U.S. Consumer Mobile Content Markets
- Opportunities and Challenges in 2009
Vikrant Gandhi, Senior Industry Analyst
Mobile and Wireless Communications
March 31, 2009

Focus Points
Current Financial Crisis – Impact on Mobile Content
•
and Services
Mobile Data Services Analysis
•
Consumer Mobile Content Market – 2008 Review and
•
Future Forecasts
Mobile Messaging Trends –SMS and MMS
•
Mobile Advertising and Mobile Search
•
Mobile Financial Services - Banking and Payments
•
Conclusion
•
2

Current Financial Crisis – Impact on Mobile Content
and Services
3

Current Financial Crisis – Impact on Mobile Content and
Services
It is incorrect to assume that mobile content markets are not
•
affected by the current economic downturn.
A fair percentage of mobile content is purchased as part of
•
‘discretionary spending’ budgets and this affects the
consumer/buy side.
The lack of credit facilities impacts crucial innovative companies
•
that drive innovation in mobile content markets.
People need entertainment, information and communication
•
abilities and the mobile phone is the only converged portable
device that provides all three “on the go”.
The next six months will be crucial for the overall wireless
•
industry – unemployment rate is already more than 8 percent and
people are waiting to see how things evolve.
4

Mobile Data Services Analysis
5

Mobile Data Services Revenues – The Growth Continues
Mobile Service Revenues($ Million)
Mobile Data Revenues($ Million)
Contribution(%)
180000.0 40.0%
160000.0 35.0%
140000.0
illion)
30.0%
)
120000.0
Contribution(%
Revenues($ M
25.0%
100000.0
20.0%
80000.0
15.0%
60000.0
10.0%
40000.0
5.0%
20000.0
0.0 0.0%
2007 2008 2009 2010 2011 2012 2013
Year
Data revenues contribute around 25 % to the total mobile services revenue
pie. In several cases, operators do not get any revenues (ex- Apple’s app
store) – much also depends on revenue sharing terms.
6

Three Important Pillars of Mobile Data Services
Mobile Data Services
Mobile Mobile Mobile Data
Messaging Content/Apps Plans & Others
-Primarily SMS -Consumer and -Specific or
and MMS Enterprise Bundled data
based services applications plans
-Done al-a- - Generally - Deliver max
carte offered on a ‘value’ to
or as part of a premium basis consumers
data plan
Mobile messaging and messaging-based services, premium mobile content
and applications, and mobile data plans (messaging, mobile Internet,
unlimited-everything, etc.) are the three most important revenue generators.
7

Three Important Pillars of Mobile Data Services (contd.)
Mobile Data Plan Contribution (%)
Premium Mobile Content Contribution (%)
A-la-carte Messaging Contribution (%)
100%
90%
Contribution (%)
80%
70%
60%
50%
40%
30%
20%
10%
0%
2007 2008 2009 2010 2011 2012 2013 2014
Year
Majority of messaging is done as part of a data plan (messaging or bundled)
and data plans continue to be the largest revenue generators.
8

Consumer Mobile Content Market – 2008 Review
and Future Forecasts
9

U.S. Consumer Mobile Content Market - Segmentation
Premium Mobile
Downloadable
Content and
Applications
Mobile Music Mobile Games Mobile Graphics Mobile Video Informational
Services Services
•Ringtones
•Downloadable •Screensavers •Streaming •Sports/News/
•Ringback Tones (BREW/Java/ Financial
•Wallpapers •Downloads
others)
•Full-track •POI/Navigational
•Multicast
•WAP-based
•Downloads •Weather
•Messaging-
•Mobile Music •Traffic
based
Streaming
•Others
•Others
10

U.S. Consumer Mobile Content Market – Value Chain
11

Consumer Mobile Content Market – 2008 Review and
Future Forecasts
Total U.S. mobile data services market grew 38% in 2008.
•
U.S. premium mobile content market grew approximately 30% in
•
2008.
Revenue-wise, mobile games growth was the strongest though
•
relatively higher price-points also make them most vulnerable to
a slowdown.
Total On-deck U.S. Premium Mobile Content
and Applications Market
A $3.5 Billion market in 2008
Expected to approach $6.0 Billion in 6 years (2014)
12

Consumer Mobile Content Market – 2008 Review and
Future Forecasts
Mobile Music($ Million) Mobile Games($ Million)
Mobile Video Services($ Million) Mobile Graphics($ Million)
Mobile Informational Services($ Million)
6000
5000
Revenues($ Million)
4000
3000
2000
1000
0
Year
2007 2014
13

Premium Mobile Content- Off-deck vs. On-deck
On-deck is clearly the leader in the U.S. mobile content markets.
•
Emergence of newer types of app stores has the potential to change
•
this equation significantly.
The distinction between these two ecosystems is going away.
•
Mobile operators have embraced and accepted the potential of such
•
marketplaces to drive data revenues and are willing to add value to the
overall customer experience.
Independent app stores have been around for a few years now
•
(Handango, Pocketgear, Handmark, others).
Entry/expected entry of heavyweights such as Apple, Google, Microsoft,
•
Nokia, Palm and others has helped stimulate growth in content,
stimulated mobile advertising, driven greater data traffic and benefited
the entire ecosystem.
14

