2011 Mobile Consumer Trends Gavin Patterson Chief Markets Analyst Mobile SQUARED
Contents Chapter 1: Introduction... 3 Mobile Internet... 3 Mobile Applications... 3 Mobile Commerce... 4 Mobile Advertising... 4 Mobile Marketing... 5 Chapter 2: Mobile Internet & Apps... 5 Mobile Internet... 5 Mobile Apps... 6 Usage by gender... 7 Usage by age... 7 Chapter 3: Mobile Marketing & Advertising... 9 Mobile Marketing... 9 Mobile Advertising... 10 Chapter 4: Mobile Commerce... 12 Appendix... 13 Page 2
Chapter 1: Introduction The total number of mobile operator devices in the UK is expected to rise 2.3% from 81.04 million end-2010, to 82.91 million end-2011, with smartphone penetration of total devices increasing from 24.28% end-2010 (19.68 million) to 39.13% end-2011 (32.44 million). The number of smartphones in the UK is forecast to rise almost 65% over the period driven by the almost unstoppable adoption of Android, the youth segment usage of BlackBerry and, of course, the iphone. More importantly, however, these numbers mean that smartphone penetration measured by population numbers will rise from 32.22% in 2010 to 52.77% to end-2011 an enormous watershed in terms of how we all communicate and interact with mobile digital media. Android devices are forecast to grow from 2.71 million end 2010 to 11.16 million at the end of this year more than one third of the total smartphones in market. iphone is expected to drop from first place to second place, growing from 6.4 million to 8.82 million, with BlackBerry dropping from second to third growing from 5.62 million to 7.88 million. Symbian devices will continue to fall, with a slight upturn in numbers for both Microsoft and Other smartphones. Mobile Internet The total number of mobile internet users in the UK is forecast to grow almost 40% from 21.57 million end-2010 to 30.2 million at the end of this year, driven by the burgeoning trade in smartphones. Moreover, the accelerating take-up of devices running on the Android, ios and BlackBerry operating systems will see the smartphone penetration of mobile internet users also rise sharply - from 58% end-2010 to 74% end-2011. Although iphones only accounted for 8% of the total devices in market end 2010, rising to 11% by the end of this year, they account for approximately one quarter of total mobile internet devices over the period. Android-based mobile internet usage will rise from 9.6% of total devices end 2010 to 28.7%, while BlackBerry will see a decline in mobile internet market share from 21.5% to 18.8% despite an overall growth in sales. The anomaly with BlackBerry is a result of extreme growth among 18-25 year olds (mainly the student population) who are primarily interested in the cheap BlackBerry Messenger (BBM) capabilities. Despite rapid growth in unit sales over the period, mobile SQUARED believes BlackBerry is likely to see the same decline in sales it has witnessed across North America and rumours of providing BBM to Android and, possibly, Apple is not going to help this. Mobile Applications App users in the UK are forecast to grow 51.2% from 16.69 million end-2010, to 25.24 million by the end this year. App usage Page 3
will remain proportionately higher among owners of Apple devices, although the sheer volume of Android sales will see it just sneak ahead in term of users by the end of the period. The majority of app users are obviously on smartphones, rising from 68% of the total end-10, to 80.5% at the end of this year. iphone owners will account for 34.2% of all app users at the start of the period, falling to 31.2% end this year, while Android will increase from 11.2% to 31.3%. On a proportionate basis, 89.1% of total iphone users downloaded and use apps end-10, rising to 89.4% by the end of this year, while Android will see app users grow from 69.1% of total ownership to 70.7% over the period. The disparity with mobile internet usage is not quite as marked, with 90% of iphone owners using the mobile internet end-10 and 90.3% end-11, compared to 76.8% and 77.7% respectively on Android. The difference in app and Internet usage from Apple to Android is due to the vast number of different Android devices available, and varying price points, compared to Apple. Hence, low-end Android devices are still largely used as featurephones. Mobile Commerce Commerce numbers are estimated to grow 23% from 16.89 million end-2010 to 20.76 million by the end of this year, with the growth unsurprisingly driven by smartphones. The penetration of smartphone devices among total m-commerce users is expected to jump from 49% to 62% over the period. The iphone remains the single most used device for m-commerce activities (the purchase of physical goods and services) accounting for 20% of total users end-2010, and forecast to hit 25% end-2011. Android owners only accounted for 5% of total m-commerce users at the end of last year, although the number is forecast to rise to 12% by the end of 2011, while other smartphones (including BlackBerry, Symbian, Microsoft and Others) will rise from 24% to 25% over the period. The penetration of m-commerce usage among iphone owners is expected to rise from 53% to 59% over the period, while Android m-commerce penetration will fall from 31% to 22% due to the massive growth in the number of devices in market and featurephone-type usage. Mobile Advertising Mobile advertising numbers are growing strongly, up 66% over the period from 10.82 million to 18 million. Smartphones again dominate the numbers, accounting for 77% of all eyeballs reached end 2010 and 85% by the end of this year. The importance of the iphone to developers is Page 4
