We're left to chew on anecdotes, partial information released by companies that are trying to push a point of view, and unscientific "polls" of online enthusiasts.
So I'm always on the lookout for more rigorous information. Recently I came across several fairly good sources of data, and they give some interesting perspectives on what's happening with mobile data. It is by no means a complete view, and most of it is US only. But I think it's worth sharing.
Steady, unspectacular growth
The overall picture of mobile data is one of steady but unspectacular growth. It's a bit like watching a tree grow -- you can't see anything changing day to day, but if you walk away and come back in six months you'll notice the difference. SMS continues to be the dominant service, especially in Europe, and there's no sign of some other service surpassing it.
Is the growth rate good or bad? It all depends on how much growth you were expecting, and how fast you wanted it to happen. The one thing I think is very clear is that each country market is different, and you can't classify any of them as leaders and laggards. They're just unique.
Here are the details:
Capabilities of mobile phones in the US
The Pew Internet organization has been surveying Americans on their Internet usage for years. A couple of the questions in their survey ask about the data capabilities of their mobile phones. In the most recent results, from early 2006, 75% of mobile phone users in the US said their phones are capable of texting. 63% said they can play games, and 39% said they have cameraphones. Here's the full chart:
Nothing there stands out as shocking, although I expected the penetration of cameraphones to be higher. My guess is it has gone up in the last year.
(Note that some people could have capabilities in their phones and not realize it. So the question tells us as much about awareness of features as it does about the phones themselves.)
What people do with their phones: Nothing else rivals SMS
The chart below examines the percent of mobile phone users in the US and several European countries who have ever performed various tasks with their mobile phones. The source is M:Metrics, Q4 2006, and the numbers were quoted in a presentation by Orange / France Telecom.
The figures show that there's no other mobile data service with near the penetration of short messaging service (texting). That's not really news, but it's striking to see the hard numbers. About 80-85% of people in most of the big European countries have ever sent a text message, with France lagging slightly (at about 75%). In the US, almost 40% of mobile phone users report that they have sent a text message.
The next closest service is picture messaging, with 20-30% of mobile users in the big European countries saying they have received photo messages at least once. In the US, the figure is 15%. It's ironic that photo messaging is in second place, since it's generally considered a major disappointment. What does that say about the other services? Well, none of them generally crack 10% usage.
Is the US really a laggard? The other thing in the chart that really stood out to me was that the adoption "lag" of US mobile users varies depending on service. The US is far behind in SMS, MMS, and playing music on the phone (the last one is, I'm sure, due to the strength of the iPod in the US). But in the other categories, the US is in the middle of the pack, or even ahead (somebody explain the ringtone result to me, please).
It's always fun to stereotype the US market as primitive in all areas of wireless, but the adoption numbers don't support that. It just looks different.
What does it all mean? Orange's spin was that it means we're just getting started in mobile data, and everyone should wait patiently for the good services to take off. They showed the following growth projection from Ericsson as evidence:
No offense to Orange, but that is basically a statement of faith rather than analysis. If you're a cynic, you'll point out that the chart assumes compound growth will continue uninterrupted for a decade, something that is often true for technology specs but is rarely true for technology markets.
What we really need is time-series data, so we can see what's growing and what isn't. Unfortunately, Orange didn't present any numbers like that, but the research firm Telephia did, in a separate presentation. Unfortunately, their numbers were US only, and they didn't cut the usage categories in the same way as France Telecom. But they still show some interesting trends...
Mobile data growth in the US
Telephia measures mobile data usage by analyzing the monthly bills of mobile phone users. This should give very accurate information on revenue and number of users, but it doesn't track physical usage. Because some services are billed per-use and some have monthly subscription fees, it's hard to tell how heavily people are using the services listed below.
Telephia reports that billings are growing steadily for a wide range of mobile data services. The chart below shows total US operator revenue for mobile data from Q3 2006 to Q1 2007. (These figures include anything that passes through the user's phone bill. Applications and services paid for separately by the user are not included.)
The chart is in billions of dollars, so it shows that in Q1 2007, total on-deck US data revenue was about $4.6 billion. Is that a big number or a small one? Well, total service revenue for the US mobile operators is about $32.5 billion per quarter, according to the CTIA. So mobile data is about 14% of mobile billings.
Where is e-mail? I can't find e-mail anywhere on the chart. I'm very surprised they didn't break it out separately.
Strangely consistent growth rates. The weirdest thing about the chart is that everything's growing at the same rate. In the real world, that sort of thing doesn't often happen. I wonder if a lot of the growth might be driven by people buying service bundles, where they pay a flat extra rate per month to activate a bunch of different services, and then the revenue gets allocated across the services by the operator. That would cause everything to grow in lockstep.
If that's what's going on, then these numbers really might not say much about usage -- what they'd be tracking is the ability of the operators to sell services bundles.
Anyway, the numbers show that the US operators are making pretty good revenue from mobile data. I didn't make a chart of this, but in general, the growth in mobile data billings is large enough to make up for the ongoing decline in mobile voice revenue. So the operators aren't getting rich, but data is helping to keep them from getting poor.
More details. Telephia lumps a lot of different things in the "Downloads" category. For Q1 2007, they gave more details on that category. So I can't give you a time series, but here's a more fine-cut look at how mobile data revenue looked in the US at the start of 2007:
Premium SMS is mostly ringtones paid for via SMS, plus voting for things like American Idol. Audio is downloading and streaming of songs. The other categories are self-explanatory. I feel bad about the tiny size of the applications category, but keep in mind that most smartphone apps are sold through the web and then synced onto the device, and so don't show up in operator billings.
Number of users per service. Telephia also reported the total number of users for each service. As we saw in the Orange chart, SMS has the most users in the US (although the gap between it and the other services isn't as large as in Europe).
Revenue per user. Combining the user and revenue data, we can estimate monthly billings per user for each service:
You can see why the operators like premium SMS. And look at WAP! It never lived up to the original hype that it would become the mobile version of the Web, but as a tool for getting things like sports scores and weather reports, it's not doing too bad. (Whether it's paying for all the money that was invested in it is another story.) Video's generating the most revenue per user, but with a very tiny user base. Audio revenue (which is revenue from listening to songs, not ringtones) is fairly close to what Apple gets from iTunes users (the average iTunes user downloads about 3.3 songs per month, or about $3.30) (link).
Usage doesn't follow capability. And now for the "big" mashup. We can combine Pew Internet's figures on phone capabilities with Telephia's numbers on service usage to figure out roughly what percent of US mobile customers who know they have a given feature on the phone ever actually use it. The results are interesting:
For communication-related services, the percentage of users is quite high (although remember that we don't know how heavily the features are being used). But most mobile users are not adopting the entertainment features in their phones. That's exactly what you'd expect if only a limited percentage of the population were interested in using their phones for entertainment, which is what a lot of user studies have shown (link).
The lesson: If you're an operator or handset vendor, be careful about pushing phones that are a kitchen-sink collection of expensive features. The odds are very good that you'll spend a lot of subsidy money on people who won't ever adopt the underlying services that were supposed to justify the subsidy. It's much better to offer a variety of phones specialized for different types of user, and let them pick the ones they want.
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As I said at the start, it's an interesting collection of tidbits, but far too US-centric. If you live outside the US and have information to add on your market, please post a comment.
Sources:
Total revenue of the operators: link
Orange's presentation at the Global Mobility Roundtable: link
Telephia's presentation at the GMR: link
Pew Internet: link
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