Apps and the Mobile Internet The battle of the platforms: both native and Web apps

The battle of the platforms: both native and Web apps 4 th Edition Ref: M11117- Janvuary 2012 Mobile Internet is here and geared for growth, despite the global recession. For 2016 the worldwide penetration rate of Mobile Internet will reach 34.7% - or 2.89 billion users - generating service revenues (apps and advertising) of 43.3 billion EUR. This report provides detailed information about market's structure, data & forecasts 2008-2016, player profiles and strategies. It also spotlights the current and upcoming trends and the different kinds of mobile Internet usages. What are the key figures in the main European, American and Asian markets for mobile Internet? Which of the device or content will be more important for platform players? Who will control the user data? What conflicts between interoperating platforms can be observed? What role for HTML5? Can it be an attractive alternative to the native apps and are there already hybrid solutions? Which will be the main revenue source for mobile Internet? What are the key drivers for this market? Market & Data >This report ships with a database Market data & Forecasts 2008-2016 by zone & by country Market volume & market value

Contents (Report-PDF) 1. Executive Summary 2. Methodology 3. Market structure & key factors 3.1. Market overview 3.1.1. Market segmentation 3.1.2. Product/service trends 3.2. Current market estimates 3.2.1. Shipments & subscription numbers of smartphones 3.2.2.Shipments and subscriber numbers of tablets 3.2.3. Mobile Internet penetration 3.2.4. Mobile Internet advertising revenues 3.2.5. Mobile app revenues 3.3. Key drivers 4. Market structure and player strategies 4.1. Industry structure and value chain 4.2. Competition structure/landscape/ environment 4.2.1. The mobile devices market 4.2.2. The tablet market 4.2.3. Mobile OS and ecosystems 4.2.4. Mobile app storefront strategies 4.3. The developer perspective 4.3.1. Origins of developers 4.3.2. Developers must get their satisfaction 4.3.3. Future direction for developers 4.4. Business models 4.4.1. Mobile advertising 4.4.2. Revenues from app sales 4.4.3. M-commerce 4.5. Company profiles 4.5.1. Device vendors 4.5.2. Internet giants 4.5.3. Mobile network operators 4.6.Strategic analysis 4.6.1. The dust settles on the mobile OS battlefield 4.6.2. The reality of app stores and the developer perspective 4.6.3. The way forward for mobile operators 4.6.4. Native apps, Web apps and hybrids will and already co-exist 4.6.5. Platforms to fight for data control over mobile Internet 5. Markets and forecasts 5.1. Market development factors 5.1.1. Mobile assets 5.1.2. Analysis of growth drivers 5.1.3. Forecast hypotheses 5.2. Market forecasts 5.2.1. Smartphone shipments and subscribers 5.2.2. Shipments and sub numbers for tablets 5.2.3. Mobile Internet penetration 5.2.4. Mobile Internet advertising revenues 5.2.5. Mobile apps Database (Excel) Markets 2008-2011 Forecasts 2012-2016 Market value and volume. Worldwide coverage See next page for details Slideshow (PDF) Synthesis of the report s key issues (Powerpoint format) Deliverables: Report (pdf) Database(Excel) Slideshow (pdf) Publication date: January 2012 1-5 users licence: EUR 3 500 Sales contact: Isabel Jimenez i.jimenez@idate.org Tel. : +33 (0)467 144 404 Project Manager Soichi NAKAJIMA s.nakajima@idate.org Tel: +33 (0)467 144 458 Other available reports: World Internet Usages & Markets Mobile VoIP Mobile Video Online Video ebooks Upcoming reports: Mobile devices Cloud-Focus datacenter LBS NFC Mobile payments Offloading mobile networks Femtocells Annual service: LTE Watch Service - Half-yearly updated database - Monthly Insights - Analyst access More information at www.idate.org IDATE - BP 4167 34092 Montpellier Cedex 5 Tel : +33 (0) 467 144 444 Fax : +33 (0) 467 144 400 - info@idate.org www.idate.org

Database Markets 2008-2011 & Forecasts 2012-2016 (Excel) Market Volume Number of mobile subscriptions Number of 3G subscriptions Share of 3G subscriptions Shipment of mobile phones Number of subscribers of mobile phones Shipments of smartphones Number of subscribers of smartphones Share of smartphones in shipments Shipment of tablets Number of subscribers of tablets Number of mobile Internet users Mobile Internet penetration Market Value Mobile Internet service revenues Mobile Internet advertising revenues Mobile apps revenues Total mobile Internet service revenue Zones Asia Pacific Europe-27 Europe-5 World Countries - China - South Korea - France - Germany - Italy - Japan - Spain - The UK - The United States Mobile app revenues by country (abstracts) Source: IDATE IDATE - BP 4167 34092 Montpellier Cedex 5 Tel : +33 (0) 467 144 444 Fax : +33 (0) 467 144 400 - info@idate.org www.idate.org