evident by the fact that 29% of all users viewing a mobile advert were on an Apple device end-2010, and forecast to rise to 33% by the end of this year. Android users are expected to increase from 12% to 18%, with other smartphones falling slightly from 36% to 34%, despite an overall 57% growth in the number of other smartphone devices accessing mobile ads - driven primarily by BlackBerry. Furthermore, the proportion of total iphone users who have acted on a mobile ad (either purchased as a result in-store, on PC, on mobile, or seen but not purchased) is forecast to grow from 49% to 67% over the period, while the proportion of total Android users will actually fall from 48% to 29% despite an almost 150% increase in the number of Android device users viewing mobile ads from 1.3 million to 3.24 million. Mobile Marketing mobile SQUARED forecasts that opt-in users will grow 27.6% over the period from 13.5 million to 17.2 million as brands increasingly realise the power of mobile marketing. Initiatives such as O2 more, and its Priority Moments scheme have gained tremendous traction in the market and consumers are increasingly likely to use mobile as a vehicle to discover and redeem offers. Mobile opt-in is the only area currently tracked by Mobile Consumer Trends where featurephone/other usage remains ahead of smartphones during the period, accounting for 68% of total users in 4Q10 and 61% in 4Q11. Future issues of access: mobile will analyse usage of mobile internet, app, advertising, opt-in and commerce in much greater detail, leveraging our exclusive consumer research covering a panel of 3,000 18-64 year olds throughout the UK broken out by age, gender, location, device type and socioeconomics. Chapter 2: Mobile Internet & Apps Mobile Internet Although the total number of mobile internet users in the UK is forecast to grow almost 40% from 21.57 million end-2010 to 30.2 million at the end of this year, mobile internet users aged 18-64 year Page 5
old covered by our consumer research are forecast to increase almost 42% from 18.45 million to 26.14 million over the same period. The proportion of users in the 18-64 age range is expected to rise from 85.5% of the total mobile user base in 4Q10 to 86.6% by the end of this year. Our consumer research shows that the frequency of mobile internet usage is changing rapidly driven by the increasing penetration of smartphones in the user base. The number of users who access the mobile internet at least once per day will remain the majority over the period rising from 57% of total mobile internet users in 4Q10 to 59% in 4Q11. Total daily users are forecast to rise 46.7% from 10.5 million to 15.4 million over the period, while those claiming mobile is now their primary method of internet access will rise 176.2% from 1.1 million to 3.05 million. Mobile as the primary method of internet access will double from 6% of total mobile internet users in 4Q10 to 12% in 4Q11. Respondents saying they access the mobile internet at least once a week will also rise 54.7% from 3.02 million to 4.68 million, while those going online at least once per month will fall 21% from 3.82 million to 3.01 million falling from 21% of the total mobile internet user base to 12%. Mobile Apps App users in the UK are forecast to grow 51.2% from 16.69 million 4Q10 to 25.24 million 4Q11, with those in the 18-64 age range increasing 52.7% from 14.42 million to 22.02 million. The proportion of users in the 18-64 age range is expected to rise from 86.4% of the total mobile user base in 4Q10 to 87.2% by the end of this year. Patterns of usage vary greatly between age and gender, but there appears to be two general constants around the frequency of app downloads and, separately, the frequency of app usage on handsets. Firstly, the majority of users only download apps occasionally and the proportion of occasional downloaders appears to have stabilised at around 75% across the period. The proportion of heavy and frequent downloaders (defined as more than 5 apps per week and up to 5 apps per month respectively) actually fell slightly from 26.7% of total app users to 24.7%, highlighting the trend that most online mobile users have no more than 10 favourite sites that they visit regularly, either by app or web - notwithstanding game fads such as Angry Birds. Page 6
Secondly, the majority of users also describe themselves as frequent users of the apps on their phone, although the proportion of frequent users appears to have stabilised around the 60% mark across the period. Overall, the occasional downloaders, infrequent users remain the single largest group increasing 52.8% over the period from 5.79 million in 4Q10 to 8.85 million in 4Q11. Occasional downloaders, frequent users are forecast to rise 61.7% from 4.79 million to 7.74 million, with frequent downloaders, frequent users up 33% from 2.85 million to 3.79 million, and heavy downloaders, frequent users up 64.8% from 991,933 to 1.63 million. Usage by gender There is a marked difference in behaviour between males and females regarding their use of both apps and the mobile internet, with males far more likely to be extreme users. Mobile Consumer Trends forecasts that males will make up more than 60% of heavy or frequent app downloaders in 4Q11, and almost 60% of those who will use mobile as their primary form of internet access. Our forecasts show that males will comprise 66% of app users who download more than five apps per week and use the apps on their phone frequently, and 61% of the users who download up to five apps per month and use the apps