February in mobile is a good month for insight. Analysts have gotten a month to look at 2010 numbers, and companies are gearing up for GSMA and eager to show insight into the industry. So what are some of the latest numbers worth noting?
1) Smartphones. Smartphones. Smartphones.
Gartner said smartphone sales rose 72% in 2010, and Android has now surpassed Symbian as the largest smartphone operating system. In Europe and the US, 50% of all phones sold are smartphones. This contains no surprises, but what is interesting is to see that a significant portion of Android’s growth come from “white box” manufacturers, i.e. mainly Chinese based manufacturers that are building cheap phones (with Android) in small production batches, effectively competing with big brands. This trend may continue and pose increased fragmentation challenges due to Android’s customizable nature.
2) App downloads and mobile internet usage: We’re only at the beginning
Former Morgan Stanley internet guru, Mary Meeker, now hails mobile as the biggest game changer in history. No surprise for many of us who are attached to the industry simply because of that. The presentation she gave contains a good number of hockey stick graphs. One of the more interesting slides (below), shows how a mobile experience done right can displace PC:
Japanese trends do not necessarily catch on in the rest of the world, but I would expect to see similar patterns on services that are well tailored for 24/7 activity – if done right.
One of the most interesting observations here, which has been known for some time, but provides a good visual, is the discrepancy between installed based and app downloads when comparing smartphone platforms:
Of course, what is missing here is the availabilityof applications, which manufacturers and OS providers are keenly aware of. This will not hold for long. Windows mobile will certainly get a huge uplift with the Nokia alliance. And despite BlackBerry being a business focused platform – and therefore you may not think an increase in usage will come due to the nature of the users – business users want apps too, and it is a matter of RIM getting their act together to get developer support and create well functioning distribution outlets.
3) The importance of in-app billing
Google has expressed disappointment with revenue generation on Android, which when you compare free to in-paid conversion on apps (which is largely attributed to in-app billing) on Android vs iPhone becomes very apparent:
Google wants to improve the in-app purchase process, and companies like Visa owned PlaySpan are already on the ball there. Clearly convenient billing is a huge factor. This should not however been a surprise to Google. Anyone in the mobile industry are keenly aware of the massive consumer preference to use SMS when paying for mobile content. And experiences have shown that despite the method being very expensive for certain purchases (for online games for instance, mobile often comes with surcharges), the convenience factor far outweighs the costs for consumers. Expect to see a lot of focus on this area going forward, especially if the forecasts of a $15bn market this year is going to be fulfilled.
4) The promise of mobile advertising getting closer (maybe)
This seems to be predicted at the start of most years, and 2011 is not an exception. Part of the $15bn revenue potential will have to be fulfilled through advertising, as Gartner points out that 81% of app downloads will be free. Forrester believe this will finally be the year where brands will set aside dedicated funds for the mobile platform, and according to Juniper, a large part of these funds will be spent inside mobile games.
There are signs however, that the platform is not that mature. One survey found that half of all ads were clicked by mistake. And certainly, the maturity of mobile advertising varies wildly by market, depending on the level of sophistication in the market. Many agency execs I’ve talked to in Australia feel that it is largely an irrelevant platform, citing a small addressable base and low click troughs. But part of the problem lies when brands and advertisers ignore parts of the market by only selecting some platforms. For instance, what is interesting to note is the success case of the game Angry Birds, who really took off as an ad supported version on GetJar, and later on Android. This should show advertisers and games developers that non-Android and non-iPhone platforms are important, and that as an advertiser you want full reach, not just selected smartphone platforms. It does not help that brands and agencies sometimes in the rush to get something out deliver poor experiences, which perhaps explains why 40% of users are unhappy with branded apps.
5) Will there be enough apps?
Various studies have found some interesting observations on app usage. One study found for instance that the average iOS users has downloaded 60 applications. Another one found that 26% of apps are used only once– which means a lot of dead space on iPhones and other phones for sure.
But that’s just a sign that this is still an early market. More and more companies are finding apps are strategic, and even eco-system providers like Google are realizing the strategic importance of developing your own apps. Could there be a 1:1 relationship between apps and websites? Perhaps not, but apps as a delivery mechanism of a service is here to stay – and no HTML5 roll-out or other alternatives will prevent that.
Will there be a lot of ‘dead space’ apps? Sure. Will discovery continue to be a headache? Definitely. But the winners – as it is online – are those that provide a superior user experience to the most numbers of users. In a web browser, the second part of that equation is farily easy, with perhaps language being the biggest barrier. On mobile it is not – but the day of making compromises on which mobile platform to choose is soon coming to an end – as reach will not only become a competitive advantage – it will become a requirement. Any doubters should look to Vision Mobile’s report on their megatrends for 2011. Mobile has shifted from the “Telecoms World” to the “Software World”, to where winners are those who provide consistent experiences across any device . Let the games begin.