Tablets and the evolution of Mobile advertising

The growing popularity of tablets is encouraging not just print publishing and television service providers to go mobile, but advertisers as well.Tablets, thanks to their larger screens and more engaging media experience, will account for 53% of mobile advertising dollars in 2014, compared to 47% for mobile handsets. That number is expected to grow to 60% by 2016.

A quarter of tablet owners clicked on ads while using apps, and 29% purchased extra content. Additionally, on average, tablet owners buy 1.7 paid apps  per month, while smartphone users buy 1.1.

A recent study by the Yankee group provides the directions towards tablets propelling and growing the future of Mobile advertisements and media.

•    Tablets are leading content owners, service providers and advertisers to go mobile. Tablet usage extends beyond games into print publishing and rich media. A fifth of tablet app downloads are for shopping and banking—an indication of the device’s potential for mobile commerce.

•    Over two-thirds of tablet owners are frequent video watchers. Pay TV services, producers and advertisers are rising to the challenge with optimized apps and dual-screen functionality. Video viewing is set to increase as mainstream adopters—who are even more video-oriented—buy into tablets.

•     Tablet ad revenues will surpass handsets by 2014. Mobile advertising works on tablets. In-app ads are especially effective and generate responses from a quarter of their target audience.

•     Over a third of tablet owners purchase multimedia from application stores. Apple’s App Store is a key strategic advantage and remains a killer incentive for developers to prioritize iOS. No surprise, then, that Google turned the spotlight on Google Play in the Nexus 7 tablet launch. The application store forms a decisive battleground for ecosystem rivals.

MVAS: The next wave of growth (Part I)

With traditional revenue sources for the operators like voice and messaging at bottom levels, the subscriber churn, as a result of mobile number portability, it is quite natural that the operators are taking a safer route and betting on VAS as the next big opportunity to sustain and succeed in the market.

According to PwC, the mobile VAS market in India has the potential to generate Rs.55,000 crore by 2015. As per V&D100-the annual survey of the Indian communications industry-the Indian cellular market for FY11 is estimated to be around Rs.102,230 crore, ie, $22.3 mn and this market is growing at the rate of 16.6%. Of this total amount, VAS or non-voice revenue for mobile operators contribute around 13%, which translates to Rs.13,026 crore. It is expected that the Indian VAS market is bound to increase to Rs.32,000 crore in FY15. All this will happen only when operators provide stable 3G and 4G network and quality of experience so that data services improve considerably.

The Indian VAS market is also bound to grow as operators have already invested around ’100,000 crore in terms of 3G and BWA auction, and they are presently in search of a series of killer applications that will help them recover their auction money. Not only this, they are also looking at killer applications that are less bandwidth consuming and can bring a large chunk of revenue.

Growth Drivers
The launch of 3G services in India opened up a plethora of opportunities for VAS players. With 3G services, the operators will now be able to offer richer services such as mobile internet and video, as there is greater bandwidth available to deliver an enhanced service experience. While the operators will continue to offer pre-3G existing VAS, such as ringback tones, messaging, and infotainment services; there will be an opportunity to offer services that require more video or image based content, such as telemedicine, wireless teleconferencing, and e-learning.

VAS will also play a critical role in bridging down the digital gap between urban and rural masses, with operators coming up with innovative offerings to suit customer demands in all regions. Of late, VAS has also helped in digitally empowering the masses as it continues to play a major role in m-governance and m-commerce. Offerings like medical facilities, an SMS away, or mandi prices for farmers on phone, have even made the government to take a keen interest in the development of VAS. Innovations such as location based services, mobile TV, m-wallet have given the best breed of personalized services on mobile devices.

Market growth drivers on the supply side include declining ARPU, brand differentiation needs, and growing focus on entertainment-related content; demand-side drivers include the booming Indian economy, increasing user comfort with basic mobility services, personalization of content, devices, and cheaper handsets. From the early days of ‘Person-to-Person Short Message Service’ (P2P SMS), the industry is witnessing the growing portfolio of services including graphics/wallpapers downloads, ringtones and caller ringback tones (CRBT), SMS contests, and games.

to be concluded

IDC: Mobile phone industry numbers (Q4,2011)

Nokia, Samsung and Apple are the top 3 global mobile phone makers for Q4, 2011 and CY 2011. Apple displaces LG from the 3rd spot even while Samsung reduces the gap with Nokia. LG and Nokia lost share and volumes.

