Echelon 2013: The Future of Mobile in Asia by Thomas Clayton


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With the phenomenal growth Facebook and Twitter followed by that of Line, KaKaoTalk, Viber, Whatsapp, and WeChat across the region, where does this all end up?

Feature phones still dominate most Asia countries, but for how long?

What does the future state look like?

Thomas Clayton – President & CEO, Bubble Motion

Published in: Technology, Business

Echelon 2013: The Future of Mobile in Asia by Thomas Clayton

  1. 1. CONFIDENTIAL 1The Future of Mobile in AsiaEchelon 2013Information contained in this presentation is confidential & proprietary in nature and contains information pending patent protection.This document is meant strictly for the addressee and may not be copied or redistributed without prior authorization from Bubble Motion, Inc.
  2. 2. CONFIDENTIAL 2Asia is DifferentMobile Trends Across the RegionThe OTT App ExplosionThe Messaging App Phenomenon
  3. 3. CONFIDENTIAL 3First… Why Does Asia Matter?The Majority of the World‟s Population lives within this tiny circle
  4. 4. CONFIDENTIAL 4However, Things are Very Different Across Asia• Consumer loyalty for mobile services is the lowest in the world– Consumers are extremely price sensitive and willing to trade off inconvenience forsavings• Credit card penetration is minimal– Only real electronic payment system is fragmented prepaid card systems or operatorbilling• Feature phone users outnumber smartphone users 4-to-1– 2.4B+ feature phone users still represent the masses– Japan and Korea growing fast, but India, China, Indonesia are much slower– Many countries have limited data plan penetration – even with smartphones• 3B+ mobile subs vs. ~1B Internet users– Majority of Internet usage is mobile– Prepaid users outnumber postpaid 5-to-1• Highly diverse population– 52 primary language with 1,000+ regional dialects– 27 currencies with some of the lowest and highest GDPs per capita in the world– Very different political and legal systems
  5. 5. CONFIDENTIAL 5Asia Accounts for 65% of World’s Internet GrowthRank Country2008-2012Internet UserAdds (M)2012 InternetUsers (M) Y/Y GrowthPopulationPenetration1 China 264 564 10% 42%2 India 88 137 26% 11%3 Indonesia 39 55 58% 23%4 Iran 35 42 205% 55%5 Russia 33 70 6% 49%6 Nigeria 31 48 15% 30%7 Philippines 28 34 32% 35%8 Brazil 27 88 6% 45%9 Mexico 19 42 9% 37%10 USA 18 244 3% 78%11 Argentina 17 28 57% 68%12 Egypt 17 30 11% 38%13 Colombia 14 25 39% 54%14 Turkey 13 35 17% 47%15 Vietnam 12 31 7% 35%Top 15 654 1,473 15% 34%World 902 2,406 8% 34%
  6. 6. CONFIDENTIAL 6Asia Represents 77% of the BRIC’s GDP and…
  7. 7. CONFIDENTIAL 7…Southeast Asia itself could be a BRIC CountryGiving Asia 3 of the World‟s 5 Leading Economies
  8. 8. CONFIDENTIAL 8Asia is DifferentMobile Trends Across the RegionThe OTT App ExplosionThe Messaging App Phenomenon
  9. 9. CONFIDENTIAL 9By 2015, 65% of the World’s Mobile Users in AsiaAsia Mobile Subscribers
  10. 10. CONFIDENTIAL 10Mobile Penetration Continues to Grow RapidlyAsia SmartphonePenetration ForecastAnd while ARPUs will decrease slightly in some markets,it is less dramatic than in Western markets
  11. 11. CONFIDENTIAL 11Asia is ‘Mobile First’ because of the InverseCorrelation between Income and Mobile Centricity
  12. 12. CONFIDENTIAL 12Asia is ‘Mobile First’ because of the InverseCorrelation between Income and Mobile Centricity
  13. 13. CONFIDENTIAL 13Most Advanced Internet Countries Globally –Japan & Korea – Mobile Internet Surpasses PC
  14. 14. CONFIDENTIAL 14However, Same has Occurred in China
  15. 15. CONFIDENTIAL 15Smartphone Penetration in Asia Still Lags SizablyMore than 2B+ mobile subs will still be on feature phones in Asia through2015
  16. 16. CONFIDENTIAL 16Smartphone Penetration Growing, but Still Low…2013 Asia Smartphone Penetration