on their phone frequently. Females are ahead in the occasional download category - comprising 54% of frequent users and 55% of infrequent users. Overall, though, males are forecast to use their apps more often than females, comprising 53% of the three frequent user categories in 4Q11. Moreover, males make up 57% of those who will use a mobile device as their primary form of internet access in 4Q11, and 54% of those using the mobile internet at least once a week or once a month. Females, though, are more regular users of the mobile internet, comprising 53% of those who access on a daily basis. Usage by age mobile SQUARED forecasts there will be approximately 3 million people aged 18-64 who use mobile as their primary form of internet access end-4q11. Of these, the 25-34 demographic is most active, accounting for almost 31% of the total, followed by, 18-24 year olds with 24%. The 55-64 year olds account for just 7% of the total. Conversely, the occasional 3.1 million monthly users aged 18-64 will be dominated by the 55-64 year-olds accounting for 30% of the total, while the 18-24 year olds make up just 10%. The fact that younger people are heavier users of the mobile internet on a more frequent basis than older is not that surprising, but the middle ground is much more mixed. Page 7
Almost 60% of mobile internet users aged 18-64 will access content at least once per day with a fairly even split of 22% each across the three age-ranges covering 25-54. The 18-24 year olds account for 15% of daily users with 55-64 on 19%. Weekly users aged 18-64 are led by 35-44 year olds, followed by 45-54 year olds, then 55-64 year olds, 25-34 year olds and then the 18-24 year olds. There is a markedly similar situation for app usage, with younger users being more active downloaders than older. The 18-34 demographic comprises over 60% of the heavy downloaders and over 55% of frequent downloaders. Meanwhile, the 35-64 demographic comprises almost 70% of occasional downloaders. In terms of app usage, the most active of the three frequent user categories are the 25-34 year olds who comprise 28.5% of the total, followed by 35-44 year olds on 23% and 18-24 year olds on 19.3%. Conversely, 55-64 year olds make up just 11.3% of total frequent users, but 28.5% of infrequent users. Page 8
Chapter 3: Mobile Marketing & Advertising Mobile Marketing The total number of mobile marketing users in the UK is forecast to grow from 12.69 million in 4Q10 to 20.8 million as of 4Q11, with the 18-64 year old segment growing from 10.37 million to 17.15 million over the same period. The uptake in mobile marketing opt-in is currently being driven by the mobile operators with O2 and, to a lesser degree, Orange leading the way. Research by mobile SQUARED shows total operator opt-in will have risen from just 1.33 million end-2010 to 11.83 million end-2011 primarily on the back of the amazingly rapid growth witnessed at O2 More. At the same time, the number of people opted-in to third party brands and companies is expected to grow from 12.16 million to 16.66 million, with Argos alone counting around 6 million opt-ins. There are obviously a number of duplicates people who have opted-in to both brands and an operator which have been discounted in our total numbers. Question marks remain, however, over the veracity of a number of optin techniques used by both operators and brands and, as we shall see, not all opted-in users actually participate. According to data based on our quarterly consumer research findings from a panel of 3,000 users across the UK, only 54% of opted-in users had actually participated the brand or company as of 4Q10, rising to 58% as of 2Q11 and forecast to reach 61% by 4Q11. This would tend to indicate that a significant proportion of opt-in users are either not aware they are opted in and, therefore, treating branded communication as spam, or the brands in question have not yet found a relevant and attractive message to engage their user base and risk alienating them. One high-profile success story is UK high street retailer Marks & Spencer, which is considered to be one of the leading mobile retailers in the UK. Having developed its mobile strategy from the Back to School using newspaper ads with a standard text response, it is now generating single transactions in excess of 1,000. In the five years since M&S included mobile within its cross-channel strategy, it has developed a portfolio of different products and related offers and distributes relevant messages based on what individuals have opted in to receive via the website. The retailer is using, what mobile SQUARED refers to as an entry level strategy for its permission-based marketing. That means the company is delivering an isolated one-off message with a promotion, and is not encouraging the user to enter into an ongoing engagement with the brand. Instead, Marks & Spencer is using messaging-based promotions to drive footfall to its 700 stores across the UK. Page 9