App Usage powering Mobile Internet growth

The era of mobile computing, catalyzed by Apple and Google, is driving among the largest shifts in consumer behavior over the last forty years. Impressively, its rate of adoption is outpacing both the PC revolution of the 1980s and the Internet Boom of the 1990s. Since 2007, more than 500 million iOS and Android smartphones and tablets have been activated. By the end of 2012, Flurry estimates that the cumulative number of iOS and Android devices activated will surge past 1 billion. According to IDC, over 800 million PCs were sold between 1981 and 2000, making the rate of iOS and Android smart device adoption more than four times faster than that of personal computers. While the Internet began its commercial ramp in 1996, iOS and Android devices have seen double the number of device activations during its first five years compared to the number of Internet users reached during its first five years (Internet 1996 – 2001 vs. Smart devices 2007 – 2012).

On top of this massively growing iOS and Android device installed base, roughly 40 billion applications have already been downloaded from the App Store and Android Market. The average smartphone user, is beginning to spend more time in mobile applications than they do browsing the web.

This chart by Flurry compares how daily interactive consumption has changed over the last 18 months between the web (both desktop and mobile web) and mobile native apps. Ever since June 2011, time spent in mobile applications has grown. Smartphone and tablet users now spend over an hour and half of their day using applications. Meanwhile, average time spent on the web has shrunk, from 74 minutes to 72 minutes. Users seem to be substituting websites for applications, which may be more convenient to access throughout the day. People are now spending less time on the traditional web than they did during an year ago. This drop appears to be driven largely by a decrease in time spent on Facebook from the traditional web. In June 2011, the average Facebook user spent over 33 minutes on average per day on the website. Now, that number is below 24 minutes. Time spent on the web without Facebook has grown at a modest rate of 2% between June 2011 and December 2011.

Even while, the growth in time spent in mobile applications is slowing – from above 23% between December 2010 and June 2011 this year to a little over 15% from June 2011 to December 2011. The growth is predominately being driven by an increase in the number of sessions, as opposed to longer session lengths. Consumers are using their apps more frequently.

Facebook is the most used app on Android among 14 – 44 year olds, surpassing usage of Google’s own native, pre-installed apps. Additionally, Facebook Messenger became the top downloaded app, at least one time during 2011, across more than 100 different App Store countries. In the U.S., the largest App Store market, Facebook Messenger ranked as the top overall app across all other apps across all categories.

Smartphone device market shares and profit shares

Strategy Analytics in its AMJ (Q2) quarter has declared Apple to the king of the smartphone crown. Apple cornered 18% of the 110 million unit smartphone market which itself registered a 76% growth Y-o-Y.In Q1, 2011, Apple had become the world’s largest phone vendor in terms of revenue. Samsung scored a close no.2 even when it was expected by analysts to become the no.1 vendor. Samsung’s growth story has seen impressive success, and its shipments grew a huge 520 percent annually from 3.1 million smartphones in the year ago quarter.

The Apple wonder doesnot just stop there.. the 18% smartphone volume market share translates into 66% profit share of the mobile phones.(Base calculated is 365 million as per IDC numbers) To put it other way around, Apple which contributes 5.5% of mobile phones by volumes, takes a disproportionate 66% of the mobile phone industry profits. This is up against from 57% share of profits same time last year. This Q2,2011 quarter saw a slight sequential decline in overall profit for the mobile phones, but Nokia, Motorola, Sony-Ericsson and LG did not manage a profit from selling phones. Apple’s share is up from 57% in Q1 and 50% in Q3 and Q4. Samsung’s share went to 15%, though that’s not a peak level historically. In Q1 2008 the company was at 21%. RIM was at 11%, a level in a range that has been unchanged for three years. Finally, HTC captured 7.4%, a new high and an increase from 6% since last quarter.

Smartphones have become the primary driver of mobile phone vendor profitability, giving Apple a significant edge over most of the competition with its smartphone-only offerings.

Apple’s ability to out-innovate competition has been a key to its domination of the profit shares. Come October and one expects that iPhone5 and a low cost iPhone would add another dimension to Apple’s ability not only to exact high profit shares but also maintain its lead in the device volume shares.

Data courtesy: Strategy Analytics, IDC, Asymco

SEO is dead! Its time for Vertical searches to take over. Semantics come in next!