  17. 17. CONFIDENTIAL 172015 Asia Smartphone PenetrationAnd Not Changing Dramatically in Next 2yrs…
  18. 18. CONFIDENTIAL 18Thus, Massive Reach in Asia via 2B+ FeaturePhones
  19. 19. CONFIDENTIAL 19Asia is DifferentMobile Trends Across the RegionThe OTT App ExplosionThe Messaging App Phenomenon
  20. 20. CONFIDENTIAL 20First… the Death of VAS• Philippines telecom regulators crack down on VAS in Spring 2010– Philippines regulators were one of the first ones to step in and require a whole host ofnew regulations for spamming consumers with SMS and confirmation requirements foradding new subs• Thailand regulators crack down at the beginning of 2011– Thailand followed shortly thereafter and added many new requirements for marketingvia SMS to subs• Indian regulators push serious penalties starting Summer 2012– India nearly went as far and it is unclear if they will enact the threat of tripleconfirmation – with the 3rd confirmation needing to be in writing within 24hrs• Indonesian regulators shut down all VAS in Oct. 2011– Indonesian regulators went further than any others by deleting all VAS subscriberbases and requiring everyone to start over.– Moreover, they required triple confirmation and no auto-renewal of services
  21. 21. CONFIDENTIAL 21China is now the largest App Market in the World –and All Asian countries are still growing rapidlyHowever, OTT App Growth is Huge Counterbalance
  22. 22. CONFIDENTIAL 22But Monetization of Apps Still is still Very Low inAsiaPrice sensitivity to Apps is much higher in Asia – users are 6X more likelyto purchase the „paid‟ vs. the „free‟ version of an App in Western countries
  23. 23. CONFIDENTIAL 23Macro Factors Drive Need for Different MonetizationStrategy in Asia• Lower purchasing power with higher price sensitivity– Excluding Japan, consumers are much more price sensitive and have lowerpurchasing power;– Thus, their likelihood to pay for an app is 1/6th of that in Western markets• Digital ad spend is still in its infancy– Online and mobile ad spend in Asia is significantly smaller than Western markets– Thus, companies cannot rely on an ad-funded monetization strategy• Low credit card and electronic payment system penetration– Even if consumers want to pay for an app, low credit card penetration makes itimpossible for most users– Thus, while virtual goods are a very popular model in the online world throughoutAsia, it still lags in smartphone app world
  24. 24. CONFIDENTIAL 24Asia is DifferentMobile Trends Across the RegionThe OTT App ExplosionThe Messaging App Phenomenon
  25. 25. CONFIDENTIAL 25First, the Crazy Social Media Evolution…QQFacebookOrkuthi5FriendsterWretchMixiCyworldZingMost Popular Social Networks 2 Years Ago
  26. 26. CONFIDENTIAL 26However, Facebook Now Dominates Most of Asia…
  27. 27. CONFIDENTIAL 27…With Some of its Largest User bases in the Region
  28. 28. CONFIDENTIAL 28Asians Have Always Been Much More Blog Savvy
  29. 29. CONFIDENTIAL 29And Now They Love Sharing Everything Online% of Population that Shares ‘Most Everything’ Online
  30. 30. CONFIDENTIAL 30FB Bus Model Always a Recipe for Success in AsiaFACEBOOK:If you‟re not paying for it, you‟re not the customer.You‟re the product being sold.
  31. 31. CONFIDENTIAL 31Twitter has Now Taken Off as wellIndonesia is Twitter‟s 3rd largest market in terms of tweet volume andJapan is its 2nd largest market in terms of revenue
  32. 32. CONFIDENTIAL 32Twitter & FB Both Focusing on Feature Phones Nowfor Growth in Asia• Nearly 90% of mobile users inIndia still do not access data• 75%+ of users across SEAsian mobile do not have dataplans• FB & Twitter both have teamsin the region focused onoperator partnerships in Asianow• FB acquired Snaptu solely tobuild a feature phoneaccessible version of the FBapp• Twitter now focused on