Internet Services Market & Data Report Apps and the Mobile Internet The battle of the platforms: both native and Web apps M11117 January 2012

Contributors Soichi NAKAJIMA, Head of Project, Senior Consultant Soichi joined IDATE as a senior consultant in January 2009. His main area of endeavour is the mobile communications market, such as the mobile Internet, applications, contents and services, the analysis of strategies employed by the various players, scenario building and forecasts. He also works on other business potentials for the mobile Internet, such as smart grids and VoIP. Before coming to IDATE, Soichi worked for NTT DoCoMo, Japan s largest mobile network operator by subscriber numbers, where he played a leading role in the strategic planning of the roll-out of Japan s first 3G M2M data-only tariffs. Soichi holds a Bachelors degree in mathematics, from the University of Nottingham in the UK. s.nakajima@idate.org Copyright IDATE 2012, BP 4167, 34092 Montpellier Cedex 5, France Tous droits réservés Toute reproduction, stockage ou diffusion, même partiel et par tous moyens, y compris électroniques, ne peut être effectué sans accord écrit préalable de l'idate. ISBN 978-2-84822-281-3 ISSN 2109-6783 All rights reserved. None of the contents of this publication may be reproduced, stored in a retrieval system or transmitted in any form, including electronically, without the prior written permission of IDATE.

Content This report is part of a study also including an Excel database and a PowerPoint presentation. 1 Executive Summary... 8 2 Methodology... 12 3 Market structure and key factors... 14 3.1 Market overview... 14 3.1.1 Market segmentation... 14 3.1.2 Product / service trends... 18 3.2 Current market estimates... 21 3.2.1 Shipments and subscription numbers of smartphones... 21 3.2.2 Shipments and subscriber numbers of tablets... 22 3.2.3 Mobile Internet penetration... 24 3.2.4 Mobile Internet advertising revenues... 25 3.2.5 Mobile app revenues... 26 3.3 Key drivers... 27 3.3.1 Network technologies... 27 3.3.2 Smartphone and tablet technologies... 30 3.3.3 Web apps and native apps: the HTML5 debate... 34 3.3.4 NFC, Open data, LBS and Cloud services... 36 3.3.5 Traffic management and Net Neutrality... 40 3.3.6 Mobile Internet usage trends... 45 3.3.7 Major categories of services... 49 4 Market structure and player strategies... 54 4.1 Industry structure and Value chain... 54 4.2 Competition structure / landscape / environment... 60 4.2.1 The mobile devices market... 60 4.2.2 The tablet market... 65 4.2.3 Mobile OS and ecosystems... 66 4.2.4 Mobile app storefront strategies... 69 4.3 The developer perspective... 75 4.3.1 Origins of developers... 75 4.3.2 Developers must get their satisfaction... 76 4.3.3 Future direction for developers... 81 4.4 Business models... 83 4.4.1 Mobile advertising... 83 4.4.2 Revenues from app sales... 91 4.4.3 M-commerce... 98 www.idate-research.com IDATE 2012 3

4.5 Company profiles... 104 4.5.1 Device vendors... 104 4.5.2 Internet giants... 108 4.5.3 Mobile network operators... 112 4.6 Strategic analysis... 115 4.6.1 The dust settles on the mobile OS battlefield... 115 4.6.2 The reality of app stores and the developer perspective... 115 4.6.3 The way forward for mobile operators... 116 4.6.4 Native apps, Web apps and hybrids will and already co-exist... 116 4.6.5 Platforms to fight for data control over mobile Internet... 118 5 Markets and forecasts... 121 5.1 Market development factors... 121 5.1.1 Mobile assets... 121 5.1.2 Analysis of growth drivers... 121 5.1.3 Forecast hypotheses... 122 5.2 Market forecasts... 123 5.2.1 Smartphone shipments and subscribers, in numbers... 123 5.2.2 Shipments and sub numbers for tablets... 125 5.2.3 Mobile Internet penetration... 126 5.2.4 Mobile Internet advertising revenues... 127 5.2.5 Mobile apps... 128 www.idate-research.com IDATE 2012 4

