EMERGING APP CULTURE

EMERGINGAPP CULTUREMarch 2012

introductionHow has the introduction of smartphones and apps affected consumers in high growthmarkets? To gain insights into the future consumer scenario with regards to app usage ingrowth markets, Ericsson ConsumerLab has conducted qualitative and quantitativeresearch in Russia, India and Brazil.As consumers begin using new smartphones and start is representative of smartphone owners across theseexploring mobile apps, we can expect to see rapid three high growth markets. The quantitative part of thegrowth and a behavior once reserved for early adopters research consisted of 1 229 online surveys in Russiabecoming the cultural norm. and Brazil that were conducted during October and November 2011, as well as a study performed in IndiaThe bulk of these new users will come from growth during October to December 2011 including both amarkets as the smartphone is poised to provide the quantitative survey and a smartphone on-device meas-primary method of Internet access in markets where urement among 5000 smartphone users.there is negligible penetration of fixed line services andhence as the smartphone user base grows, so will app During the qualitative component of the research, adownloads. Can we ultimately see the same sort of total of 33 in-depth interviews were carried out in thedevelopment in high growth markets towards an “app” three markets in order to gain a deeper knowledge ofculture as we have seen in the U.S. and in other parts how consumers in growth markets reason and behaveof the developed world? when it comes to their smartphones and the usage of apps.The research was carried out among smartphone usersbetween the ages of 15 and 54 who accessed internet This summary highlights some of the findings ofthrough their smartphone at least once a week in three the research.key markets; India, Russia and Brazil. The study sample Ericsson ConsumerLab is a knowledge-based organization, from different cultures. Our research includes general our main offering is insight. We have more than 15 years’ market and consumer trends and in-depth insights into experience in consumer research, which involves studying specific areas. people’s values and behaviors, including the way they act and think about ICT products and services. We provide consumer To be close to the market and consumers, Ericsson insight to influence strategy, marketing and product manage- ConsumerLab has team members in most of Ericsson’s ment within the Ericsson Group. Our knowledge helps opera- market regions. Being part of the Ericsson Group gives us tors develop attractive revenue-generating services. a thorough understanding of the ICT market and business models. This broad knowledge is unique and is the basis We gain our knowledge through a global research program for our credibility and integrity. We see the big picture, based on annual interviews with 100,000 individuals in more understand where the individual fits in, and know what this than 40 countries and 10 megacities – statistically represent- means for future trends and services. ing the views of 1.1 billion people. We use both quantitative and qualitative research, and spend hundreds of hours on in-depth interviews and focus groups with consumers www.ericsson.com/consumerlabConsumerLab Emerging App Culture 2

HIGHLIGHTS> Apps are becoming an emotionally important and integral part of people’s daily lives> New users are embracing apps at the same pace as existing users> Consumers in high growth markets are starting to explore the long tail of appsApps and instant connectivity are drivers forsmartphone adoptionAmong today’s users in high growth markets, smart-phone adoption is driven by app functionality anda faster Internet experience. The app culture that is “Before, I would access Facebook onceemerging reflects a trend similar to that in the U.S. a day. Now, I check it 50 times a day.”and other parts of the developed world.The smartphone is perceived as a second brain or a — Female smartphone user, Brazilbest friend, and apps are becoming an emotionally im-portant and integral part of people’s daily lives in highgrowth markets. Apps make users feel more connected,more updated with what is happening across the world,more independent and more efficient when performingeveryday tasks.Top ten activities consumers started using after Reasons for buying a smartphonegetting a smartphone Better/faster internet access 43% To be able to use/access more apps 33% Superior software/operating system 26% To be updated with the latest technology 23% Superior touch screen 20% Superior hardware/memory capacity 18% More attractive design 18% Superior resolution/screen size 17% I got it as a gift 15% To be able to listen to music 11% To improve my personal/professional image 9% To be able to watch videos 5% To have the same as my friends 2% I got it from my employer 1% Source: EricssonConsumerLab Emerging App Culture 3

