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.

The data analysis examined the distinctive consumer patterns and marketing appeal of women who work fulltime and have one or more children at home. The study includes information on their shopping habits, media patterns, demographics and lifestyles. “The Working Mother is the gatekeeper for purchases related to clothing, feeding and making a home for her family. Her high spending on cellular services together with her propensity to download content via her cell phone imply that mobile marketing could be an important platform for reaching her with product announcements, offers and other promotions,” said Howard Goldberg, Senior Vice President of agency services, Scarborough Research.

Download Shopping Insights on Today’s Working Mom, from Scarborough Research.

What outlook should we have when contemplating the future of mobile video? For content providers, carriers, advertisers and consumers, mobile video is often a glass-half-full / glass-half-empty scenario. Yes, the industry is placing tremendous attention and investment in the medium – but, by comparison its reach is fairly humble. And yes, the possibility for future growth is enormous when we consider content and commerce potential– but, it’s a complicated path to that future.

For some perspective, we turn to Nielsen’s latest Mobile Video Report, which paints the picture either way: It provides affirming insights on mobile video’s best year yet. Nonetheless, it highlights substantial limitations and challenges ahead.

Glass Half-Full – Mobile Video’s Best Year Ever

• Reach, up 70 percent year over year, crossed the 10 million active viewer mark in 2008 and kept going – up to 15.3 million active viewers as of Q2 2009 (that’s roughly 7% of all US mobile subscribers)
• With “All You Can Eat” mobile data packages and increased access to mobile video over the mobile Web, access to mobile video content is more affordable than ever. A subscriber with a data package that includes video now pays $5.73 a month, on average, compared to $8.32 a year ago. Meanwhile, most mobile video viewers today aren’t even paying for a special package, but instead access mobile web through mobile Web access, simplifying the means to mobile video
• Though average subscription cost of mobile video is down, added reach still helped carriers claim a record $308 million in mobile video subscriptions in Q2 2009, up 11% compared to the prior quarter

Glass Half-Empty – Many phones not answering the call

• Half of U.S. mobile subscribers still carry phones that aren’t even capable of viewing video (52%), that’s just a marginal improvement over two years ago (62%). The adoption rate of mobile-video capable phones slowed as the economy weakened
• Among mobile video viewers, satisfaction with the overall experience went down over the last year (74% in Q2 2008 to 65% in Q2 2009). Even more troubling, consumer satisfaction decreased around undeniably improving components such speed, reliability, content, price and general audio and video quality.
• The mobile video audience is churning quickly. Disproportional to year-over-year audience growth, today’s mobile video audience is made up mostly of viewers still in their first year of use (78%). Since its introduction, the adoption rate of mobile video has been governed by a revolving audience of mobile video “testers,” viewers who try out the medium for under a year and then ditch it. Mobile video today still lacks the stickiness it needs for more rapid growth.

A mixed bag for sure, but no matter your take on mobile video, today, it’s hard to deny that a confluence of factors — better devices, faster networks, dedicated programmers, consumer interest – prime the pump for the broader, if bumpy, adoption of the platform. In short, the catalysts for growth are now in place.

A different kind of growth

Perhaps adoption of mobile video may look more like the gradual, linear adoption of DVRs than the exponential growth of portable MP3 players and the similarity wouldn’t be a coincidence. DVRs and mobile video are analogous in their transformational nature: technologies that fundamentally alter the time or place of media consumption. That’s a very distinct evolution from a technology such as the MP3 player, which did not change the time or place of the portable CD player, but simply refined the user experience of that medium – thus the adoption of the MP3 player was a logical adoptive progression for the consumer. The extent to which mobile video asks consumers to fundamentally alter their consumption patterns should not be understated.

Choose (cautious) optimism

At 6.5% penetration, it’s easy to be a pessimist about mobile video, to see the half-empty glass. But after posting its best year yet, after 70% year over year growth, it’s wiser to be a cautious optimist. Mobile video is a transformational technology that will require real changes or additions to the consumer media diet. As such, it may have a long way to go before making a dramatic impact on our media economy. When it does, though – when mobile video adoption further dissolves barriers of video’s time and place – the beneficiaries will be those who participated in its evolution, those who anticipated and planned for this demand.

Share your thoughts below or email me for more on Nielsen’s latest Mobile Video Report nic.covey@nielsen.com.

“Although we have seen the computer and mobile phone screens taking on a significant role, their emergence has not been at the cost of TV viewership,” said Jim O’Hara, President, Media Product Leadership, The Nielsen Company. “The entire media universe is expanding so consumers are choosing to add elements to their media experience, rather than to replace them.” Nielsen data also shows Americans are using DVRs more than ever, watching one hour more of timeshifted TV each month than a year ago. Currently, 30% of homes in the U.S. have DVR devices.