Tables Table 1: Trends with mobile Internet services compared to fixed services... 15 Table 2: Type of services... 17 Table 3: LTE deployments worldwide... 27 Table 4: LTE devices shipments forecast (thousands)... 29 Table 5: Verizon Wireless tariffs... 29 Table 6: Examples of LBS apps for mobile handsets... 39 Table 7: Traffic management by MNOs in various countries... 41 Table 8: Consultations and regulation status regarding traffic management... 44 Table 9: Preferred device (Mobile, PC or Tablet) in terms of activities, by world areas... 45 Table 10: Mobile Web service usage in terms of reach in the EU5... 48 Table 11: App storefronts segmentation... 70 Table 12: Comparison of major app storefront features... 70 Table 13: Detailed examples of mobile network operator app storefronts... 71 Table 14: Platform hardware and software fragmentation... 78 Table 15: App storefront payment methods... 80 Table 16: Gross CPM rates of banners on the Orange Mobile portal... 86 Table 17: Examples of mobile apps offering location-based services... 90 Table 18: Support for in-app purchase... 93 Table 19: Comparison of air travel apps by Mobiata... 97 Table 20: Commonly-used mobile payment solutions by transaction type... 102 Table 21: Estimated transaction costs... 103 *** www.idate-research.com IDATE 2012 5

Figures Figure 1: User data and revenue flow between Apple and Le Monde... 11 Figure 2: Type of services... 17 Figure 3: Cloud computing... 18 Figure 4: Share of smartphones in mobile shipments, 2009 2011... 21 Figure 5: Number of subscribers of smartphones, 2009 2011... 22 Figure 6: Number of tablets shipments, 2009 2011... 22 Figure 7: Number of subscribers of tablets shipments, 2009 2011... 23 Figure 8: Mobile Internet penetration, 2009-2011... 24 Figure 9: Mobile Internet advertising revenues for the EU5 countries, 2009-2011... 25 Figure 10: Mobile Internet advertising revenues for USA, Japan, South Korea, EU27 and China, 2009-2011... 25 Figure 11: Mobile app revenues for USA, Asia-Pacific and EU27, 2009-2011... 26 Figure 12: Mobile app revenues by zone, 2009-2011... 26 Figure 13: The future of the mobile devices: How it will look in five years from now... 30 Figure 14: Software layers in mobile phones... 35 Figure 15: Using a NFC phone for a mobile transaction... 37 Figure 16: VoIP access prohibited in a Orange UK data browsing offer... 42 Figure 17: Free Skype-to-Skype calls authorised on the «3» UK network - advertisement... 42 Figure 18: Year on growth of global mobile Internet activities, 2010 vs. 2011... 46 Figure 19: Download rate of most popular apps, by category, in the USA... 47 Figure 20: Percentage of users preferring browser or app... 47 Figure 21: Frequency of recalling seeing a Web/app Ad... 49 Figure 22: Age of mobile owners who recall seeing a Web/app ad... 49 Figure 23: The mobile Internet value chain... 57 Figure 24: Smartphone market shares... 61 Figure 25: Mobile handset market shares by vendor in volume, 2007-2011... 64 Figure 26: Worldwide tablet sales ('000)... 65 Figure 27: Smartphone OS market share as of the first three quarters of 2011... 66 Figure 28: App Distribution Business Model... 72 Figure 29: iphone developer's heritage, all App categories... 75 Figure 30: The path to concentration... 76 Figure 31: Comparison of number of devices installed base and number of apps available, as of end Q1 2011... 77 Figure 32: Rate of developers planning to abandon a given platform as of June 2011... 78 Figure 33: Payment methods supported by app stores... 80 Figure 34: Percentage of developers using mobile platforms... 81 Figure 35: Cross-platform revenue comparison: ios vs Android... 81 Figure 36: Examples of mobile advertising... 84 Figure 37: Different banner formats advertised by Orange mobile portal... 86 Figure 38: Google AdWords sponsored links... 87 Figure 39: Google AdWords targeting and tracking options... 87 Figure 40: Details of Qype premium SEO... 88 Figure 41: Optimisation of iphone technical features for Nissan ad campaign... 89 Figure 42: Google AdWords click-to-call function... 89 Figure 43: Mobile coupon combined with geolocation... 90 Figure 44: Guitar Hero paid app for iphone and ipod Touch... 92 www.idate-research.com IDATE 2012 6

