MOBILE
ATE THE
WORLD
BENEDICT EVANS
March 2016
@benedictevans

The universal
technology product

3
Thirty years of the PC
From 9m units to 300m+ in three decades
Source: Gartner, a16z
0.0
0.1
0.2
0.3
0.4
1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Annual unit sales (bn)

4
Overtaken by a new ecosystem
Fundamental shift in scale - from 300m+ PC units a year to 1.5bn smartphones and growing
Source: Apple, Google, Gartner, a16z
0.0
0.5
1.0
1.5
2.0
1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Annual unit sales (bn)
PCs
iOS & Android
smartphones

5
Mobile is the new scale
Mobile was always bigger than PCs, but separate, and not really part of the computing
market. Smartphones broke down that wall
Source: Apple, Google, Nokia, Gartner, a16z
0.0
0.5
1.0
1.5
2.0
1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Annual unit sales (bn)
PCs
Mobile phones
iOS & Android
smartphones

6
(And tablets add a quarter-billion more)
Source: Apple, Google, Nokia, Gartner, a16z
0.0
0.5
1.0
1.5
2.0
1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Annual unit sales (bn)
Tablets
PCs
Mobile phones
iOS & Android
smartphones

7
3bn modern computers
There are 3bn iOS and Android computers on earth and 2.5bn smartphones
Source: Apple, Google, Gartner, a16z
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Dec 2007 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015
Estimated global install base (bn)
PCs
iOS & Android

8
0
1
2
3
4
5
6
7
8
9
Population Population over 16 Mobile users Smartphones PCs
Global population (bn)
Growth to 2020
2015
The world in 2020
By 2020 perhaps 5bn people on earth will have a smartphone
Source: World Bank, GSMA, Apple, Google, a16z

9
An iPhone 6 CPU has 625 times more
transistors than a 1995 Pentium.
iPhone 6 launch weekend: Apple sold ~25x
more CPU transistors than were in all the
PCs on Earth in 1995.
Everyone gets a pocket supercomputer.
Source: Apple, Intel, a16z

10
Everyone gets a pocket supercomputer
Mobile takes computing to people hardly touched by technology before
10 Source: Alan Knott-Craig

11
Yes, everyone
Networks almost everywhere, and the entry price for Android is now well under $50
Source: Ericsson, McKinsey, GSMA
0%
10%
20%
30%
40%
50%
60%
70%
80%
Cellular coverage 3G coverage 3G coverage 2019e Improved water Grid electricity Mobile users
Sub-Saharan Africa population coverage, 2014

12
0%
5%
10%
15%
20%
25%
Least developed countries Developing Developed World
500MB mobile data as % per capita gross national income*
2013
2014
Though data is still expensive at the margin
Access to affordable data (and power) is the largest remaining barrier for new users, not the
price of the device
* Prepaid handset-based plan. Source: ITU

13
Every
corporation
‘Every home
and every
desk’
Every pocket
The first universal tech product
Mobile completes a journey from one computer on earth to a computer in every pocket

The new ecosystem

15
Mainframes
100k
Workstations
10m
PCs
1.5bn
Mobile
5bn+
Mobile is the new tech ecosystem
Tech moves forward by going from one ecosystem to the next, and each new ecosystem is
a change in scale. Mobile has the scale of everyone on earth
Source: a16z

16
0.0
0.5
1.0
1.5
2.0
Games consoles Cameras TVs PCs Smartphones Mobile phones
Unit sales, 2015e (bn)
Smartphones have unique scale for tech
The first tech product to be bought by almost everyone on earth, every 2-3 years
Source: CIPA, Displaysearch, Gartner, companies, a16z

17
Tech moves in ecosystems.
Each ecosystem is the centre of innovation
and investment for that generation.
The ‘PC’ ecosystem played that role for 30
years: now the ‘mobile’ ecosystem takes
over.

18
What does ‘mobile’ mean?
These are ‘PCs’, but not ‘personal computers’: they’re the product of the PC ecosystem.
The same proliferation will happen around ‘mobile’
Source: Google18

19
Hardware
innovation
centres on
ARM and
smartphones
Software shifts
to a native
touch UX
Secure,
sandboxed
software
model
iOS & Android
operating
systems
‘Mobile’ is an ecosystem, not a screen size
The change isn’t screen size or keyboards - those are all just options. The change is the
shift to a new ecosystem with 10x the scale