The Simultaneous TV and Internet Experience

Nielsen’s Convergence Research Panel, launched in 2008, provides single source electronic measurement of TV and Internet usage in the same homes. As of June 2009, this panel shows 57% of consumers with Internet access at home watch TV and go online simultaneously at least once a month. On average these consumers spend 2 hours, 39 minutes each month simultaneously using the Internet while also watching TV. Their online experience at home is in front of the television almost a third of the time.

Other Key Facts and Trends

• As Americans continue to watch more TV each year there are also more TVs in each home than people – in 2009 the average U.S. home had only 2.5 people vs 2.86 television sets. 54% of Americans have three or more TV sets in the home. (link to universe estimates)
• Online usage is relatively flat since last year, though more people are viewing video online than ever before. Certain age groups also view online video more than others do – Adults 18-24 watch more than 5 hrs each month vs. Adults 65+ watching just over 1 hr of online video.
• Short form video (such as YouTube clips) still makes up the lion’s share of online video viewing – 83% in May 09 – while name-brand TV network content comprises the majority of mobile video viewing.
• Younger demographics aren’t using the Internet as much as older demographics, yet the growth rate of kids 2-11 online clearly outpaces the overall Internet penetration. The number of kids online has increased 18% compared to 10% growth for the total active Internet universe (P2+).
• Mobile video viewing continues its upward trend, with over 15 million Americans reporting watching mobile video in Q2 2009. This is an increase of 70% versus last year – the largest annual growth to date.

Download Nielsen’s complete Three Screen Report for complete details and methodology.

They might be on the Internet, or gaming or texting… but they could also be be watching live TV, listening to the radio or reading a newspaper. At the annual What Teens Want conference in New York, The Nielsen Company presented How Teens Use Media, which argues once you look past the hype – American teens are not as alien in their media usage as you might expect. Sure, it might sound hip and trendy to suggest they’re too busy texting, Twittering or LOL-ing to be engaged with traditional media, but ultimately, the research proves otherwise.

“The media experience is broadening for all consumers, not just teens,” said Nic Covey, director of insights for The Nielsen Company. “Looking at our research across markets and media, we see that, contrary to popular assumption, teens are actually pretty normal in their usage, and more attentive than most give them credit for.”

The comprehensive report combines insights from Nielsen’s global resources in Television, internet, mobile, gaming, moviegoing, radio, newspaper and advertising research to debunk myths and provide the hard facts around how teens use media.

Key Takeaways

• Teens are NOT abandoning TV for new media: In fact, they watch more TV than ever, up 6% over the past five years in the U.S.
• Teens love the Internet … but spend far less time browsing than adults: Teens spend 11 hours and 32 minutes per month online. Far below the average of 29 hours and 15 minutes.
• Teens watch less online video than most adults, but the ads are highly engaging to them: Teens spend 35% less time watching online video than adults 25-34, but recall ads better when watching TV shows online than they do on television.
• Teens read newspapers, listen to the radio and even like advertising more than most: Teens who recall TV ads are 44% more likely to say they liked the ad.
• Teens play video games, but their tastes aren’t all for the blood-and-guts style games: Just two of their top five most-anticipated games since 2005 have been rated “Mature.”
• Teens’ favorite TV shows, top websites and genre preferences across media are mostly the same as their parents: For U.S. teens, American Idol was the top show in 2008, Google the top website and general dramas are a preferred TV genre for teens around the world.

For additional insights, download a free copy of How Teens Use Media

More highlights from Nielsen Online’s Q1 2009 Canadian Mobile Internet Report can be found in the complete media release.

Susan D. Whiting

Of the myriad challenges confronting the television industry, the much-discussed defection by viewers to online and mobile platforms may be the most comforting; simply because it hasn’t happened. Despite the profusion of multimedia computers, broadband Internet connections and portable video devices, the overwhelming majority of Americans are staying right where they are – in front of their TV sets inside their homes.

That is just one finding from a new, year-long Video Consumer Mapping study, which calls into question several current presumptions about media consumption. Conducted by Ball State University’s Center for Media Design and Sequent Partners, and funded by The Nielsen Company, the $3.5 million research project was produced on behalf of the Council for Research Excellence, an independent body of broadcast, cable and advertising professionals and associations.

Though primarily focused on television and video, the study quite literally examined how consumers incorporate all forms of media into their daily lives. To that end, researchers observed, first-hand, 376 individuals in five major markets (Chicago, Philadelphia, Dallas, Atlanta and Seattle) throughout an entire day as they were exposed to visual content across a full spectrum of platforms. Observers also tracked a special Accelerated Panel in the Indianapolis market, whose 100 members specifically engaged with selected new media devices. In all, the more than 950 observed days generated an abundance of comprehensive data related to screens on televisions, computers, cell phones and even GPS navigation systems.

