So what are Brits doing with their smartphones?  Mobile web browsing was the fastest growing activity, with 10.4 million using that function in the third quarter, up from 8.8 million in the second quarter.  Downloading applications was the second fastest growing activity, with 1 million new users in the third quarter to 4.1 million.

“Although there have been sizable increases in the take-up of new mobile technologies such as video and location-based services, they remain niche forms of behavior,” said Edward Kershaw, Vice President of Mobile Media at Nielsen.  “The era of the handset as a truly multi-media device on a mass-market level lies somewhere on the horizon, and the key for companies to successfully harness mobile lies in a realistic understanding of what activities people on a large-scale are actually doing with their handsets now.”

The launch of the Droid by Motorola–which runs Google’s Android 2.0 operating system–is the latest smartphone to be tagged “game changing iPhone killer.”  We prefer to view it as simply a quality choice in a growing line of smartphones rather than something that will stifle the competition. With only 10,000 applications available in the Android market and more than 100,000 available for the iPhone, the Droid–or any Android phone–won’t be killing the iPhone anytime soon. What the Droid will do is advance the use and adoption of web content to a connected device. Android’s integration with popular and widespread Google applications such as Gmail, Google Calendar and Google Voice is a big help as is its ability to run multiple applications (up to six on the Droid). Most users do this on their computers so being able to listen to music while browsing the web and sending email makes a multi-tasking smartphone an appealing option.

The Competition to The Competition

The mobile marketplace is not just a faceoff between the iPhone and Droid; over the next few months, there are at least six new devices on deck that will have large screens like the Droid, keyboards (the Droid has both a virtual and physical keyboard), and an ever-increasing number of applications.

Nielsen’s data from Q3 2009 suggests that if you buy an Android phone, you’ll likely use more of the data features more often than if using any other smartphone.

Also, for the first time in Q3, Nielsen saw more users accessing the Internet on smartphone than that of feature phone users. If this trend continues, we’ll see more than 80% of the devices accessing the Internet being these advanced phones.

The Mobile Universe is Expanding

In Q3 2009, historically the slowest phone sales quarter, more than 25% of all phones sold were smartphones. Expect Q4 to have more than 40% of the new phones sold be smart devices. This is important to watch as smartphones are on track to be the majority of phones in the U.S. by 2011. Projecting Nielsen data out through 2010, we see smartphones crossing 50% of the market by the middle of 2011, roughly equal to 150 million users. This shift could happen much faster with the right conditions such as continued competitive price points on devices, lower “all you can eat” data packages and the increasing consumer need to be connected anytime, anywhere.

By mid-2011, the U.S. should be just over 300 million mobile subscribers. If we assume that we will have over 150 millions uses of smartphones (based on our projections) and that 80% of these users will access the Internet and 60% will access video (given the current data trend these assumptions may actually be low), this means that over 120 million mobile users will be on the Internet and 90 million will be watching video. What we have typically called the “third screen” is quickly becoming an extension of the first and second screens (TV and desktop viewing) especially in some key demographics. Note how Hispanics and African-Americans over-index on Mobile Video and Internet Usage.

Overall, we see mobile media growth accelerating over the next year with more users paying for video and premium content. Remember,  the mobile phone is the one media device that is always within reach. The trend in the U.S. is more interaction, more consumption, and more connected devices. While not a competition killer, the Droid is the next logical step in a market with a wide array of rich media devices. As that trend continues, the battle for better smartphones with better access to content will wind up seeing the consumer as the clear winner.

Jon Stewart, Research Director, Technology & Search
and Chris Quick, Mobile Media Analyst, The Nielsen Company

SUMMARY: The mobile media landscape is primed for accelerated growth. Smartphone sales are predicted to lead the way, accounting for nearly half of worldwide sales by 2013. Mobile consumers around the world weigh in on the features, functions and data applications they find most desirable. The key driver of mobile growth is good devices and fast, affordable data. Understand what vehicles are most effective in reaching consumers.

Growing from a niche opportunity for games and ringtones, the mobile media landscape has flourished into a full-blown marketplace for advertising, rich media content, ecommerce and unparalleled utility—bringing about one of the biggest changes in the media and advertising business in a generation.

A perfect storm is imminent. The market is primed for accelerated growth well into 2010. What will “phone” mean to the next generation of consumers and what applications, functions and features are the most effective in reaching today’s consumers. A review of these opportunities reveals important insights into what is driving mobile growth in the U.S and abroad.