With the advent and evolution of Mobile as primary devices to access internet, the nature of search is beginning to change.Search has to evolve to keep pace with the changing nature of internet and be able to be relevant to browsing through mobiles as against through desktops or laptops.

Search 1.0
Traditional Web search is “horizontal” : complex algorithms, immense processing power, vast data centers, and even human editorial involvement are used in an attempt to span all sources to respond to queries.
These resources are used to “recall” all possible relevant links. The majority of the results produced are information resources and links to websites, rather than specific content. The user is faced with clicking through page after page of results. Broadband connections and powerful personal computers with large screens help make horizontal search useful, though often imprecise and labor intensive.

“Mobile” augments Search 2.0:Vertical Deep Dive Search
However search on mobile requires a different level of precision. Mobile,“on the go” users conduct their searches with less powerful, small screen devices and must deal with network limitations. They face an entirely different challenge and have different goals: 85% of the time they’re shopping for content they can consume on their phone. Results must be precise or the content simply won’t be discovered and consumed. Long click distances and click fatigue kill content discovery. The experience is frustrating for users and threatens revenue opportunities for mobile operators and content providers alike.

Mobile users are not looking at a million “matches” but possibly 10 deep matches, with huge degree of relevance, contextual applicability, profile understanding, local “sense”, social discover-ability and referencing and more.Users need to connect far faster—in 2-3 clicks—to the content in each of these relevant vertical channels, need linkages to payment gateways, social sites, rewards programs and much more. While there is a debate on how much content will be delivered: in terms of HTML5 web page or Applications, i would vote for Applications to be more versatile in doing the deep dives with user relevance. Add to this a decent dosage of Semantic Web and you have a huge opportunity to take search monetization to a new level with precision targeting and relevant solutions.

So where does SEO stand?
SEO, Adwords, Adsense are industries unto themselves which have allowed and helped users to refine data search and monetize effectively. However most of these techniques work on indexing the horizontal web- the dead links of Google. Search now is actively propelled by billions of bits of content created by the users collaborative, sourced from the crowd: Twitter and Facebook being the prime examples. These are examples of active web… always generating, creating and moving instead of the static web-pages of yore. Thus the delivery medium for these need to be mechanisms which are forever refreshing and renewing with new data.

Thus the challenge today is not SEO (ad placement), but to analyze, understand and cater to mobility experiences and i am betting my money on Applications and Vertical searches.

Top 20 Mobile Operators in the World

Wireless Intelligence released a report recently on the Top 20 Mobile Operators in the world based on revenues. The list is led by China Mobile followed by Vodafone and Verizon. Bharti Airtel scores 5th in terms of subscribers having just shy of 200 million subscribers.

However, Airtel is the worst performer in terms of revenue generated per user. Airtel earns USD 14.5 per subscriber in an year, equivalent to about Rs. 650 in an year.China Mobile earns over Rs. 1530 on its 584 Million Subscriber base. NTT DOCOMO which is primarily based in Japan, earns over 9000 rupees per subscriber and ranks 6th largest in terms of revenue on its relatively miniscule 57 million subscriber base. That is about 14 times more than Bharti Airtel !

7 out of top 20 mobile operators earn over Rs. 4500 (USD 100) per subscriber. The average per subscriber earning amongst top 20 mobile providers is Rs. 3813!

Mobile Apps as media channels

Sharing a perspective paper on the future of Mobile-applications as media channels that allow brands and sponsors to engage their users and consumers. The Potential of this market is currently not measured but estimates put the magnitude of spends on mobile media at 1/3rd of total marketing budgets.

Reference posts:

New Monetization paradigms sought to support Profusion of App stores
Apps: The new face of Internet (Part II)
Apps: The new face of Internet (Part I)
Evolution of App Stores (Part II): Putting the Brands perspective to Monetizing Apps stores
Evolution of App Stores (Part I)

Apps: The new face of Internet (Part I)

Theres an App for that!…Apple

In an earlier post, i had written about focus on innovation for apps and services to customer centric models amidst larger value creation templates with more stakeholders. It also shows the roadmap and indicators for value creation.

