2013 11 mobile eating the world

1. Mobile is eating the world ! November 2013 ! Benedict Evans @benedictevans

2. Mobile scale Tablets Ecosystems 2 Mobile social discovery

3. The state of PCs Global annual unit sales (m) 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Corporate PCs Consumer PCs Tablets 3 Source: Gartner, IDC, Enders Analysis

4. Smartphones are exploding Global annual unit sales (m) 800 600 400 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Corporate PCs Consumer PCs Tablets 4 Smart phones Source: Gartner, IDC, Enders Analysis

5. More mobile growth coming Global annual unit sales (m) 1,800 1,350 900 450 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Corporate PCs Consumer PCs Tablets 5 Smart phones All mobile phones Source: Gartner, IDC, Enders Analysis

6. The future is mobile Global annual unit sales (m) 1,250 1,000 750 500 250 0 1995 PCs 1997 1999 2001 2003 2005 2007 2009 2011 2013e Smartphones and tablets 6 Source: Enders Analysis

7. The world in 2017 2017 forecast base (m) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Population 2012 Adults Literate adults Mobile Smart phones PCs Tablets Growth to 2017 7 Source: GSMA, World Bank, Enders Analysis

8. Growth in emerging markets Global 3G/4G device unit shipments (m) 300 250 200 150 100 50 0 North America 2010 2011 Europe 2012 Japan/Korea China/India Latam RoW 2013e 8 Source: Qualcomm

9. Fundamental change • Mobile was always much bigger than tech, but always separate • Smartphones • Internet • Tablets • This mean the Technology and Mobile worlds merge and Media are being dragged along accelerate the change is changing everything 9

10. Fundamental change in scale Mobile industry PC industry • 350m • 1.6bn • 1.7bn units in use • Replaced phones sold in 2012 • 3.2bn PCs sold in 2012 mobile users • Replaced every 4-5 years • One • Shared • Data every 2 years per person plan penetration/pricing is the only limit to growth 10

11. Fundamental change in use Mobile internet PC internet • Shared, or • Semi-portable • Web • Personal used at work • Taken at best everywhere • Web, web search, apps, social, location, service integration, prediction, APIs, image recognition, local wireless… and web search 11

12. What does mass mobile internet use really mean? From this… 12

13. …to this “I love reading about TV soaps so I got the app on my phone” 13

14. Industry scale 2012 global revenue ($bn) Mobile networks Advertising Mobile phones PCs Apple Books Online advertising Amazon Google Watches Recorded music Facebook 0 250 500 14 750 1,000 1,250 Source: Zenith, Apple, Amazon, Google (excludes Motorola), Facebook, Enders Analysis, FSWI

15. Polarisation of manufacturers Quarterly handset revenue, March 2011-Sept 2013 ($bn) 35 30 25 20 15 10 5 0 Samsung Apple Nokia HTC LG 15 Blackberry Moto Sony Other? Source: Companies, Enders Analysis

16. The irrelevance of Microsoft Microsoft share of connected device unit sales (%) 100 75 50 25 0 Mar-2009 Mar-2010 Mar-2011 16 Mar-2012 Mar-2013 Source: Enders Analysis

17. Scale at Samsung… Samsung Electronics marketing budget ($bn) 4 3 2 1 0 Mar-2009 Advertising Mar-2010 Mar-2011 Mar-2012 Mar-2013 Sales promotion 17 Source: Samsung

18. and scale at Apple Daily visits to Apple retail stores (m) 1.50 1.25 1.00 0.75 0.50 0.25 0.00 Mar-2009 Mar-2010 Mar-2011 18 Mar-2012 Mar-2013 Source: Apple

19. Very different products Global mobile handset industry, Q2 2013 200 Other Android Units sold (m) 150 100 Samsung Other feature Nokia 50 0 Apple LG, Sony, HTC, Moto Blackberry 0 150 300 450 600 Average Selling Price ($) Bubble area = revenue 19 Source: Companies, Enders Analysis

20. Apple sticking to the high end? iPhone share of global mobile phone unit sales (%) 12 10 8 6 4 2 0 Jun-2007 Jun-2008 Jun-2009 Jun-2010 20 Jun-2011 Jun-2012 Jun-2013 Source: Apple, Enders Analysis

