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Mobile is eating the world
!

November 2013	

!

Benedict Evans	

@benedictevans
Mobile scale

Tablets

Ecosystems

2

Mobile social 
discovery
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
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
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
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
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
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
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
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
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
What does mass mobile internet
use really mean? From this…

12
…to this

“I love reading about TV soaps
so I got the app on my phone”

13
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
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
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
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
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
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
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
Scale

Tablets

Ecosystems

21

Mobile social 
discovery
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
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
• 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
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
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
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
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
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
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
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
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
Scale

Tablets

Ecosystems

33

Mobile social 
discovery
‘Four horsemen’ driving the
agenda
Google

Apple

Facebook

34

Amazon
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
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
(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
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
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
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
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
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
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
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
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
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
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
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
Scale

Tablets

Ecosystems

49

Mobile social 
discovery
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
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
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
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
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
• 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
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
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
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
Is the mobile opportunity so big
that it doesn’t matter to
Facebook if it isn’t dominant?

59
Unbundling

60

Source: Andrew Parker
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
Unbundling
Facebook
• Each

part of the Facebook
experience gets peeled away
on mobile	


• Photos, text, music, video...

62
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
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
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
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
Cards as content packets - social
as discovery

67
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
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
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
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
72
Thank you
More:	

@benedictevans	

www.ben-evans.com	

www.ben-evans.com/newsletter

73

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2013 11 mobile eating the world

  • 1. Mobile is eating the world ! November 2013 ! Benedict Evans @benedictevans
  • 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
  • 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
  • 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
  • 72. 72