SMARTPHONEs areinducing new habits> Except for connectivity, apps are the number one driver for purchasing a smartphone> Apps are becoming an emotionally important and integral part of people’s daily lives> 20 percent have started using data intensive appsAccording to the study, a majority of smartphone users In contrast, Indians have more of an emotional relation-in high growth markets are first-time users who pur- ship to the smartphone and relate to it like a familychased their smartphone during the past six months. member or a close friend. They focus on apps that helpAmong all respondents, the two most important rea- strengthen their identity or could enhance their mobilesons for purchasing a smartphone were to be able to browsing experience. Although games and social mediause apps to access various services, and to have a are most popular, what differentiates Indian app usagebetter and faster Internet experience. Consumers tend is increased interest in live wallpapers, screen savers,to have a hard time separating apps from the smart- themes and browsers.phone itself – for many users smartphones are equalwith apps. Smartphone users in Brazil, on the other hand, have a more rational relationship with the smartphone thanApps are becoming an emotionally important and inte- those in India but more of an emotional connection thangral part of smartphone users’ daily lives in high growth those in Russia, and use apps that enhance their socialmarkets, something that is already evident in developed interactions.markets. However, their use differs depending onthe country. In all markets, it is evident that smartphones are induc- ing new habits among users – on average, 20 percentIn Russia, users have a more rational relationship to have started to use data intensive apps related totheir smartphone and use utility apps that benefit the video, TV, maps and navigation since purchasing theirflow of their everyday lives, such as those for navigation smartphone.and maps, barcode scanners, translators, dictionariesand so on.Market patternswhen it comes toapp usage BRAZIL INDIA RUSSIA Mixed EMOTIONAL RATIONAL More rational than India, Most emotional: Most rational: RELATIONSHIP more emotional than Russia The smartphone is a close friend The smartphone is a vital helper 3g GPRS Wi-Fi Consumers tend to regard a GPRS is the most common Wi-Fi is prevalent in homes 3G connection as reliable connection in India and publicly CONNECTION and good enough SOCIAL PERSONALIZATION UTILITY Enhancement of social Screen enhancement and third Maps, scanners, dictionaries, interaction is the most party browsers in addition bar code, etc. are prevalent APPS obvious adaption to gamesConsumerLab Emerging App Culture 4

APPs intuitivelyEMBRACED BYNEW USERS> New users use nearly as many apps as mature users, and quickly gain pace> Willingness to pay for apps increases with app usageEven though the majority of smartphone users ingrowth markets are new users, the usage pattern when User maturity is an important dimension when trying toit comes to apps is similar to the one seen among understand app behavior. The longer you have owned amature users. New smartphone users use nearly as smartphone, the more you demand increasingly spe-many apps as mature users, and the usage rate cific apps, and the more willing you are to pay for them.increases quickly. According to respondents, the barriers to pay for appsIn the study, new users were almost as savvy as mature today include low credit card penetration and a lack ofusers when it comes to accessing the Internet. Almost trust in card payments.half – 45 percent – of all new users indicated that theyspend 50 percent or more of all of their Internet timeon their smartphone, compared to 53 percent among Average number of app installationsmature users. per user/month in India 16Smartphones being embraced by new users is leadingthis change in behavior. 37 percent of the new smart- 11phone users from Brazil and Russia who participatedin the study own an Android- or iOS- based phone and Android 8are starting to use apps in a manner that is on par withmore mature and experienced users. In India, Android Symbian OSusers spend almost three times as much time on appsthan Symbian owners. Android users also install moreapps on their phones than consumers owning a BlackBerrySymbian or a Blackberry. Looking ahead, Android islikely to overtake Apple when it comes to app down-loads across all growth markets – a majority of the How often new and mature users access the Internet onusers who participated in the study say Android is the their smartphone using appspreferred OS for their next smartphone. NEW USERS* MATURE USERS** 9% 7%Android users in India 18% 29% Spend almost 3 times the time spent 63% by Symbian users on applications Consume 23% more data than their 75% Symbian counterparts Daily *New users were defined as: users of a smartphone that are on their first smartphone and have had it for less than a year At least 2-3 times a week **Mature users were defined as: users who had had their current smartphone for more than a year or were users of at least their Once a week second smartphone Source: EricssonConsumerLab Emerging App Culture 5