Apps-titude
Nielsen examined mobile media usage across 14 countries and discovered some interesting patterns. China has the highest penetration of software/application downloaders, ringtone downloaders, and mobile Internet users. At 89% penetration, text messaging is nearly as prevalent as voice services in Mexico, which is also the highest penetration of any media activity in any country analyzed.

Canada ranked first for content uploads and game downloads. The United States clicked into first place for picture messaging/MMS (multimedia message services) and location based/global positioning services.

Purchase criteria
Mobile consumers around the world applied different criteria when deciding what phone to purchase. Cost was the top factor across the board—especially influential among buyers in Turkey, South Africa and India. Brand or previous experience also weighed heavily among shoppers in Italy, Spain, Sweden and Russia. Ease of use was second most important factor for consumers in Germany, the United Kingdom and France. Design and style factored in for mobile users in Mexico, United Kingdom and the United States.

The features most desired by global mobile shoppers on their next purchase will be camera capability (number one in all 13 countries examined), followed by a built-in MP3 player and Bluetooth connectivity.

Growth drivers
In the fast-paced world of mobile media, the U.S. mobile subscriber base grew 7% to 277 million by the second quarter of 2009, which represented 221 million unique users, adjusting for multi-phone holders.

Among the many applications available on mobile devices, the fastest-growing segment in the U.S. was web video, which expanded by 33% to 20 million subscribers/15.2 million unique users, followed by multimedia messaging which jumped 29% representing 174 million subscribers/68 million unique users, and audio/application/game downloads which increased by 25% to 71 million subscribers and 39 million/27 million/23 million unique users per respective download.

Get smart
Perhaps more telling for the future of the industry, was the increase in the number of U.S. smartphone subscribers during the 2008-2009 Q2 period—a jump of 72% to 26.1 million users.

The Gartner Group predicts that smartphone sales will account for 46% of all mobile phone sales worldwide by 2013.

Currently, smartphone penetration varies by country. In Italy and Spain, more than one-quarter of new mobile handsets purchased were smartphones, with 28% and 23% market penetration respectively. The United States followed at 17%, Sweden at 13%, Canada-Germany-United Kingdom at 12% and France at 11%.

The newest generation of smartphones, like the Apple iPhone, the Palm Pre and the Blackberry Storm, combine cellphone connectivity with handheld computer capabilities like email, Internet, ebook readers, QWERTY keyboards, touchscreens, video, cameras and navigation software to name a few popular features and applications.

Dialed in
Smartphone owners in the U.S. tend to be male, younger (between the ages of 18–34), affluent (income of $75k+), and they use the phones for a mix of both personal and business purposes, with more emphasis on business usage. The profile of the iPhone user is similar, but skews even higher for the more affluent (twice as many in the $100k+ income group). A higher percentage of iPhone users also use the device for a mix of personal and business purposes (index of 160 for the iPhone compared to 220 for all smartphones).

One of the most appealing attributes of the U.S. smartphone owner, and particularly the iPhone user, is their appetite for data packages. All mobile subscribers spend $57.04 in billed services, with the monthly voice plan accounting for $35.40 and data extras adding $12.10 to the bill. Blackberry owners typically rack up $88.85 per month in charges, with $45.10 in voice plan costs and $28.20 in data extras. iPhone users spend nearly as much on data ($37.60) as they do on voice ($42.00) and have an average monthly bill of $89.35.

Surf city
Smartphone utilization underscores the point that, if you build a better browser and user experience, they will come. Almost 60% of all software/application downloaders were smartphone owners. More than half (55%) of all streamed music users did so using their smartphones. Smartphone owners also account for half of all active mobile Internet users, 41% of online game players and 38% of mobile instant messagers.

iPhone owners lead the way in media usage when it comes to mobile Internet (89%), text messaging (87%), software/application downloads and location-based services (75%), video/mobile TV (41%) and full track music (38%). The same market-leading usage pattern holds for iPhone’s built-in handset features like camera pictures (87%), Wi-Fi (77%) and speakerphone (72%). The sole exception is Bluetooth connectivity, where other smartphones feature a slightly higher utilization rate at 42% compared to 40% for the iPhone.

Transaction action
SMS (short message services), or text messages, reached 4.2 billion standard rate transactions in the U.S. on AT&T and Verizon in Q2 2009. The clear leader was Twitter with 1.3 billion messages, followed by FOX (due in large part to MySpace) with 740 million texts, Facebook at 465 million, and 4INFO at 257 million transactions. Total traffic was generated by 50 million unique users.

