based systems, we should of course examine the other 98% of mobile payments while we talk about mobile money. And there is plenty more to mobile payments than just mobile wallets. Now how do we transfer money if not NTC? Those methods are primarily SMS, USSD, mobile web, QR Code, and mobile app. SMS and USSD work on all phones, mobile web (like using Paypal on your mobile phone) works on most phones which now have a browser. QR codes and apps only on smartphones and mostly require an app to be first installed onto that smartphone.

SMS IS THE KING OF MOBILE PAYMENTS

So yeah, lets move to the giant. SMS. SMS text messaging is actively used by over 6 billion mobile phone users (or in reality, used at mobile phone subscriptions/accounts as one human may have several accounts/SIM cards and use SMS on both/all of those). As we just heard from Ericsson’s CEO, the planet now in September has 7.6 Billion mobile subscriptions in use. SMS active user base is 79% of all mobile accounts. And before you say ‘Whatsapp and Facebook and the youth’ yeah yeah yeah. A brand new study out last week, of 7,000 youth surveyed by Niche in America, found that 87% use SMS. The reports of SMS’s death are vastly premature. So yeah, sending an SMS is not making a payment, but making a payment by SMS is essentially as easy as sending an SMS. Which is why it becomes so widely used.

So a bit of history. The world’s first SMS based payment system was launched in Finland by Coca Cola in 1998 when they enabled two Coke vending machines to accept SMS payment. The telecoms tech was ‘premium SMS’ and you sent an SMS to the number printed on the Coke vending machine. Seconds later you heard the ‘clunk-clunk’ in the machine and a fresh cold Coke can dropped out of the bottom of the machine. Next month on your phone bill you’d discover a new line item ‘Coca Cola purchase’ and the price was the same as paying cash. Who wouldn’t love this? Coca Cola has rolled out SMS payments in most countries where it operates and reports that when SMS payments are enabled the same vending machine typically produces 14% more sales!

So how is Finland today? BookIt reported last year that 3.7 million Finns use mobile payments. Thats 86% of Finland’s adult population. The most common uses are various vending machines, public transport and fast food, as well as for paying all sorts of online and virtual goods and services. Finland of course has all the main forms of mobile payments but SMS continues as the most popular. One great example is Finnair, which invented the mobile phone based check-in 13 years ago (also, initially, via SMS but now available on anything from apps to mobile web to of course still also, SMS). That service has evolved and expanded. Today Finnair offers automated paid - but discounted - upgrades whenever any flight has any business class seats unsold. The discounted seat offer goes first to Finnair’s platinum-level frequent fliers on that flight, then to the gold members, etc. More than half of Finnair’s passengers use mobile check-in services. 23% of Finnair frequent fliers who have received an offer like that have already purchased such a discounted upgrade! They can pay by frequent flier miles or by mobile payment. Instantly on one click. The convenience is remarkable, especially comparing to attempting to enter 16 digit credit card info on a touch-screen keyboard in a hurry at an airport while juggling luggage. And if you know anything about airline economics, the business class seats are where profits are made. The combination of a loyalty program, mobile wallet, and personalized, timed special offer can yield astonishingly strong results in profit (and inventory management, all fully automated, no humans involved).

And that loyalty card and mobile payment bundling is a powerful combination that is only starting to be understood. Starbucks and Uber got together in London on a magnificent offer. If you buy a Starbucks coffee on your Starbucks mobile account, the coffee shop will toss in a free Uber ride from your location to the nearest Starbucks. How cool is that? And how brilliant in cross-marketing and support, where obviously both brands want to cross-pollenate their loyalty card customer bases, with no risk of cannibalizing each others’ businesses but rather where they truly are complementary.

AH AFRICA

So then lets see how fast this can explode if all the elements are just perfect. Lets now go to Kenya. M-Pesa was launched in 2007 by Safaricom the Vodafone affiliate and Kenya’s largest mobile operator/carrier. An instant success it soon led the world’s mobile payment statistics and its creators won the Economist Innovation Award in 2010. Today Kenya has 7 mobile payments solutions, all primarily working on SMS and USSD with M-Pesa still the biggest. The nation of has 26 million active mobile payment accounts according to the Central Bank of Kenya. If we just assign the number as percent of adult population (over age 18) it would be 97% of adults. In reality of course some have multiple mobile payment accounts, especially any solo merchants or entrepreneurs, and especially in an African nation where 39% of the population is under the age of 18, many teens also work and will have mobile payment accounts. But on an oranges-to-oranges comparison to the Japanese, Korean and Finnish stats, yes, when measured total mobile payment accounts as percent of total adult population, Kenya will pass 100% penetration rate this year. And for those who worry about the survival of the traditional banking industry yes, the number of mobile payments accounts exceeds ‘real’ bank accounts in Kenya by more than double.

Thats not the big number no. The mobile payments revenue volume is the staggering number. Kenya’s GDP is 44 Billion US dollars in 2013. And how much was the value of payments that was processed through mobile? Central Bank of Kenya reported that it was 22.4 Billion dollars last year. Yes, Kenya’s economy has now passed the half point, where yes, more than half of the economic value of the nation’s output transits mobile phone accounts. 51% in just six years (and rising). And just before you think this is a total anomaly and it can’t possibly replicate, many African countries follow in close lock-step. The next in line, Zimbabwe is already at 43%. Mahindra Comviva just reported at the Mobile Web Africa conference three weeks ago in Johannesburg, that 10 African countries have passed the level of 25% of the population already using mobile payments. And in Africa this will inevitably be SMS and USSD based systems. But seriously, yes, salaries paid by mobile, taxes paid by mobile, school fees, mortgages, car payments paid by mobile.