Yet this ability to directly monitor and record individuals’ activities all through their waking hours – in increments as concise as every 10 seconds – also provides unique insights that sometimes starkly contrast with participants’ own recall. In questionnaires completed by panel members a day after being observed, TV use was substantially underreported, although the observation data confirmed earlier Nielsen research that more than 99 percent of all consumer screen time is still spent with television.

On the other hand, respondents significantly over-reported both online video and mobile video use. Though computing has replaced radio as the number two media activity, video on PCs actually averaged just two minutes (slightly more than 0.5 percent) a day; whereas exposure to video on mobile phones was too small to measure without a much larger sample. Indeed, by any measure TV in the home still dominates viewing behavior – whether in terms of daily reach (94 percent) or average daily duration (5.5 hours) – among all adults.

Market researchers know full well to exercise caution when interpreting self-reported information by consumers about their exposure to multiple media, because most people find it hard to accurately gauge the time they spend. One reason may be that TV viewing is such a familiar activity it is easily taken for granted; while watching video on newer technologies is still unique enough to engender disproportionate attention, and possibly skew outcomes.

Thus, it should not be a complete surprise that media multitasking, a skill set regularly associated with 18 to 24-year old “digital natives,” is, in truth, practiced among all age groups 55 and under. Nor, for that matter, is the fact that TV viewers are exposed, on average, to 72 minutes per day of commercials and promos, dispelling the commonly-held notion that audiences avidly avoid most ads in television programs.

Conventional wisdom is frequently based on old assumptions that ignore or dismiss the emergence of new ideas. In this instance, however, some of the new ideas may essentially represent a collective rush to judgment.

For one thing, enduring changes in consumer behavior rarely happen overnight. They tend to be a lot more subversive than revolutionary, becoming apparent only after years of continuous adaptation. For another, predictions about new technologies sometimes underestimate the staying power of the products and systems they seek to replace. Even among digital natives, who are exposed to twice as many different screens as those 65 and older (10 versus 5), live TV occupies the largest share of media time.

Nonetheless, many pundits limit their perspectives to only a handful of big, popular concepts when drawing conclusions, either failing or choosing to overlook a wider choice of possibilities. But in an expanding and simultaneously fragmenting media universe, the capacity to leverage a multitude of resources and opinions is crucial.

This is why the Video Consumer Mapping study substantially enhances the body of knowledge about how people use media. Not only does it capture critical data through extensive direct observation rather than merely count on less reliable responses via diaries or telephone interviews, but it also reflects the diversity of interests and objectives across the Council for Research Excellence. By bringing together what are often competing points of view and applying them to a truly rich array of facts, it exceeds conventional wisdom. The result is both a broader and deeper understanding of just how much the market is changing; and forcefully consumers are driving that change; and how profoundly it affects all parties.

Key findings in the Mobile Video Report

• 51% of mobile video viewers surveyed reported that they are new to the medium, viewing for less than 6 months
• Viewers are spending an average 17 sessions per month viewing video on their cell phones. They are watching an average of 15 minutes per session
• On average, teens watch 22 mobile video sessions per month and spend 20 minutes per session viewing mobile video
• 63% of teens report watching programs to completion-the highest portion of any age group
• 11% of total mobile video viewers report the iPhone as their primary cell phone

Additional findings about media viewership are contained in Nielsen’s Three Screen Report, which tracks TV, Internet, and Mobile usage.

-Each month, 10.3 million U.S. mobile phone subscribers access video content via their phones — up 14% from 2007

-Still, mobile video use in the U.S. remains low (5% of all subscribers), compared to other mobile media

-Among mobile video users, Apple’s iPhone is the most popular phone: as of Q3 2008, 11% of all streaming video users were using an Apple iPhone, and 35% of iPhone users reported regularly using mobile video (compared to about 5% of all mobile subscribers)

-Mobile Web video has fast become the most popular means (66% of mobile video users) of mobile video consumption – however, many mobile video users continue to pay for access to a video service (42% of mobile video users)

-YouTube was the leading Web video provider in Q3 2008, accessed by about three million U.S. mobile subscribers — the Web video giant’s mobile audience grew by 277% from October 2007 to October 2008

-Subscriptions to mobile video are also growing – from 13.2 million in Q3 2007 to 16.4 million in Q3 2008

-Usage frequency among mobile video users is relatively low (17 videos per month median), but overall satisfaction with the mobile video experience is high among current users — as of Q3 2008, 71% of mobile video viewers said they were satisfied with their mobile video experience

Download a copy of Nielsen’s new white paper, “Tuned into the Phone: Mobile Video Use in the U.S. and Abroad.”

Read more about who’s watching mobile video and what they’re watching in the January 2009 issue of Nielsen’s “Consumer Insight” online newsletter.

Read coverage of Nielsen’s findings in Mediaweek.