Premium Mobile Content- Off-deck vs. On-deck Forecasts
Off-portal Revenues-Without App Stores
On-portal Revenues
6000 Off-portal Revenues-With App Stores*
5000 Potential Uplift
of
Revenues ($ Mn)
approximately
4000 $1.7- $ 2.0
Billion per Year
3000
2000
1000
0
2007 2008 2009 2010 2011 2012 2013 2014
Year
* Apple, Google, Microsoft, RIM, Palm, Nokia, Others
App stores have a significant potential of driving content sales – as evident
by the success of the Apple store. Other major participants will leave no
stone unturned to offer innovative applications and services.
15

Mobile Messaging Trends- SMS and MMS
16

Mobile Messaging Trends – Messaging Volumes
MMS Volume (Billion)
SMS Volume (Billion)
3500.00
SMS ~ 3200 billion
3000.00 MMS ~ 100 billion
Volume (Billion)
2500.00
2000.00
1500.00
1000.00
500.00
0.00
2007 2008 2009 2010 2011 2012 2013 2014
Year
SMS continues to see exponential growth, while MMS grows steadily. Adoption
of picture messaging in the U.S. is very high.
17

Mobile Messaging Trends –A2P/P2A vs. P2P Messaging
105.00% A2P SMS Volumes
P2P SMS Volumes
100.00%
Contribution (%)
95.00%
90.00%
85.00%
80.00%
2007 2008 2009 2010 2011 2012 2013 2014
Year
Largely driven by short-code SMS based programs, A2P/P2A messaging
contributes an estimated 1.5-2% to total messaging volumes. This is expected
to increase during the forecast period.
18

Mobile Advertising and Mobile Search
19

Mobile Advertising and Mobile Search
There is no doubt that the future is bright for the U.S. mobile advertising
•
markets.
Some challenges have been a lack of global guidelines for mobile
•
advertising, inconsistent measurement of mobile advertising, to name a
few. Expect resolution to the challenges soon.
New types of inventory are continually generated. (Ex- third-party
•
storefronts such as the new App Stores).
Advertisers is becoming more demanding and performance-based
•
advertising has a slight advantage under the present economic
conditions.
Messaging and mobile Internet, followed by In-application, mobile
•
search and mobile video advertising are the main channels.
New advertising channels such as iPod Touch, mobile email and P2P
•
SMS will also be used.
20

Mobile Financial Services- Banking and Payments
21

Mobile Financial Services - Mobile Banking and Payments
All leading financial institutions have a mobile ‘interaction’ strategy.
•
Messaging , mobile Internet and Rich-client are the three main channels
•
for m-banking.
M-banking and m-payments are expected to converge and subscribers
•
should be able to perform a wide-range of financial services from a
single interface.
M-commerce needs to move beyond premium SMS to ensure a secure
•
and transparent payment mechanism.
Business models continue to evolve and we will see newer monetization
•
mechanisms.
22

Mobile Banking Evolution and Roadmap
S ta g e II
- M o b ile
b a n kin g a cce ss
-Ale rts a n d
No tifica tio n s
- M o b ile Bill P a y
- P 2P P a ym e n ts
-M -Co m m e rce
a n d M o b ile
S ta g e 1
M a rke tin g
- In te rn a tio n a l
- M o b ile
Re m itta n ce s
b a n kin g a cce ss
-M o b ile W a lle t
-Ale rts a n d
a n d Co n ta ctle ss
No tifica tio n s
P a ym e n ts
- M o b ile Bill P a y
2006 2007 2008 2009 2010 2011 2012
Ye a r
23

Mobile Financial Services – Forecasts
M-commerce Revenues ($ Million)
Growth (%)
1000 0.7
900
0.6
800
Revenues ($ Million)
0.5
700
Growth (%)
600 0.4
500
0.3
400
300 0.2
200
0.1
100
0 0
2007 2008 2009 2010 2011 2012 2013 2014
Year
At 1% of the total U.S. retail spending, goods sold via m-commerce are
substantial. Improving payment mechanisms, dedicated m-commerce sites and
a better end-user experience are some drivers.
24

Conclusion
25

Conclusion
Data revenues will continue growing- perhaps even overtaking voice
•
revenues within a decade.
Leading mobile operators clearly have adopted an ‘open’ strategy
•
tailored to drive data traffic on their networks.
Messaging volumes will continue growing due to an increase in
•
proliferation of data plans.
Leading device vendors and OS providers launching their own App
•
Stores help drive innovation and are a significant driver to watch out for.
Mobile Advertising is still a new market – the inventory continues to
•
increase rapidly.
M-commerce will evolve beyond PSMS and alternate payment
•
mechanisms will become more popular (even for mobile content
purchases).
26

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