Worldwide KPMG just counted that 80 countries have already launched mobile money services. The oldest full mobile wallet (running on SMS) is from the Philippines. Smart Money launched in 2000 and few months later rival GCash also launched. Today Philipines have more than 10 million mobile money wallets on the two rival platforms. One of my fave stories comes from Rio de Janeiro in Brazil, where local ice cream merchants have for many years now accepted SMS based mobile payments because the cool people hanging around at the beach will not bring their wallet, but will of course not go anywhere without their mobile phones. So if you want an ice cream now its no problem.

 

And still, back to the Philippines, one of the many overwhelming advantages of mobile as a payment system over all others is how versatile it is. Take ATMs/cash machines. The Philippines has 10,000 cash machines/ATMs where you can draw cash if you have a bank account or credit card. But the Philippines has over 1 million top-up merchants to do your mobile account top-ups. They all can act as ‘cash out’ points, ie human ATMs/cash machines. Yes 100 times more places where you can pull out cash from the mobile account, than if you have the plastic of a debit card from a bank or a credit card. And the same is true of course of merchants themselves. You don’t need any expensive cash machine or credit card reading machine. All you need is some old second-hand worn Nokia basic dumbphone and it can act as the receiving end of any mobile payment for the merchant. Brilliant!

KILLING CASH

So then lets examine the pending death of cash. Coins were invented in what is now Turkey, three thousand years ago. But we will live to see the end of coins as a minted payment instrument in most countries. The race is on. But hold on, let me explain how this started. Lets go to Estonia. About six years ago Estonia saw wide use of criminal scam related to parking. A man dressed in what appeared to be official police uniform was standing at a parking meter. The parking meter itself had an official-looking sign saying it was broken. The policeman took your cash, issued you an official-looking receipt and you went away confident the parking was legal. When you returned the parking meter ‘broken’ sign was no longer there, your car was ticketed and when you complained to the judge, you found out that the ‘receipt’ was a fake and obviously nobody could find that ‘police officer’ either. Clever scam. It depended on cash payment of course.

So as Estonia had been using mobile payments with parking since 2000 and all Estonians had mobile phones by then, the government decided to end that crime with a simple law. No cash was accepted anymore to pay for parking. The parking meters were changed and now you could pay by credit card or e-cash or of course, the most popular way to pay - SMS. The crime wave vanished.

Then in 2009 Sweden saw a sudden spike in crime where bus drivers were held up by gun-point or knife-point and robbed of the spare cash they had intended for use as change when passengers paid for tickets when boarding the bus. The total value robbed was always modest but the threat to the drivers was considerable. So Sweden had to consider how to safeguard the drivers. Should they install USA-style bullet-proof glass cabins for the drivers or why not just adopt what Estonia had done. As Sweden had used mobile payments since 1999 and all Swedes had mobile phones and many other electronic payment systems also were very popular, they just copied Estonia and outlawed cash as payment in busses. That crime vanished overnight.

 

So we’ve already seen actual (small) industries eliminate cash as accepted payment mechanisms while allowing mobile payments to replace it. So then fast-forward to the race to kill cash. Visa has already said that their view is that mobile is the future of payments (not plastic). But how close is that cashless society? The Dutch retailers association is lobbying the EU to allow Dutch retailers to stop accepting Euro in cash denominations. The Swedish health lobby (led by members of the pop band Abba) is asking for Sweden to outlaw cash because of the filth that accumulates onto cash. But Turkey went the furthest so far. Their parliament established in 2011 a target date for the Turkish Lira cash production to end. How far into the distant future is that date? Year 2025. Yes. We may be only 11 years from the beginning of the end of cash. It would be poetic justice if that was Turkey as the first coins came from Turkey 3,000 years ago.

Now its a race, will Kenya do it first or Zimbabwe or Somaliland or will it be Turkey or Estonia or Finland or South Korea or the Philippines or Sweden or Netherlands or Japan. I can promise you it won’t be the USA, they are so sooooo far behind in this race. Americans still use cheques in consumer payments haha (seriously!)

So yes, nice that even Apple finally ‘gets it’ about mobile money. Nice that they have created their mobile wallet but a proprietary version built on top of industry-standard NFC system so once again, Apple isn’t standard and now a merchant has to opt for Apple Pay only? Come on, even in America that is foolish. Its like selecting Betamax after VHS has already established an unbeatable lead. But rest of the world will definitely utterly ignore Apple’s selfish proprietary NFC mobile wallet and go for standardized payments systems instead. Why can’t Apple for once do a standardized solution right out of the box?

Will mobile money be big. You betcha! Will it eventually kill cash and plastic. Of course it will. But in Industrialized nations where we have many reliable and widely used payments alternatives, the path to mobile money will be slow. In the Emerging World where alternatives are few, costly and far inbetween, mobile money is growing at breakneck speeds. But yes, mobile money is inevitable and one day we all will receive salaries, pay rents and taxes on our mobile phones and yes, we will use them like we use plastic and cash today. The current dominance of SMS and USSD will eventually subside. QR codes are a good short-term solution but NFC the inevitable long-term most suitable solution, which can process payments very fast to suit rush-hour subway train type of uses (like they do in Japan today).

So thats the update on mobile money. If you’d like to see one of my presentations on ‘Imagine Perfect Money’ it is here. And if you’d like to see my ebook about mobile money Pearls Vol 3: Mobile Money is here.