Stateside, social networking drove the growth train for mobile Internet, with a 187% increase in audience for the year ending July 2009. The distribution of 18.3 million unique social network users by the top three sites is Facebook (26% reach), MySpace (13% reach) and Twitter (7% reach).

Ad exposure
One-third of all mobile data users were exposed to some form of mobile advertising in Q2 2009. SMS and MMS comprised the two most popular forms of mobile advertising response. Roughly 16% of consumers responded to mobile ads most frequently via text message, a picture or MMS message, email or by visiting a designated web site.

Teenagers were the most accepting of mobile advertising—the acceptance rate declines as age increases. Perceptions of mobile ads were highest among all age groups if it lowered their bill. Consumers age 45+ were the least accepting of mobile ads. The Yankee Group forecasts mobile ad revenues could see faster growth than online, predicting a 60% jump in 2009 to $184 million. By 2013, that amount could reach in $566 million range.

Mobile marketing opportunity
Companies looking to drive sales should leverage mobile marketing activities like providing product information, coupons, discounts, event notification and mobile search. Another high-return approach would be to employ mobile’s innate capability to enhance the consumer interaction with a brand, providing information, inspiration or helpful functionality.

Companies who are finding success have developed specialized applications that were either fun or functional, scoring high on consumer engagement. Optimally, marketers will strike a balance between utility and enrichment, marrying the two into a unique, timely mobile consumer experience that makes best use of these dynamic devices.

We have seen that the mobile industry is on a fast-track, with massive growth in mobile marketing, advertising and paid-content for users. But what is really leading this growth is the increase in quality devices and fast, affordable data. While smartphone ownership was once just a business tool, more consumers than ever are using smartphones in their everyday lives. In the past year alone, the total number of smartphone subscribers increased 72% quarter-over-quarter, growing from 15 million subscribers in Q2 2008 to 26 million in Q2 2009. While the penetration level of smartphone users is still fairly low – nearly 17% in Q2 2009 – they make up half of the mobile Web audience.

Italy Leads in Smartphone Adoption

Despite America’s reputation as a nation of big talkers — the U.S. is not setting the pace in smartphone adoption — ranking third when ranked by penetration. Italy has the largest percentage of smartphone owners at 28%, while Spain is not far behind with 23%. France has the most room to grow, with an 11% penetration level.

Smartphone Gender Gap Continues

With the continued expansion of smartphone ownership in the U.S. and the availability of more affordable devices, the market is opening up to a wider range of consumers. However, we continue to see similar demographic profiles for smartphone owners as we did a year ago. While smartphone usage is shifting from purely business use to both personal and business use, owners are still more than two times as likely to own a smartphone for business usage only. Smartphone owners continue to be predominantly male, are 65% more likely than the average mobile subscriber to be between the ages of 25 and 34, and nearly two times as likely to make more than $100,000 a year.

What’s Next?

So while more people are buying smartphones and penetration levels are increasing, the demographics are not significantly changing yet. There is a lot of untapped potential available to marketers to reach a whole new generation of smartphone users. Is your mobile marketing strategy as smart as your phone?

Over the past few months, the government’s interest in the practice of handset exclusivity has intensified. On the heels of Congressional hearings in July, Verizon Wireless agreed to dial back its exclusive deals with cell phone manufacturers to accommodate smaller carriers. This week the FCC, which has already begun a review of handset agreements, has made the issue a focus of its regular monthly meeting. But no matter what the setting or circumstances, whenever U.S. lawmakers and regulators discuss competition in the wireless industry, the elephant in the room these days is almost always the iPhone.

Since Apple first gave AT&T exclusive rights to carry its groundbreaking device in the United States, concerns about unfair competitive advantages have become a hot-button issue. Apprehensions increased as AT&T sought to extend the deal beyond the 2009 deadline, and reached a fever pitch when Apple rejected a Google Voice application earlier this summer.

Nonetheless, many both inside and outside the industry question the need for more government intervention.

Indeed, before the iPhone came along, far fewer consumers (or lawmakers and regulators for that matter) cared a great deal about handset exclusivity, because most cell phones were utilitarian at best. According to Nielsen’s Mobile Insights report, which surveys 300,000 wireless users every year about their opinions and behaviors, in Q3 2006 – a full year before the iPhone launched – “device” was only the seventh most important factor in choosing a wireless carrier. The percentage of respondents on device has since increased from 2.9% to 6.4% in Q1 2009, yet the category remains in seventh place.