  33. 33. CONFIDENTIAL 33And Messaging is becoming UbiquitousAcross User’s Lives…FamilyFriendsWorkApplications• Text• Photos• Voice• Video• Group Chat• Text• Photos• Voice• Video• Games• Group Chat• Text• Voice• File Transfer• Appointments• Group Chat• Text• Voice• Photos• Video
  34. 34. CONFIDENTIAL 34Leading to the Explosion of Social Apps Across Asia
  35. 35. CONFIDENTIAL 35Asian Users Love a Fun & Cheaper Way toCommunicateOTT Messaging• Innovative services and veryconsumer driven• Across top layer of networkonly• Limited interop so far, but likelyto change quickly• Reliability is lower thanoperators today, but improvingfast• Free – monetizationexperimentation• Little-to-no customer supportOperator SMS• Seen as „old school‟ and pay-per-message• Still viewed by many though asthe most reliable• Interoperable across platforms/ operators / devices• Direct monetization via usageor subscription• Strong customer relationshipsincluding billingBeingreplaced by
  36. 36. CONFIDENTIAL 36It is a Crowded Space –Everyone is Coming from a Different Angle
  37. 37. CONFIDENTIAL 37Today its Largely Divided into 3 Segments;However, They are All Merging QuicklyMessaging Social Media VoIP
  38. 38. CONFIDENTIAL 38Time to Critical Mass has Decreased DramaticallyTime to Reach 50M UsersLine 384 daysDraw Something 50daysInstagram 612 daysWhatsApp 438 daysTwitter 1,218 daysSMS 3,120daysMobile Subs 4,422daysFacebook 1,321 days
  39. 39. CONFIDENTIAL 39Who is Winning in the Messaging Battle Asia?
  40. 40. CONFIDENTIAL 40What is Happening on the Ground?• Only Korea has a clear cut winner – KaKaoTalk– Korea‟s local app is used by 90%+ of Korean smartphone users• In Japan – Line dominates, but others are growing– Increasingly crowded space with KaKaoTalk teaming with Yahoo! Japan and both DeNA(COMM) and GREE launching their own competitive apps• Much of Southeast Asia dominated by Line– Thailand is dominated by Line with Indonesia and Philippines tipping in that direction aswell• WeChat is growing outside of China, but unclear how strong– Only messaging app with a “17+ rating” – seems to be strong among pockets of users• WhatsApp is an early leader in India, but still quite fragmented– Also, BBM is still much larger than any of the OTT messaging apps
  41. 41. CONFIDENTIAL 41Globally, Each Country Shows a Different WinnerMessaging Apps Market Share
  42. 42. CONFIDENTIAL 42Monetization Strategies Varying Widely by Region• Ad-rev model – free with lots of ad placement potential• Charging brands to send out promoted messages to Korean user base• Charging users for packs of emoticons/stickers• Selling virtual goods and gifts• Free – money made from iOS device lock in• Initially free, but now charge $0.99 as one-time purchase• Charge $9.99 for the app for unlimited SMS/text messaging
  43. 43. CONFIDENTIAL 43The Future of Messaging Apps in Asia…• Each country is exploding into a different battle ground– First battle is domestically in each country, but the bigger war is regionally, then globally– Winner likely to come from Asia• Due to strong network effects, it’s a Winner takes all market– Could be divided by country or communication type though• Switching costs are minimal and decreasing– With FB connect and deep contact list integration on the phone, it is extremely easy tomigrate– This war will never be over – its going to be very long ongoing• UI & UX are key – not feature breadth– FB spun off Messenger for exactly this reason; Instagram the best example of UX vs.Features• Careful curating of the community early on is extremely important– Facebook and Twitter did it extremely well early on – not as good though early in Asia
  44. 44. CONFIDENTIAL 44In Summary…Asia is a MASSIVE Mobile Market, but ExtremelyDiverse1Monetization approach has to be VERY differentin Asia2Messaging Apps are EXPLODING, but the Battleis far from over3