Presently, it sends six messages to its opt-ins every eight weeks. On a per week basis, based on an SMS cost of 0.03, Marks & Spencer spends 24,000. Over a 12-month period, Marks & Spencer is spending 936,000 sending a total of 31.2 million. That means each subscriber receives 39 SMSes per year at a cost to the retailer of 1.17. The majority of messages are promoting the Dine in for 10 meal deal the company runs. To cover the cost for the campaign over the year, M&S has to sell 93,600 dine in for 10 dinners only, averaging 1,800 per week. With over 700 stores across the UK, that is 134 sales per store per year, or 256 nationally per day. Mobile Advertising The mobile advertising market is growing fast as more and more retailers crank up their mobile strategies around web and app. The total number of consumers who have seen ads on their mobile devices is forecast to rise from 10.82 million end-2010 to over 18 million by the end of this year. According to on-going consumer research undertaken for mobile SQUARED by Lightspeed Research, the number of 18-64 year olds who have seen a mobile ad will rise from 9.34 million to 15.81 million over the same period. Nevertheless, the vast majority of people who are reached by mobile advertising are still not buying as a result although the situation is improving over time. At the end of 2010 a total of 5.64 million mobile consumers aged 18-64 who had seen a mobile ad made no purchase as a result equivalent to 60% of the total universe. By the end of this year, however, forecasts based on our latest round of consumer research show that the proportion of users not purchasing will have fallen to 54% as rich media, better profiling, and geo-location targeting increasingly exert their influence. Paul Childs, CMO at Adfonic, believes geo-targeting has created a real buzz within mobile advertising circles over the last year promising a new era of real-time mobile advertising that is geographically relevant to a consumer according to where they are at a particular moment in time. The appeal of being able to improve the efficacy of campaigns by targeting consumers to whom the message is most geographically relevant is evident and we re seeing a number of business models beginning to emerge around the geo opportunity, says Childs. Figures from Mobile Consumer Trends also show that an increasing proportion of mobile consumers are now buying in store as a result of seeing mobile ads on their devices Page 10
rising from 854,372 (or 9% of the market in 4Q10), to 1,79 million (or 11%) in 4Q11. Of course, there could well be other reasons at play behind these purchase decisions, but the trend of mobile advertising driving footfall to bricks and mortar premises is being seen. Spurred on by the growing popularity of social media location check-in features, such as Facebook Places or Foursquare, hyper-local advertising has generated a lot of interest amongst brands. The effect could be described as similar to the digitisation of the sandwich board, says Childs. Mobile couponing has also gained significant traction as a hook to drive footfall and redemptions in store. Driven forward by players like Groupon, Living Social and Amazon, and adopted by an increasing number of brands, mobile couponing enables consumers to click on a mobile banner to download a promotional coupon which can then be redeemed in store at point of sale. The other mobile-advertising driven transactions measured by mobile SQUARED are purchases made via mobile, and purchases made via PC. In 4Q10, slightly more purchases were made on a desktop/laptop at home or in the office after seeing a mobile ad, than via a mobile device, with 1.45 million people using a PC versus 1.4 who would use their mobile to purchase. Mobile crept ahead in 3Q11 and, by the end of this year, is expected to be used by 2.74 million people versus 2.71 million who still prefer the PC. Page 11
Chapter 4: Mobile Commerce mobile SQUARED estimated there will be 20.76 million m-commerce users in the UK in 4Q11, of which 17.7 million will be aged 18-64. According to behaviour revealed in our 2Q11 survey of mobile consumers aged 18-64, our MCT database forecasts an average of 45% of m-commerce users will only spend up to 10 in 4Q11, with 37% spending up to 100, 7% spending up to 1,000 and the remaining 11% saying they will spend up to 1,000, or above. The major population centres as measured by ITV advertising region such as London, Central, Meridian, Granada and Yorkshire obviously have the most m-commerce users, but some interesting regional variations begin to emerge when compared against national average spend. For instance, the West Country, Ulster and HTV, each claim at least two extremes of behaviour when measured against the national average. Approximately 64% of mobile consumers aged 18-64 in the West Country will only spend up to 10 on m-commerce, while just 12.4% say they will spend up to 100. At the same time, however, the proportion of users who say they will spend up to 1,000 and above peaks here at 16.4%. Ulster boasts the lowest proportion of users who will only spend up to 10 just 34.1%, but also the highest who will spend up to 100 47.3% Meanwhile, HTV has the highest proportion of users who will spend up to 1,000 11.1%, but the lowest who will spend 1,000 and above 5.7%. Meridian had the lowest proportion of users willing to spend up to 1,000 just 3.2% of the m- commerce user base. Users in the Anglia region were generally above average on everything apart from spend up to,1000, while Border was below the national average on everything bar spend up to 100. Over 50% of users in Granada would only spend up to 10, while affluent London users were below average for those willing to only spend 10, and above average on everything else. Page 12
Appendix All data and forecasts are taken from the Mobile Consumer Trends database covering the 12 months from the end of 2010 to the end of this year. All figures and forecasts are based on ongoing quarterly consumer panel research up to 2Q11. The consumer research undertaken by mobile SQUARED tracks the usage and behaviour of 18-64 years olds, and all figures contained herein apply to this demographic unless stated otherwise. Page 13