The yearly Internet Trends Report from KPCB’s well-regarded analyst Mary Meeker always provides talking points for the internet and high-tech industries, and this year’s is no different. Mobile has become an increasingly big part of the report over the years, and the current installment released May 29, 2013, highlights a number of key trends for the industry, developers and developer programs.
The key trends the report highlights are that “growth continues,” and innovation and social behavior changes are happening at an increasing pace. Overall, mobile traffic now accounts for 15 percent of all internet traffic, up from 10 percent last year (see chart at right). But the real story in mobile is one of opportunity, rather than saturated growth.
Room for Growth
The report includes two slides showing how much room there is left for growth, in terms of smartphone subscribers, but also in spending.
Spending first: an early slide from the deck shows that smartphone usage now accounts for 12 percent of the total time spent by Americans in media (i.e. reading print media, listening to radio, watching TV, spending time on the internet, etc.), but accounts for just 3 percent of advertising spending. Compare this to TV, which sees 42% of media time and 43% of ad spending, or the internet, which gets 26% of time and 22% of ad spending.
The growing pains of the mobile advertising business have been pretty clear to see so far, but as consumers spend more and more time on their devices, it’s natural that the ad spending will follow suit. It seems likely that spending will shift away from print media, which commands a whopping 23% of ad spend, compared to just 6% of time spent. Meeker estimates the upside revenue opportunity in the mobile ad business to be somewhere on the order of $12 billion over current spending, which would represent a massive boost to publishers and developers.
The other key growth state to watch for mobile is smartphone user growth. In the US, some 58% of mobile subscribers are now on smartphones, a figure that increased by about a quarter over the last year (see table above). While there’s still more room for smartphone uptake in that country, it dwarfs the smartphone penetration rate of much larger countries like China (29%), Russia (12%) and India (6%), and it’s higher than other “first-world” nations like the UK (53%), France (46%), Germany (29%) and others.
This points to continued growth in the overall market, but particular growth in countries with differing languages, cultural norms and content needs around the world. Effective localization will be increasingly important for mobile developers to reach these markets. Google, for one, has caught on to this, as shown by its recent announcement of app translation services that can be accessed from within the Developer Console.
M-Commerce is quietly growing
Over the last few years, m-commerce has really taken root, though it’s done so in a manner that hasn’t matched the huge amount of early hype the topic generated.
Still, the idea of buying real-world goods through an app is no longer foreign to many smartphone users, whether it’s booking a taxi in Uber, buying a movie ticket, reserving a room in Hotel Tonight, or ordering from Pizza Hut. Meeker highlights in her report the stat that 45% of Groupon’s North American transactions are completed on mobile now, compared to just 14% in 2011. Users, particularly those in North America, are increasingly comfortable making purchases via their handsets.
All of these examples have one common feature: they use credit card billing rather than an in-app payment API from a platform provider or an operator. They ask users to either enter their credit-card info for each order, or when they set up an account. While this has long been held up as an example of poor usability – and having a significant effect on conversion rates – it’s working. And these companies are happy to put up with it over other payment mechanisms because of the relative cheapness of credit card processing compared to other means.
There are a few implications here worth noting for developer programs. First, credit cards aren’t going anywhere for mobile purchases. There are times where carrier billing might make sense, and there are times when credit-card billing makes sense, particularly for high-value purchases. But where there is still value to be added is in helping developers increase conversion rates for all purchases, not just reducing friction for purchases through an in-app API. A good example of this is the forthcoming Customer Profile API announced by AT&T in January, which can pre-populate form fields for certain information for its subscribers.
Time for tablets
Tablets have obviously enjoyed a significant amount of success in the market, but the scale of that success might be a bit surprising: in Q4 2012, more tablets were sold than either laptop or desktop PCs (see chart above right). While Q1 2013 sales dropped (as they typically do after the holiday season), tablet sales remain higher than desktops.
Tablet apps have been making some minor noise for some time now, but we are still yet to see a major breakout of tablet-specific apps. Indeed, the top download lists for phones and tablets enjoy a tremendous amount of overlap, with few tablet-only apps appearing.
It’s still not yet clear just how different users want apps to be on a phone versus a tablet, but it is clear they are very interested in using tablets as media consumption devices (think of the success of the Netflix and Flipboard apps, for instance).
However, the growth of tablets also reflects a bigger trend in computing: the shift of services and applications to the cloud. This will continue, if not accelerate, as tablets become even more pervasive and replace standard PCs for many people. In many cases, tablets serve the basic needs of a large number of users quite well, particularly when those needs amount to little more than web browsing on a decent-sized screen.
More advanced needs are moving into the cloud and off of PCs, as well. For instance, a PC used to be a necessary tool to download music, movies or other media to a mobile device; that’s not the case any more. As mobile phones become the primary digital camera for many people, image editing on a PC before uploading is becoming morerare. See Google’s announcement of automatic photo edits and enhancements in the cloud from I/O for more on this point.
The result of this for developers would point towards an increasing need for applications to perform PC-like tasks on tablets – or cloud-based services that can perform them in concert with apps or via the web browser. The biggest challenge, though, will be to get consumers to accept pricing of tablet apps and services that is more along the lines of PC applications than mobile phone apps.
Hunger for sharing
One trend that shows no sign of abating is the huge hunger people have for generating and sharing content from their mobile devices. Based largely on content created via mobile, the amount of digital information created and shared worldwide will amount to almost four zettabytes in 2013, and 8 zettabytes by 2015 (1 zettabyte = 1 trillion gigabytes!).
Powering this huge growth is a number of types of content:
Photos, which have seen explosive growth, but continue to boom as new players like Snapchat (which will this year see 4-5x as many shared photos as Instagram) emerge (see chart below).
Video, already popular via old stalwarts like YouTube, but also seeing a boost from new services like Twitter’s Vine.
Sound, which is growing from audio content services like Soundcloud and Audioboo, but also seeing a resurgence in messaging through services like the wildly popular Chinese chat service WeChat.
Already emerging on the horizon too is user-generated (or often device-generated) data. Whether this is from crowdsourced content like Yelp reviews, automated data from a Jawbone Up health tracker, or traffic data collected via smartphone by Waze, it’s adding up. This snowball will turn into an avalanche, as well, contends Meeker, as sensor-enabled wearable devices become more popular and pervasive.
Key points here for mobile developers and developer programs are:
An increasing number of new devices – some which will have cellular networks (and thus will need to be tested and certified), but many which will integrate into a user’s personal network via WiFi, Bluetooth or another means.
A growing need for tools to help developers store, manage, sort through and make sense of all this data their users are generating.
That users have a currently insatiable hunger for communicating via shared content, either on a 1-1 basis (as in Snapchat and WeChat), or on a 1-many basis across varied types of social networks. This also puts increasing pressure on major social network players themselves to either innovate with new services (such as Twitter did with Vine) or acquire (as Facebook did with Instagram).
As an extension of the above point, content remains a valuable currency with users, and they’re interested in apps and services that help them capture, create and share it in novel and fun ways.
This latest Internet Trends report illustrates just how fast the mobile space continues to move. The broad trends Meeker highlights do have an effect down to developers, and in turn should provide some guidance to developer programs.
Each trend highlighted here has an accompanying opportunity for mobile developers, and they will flock to the programs that help them take advantage. Some of these trends may be ones your program can directly take advantage of, but giving developers the support and power to leverage the trends for their own success will deliver long-term results for your program.