The Growth of the Global Mobile Internet Economy

The Growth of the Global Mobile Internet Economy

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The Growth of the Global Mobile Internet Economy

The Connected World
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    The Mobile Internet Takes Off—Everywhere

    Has a small device ever had a bigger impact?

    Around the world, the smartphone, along with its cousin, the tablet, and a fast-expanding family of “wearables” and other “smart” devices are transforming the way people live, work, play, connect, and interact. In the process, they are converting the digital revolution into an increasingly mobile phenomenon.

    The Mobile Internet Takes Off EverywhereConsumers put a value on the mobile Internet that far exceeds what they pay for it. Competition and innovation in the tech sector are unleashing invention in countless other areas as consumers adopt new behavioral patterns and businesses find ways to improve efficiency, develop new products and services, and expand their market reach. The mobile Internet has created millions of jobs, too.

    And the wave has not yet begun to crest. Mobile penetration is increasing, the costs of access and devices are coming down, and more and more people in both developed and developing economies are using the mobile Internet as their first—and often their only—means of going online.

    To be sure, there remain big issues of infrastructure, remote-area access, privacy, and data security, among others, to be addressed. But the combination of consumer demand and market-based innovation has consistently and successfully driven the mobile Internet’s growth, generating enormous economic and social benefits. As we have argued before, for almost everyone on the planet today, regardless of where he or she lives and works, the mobile Internet is already, or soon will be, a life-changing phenomenon. (See Through the Mobile Looking Glass:The Transformative Potential of Mobile Technologies, BCG Focus, April 2013.)

    This report, the second in a two-part series, looks at the global impact of the mobile Internet in the 13 countries that make up about 70 percent of global GDP. (The first report examined the mobile Internet’s economic impact in the EU5; see The Mobile Internet Economy in Europe, BCG report, December 2014.) It provides an overview of the reach, ramifications, and potential of the mobile Internet so that policy makers and other leaders can better assess its current and future impact and pursue policies that foster its continued growth.

    The 13 countries are Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, South Korea, Spain, the United Kingdom, and the United States.
    Exploding Demand for Mobile Access and Services

    The numbers tell one part of the story. There are currently almost 7 billion mobile phone subscriptions globally, or one for every person on Earth. More than a third of these are smartphone subscriptions. Global smartphone sales are expected to have grown 18 percent in 2014, led by big emerging markets such as China, India, and Indonesia, as average unit prices fall. Mobile Internet penetration worldwide has doubled from 18 percent in 2011 to 36 percent today; by 2017, mobile access will exceed fixed-line access, with 54 percent penetration compared with 51 percent. At that point, mobile will account for almost 60 percent of all spending on Internet access.

    Several factors are fueling this growth, including expanding coverage, increasingly sophisticated mobile-device functionality, sharply falling prices and fast-rising sales, a growing selection of smartphones and tablets on the market, and the development of new categories of devices such as wearables and connected home devices. Another factor is more reliable data connections that enable increasingly data-intensive activities. Some 60 percent of the world’s population is now covered by 3G connectivity. The EU has 90 percent 3G coverage. The U.S. has 96 percent 4G coverage. Even Mount Everest is online—with 4G connectivity at 17,000 feet. Wi-Fi hot spots proliferate as well. In developing markets where 3G and Wi-Fi coverage is sparser, developers are optimizing apps to reach consumers on older 2G networks. One example is Nanu, a free-call app that operates like Skype or Viber but is optimized for 2G networks.

    While much has been written on the infrastructure and related challenges facing mobile technologies, consumer demand remains strong. (See “Delivering Digital Infrastructure,” BCG article, April 2014.) The volume of mobile Internet data traffic will continue to expand, driven primarily by increased demand for streaming of video and music content on mobile Internet devices. Global demand for such services will drive up data traffic sevenfold by 2017, from 1.2 terabytes per month in 2013, supported by more 4G networks coming online and existing operators increasing their speed, coverage, and capacity. (See Exhibit 1.)