21. Scale Tablets Ecosystems 21 Mobile social discovery

22. Glass is eating the world Global LCD screen sales (billion square feet) 4 3 2 1 0 2005 2006 2007 2008 2009 22 2010 2011 2012 2013e Source: Corning

23. Tablets overtaking PCs Global unit sales (m) 100 75 50 25 0 Jun-2010 Dec-2010 Tablets Jun-2011 Dec-2011 Jun-2012 Dec-2012 Jun-2013 PCs 23 Source: Gartner, IDC, Enders Analysis

24. • Tablets are not cannibalising PC sales yet - not exactly • However, tablets and smartphones are crystalising a rethink of consumer needs • “Do I really need to upgrade my PC? Do we need another PC? Do I need a laptop as well?” 24

25. Tablet market splitting Global unit sales (m) 60 45 30 15 0 Jun-2010 iPad Dec-2010 Nexus Jun-2011 Dec-2011 Other Android (activated) 25 Jun-2012 Dec-2012 Jun-2013 Android (unactivated) Source: Apple, Google, Asus, Mediatek, Enders Analysis

26. iPad dominates use everywhere Share of tablet web trafﬁc, February 2013 (%) 100 80 60 40 20 0 US iPad UK Android Germany France Kindle Fire Japan China Nook 26 Source: Adobe

27. Two distinct ‘tablet’ markets The $100 generic The ‘post-PC vision’ • Rich • Black apps and content • $250+, 7” plastic no-brand • Cheap 10” 7” $75-$125 • Massive volume, but usage of apps and web is near-invisible so far • Still mostly iPad with some Samsung - Nexus 7 sold just 7m units in 12 months • Mostly TV 27 free games

28. Tablet dynamic quite different to smartphones Device prices ($) 700 600 500 400 300 200 100 0 Smartphone iOS premium Tablet iOS mass-market 28 Good Android Cheap Android

29. Tablet dynamic quite different to smartphones • Price window underneath the iPhone is much larger than that underneath the iPad • Tablet app gap is much larger - still very few premium apps designed for Android tablet • So mid-range Android phones are much stronger propositions than mid-range Android tablets 29 Source: Companies

30. Blurring deﬁnitions Estimated Android user base, August 2013 (%) Global South Korea 0 20 Small (3.5) Small tablets (7-8.4) 40 60 Medium (3.5-4.9) Large tablets (8.5+) 30 80 100 Phablets (5-6.9) Source: Flurry

31. Tablets in 2013 • Well over 200m tablets will be sold in 2013 • Driven by size and price - 7” screens, $300 and (far) below •A ﬂood of cheap generic Chinese Androids - perhaps 125m units in China alone this year, with prices under $150 • Apple (and Nexus and Samsung) share falling fast - but really there are two markets 31

32. Still lots of unknowns • One device per person or per household? • Replaced every 2 years? 5 years? • 10” tablets mobile? stay at home - will 7” ones? Will they become • Will Android break into the premium usage segment? 32

34. ‘Four horsemen’ driving the agenda Google Apple Facebook 34 Amazon

35. Ecosystem sizes Active users (m) 900 600 300 0 Mar-10 Sept-10 Apple iOS Mar-11 Google Android Sept-11 Mar-12 Sept-12 Facebook mobile MAUs 35 Mar-13 Sept-13 Amazon accounts Source: Apple, Google, Facebook, Amazon, Enders Analysis

36. Reach (≠ value) Global internet audience, Q2 2013 9% 14% 47% 12% 18% PC Google Android iOS 36 China PC China Android Source: ITU, CNNIC, Google, Apple, Enders Analysis

37. (Chinese Android isn’t Google) Chinese Android app install vectors 7% 7% 6% 9% 73% 3rd Party store OEM store Play 37 Publisher Other Source: Umeng

38. Geographic variation Facebook smartphone users by % of the base, November 2013 100 75 50 25 0 USA iPhone UK Samsung Android Spain Indonesia Other Android 38 Brazil Blackberry India WP Source: Facebook, Enders Analysis