FEW APPS – butfrequently used> Two out of five rarely or never visit an official app marketplace> Consumer fear of apps using up bandwidth limit outside user control a significant barrier to downloading> While 69 percent access Internet using apps daily, almost half do not use more than 5 apps on a weekly basis How often users visit dedicated market places for downloading apps 9% 14% 18% Daily At least 2-3 times a week 27% Once a week At least 2-3 times a month More rarely 19% Never 13% Source: EricssonThe lifecycle of an app can be divided into four phases: Lack of native language apps is especially a concerndiscovery, adoption, usage and abandonment. When among Russian users.it comes to the discovery of apps, users have not yetembraced dedicated app marketplaces. Two out of five Users have few apps on their smartphones – the major-users in the study rarely or never visit an official app ity of respondents have 25 apps or less – but use themmarketplace, but instead sort through third party sites frequently. While 69 percent say they access Internetand forums to gain info on new releases and find apps using apps daily, almost half do not use more than oneto download onto their smartphone. 60 percent say to five apps on a weekly basis.they use the browser as a starting point to searchfor apps. Abandonment of apps occurs mainly when users dislike the app they have downloaded or simply do not use itWhen choosing which app to download, the main as much as they did before. One out of four respond-barriers are fears of apps accessing Internet outside ents also stated a full memory as a reason to deleteuser control, lack of native language apps and limited an app – either because they wanted to make room forsmartphone memory capacity. In the words of one of other apps or because they experienced their smart-the respondents in the study: “I can’t download just any phone working slower due to lack of memory space.app I want, I have to think. The smartphone will fill upfast and then I will have problems with the phone notworking as fast.”ConsumerLab Emerging App Culture 6

exploring thelong tail of apps> Users in high growth markets are starting to explore the long tail of apps> Apps are likely to be the natural gateway for newcomers to the Networked Society> This app evolution will be heavily affected by market specific factorsWhile social media participation is a significant trigger places, people and things in their urban surround-for mobile internet usage in high growth markets, there ings. This will likely result in mobile apps becoming theis a shift towards consumer preference for more natural gateway for new smartphone users into thespecialized apps. Networked Society.The results of the study indicate that high growth mar- The evolution of apps will also be dependent on a num-ket users are beginning to explore and use apps further ber of macro factors, such as the bandwidth availabledown in the long tail of apps. Even though mature users to the user, subscription schemes, OS platform anduse their apps more frequently than new users, we can user maturity. 41 percent of respondents answered thatsee a general evolution toward new users purchasing they often or always postpone downloading apps untilincreasingly specialized apps such as dating services finding a Wi-Fi connection, 50 percent download appsand price comparison right from the moment they get first to their PC to save on data limits, and two out oftheir smartphone. The usage of these specialized apps five smartphone users still do not download apps on ais almost as high among new as mature users. weekly basis.Users have a strong interest in using apps that enablethem to deal with daily challenges and interact with Macro factors affecting app evolution in growth markets MARKET MATURITYShare of respondents who use the following typesof apps daily — Subscription plans not encouraging connectivity and app usage Social networking apps — Fear of unexpected costs induced when connecting 49% Messaging apps/apps for chat 39% NETWORK MATURITY Weather forecast apps 31% — Operator network that does not offer sufficient speed for Apps to find information 29% app usage — Operator network that does not provide reliable connection News apps 26% Tools and utility apps 25% TECH MATURITY Games/amusement apps 20% — Limited understanding of how to install/use apps — Battery timeApps based on the usage of maps, gps, navigation 20% — Type of OS Apps for video and TV 16% — Memory space inflicted by app usage Apps for i.p. telephony or similar 15% 50% Timetables and traffic help apps 12% Photography and design apps 12% download apps first on Apps for banking 12% PC to save on data limits Apps that are guides to restaurants, movies 8% 41% Apps that monitor real estate 7% often (or always) postpone Apps for health, diets, exercise 7% downloading apps until Apps for shopping/price comparing 7% they have access to a Wi-Fi connection Online dating apps 6%Source: EricssonConsumerLab Emerging App Culture 7

Ericsson is the world’s leading provider of communicationstechnology and services. We are enabling the Networked Societywith efficient real-time solutions that allow us all to study, work andlive our lives more freely, in sustainable societies around the world.Our offering comprises services, software and infrastructure withinInformation and Communications Technology for telecom operatorsand other industries. Today more than 40 percent of the world’smobile traffic goes through Ericsson networks and we supportcustomers’ networks servicing more than 2 billion subscribers.We operate in 180 countries and employ more than 100,000 people.Founded in 1876, Ericsson is headquartered in Stockholm, Sweden.In 2011 the company had revenues of SEK 226,9 billion (USD35,0 billion). Ericsson is listed on NASDAQ OMX, Stockholmand NASDAQ, New York stock exchanges.The content of this document is subject to revision withoutnotice due to continued progress in methodology, design andmanufacturing. Ericsson shall have no liability for any error ordamage of any kind resulting from the use of this document.EricssonSE-126 25 Stockholm, SwedenTelephone +46 10 719 00 00Fax +46 8 18 40 85 EN/LZT 138 0784 R1Awww.ericsson.com © Ericsson AB 2012

EMERGING APP CULTURE

by Михаил Скетин

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