There is no doubt AT&T has benefited from the arrangement. New subscribers between the first quarters of 2008 and 2009 who signed up for “a phone not offered by my carrier” (i.e., the iPhone) jumped from 11% to 23%, and the company has reported that 40% of its iPhone customers switched from other services.
Still, the mobile industry is home to many operators who sell a wide variety of handsets. Currently, there are more than 100 different phones offered by the nation’s “Big 4″ service providers in their retail store, plus hundreds more from the large carrier’s websites and the more than 100 smaller carriers that are operating in the United States.

Even if every handset were required to be accessible across all four networks, only the largest of manufacturers could invest in the infrastructure necessary to produce identical products with different technologies. Neither legislation nor regulation could nor should be expected to change that situation.

It can be argued that exclusivity actually enhances innovation and creates more choice. If, for example, Apple’s iPhone or Motorola’s RAZR were initially available on all U.S. carriers, there would have been minimal incentive for handset manufacturers to create rival products. Though competition would exist, the options would be considerably less diverse.

What is more, the iPhone’s significant technological lead over virtually every other smart phone would probably have virtually destroyed the market for the other handset manufacturers. T-Mobile, like several other carriers, would have had less reason to invest in the development Android-based devices. Palm would not have been able to build the Pre and sell as many as it did in the first few weeks without the support of Sprint. In fact, Palm would have likely died without the Centro, which was custom built for Sprint under an exclusive pact that has since expired.

Beyond the iPhone’s distinct technological advantages, AT&T’s infrastructure would almost certainly limit competition as well. Early on Apple had decided to build its phone on a GSM technology path, the most popular standard for mobile phones in the world. But in the United States there are but two GSM networks – AT&T and T-Mobile. Were the iPhone originally available on both, consumers would pick their carrier based largely on price and coverage. Since pricing can be easily matched, T-Mobile’s nascent footprint would have a hard time going up against AT&T’s more built-out network.

In time – perhaps as early as next year – Apple will likely drop its AT&T exclusivity and build an iPhone in the U.S. that can be used across other wireless technologies. That is about to happen in Europe, where the company is reportedly moving away from exclusive deals because it can now derive greater profitability by not having restricted relationships with only single providers. At that point, new and current iPhone users will migrate to carriers that makes that the most sense for them – still driven by the factors other than “device.”

A version of this article also appeared at FierceWireless.com.

While public awareness of Apple’s iPhone has been significant since its summer 2007 launch, its influence on consumer purchasing decisions remains up for debate.

To try to better understand the iPhone phenomenon, I took a look at the most recent data from The Nielsen Company’s Mobile Insights survey, which asks 25,000 wireless users every month (a total of 300,000 per year) about their wireless attitudes and experiences, including why they chose their current wireless service.

When the results of 1st quarter of 2009 are compared with the 3rd quarter of 2006 as a control for the “iPhone-effect,” some interesting insights emerge. Q3 2006 was the last quarter without solid iPhone news that could sway consumers in their purchasing behavior.

At first glance, the most striking difference between 2006 and more recent data is what changed and what did not. Price remains the most important factor in choosing wireless service. Yet, even with the prominence of the iPhone, surprisingly the availability of a specific phone stayed flat as the 7th most important factor. While increasing in importance from 2.9% to 6.4% handset-choice alone did not bump up in the rankings. It seems that what makes for an outsize share of newspaper headlines, and congressional and regulatory attention, leaves the average American cold.

Not as surprising, economic factors are increasingly important. Family plans that let consumers call other family members for free and free in-network calling have shot up to near the top. Payment options, including pre-paid and unlimited calling and texting offers, are also substantially more important.

This translates into opportunity for:

• Pre-paid providers such as Tracfone
• Unlimited providers Boost Unlimited, Metro PCS, and Leap, each who offer unlimited calling and texting for as low as $40 per month
• The two largest wireless operators in the U.S. Verizon Wireless and AT&T due to the larger free calling circles

Perhaps the most unexpected outcome is the declining importance of network quality as a major factor from 2nd to 5th place. A testament to the success of its consistent advertising message, the number of consumers who perceive Verizon Wireless as having the best mobile network has shot up over the last two years and it leads its closest competitor now by an almost 2:1 margin. Consumer perception of the carrier’s quality has shot up over the last two years and it remains the single-most important reason consumers choose them. While handsets represent popular topics of conversation, economic factors are actually the major driver in the purchasing process.