    More Capabilities for the User

    As the mobile revolution has gathered steam, intensifying competition in operating systems and technology has led to fast-paced innovation in smart-device functionality. Nokia and Ericsson launched the first smart devices with multimedia features in 2000. BlackBerry contributed major advances with such innovations as push e-mail and encryption between 2001 and 2007. The launch of Apple’s iOS and Google’s Android operating systems led to a step change in the user experience with the widespread adoption of the touch screen and easy-to-use, full-featured mobile Web browsing and the rapid rise of third-party-app ecosystems.

    Competition among operating systems and their app ecosystems has also triggered an explosion in device development and sales, as well as in global mobile data traffic. In many markets, especially in the developed world, smartphones have rapidly come to dominate mobile phone sales as competition provides consumers and businesses alike with more choice, cheaper devices, and new products. Average smartphone selling prices fell 25 percent worldwide between 2011 and 2013 and are expected to drop a further 19 percent by 2017, for reasons that include falling manufacturing and development costs, market saturation in some developed economies, and prolonged upgrade cycles. (See Exhibit 2.)


    Choices for consumers abound. There are more than 18,000 Android mobile-device models currently in circulation, manufactured by a host of third-party OEMs. Global tablet sales will have surpassed 260 million units in 2014; according to the Pew Research Center, 42 percent of Americans 18 years and older own a tablet. TVs are increasingly becoming connected devices that can run apps and perform computing functions as well as display broadcast programming. Wearables—smart watches, connected glasses, and fitness monitors (so far)—are a new product category, and market growth and size projections vary. IDC predicts that total wearable shipments will grow from 19 million units in 2014 to 128 million in 2018. Connected technology is being built into more and more automobiles, homes, and machines. Estimates put the ultimate number of connected devices in the Internet of Things—machines or devices that communicate directly with other machines or devices—at around 30 billion. 

    A Revolution in Behavior

    From shopping to sharing to socializing, the mobile experience is a whole new universe of connectivity that’s local (it’s always where you are), personal (tailored to your needs and preferences), social (all your friends are there as well)—and it’s always on. Continuous access to information, communication, friends, and entertainment—among myriad other things—is changing the way billions of people go about their daily lives. (See “Changing Consumers’ Lives—Every Day.”)


    Mobile apps are changing the way millions of consumers go about their everyday lives. Apps are increasingly prevalent in all kinds of areas, from health and fitness to finance and from productivity to entertainment.

    The banking industry has used digital and then mobile technology to totally transform the banking experience, putting these technologies to work on the tasks in which ease and speed are most valued by customers, such as paying bills, depositing checks, and transferring funds. Our research shows that U.S. consumers rate banks highest for digital satisfaction among 16 business segments, ahead of even online merchants. (See Delivering Digital Satisfaction: U.S. Consumers Raise the Ante, BCG Focus, May 2013.) Investment companies are following suit: according to the Wall Street Journal, some 725,000 customers used Charles Schwab’s mobile apps in 2014, an increase of 12 percent over 2013.

    Fitness is another area where mobile is making its growing presence felt. One leading app developer, Fitbit, makes wearable bands and other products that enable users to monitor both activity—the number of steps taken or stairs climbed during the day, for example—and inactivity, such as the amount and quality of a night’s sleep. Users can set goals, keep track of their progress in real time, and compare results with friends and the Fitbit community. Fitbit accounted for half of the 2.7 million wearable bands shipped in the first quarter of 2014.

    Productivity apps such as calendars and e-mail were among the first to be installed on mobile devices. Now they abound for just about every task imaginable—brainstorming, communication, presentations, and project management, to name just a few. And since life is about more than work, media and entertainment apps keep us amused while we are at the office, on the road, or at the gym.

    Spotify uses digital and mobile technology combined with a new-to-the-industry business model to give users access to whatever music they want to listen to, whenever they want to listen, wherever they are. By allowing users to choose which songs they want to stream or download, Spotify makes available a library comprising some 20 million songs.

    Spotify’s service is available in 58 nations. Its user base reached 10 million in 2010, doubled in 2012, and then doubled again to 40 million in 2014. The company has paid more than $2 billion in royalties. It had revenues of $577 million in 2012, and $250 million in new funding in 2013 gave it an implied valuation of some $4 billion.

