Archive for May, 2011

Mobile Hotspots

By Michael de Souza, VP Media

What’s driving the growth of the mobile internet? In case you blinked, the growth has been outstanding… by any measure.

  • There are five times as many mobile phones as landlines. Of the billions of handsets in use, over 96% have at least a basic web browser and over 94% have a colour screen. The number of phones with a browser capable of rendering an HTML web page eclipses the total number of personal computers worldwide by three times.
  • BuzzCity first started measuring ad impressions in 2007. In the first quarter of that year, we delivered 340 million ads. That seemed like a lot at the time. Fast forward four years to the first quarter of 2011 and our network served 23.2 billion ads. In fact, several of our top markets experience more ad clicks in a single month today than our entire market did back in 2007.

And the growth is not just over a period of years, or even year-on-year. Every quarter we see mobile ad markets doubling in size. Every quarter. Take a look for instance at some of our top markets:

  • Spain :  225% growth (212 million ad impressions in Q1 2011, up from 66 million in Q4 2010)
  • Egypt :  144% growth (288m v. 118m)
  • China :  130% growth (448m v. 194m)

All three of these countries, by the way, rank in our Top 20 markets, in terms of the number of ads served.

So what factors, we wondered, need to be in place to create this kind of soaring exponential growth?

To answer this question, we decided to study data from our ad network, focusing on hotspots where mobile web usage is doubling at least every three to six months. We examined traffic, not advertising spend, so we’re simply looking at consumer demand.

Our analysis

We studied several markets where growth has been particularly strong.

India was a natural choice – it’s our largest market by number of ads served and one of our fastest growing. Other countries on an equivalent growth path include Mexico, Nigeria, Saudi Arabia, South Korea and Vietnam.

We mapped periods of intense growth in these six countries to changes in local ecosystems, analysing each market for underlying factors that might explain the increases. We identified four key factors that drive growth. When more than one of these factors comes into play, the effect is exponential.

Finally, we applied this thinking to four regions – Africa, Central America, the Middle East and Southeast Asia – to see if the same four factors have the same explosive effect in the rest of the world. The answer by the way is a resounding “yes”. So, if you are an advertiser and you notice the following factors coming into play in a market, expect massive growth.

Four Key Factors
So, here’s what we found, the top four forces driving growth of the mobile internet:

1.  Falling cost of internet access

This is by far the most immediate and powerful factor in growing traffic volumes. It can be done incrementally (resulting in gradual growth) or through a price-war between carriers (which creates staggering quick jumps).

India provides one of the best examples of the effect of a price war. There are now 750 million active mobile phones connected by 15 mobile carriers. The market activates between 10 and 15 million new SIM cards each month. Competition between the carriers is fierce and primarily price-driven; margins are razor-thin. The cost of data has plummeted to less than 20 US cents per MB. This is not the cheapest in the world, but with 15 carriers fighting over each activation, it’s a good place to be a customer.

2.  Rollout of new technologies such as 3G or WiMax

Next generation technologies allow networks to transfer large amounts of data at high speed. Carriers usually engage in heavy promotion of these new technologies, leading to fast adoption by new users and increased data consumption for existing clients. Governments and regulators moreover tend to award licences for each technology to several providers at once, which leads to a healthy competitive environment.

After the government allocated 3G licenses in India, mobile internet traffic skyrocketed from about 500 million monthly impressions in April 2010 to 2.4 billion a year later.

The same pattern has played out in Mexico, where the number of ads served more than tripled in just five months.

3.  Cheaper handsets with larger screens and better usability

The producers of entry-level smartphones are achieving economies of scale and have slowly flooded markets in Africa and Asia over the past 18 months. Handset prices have dropped to less than US$100 for an Android phone and US$50 for MAUI-based handsets.

The availability of these cheap smartphones has driven massive increases in the consumption of email, web and multimedia content, and a wave of demand for data, as users take advantage of the full capabilities of their handsets. A market share of just five percent for one of these devices can create a noticeable and disproportionate increase in data traffic.

A look at the market share of MAUI-based generic handsets for April 2011 illustrates this:

  • Vietnam     :  42.5 %
  • Kenya        :  13.9 %
  • Bangladesh :  11.8 %
  • Egypt          :  8.2 %
  • Thailand      :  8.0 %

 In several of these regions, the ‘white box’ handsets look set to knock the mighty Nokia off its long-held position as number-one manufacturer. 

4.  Heavy promotion of web services

Carriers from Mumbai to Manhattan are positioning bundles of ‘handset plus data package’ and promoting them as ‘designed for Facebook’ or ‘Twitter enabled’ to take advantage of the growth of social media platforms and other mobile web services. Other key enablers include financial service offerings and location-based services. Here are some examples from competing carriers currently running in Indonesia:

These top-level findings may sound obvious but they are powerful levers for accelerating the growth of a mobile ecosystem. When more than one of these factors is introduced at once, you’re likely to see exponential growth.

Check out the next installments of this series, when we start to take a look at how these factors play out region by region.

Related Stories 

Part 2 – Latin America
Part 3 – The Middle East

Categories: Michael de Souza