20
‘Tablets’ are PCs, but from the new ecosystem
Tablets (and Chromebooks) come from the mobile ecosystem but address ‘personal
computer’ use cases
Source: IDC, Gartner, Barclays Capital
0
25
50
75
100
125
150
175
Mar 1995 Mar 1997 Mar 1999 Mar 2001 Mar 2003 Mar 2005 Mar 2007 Mar 2009 Mar 2011 Mar 2013
Global quarterly unit sales (m)
Tablets
Laptops
Desktops

21
A drone is a
smartphone that
flies
Most of the intelligent components
of a drone come from the
smartphone ecosystem
‘Mobile’ components for different
use cases
Source: Airware21

22
Ecosystems are Lego for technology
‘Mobile’ Lego overtakes ‘PC’ Lego
Smartphone components enable a ’Cambrian Explosion’ of new products
Firehose of smartphone
components
Contract manufacturers
assemble those
components into
anything
Tablets
Internet of Things,
satellites, wearables,
connected cars,
connected home,
drones etc.
Virtual Reality
Firehose of products
Hardware tech for
almost anything is on
the shelf
The challenge is vision
and route to market

23
Our grandparents could count their electric
motors.
Our parents could count the things they
owned with a chip inside.
We can count our connected devices.
Our children…

24
‘A computer
shouldn’t ask
anything it
could work
out’
Sensors
profoundly
change what
a computer
can know
Every new
sensor
creates new
businesses
Sensors everywhere, data everywhere
Smartphone components and sensors drive a step change in data

25
New systems, not just new products
Ubiquitous connectivity and sensors enable fundamentally new approaches
Operating efficiency
Know exactly how the
product is operating all
the time
Product design
Knowing exactly how a
product operates
enables new designs
System design
Understanding
everything in a system
enables a new system

26
Redesigning the system: containerisation
Unload the ship faster, then build 10x bigger ships, then move the supply chain to China
Source: Maersk26

27
Redesigning the car?
As technology remakes what cars are, how far can tech companies take advantage?
* Mercedes, BMW, Audi, Lexus. Source: Companies, a16z
Mobile phones
PCs
TVs
Cars
Luxury cars*
iPhones
0
200
400
600
800
1,000
1,200
1,400
0.00 0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00
Annualrevenue($bn)
Annual unit sales (bn)
Global market scale, 2014 (bubble size = install base)

28
Fundamental reduction in
mechanical complexity
Different supply chain,
manufacturing structure
Change who can make
cars, and how
Electric
Each city will reach an
different equilibrium point
Fewer cars
Who owns on-demand
fleets? What kinds of cars
do they choose?
On-demand
Rocket fuel for on-demand
– far more supply, lower
costs (driver, insurance,
parking)
New vehicle types,
ownership structures –
and new real estate
models
Autonomous
Smartphones with wheels
Three ways to think about cars, if you’re a software company

29
'Driverless cars' = 'horseless carriages'
Electricity and autonomy will allow fundamental redesign of vehicles
29 Source: Daimler29

30
Redesigning the system
How will the end of manual driving (and parking) change the urban landscape?
“It was easy to predict mass car ownership, but hard to predict Walmart”
30 Source: Walmart

New productivity

32
We all know mobile is bigger than PCs, just
as PCs were bigger than mainframes or
workstations.
Eventually, PCs supplanted those.
How does mobile supplant PCs?
(Or is computing progress over?)

33
Computing in 1960
Everyone in this picture is an Excel cell – the building is a spreadsheet
33

34
A tool for real
work: the Friden
Adding Machine
“Electronic data processing
systems did not come about for
the purpose of replacing any type
of office equipment.
There will always be a place for
the machine based on mechanical
and electro-mechanical principles.”
Source: National Office Machine Dealers Association, 1957

35
Then they bought a mainframe
New tools change what work means
Source: IBM35

36
The future comes looking like something you
can’t use for real work.
These days it often looks like a toy for rich
hipsters.
But the toy gets better.
And the work changes.

37
The toy gets better…
“You can’t do CAD on (DOS, Windows, Web, Mobile)”
37 Source: Onshape

38
…and matches or beats the old ways
“You can’t do video on (PCs, Windows, Web)”
38 Source: Frame.io

39
And work changes. A thousand VPs today…
When we say ‘real work’, do we mean what the business needs, or the tools we have now?
Download data from business
systems - SAP/Salesforce/Oracle
(or a really big Excel file)
Make charts in Excel, copy charts
into PowerPoint & write bullets
Email PPT to 20 stakeholders
“I need a PC, mouse and keyboard
to do my job”
But actually, your job isn’t to make
PowerPoints
And that PowerPoint should be a
SaaS dashboard with live data and
a Slack channel

40
Tools follow workflows, then reshape them
First you make the new tools fit into the old way of working.
Over time, the work changes to fit the new tools
10x better data
10x less typing
10x better data
10x less typing

41
Cloud, AI and mobile devices drive new tools
and new workflows.
Unbundling & rebundling of business tasks.
New connective tissue for the enterprise.