39. Ecosystem is the key leverage point For Amazon, Google and Facebook, the experience on the phone is what drives engagement with all their services For Apple, the ecosystem is what sells hardware 39

40. People like apps Stated cumulative app downloads (bn) 60 45 30 15 0 Jan-09 Jan-10 iOS Jan-11 Jan-12 Jan-13 Dec-13 Android 40 39 Source: Apple, Google

41. Mobile platform wars over? • Apple and Google’s Android have won: unlikely that other platforms will be relevant • Apple • But camped out at the high end, Android taking the rest Google’s control of Android is partial • Facebook and Amazon trying to extract value • Samsung’s position uncertain 41

42. Speed of innovation? Active install base by operating system version, October 2013 (m) 400 300 200 100 0 Current (iOS7 / 4.3) Last Year (6 / 4.1 4.2) 2 years ago (5 / 4) 3 years or older (4 / 2.x) iOS Google Android 42 Source: Apple, Google, Enders Analysis

43. Different focus for innovation Google Apple • Integrated • Systemic fragmentation, little hardware control hardware software • Fingerprints, Bluetooth, • Google Now, Maps, Plus, semantic search etc Airdrop, 64 bit etc • Move innovation down the stack (hard for Google) • Move innovation up the stack (hard for Apple) 43

44. App engagement iOS Google Android • 2bn downloads and $1.1bn gross revenue per month • ~2-3bn • Average • Average month of 4-5 apps and $2 spent per active device per month • Smaller, more base downloads per of 3-4 apps (perhaps) per active device per month engaged • Much lower payment rates (but no data from Google) 44

45. Self-selection • The iPhone averages $575 and gets most of the high-end • Android sells at anything from $800 to $50, but averages $250-$300 • Apple only sells to people with money to spend who (mostly) value apps and a good experience - Android sells to everyone • Hence average engagement levels for iOS are far higher than average for Android - but not all of Android is low • Wide geographic variation: a US $150 Android sees much lower engagement than a Chinese or Indonesian one 45

46. Ecosystem cohorts Value and engagement High end devices, engaged users. Mostly iPhone Midrange Android, some iPhone - engaged, but spending less Symbian, featurephones, much low-end Android: little engagement yet User base 46

47. Ecosystem cohorts? Active smartphones, Q2 2013 Often highly engaged but hard for foreigners to address 2% 23% Mostly highly engaged and high value 20% 12% Lower average engagement, slowly increasing iPhone Android China 100-150m highly engaged users value unclear 43% Premium Android users Windows Phone 47 Other Android users Source: Apple, Google, Nokia, Enders Analysis

48. Future of Android • ‘Android’ is many things • Forks, different versions, Google layering tools on top, Amazon, Xiaomi, Samsung playing with the value chain in different ways • For Google, Android began as ‘Webkit everywhere’ - a tool for reach - which it gets on iOS and Kindle Fire as well • So how much control does it want? What happens to Chrome? Where does Google want to sit in the stack? 48

50. Mobile social scale Mobile social messaging users (m) 800 600 400 200 0 FB WhatsAppWeChat Twitter Monthly active Line Instagram Skype Viber Kakao Kik Registered 50 Source: Companies

51. Mobile social scale • Over 50 social messaging apps have had more than a million downloads on Google Play •A dozen have had over 50m downloads • Whatsapp now sends 14bn messages/day: global SMS volume is ~20bn • 400m photos/day shared on Whatsapp, 350m on Snapchat, 350m on Facebook, 55m on Instagram 51

52. Children’s use of messaging UK 12-15 year old children’s messaging per week, 2013 300 250 200 150 100 50 0 Phone calls SMS sent 52 App-based messages sent Source: Ofcom

53. Smartphones are inherently social, unlike the desktop web • Smartphone address book is a ready-made social graph that all apps can tap into • Photo • Push library is open to all apps notiﬁcations remove the need to check multiple sites • Home screen icons are easier to switch between than different websites 53

54. People happily abandon history • Remember Myspace, Bebo, Tuenti, Orkut... • People appear to regard almost all of what they share on a social network as transitory - and not just for Snapchat • People walk away from the archive - social detox • Perhaps • This social networks are sticky like nightclubs, not banks makes mobile social potentially very volatile 54