    Sharing photos and videos on the move is now commonplace, as are tweeting, pinning, and posting. Of Facebook’s 829 million active daily users in June 2014, 654 million (almost 80 percent) were mobile users. Much has been made of the role of smartphones in social uprisings and the response to natural disasters. We regularly watch images on the evening news shot not on professional video cameras but on smartphones.

    Travelers today use their phones to board planes, unlock hotel rooms, monitor devices at home (temperature and alarm settings, for example), and check in via live video with their families. Mobile payments are common in many economies; mobile apps are transforming banking. The lines between traditional retail, e-commerce, and m-commerce have blurred almost to the point of indistinction in some markets, as consumers research online, offline, and on the go and buy wherever and however they find the best selection, service, and deals. Moreover, customized mobile technologies and apps provide services to countless subsegments of consumers with highly particular needs. (See “Providing the Services People Need.”)


    Mobile technology provides on-the-go Internet access to billions, but it can also provide essential services to much smaller groups of users with common—and critical—needs.

    In Kenya, for example, which has a serious shortage of doctors (7,000 practitioners for 40 million people), MedAfrica provides a first-stop medical shop for the 10 million Kenyans with mobile Internet access. Users can diagnose illnesses based on visible symptoms, monitor treatments, validate doctors, check that their medication is authentic, and find directions to the nearest clinic or hospital.

    Wheelmap, launched in Germany in 2010, provides accessibility information to wheelchair-bound people worldwide. The website or mobile app reads a user’s location and provides a map showing area restaurants, restrooms, schools, churches, and other destinations rated according to their wheelchair accessibility. Ratings are based on data provided by the users themselves—anyone can sign up to contribute. A green flag represents ready accessibility, yellow means partial accessibility, and red signals that the destination is not wheelchair accessible. The Wheelmap app has more than 470,000 crowd-sourced data entries and 35,000 monthly users. It is available in 22 languages and has spawned several copycats.

    Consumers realize an enormous benefit from all this activity, which can be quantified using an economic concept called consumer surplus—that is, the perceived value that consumers themselves believe they receive, over and above what they pay for devices, apps, services, and access. The mobile Internet’s total consumer surplus across the 13 countries in our sample is about $3.5 trillion a year, or about $4,000 per individual user. In the developed countries surveyed, the per capita surplus is $5,600, while in the sample’s developing markets it averages $2,250.

    Consumer surplus and the other benefits of the mobile Internet are only set to grow—potentially exponentially. An entire generation of 18- to 34-year-olds, a larger group than the baby boomers, already accesses the Internet primarily through their mobile devices. A 2014 Nielsen survey in the U.S. found that more than 85 percent of these people own a smartphone. Young people in the 18- to 24-year-old age bracket spend an average of 37 hours and 6 minutes per month—the equivalent of almost a full working week—using their phones. Another survey found that almost 20 percent of U.S. Millennials use only their smart devices to go online. 

    Businesses Are Benefiting, Too

    The mobile Internet is creating entirely new businesses and business models, as well as transforming traditional companies. All kinds of businesses are using mobile technologies to improve operations, cut costs, and reach new markets and customers. The digital economy is flourishing on mobile devices as consumers access and buy apps, music, videos, books, magazines, and other content anytime from anywhere and receive many purchases instantly. They can also buy physical goods on the go using dedicated retailer apps from brick-and-mortar stores such as Walmart, Belle International, and Cromā or from online shopping platforms such as Amazon, Rakuten, and Taobao.

    The app economy is flourishing. There have been more than 200 billion cumulative downloads of mobile apps from the various app stores since 2008. The rate of growth is mind-boggling: more than 100 billion downloads took place in 2013 alone. The app economy already contributes $26 billion to GDP and has created some 800,000 jobs in the 13 countries in our sample.

    Payment apps are increasingly popular, and some businesses are cutting out the cash register altogether (DASH, GoCardless, Uber, and Hailo, for example.) There are more mobile bank accounts in Kenya than in Kansas, but banks in the U.S. and other developed markets are using mobile apps to transform the banking experience for consumers (you can deposit a check by taking a picture)—and are winning plaudits from their customers in the process.