The internet moves
to mobile

43
0
50
100
150
200
250
300
350
400
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
US online revenues ($bn, 2014 dollars)
So, the internet happened…
US ecommerce + online ad revenue has increased ~15x since 1999
Source: US Census Bureau, IAB/PwC, a16z
Online
advertising
Ecommerce

44
Media and attention moved…
Global Internet advertising is now a quarter of the total advertising market
Source: Zenith, a16z
0
10
20
30
40
50
60
70
80
90
Annual ad spending, 1980-2014 ($bn, 2014 dollars)
Internet
Print
TV
Other
North America Western Europe APAC CEE Latam MENA

45
0%
25%
50%
75%
100%
2013 2014 2015
‘What’s your most important device for accessing the internet?’ (UK, summer 2015)
Desktop
Laptop
Tablet
Smartphone
And now we move to mobile
Devices based on the new ecosystem are already overtaking the old one
Source: Ofcom

46
Half of Facebook’s base is mobile-only
52% of Facebook's 1.6bn monthly active users only use it on mobile
Source: Facebook, a16z
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
Mar 2012 Sep 2012 Mar 2013 Sep 2013 Mar 2014 Sep 2014 Mar 2015 Sep 2015
Facebook MAUs by platform (bn)
Mobile only
Mobile & desktop
Desktop only

47
0%
10%
20%
30%
40%
50%
60%
2010 2011 2012 2013 2014 2015
Mobile share of US ‘Black Friday’ ecommerce
Share of traffic
Share of sales
Ecommerce is shifting
Mobile can now be over half of ecommerce traffic and a third of revenue
Source: IBM

48
Only at home
8%
Mainly at home
16%
Both at home and outside
66%
Mainly out of home
9%
Only out of home
1%
Where do you use the internet on your phone? (UK, 2014)
Mobile doesn’t mean ‘mobile’
People don’t use the internet on their phone when they’re mobile – they use it everywhere
40-50% of all smartphone traffic happens on wifi*
Source: Ofcom, *Facebook, *Cisco

49
Smartphones, 19%
Tablets, 22%
PCs, 27%
Consoles, 3%
STBs, 18%
Streaming boxes, 8%
BBC video requests by platform, December 2015
‘Mobile’ is taking over the living-room
Smartphones and tablets have close to half of streaming viewing, and growing
Source: BBC iPlayer Performance Pack

50
Mobile means richer, not limited
The smartphone is now a more capable and sophisticated internet platform than the PC
Personal Touch Sensors
Cameras Location Payment
Social
integration
Security
And much
easier to
use…

51
Mobile is not a sub-set of the Internet
anymore.
Mobile becomes the Internet - the main way
that most people go online.
Saying 'mobile internet' = saying 'color tv'.

52
Mobile’s multiplier effect
Increase in sophistication and complexity of mobile is as important as the increase in scale
!
Vastly
bigger
opportunity
=
3-4x more
smartphones
than PCs
Used everywhere
Used much more
Used in more
sophisticated ways

And on mobile, the
internet is different

54
For 20 years, PC internet mostly meant web
browser + mouse + keyboard.
Search (and later Facebook) dominated.
Mobile unbundles the web into apps, apps
into the OS (& other apps), breaks search.
From stability to rapid, ongoing change.

55
0
250
500
750
1,000
1,250
1,500
Jun 2013 Jun 2014 Jun 2015
Billion minutes online, USA
Mobile browser
Mobile app
Desktop
Easy to say: apps are over half of internet use
Fundamental shift in behaviour from desktop web to mobile apps
Source: Comscore

56
0
100
200
300
400
500
Desktop web Mobile web Mobile apps
Properties hitting US monthly user thresholds
5-10m
10-20m
20m+ users
Apps drive increased concentration
The app install test - do people care enough to want to put your icon on their home screen?
Source: Comscore

57
0
250
500
750
1,000
1,250
1,500
Jun 2013 Jun 2014 Jun 2015
Billion minutes online, USA
Mobile browser
Facebook etc
Mobile app
Desktop
But a third of mobile app use is Facebook…
Source: Comscore, Scientia, a16z