55. • Vastly less friction to adopt social apps on mobile • People jump from network to network and abandon old ones • All that matters is what your friends use today 55

56. Facebook is one of many UK 15-24 year old mobile users, May 2013 11% 21% Two thirds are using Facebook on mobile… 10% 10% 48% Facebook No social apps Facebook and other social apps No smartphone 56 But half are using other apps as well Other social apps, no Facebook Source: Enders Analysis

57. Facebook is doing well on mobile Facebook revenue by source ($m) 2,500 2,000 1,500 1,000 500 0 Sep-11 Dec-11 Desktop ads Mar-12 Jun-12 Mobile Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Payments 57 Source: Facebook

58. Half of DAUs are mobile-only Facebook Daily Active Users - DAUs (m) 1,200 900 600 300 0 Sep-12 Desktop only Dec-12 Mar-13 Mobile desktop Jun-13 Sep-13 Mobile only 58 Source: Facebook

59. Is the mobile opportunity so big that it doesn’t matter to Facebook if it isn’t dominant? 59

60. Unbundling 60 Source: Andrew Parker

61. The aggregation cycle • Value to aggregating all your needs/services/content/ messaging/friends in one place • Over time, the gravity well sucks in more and more adjacencies • Category killers emerge, lock-ins turn out not to matter so much and the aggregator is unbundled • And then the cycle repeats 61

62. Unbundling Facebook • Each part of the Facebook experience gets peeled away on mobile • Photos, text, music, video... 62

63. Unbundling functions or unbundling friends? • People aren’t using Instagram for photos, WhatsApp for text, Line for stickers... • They’re using everything for everything • Overlapping Venn social groups Diagrams of networks, use cases and • Not really any different from choosing between SMS, email and voice - just more options 63

64. Mobile social is still in ﬂux • Facebook nailed the desktop social experience - no-one has nailed it on mobile yet • Start with messaging photos, but what then? • Searching for new models of interaction • Interconnect with PSTN? Stickers? Disappearing photos? Channel for brands? API? Payments? • Embedded content, sharing, discovery and distribution 64

65. There’s money in stickers Line revenue ($m) 125 100 75 50 25 0 June 2012 Sept 2012 Dec 2012 65 March 2013 June 2013 Source: Naver

66. The real opportunity is creating the next platform • Role of mobile social in discovery distribution still undeﬁned • Line and Wechat now mounting expensive marketing campaigns - global and local • Snapchat • Building attracting a $3-4bn valuation, Instagram looks cheap? the next distribution and advertising platform 66

67. Cards as content packets - social as discovery 67

68. Two trends for mobile content Atomised content App silos • Split content into individual packets that can be routed across multiple networks • Tablet apps can get 30 minute sessions • Very tough to do SEO, SEM, acquisition data, sharing, social • Pinterest, Tumblr, Twitter cards, Line, Kik, Facebook embeds • Deep • Every piece of content is the home page • Tough linking in very early stages acquisition but valuable users once acquired 68

69. Again, all this is in ﬂux App silos Atomised content • Future • App role of Facebook? • Consolidation? Local winners? discovery? • Deep • Simplicity (Whatsapp) or rich platforms (Line, Wechat)? • OS linking? integration? • HTML5/hybrid/native? • Indexing? Search? Deep linking? Federation? APIs? • Disaggregation and return to the web model? 69

70. Broader uncertainty and opportunity • The basic interaction model of the web was set by the late 1990s web page linking to web page • Mobile isn’t nearly as clear yet: web, web apps, native apps, push notiﬁcations, deep links, OS integration (Siri, Now, Maps etc) - and much more to come • Not just apps - all mobile service discovery is in a pre-PageRank state • Not clear at all what mobile will look like in 5 years • Very likely social apps could be a major part of the glue 70

71. Blurring boundaries • The things that link and drive service use and discovery on mobile are still evolving - but social will be an important part • What • Pay is the identity platform - if any? attention to things that act both as protocols and services • Pay attention to blank canvases, where users can create new services 71

2013 11 mobile eating the world

2013 11 mobile eating the world

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2013 11 mobile eating the world