In June, anticipation of the new iPhone 3G S sent blog mentions up 1,226 percent week-overweek on June 8, the day of the announcement. After the initial announcement, buzz dipped but again picked up after the phone became available to consumers on June 19, with blog mentions more than doubling compared to the week prior.

More hardware and gaming console data available in the Nielsen Online media release. ]]> http://blog.nielsen.com/nielsenwire/online_mobile/apple-tops-list-of-hardware-sites-rings-up-buzz-in-june/feed/ 8 http://blog.nielsen.com/nielsenwire/online_mobile/iphone-users-watch-more-video-and-are-older-than-you-think/ http://blog.nielsen.com/nielsenwire/online_mobile/iphone-users-watch-more-video-and-are-older-than-you-think/#comments Wed, 10 Jun 2009 19:33:37 +0000 Nielsen Wire http://blog.nielsen.com/nielsenwire/?p=12651 Upon Apple’s announcement of a new iPhone – the iPhone 3G S, slated to be available June 19 – Nielsen takes a look at iPhone insights on its users and usage.

• As of April 2009, Nielsen estimates that there are 6.4 million active iPhone users in the U.S., up from 2.1 million a year prior. The most impactful iPhone announcement this week may be the price reduction of $99 for the 8 GB version: cost has been one factor (in addition to AT&T exclusivity) that’s kept the overall iPhone audience modestly sized.
• 37% watch video on their phone (6x as likely as the typical subscriber)
• The iPhone audience is age-diverse: a device this powerful isn’t just for kids. There are roughly as many iPhone users 55 and older as there are 13-24.

• iPhone users look good to mobile marketers. Forty-percent have household incomes of $100K or more – twice the ratio among all subscribers (19%). That income may also be helpful for current iPhone owners who want to upgrade: in-contract iPhone owners may have to pay an additional $200 to upgrade before their contract expires.

• It’s not just for looks. 98% of iPhone users use the data features of their phone, services that should improve with the enhanced speed promised by the iPhone 3G S.

• 88% use the Internet (making them 4x as likely as the typical subscriber)

• 75% download apps (5x as likely as the typical subscriber)

• 72% used location based services (7x as likely as the typical subscriber)

Apple’s announcement came on the heels of the release of the latest so-called “iPhone killer” the Palm Pre smartphone. However, iPhone buzz continues to dominate the blogosphere.

According to Nielsen Online Global Landscape report, iPhone users are unique in their use – a hint at the mobile media behaviors of users of next-gen phones to come. iPhone users, for instance, are more than four times as likely as a typical subscriber to use mobile Internet, six times as likely to use mobile applications and six times as likely to consume mobile video.

This summer, new phones like the Palm Pre, updates to Blackberry offerings, and phones using Google Android OS aim to challenge the iPhone’s “cool” factor with touchscreens, mobile apps and other features. But right now, iPhone still has the stranglehold on buzz… including the rumor of a price drop in June.

Recession or not, for good reason there is no shortage of innovation in the mobile media industry (e.g. iPhone 3.0, the upcoming Palm Pre). The bottom line: consumers still want more! According to recent research across the U.S. and Western Europe conducted by The Nielsen Company on behalf of Tellabs, consumers are still bullish on the use of the mobile device beyond voice calling services and plan on continuing to adopt and use mobile data services. Of the 200 million current users of advanced mobile data services across the U.S. and Europe, almost 60% intend to use mobile data services more in the next 24 months, and of the millions of non-users, more than 25% intent to adopt mobile data services in the next 24 months.

Not only are U.S. users leading in their expectation of use of the mobile internet, but also in their frequency of use. Seventy one percent of current users expect to use the mobile internet daily, if not several times a day, whereas 41% of Europeans expect to have such a high frequency of use.

What’s driving this trend is consumer’s expectation of how using mobile data services will add convenience and improve their lifestyle, and how this aligns with current capabilities of the mobile platform. Making consumer’s lives easier is the most important factor driving increased use in the U.S.

When conducting the research, we also looked at other lifestyle factors including work, entertainment and socializing. The “work” lifestyle was also a big factor in boosting use of select mobile data services in the U.S. These differences emerge even in the use of software/applications – entertainment was more of a driving factor for use in France, Germany and Spain, but was not as relevant in the U.S.

Given the current capability of the mobile platform and consumer’s current perception of how they would use it, keep your eyes on mobile marketing applications focused on convenience (shopping, coupons, and commerce) first and pure entertainment down the road.