58
0%
20%
40%
60%
80%
100%
iOS Android
Mobile web traffic, Q4 2015
Other web views
Facebook web
views
Web browser
And Facebook is a mobile web browser
Mobile web traffic could be almost doubled if we count use within Facebook and other
social apps
Source: Scientia

59
Really, nothing’s settled yet
If I say ‘I installed an app on my Android smartphone’, what will that mean in 5 years’ time?
“Installed” an “app”?
Web apps, APIs, push notifications,
messaging, Google Now…
“Android”?
Chrome, Xiaomi…
“Smartphone?” Watches,
Amazon Echo, wearables,
TV, tablets…
“I installed an app on my Android smartphone ”

60
OS competition drives continuous change
Apple and Google both won the mobile OS wars, in different ways
Both keep innovating
Source: Apple, Google, Gartner, Facebook, Akamai, IBM, a16z
0%
25%
50%
75%
100%
Phone unit sales Facebook users Mobile web browsing App store revenue US 'Black Friday' sales
Global mobile market share, Q4 2015
Android
iOS

61
There’s no single global market anymore
Global tech market shares mean relatively little - there are many markets with sustainable
scale and they can look very different
Source: Facebook, a16z
0%
10%
20%
30%
40%
50%
60%
UK USA FR DE IT ES ID BR IND MX TR
Facebook users as % total population, December 2015
Non-mobile
Other
Android
iOS

62
A smartphone
OS isn’t a neutral
platform
Smartphones are internet
platforms. On PC you built for web:
on mobile you build for the OS.
Interaction moves down the stack
from apps and the browser into the
OS itself.
And Apple and Google keep
changing things for everyone.
Source: Apple, Google

63
And more
platforms from
maps and social
New discovery, engagement and
user acquisition models.
Moving up the stack.
Baidu Maps (screenshots) and
WeChat have achieved this in
China – Facebook and others
trying to follow.
Car services Hotels Local services
Source: Baidu

64
More and more
platform
experimentation
Huge scale opportunities and low
entry costs mean endless
experiments.
New interaction, content and
interaction models all the time.
How to get usage, and who to
send (or sell) it to?
Keyboards ‘AI’ chat bots SnapChat
Source: Riffsy, Facebook, Snapchat

65
0.0
0.5
1.0
1.5
2.0
Facebook Messenger WhatsApp Instagram Snapchat
(daily active)
WeChat Baidu Maps iOS Google
Android
Chinese
Android
Mobile monthly active users / devices (bn)
Other
Operating
systems
Facebook
New platforms, new routes to market
The great thing about mobile platforms is how many you have to choose from
Source: Companies, a16z

66
Direct, 23%
Youtube, 14%
Search, 2%
Facebook, 6%
Facebook video, 27%
Facebook images, 4%
Snapchat, 21%
Other, 3%
Buzzfeed content views by platform, Q3 2015
New models for both content and distribution
Each platform is both a different content model and a different acquisition model
Source: Buzzfeed

67
“There are only two ways I know of to make
money in software: bundling and
unbundling.”
- Jim Barksdale

68
App stores &
discovery in 2016
= Yahoo in 1996
Mobile breaks the PageRank
model for many services, and
hasn’t yet been replaced.
‘Post-Netscape, post-PageRank.’

69
Web
Smartphone
apps
Messaging?
Maps? Now?
Siri? Bots?
Notifications?
Looking for a 3rd run-time, with acquisition
We unbundled the web into apps – now we try to unbundle or rebundle again, creating
new ways to provide services, generally focused on new ways to acquire users

70
Interim solution: give Facebook $13bn
How do you get traffic or get your app installed? Well…
Source: Facebook, a16z
0
1
2
3
4
5
6
Jun 2011 Dec 2011 Jun 2012 Dec 2012 Jun 2013 Dec 2013 Jun 2014 Dec 2014 Jun 2015 Dec 2015
Facebook revenue by source ($bn)
Mobile ads
Payments & Other
Desktop ads

71
But then, you always have to pay
There’s nothing new about paying to reach customers
Source: Google, Facebook, Zenith, a16z
0%
5%
10%
15%
20%
25%
30%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Internet ad revenue as % global ad revenue
Facebook
Google
Other internet

What kind of gatekeeper works for you?
Which is better – a department store or a boutique? Or all of them?
72

73
“Who, whom?”
Who has the traffic, and to whom do they give it? And how does the platform change that?
73

Software is eating
the world

75
The future as imagined in 1990
Newspapers thought the ‘information super-highway’ would cut printing costs. Yes, but…
when the channel & route to market changes, your business changes too
Source: a16z75

Thank you