Figure 45: The 10 most downloaded paid apps on the App Store in April 2011 (USD)... 93 Figure 46: Free Adventure Bay app, published by Ngmoco... 94 Figure 47: icoyote subscription-based app... 95 Figure 48 : Netflix app suggesting to the user to sign up on its Website... 95 Figure 49 : Amazon Kindle app maintaining direct access to the Kindle Store online... 95 Figure 50: Free app of the Pays de Fougères tourist office... 96 Figure 51: Free application from Société Générale... 97 Figure 52: Revenues of m-commerce, 2010 and 2015... 98 Figure 53: Share of m-commerce revenues in total online sales by country, 2010 and 2015... 99 Figure 54: Example of mobile payments via NFC technology... 100 Figure 55: Starbucks Card Mobile App... 101 Figure 56: Cityzi Orange promotion... 102 Figure 57: Orange multimedia... 113 Figure 58: The Financial Times Web app, encouraging users to switch from the native app... 119 Figure 59: Share of smartphones in mobile shipments, 2011-2016 forecast... 123 Figure 60: Number of subscribers of smartphones, 2011-2016 forecast... 124 Figure 61: Number of tablets shipments, 2011-2016 forecast... 125 Figure 62: Number of subscribers of tablets, 2011-2016 forecast... 125 Figure 63: Mobile Internet penetration, 2011-2016 forecasts... 126 Figure 64: Mobile Internet advertising revenues for EU27, Asia-Pacific, USA, Japan and China, 2011-2016 forecasts... 127 Figure 65: Mobile Internet advertising revenues for EU5, South Korea and China, 2011-2016 forecasts... 127 Figure 66: Mobile app revenues by zone, 2011-2016... 128 www.idate-research.com IDATE 2012 7

2 Methodology The overall approach adopted by the IDATE team of analysts and consultants combines a variety of methods: Field research and validation of field research data; Conventional tools of industry and market analysis, principally segmentation, competition analysis, strategic strengths, modelling and assessment and forecasts; Expert analysis from specialists in the field and from their professional networks. More specifically, IDATE teams make use of the following tools: 1/ A multidisciplinary team of full-time sector-specialist consultants IDATE analyses are performed primarily by our in-house consultants, and very occasionally by freelance market analysts. This approach allows us to capitalise on our pool of expertise through teamwork, sharing knowledge, ideas, contacts, viewpoints and key data. Each report is drafted by a team of specialists under the direction of senior consultants who are recognised experts in their field. 2/ Primary and secondary research IDATE reports and databases are compiled from primary data obtained from first-hand interviews with sector decision makers, and on secondary data assembled from public sources and external databases. 3/ An integrated information centre sustained by a number of tools and proprietary databases Over the course of 30 years, IDATE has developed proprietary work methods, data structures and databases that trace the history of major developments in the sectors under study. Companies: the IDATE in-house data service tracks the latest news and events to come out of the leading telecom, Internet and media industry companies around the globe. Innovative firms and startups are monitored by the market experts in the different "Practices". Markets: the IDATE databases are developed using rigorous methods to process major economic indicators (such as GDP, investment, exchange rates and demographics) and relate them to influential sectoral and national factors (such as capex and national market dynamics). Technologies: the organisation of IDATE by Practice provides us with an efficient means of tracking innovation. Our engineers ensure an in-depth understanding of the changing shape of products and services and of the latest innovations in the marketplace. www.idate-research.com IDATE 2012 12

4/ Contents of the published reports Each IDATE market report details the structures and issues at play in the market being examined, the driving forces (technologies, regulation, and consumption) and the players involved. Particular emphasis is given to the market assessments and forecasts, which are developed within the framework of a core scenario. Every market report features a clear ad concise presentation illustrated with tables and graphs of key market data and trends. The process of drafting of a market report includes the following stages: analysis of the information available in the in-house databases, and review of analyses performed in the recent past; based on a preliminary segmentation and assessment of the market, and as part of an validated interview guide, analysts conduct interviews that enable them to validate working hypotheses; a market model is then established, making it possible to test the hypotheses that have an impact on the development of the market, and validated by a new round of interviews; a discussion of the conclusions of the report with the team responsible for the project and with expert consultants from the various fields involved; a final proofreading and editing/revision process, prior to the production of the final version of the report and its delivery to the client. 5/ Market assessment and forecasts The forecasts made by IDATE are based upon: Primary data gathering worldwide. Market models which point to separate key service consumption parameters and service pricing assumptions. Scope of the study This study covers mobile Internet services and mobile content on mobile phones, smartphones in particular, with reference also to tablets. In only covering mobile Internet services, it thus does not cover access services (such as data plans and tethering), nor their revenues. Finally, pure mobile services without connection to the Internet, such as DVB-H for mobile TV and some LBS services, are also excluded. www.idate-research.com IDATE 2012 13