This post is about how Applications and an eco-system around apps will drive the next level of growth in Internet. “Next level of growth” is mostly a clichéd term. To put my argument in perspective. i will use a few stats:

So here’s the cliche no.1: Europe 58.4%, North America 77.4% and Australia 61.3% is where Internet growth is falling. Having featured the first wave of internet growth, it was about time, that the fast and furious growth in Internet numbers abated here-on. Also, these geographies house only 17.4% of the world population. Hence, the next level of growth in Internet has to be powered by 82% of the world pop scattered around elsewhere.

Cliche no.2: BBC estimated sometime around mid 2010, that the number of mobile phones globally has hit the 5 billion mark. Infact, there were interesting comparisons about Mobile phones and bank accounts and toilets, each a surrogate milestone in development of the world.

Cliche no 3: It is therefore expected that Mobile phones will be the next carriers of internet to a very large population around the world. That, more then half of the 5 billion phones are typically low end phones with very little capabilities will severely test the delivery mediums of Internet.

So here come Apps (Continued here)

Gartner: Q2,2010 Mobile Phone and Smartphone market shares

Worldwide mobile device sales to end users totaled 325.6 million units in the second quarter of 2010, a 13.8 percent increase from the same period in 2009, according to Gartner, Inc. Smartphone sales to end users accounted for 19 percent of worldwide mobile device sales, an increase of 50.5 percent from the second quarter of 2009.The double-digit growth this quarter, were offset by lower average selling prices (ASPs). ASPs were lower than expected and margins fell.Intense competition that drove price adjustments and changes to the product mix.Manufacturers such as LG and Samsung pursued market share in a low-margin market but this approach proved risky, as shown by LG’s decline of 27.8 percent in ASP in the second quarter of 2010.

New product introductions from Apple, HTC and Motorola, along with the drop in ASPs, drove strong sales of smartphones, shortages of components, such as active matrix organic LED (AMOLED) displays impaired sales volumes of some of the more popular new smartphones.HTC made its debut in the top 10 worldwide ranking, holding the No. 8 position with 139.1 percent growth year-on-year. This reflects the popularity of its Android portfolio but also a more aggressive branding strategy compared to the same period in 2009.The sudden growth in media tablets, such as the Apple iPad, did not appear to hold back smartphone sales. This lends credibility to the thought that most tablet users still feel the need for a truly pocketable, yet highly capable, device for those situations when it’s inconvenient to carry a device with a larger form factor

A few quick notes on the players in the market:

1. Nokia loss of 2.6 percentage points reiterate the need to do more to attract developers and other ecosystem members by revising its platform strategy and improving its communications
2.Although Samsung’s sales were strong in developing markets, its shift in product mix caused an overall decline in ASP. Its aggressive strategy toward the mass market enabled it to reduce inventory in the second quarter of 2010.Samsung will also be one of the first manufacturers to bring Windows Phone 7 devices to market, in time for the fourth quarter of 2010, showing that this manufacturer continues to keep its platform options open, even as it works on its own bada platform.
3.Blackberry has stood its ground in face of increasing pressure from the Androids. Blackberry released the Torch and Blackberry OS 6.0 to remain competitive. Torch’s form factor will still appeal more to business users than to consumers and will stop many loyal BlackBerry users defecting to other platforms, but it won’t attract many new users to the brand.
4.Apple’s sales would have been higher if it had not had to face tight inventory management in preparation for the arrival of the iPhone 4 at the end of the second quarter of 2010. Apple also suffered from some supply constraint on the new device.
5.In the smartphone operating system (OS) market, Android expanded rapidly in the second quarter of 2010, overtaking Apple’s iPhone OS to become the third-most-popular OS in the world (see Table 2). In the U.S, it also overtook RIM’s OS to become the No. 1 smartphone OS in this region. A non-exclusive strategy that produces products selling across many communication service providers (CSPs), and the backing of so many device manufacturers, which are bringing more attractive devices to market at several different price points, were among the factors that yielded its growth this quarter
6.Telcos will increasingly offer more affordable tiered data plans to users. Tiered data plans will make smartphones more accessible to different market segments and help make smartphones the dominant device category in mature markets. This means that total cost of ownership will be lower, and new users will face less of a barrier to entry
7.Launches of updated operating systems will help maintain strong growth in smartphones in the second half of 2010 and spur innovation. However, market share in the OS space will consolidate around a few key OS providers that have the most support from CSPs and developers, and strong brand awareness with consumers and enterprise customers