    Retailers are embracing m-commerce. With 10 percent of mobile purchases from Wal-mart now happening at stores, CEO Doug McMillon told the 2014 Code Conference that his company is moving to “geo-fence” and “price-promote” store by store—essentially turning each of the company’s 11,000 stores into its own multichannel shopping environment with its own product and price promotions. According to Walmart, customers viewed more than 1.5 billion pages on its site during the five days between Thanksgiving and Cyber Monday in November 2014, with about 70 percent of this traffic coming from mobile devices. The Subway restaurant chain uses geotargeting technology to send notifications of personalized deals to Subcard owners’ phones when these customers are near a store. France’s Groupe Casino employs near-field communication (NFC) tags on shelves to help visually impaired customers download product information to their phones. It also uses NFC technology to help all customers track costs and speed up checkout.

    Some 60 percent of global mobile consumers use mobile devices as their primary or exclusive means of going online, and more than 80 percent of these people say they will make a purchase on a mobile device in the next 12 months, according to InMobi, a mobile advertising company. Forrester Research expects that m-commerce sales will have made up 29 percent of U.S. consumers’ online purchases in 2014, up from 21 percent the previous year. Our research shows m-commerce in the U.S. jumping 60 percent, from $72 billion in 2013 to $115 billion in 2014, and continuing to rise to $245 billion in 2017. Projected growth rates in developing markets are even more dramatic. In India, m-commerce will grow from $6 billion in 2013 to more than $14 billion in 2017. M-commerce in Brazil is projected to have grown 96 percent 2014 and will exceed $5 billion by 2017. In China, m-commerce will grow from $30 billion in 2013 to more than $160 billion by 2017. On November 11, 2014—Singles’ Day, China’s biggest shopping day of the year—mobile shopping sites handled 1 billion yuan ($163 million) in transactions in the first hour. Total merchandise sales volume settled through Alipay (Alibaba’s e-payment affiliate) was approximately $4 billion (24.3 yuan), or 43 percent of all merchandise volume—double the 21 percent volume in 2013.

    It’s not just a retail phenomenon, either. All kinds of businesses are finding innovative ways to put mobile devices and technologies to work. According to one survey in the U.S., more than 85 percent of B2B customers access content on their mobile devices. Another survey found that at least 50 percent read reviews, access product information, and compare features using mobile devices. While m-commerce currently accounts for only 3 to 5 percent of B2B sales, these numbers are bound to grow as more users apply the lessons of the B2C marketplace to their businesses. IDC calculates that 14 percent of all tablet shipments in 2014 (which it estimates at about 245 million) went to commercial organizations, up from 11 percent in 2013. It expects the percentage of commercial shipments to increase to 18 percent by 2018. 

    Developing Economies Embrace the Mobile Internet

    Access to the mobile Internet continues to grow quickly around the world, especially in developing markets, where limited fixed-line access and the relative ease of deploying mobile networks make the mobile Internet particularly well suited. In China, for example, there were 632 million Internet users as of the middle of 2014, or about 45 percent of the total population. In sub-Saharan Africa, mobile penetration is about 60 percent, compared with less than 2 percent for fixed-line access. Ultimately, entire nations in Africa will access the Internet only through mobile devices.

    As mobile infrastructure is built and mobile usage increases, consumers benefit from the new services that grow up around these devices. The number of Chinese consumers using mobile devices to buy goods jumped 42 percent to 205 million in 2014. Facebook has 100 million users in Africa (50 percent penetration of connected Africans), of which 80 percent access the social network on a mobile device. With much of the continent still using 2G service, Facebook has developed technology that identifies the user’s network speed and adapts ads as needed. 

    One big impediment to mobile usage in developing economies has been the high price of smartphones. This is changing, and quickly. Google launched its Android One phone in India in 2014; this model retails for about $100. Another new smartphone launched in India, by Intex Technologies and its partner, Mozilla, retails for 1,900 rupees—or about $33. Xioami’s Redmi and Motorola’s Moto G devices are also lowering prices dramatically for smartphone consumers in India. Some 650 million Indians already own mobile devices, making India the second-largest mobile market globally, and the growth in smartphone ownership will pick up as affordability continues to increase. 

    The Impact of the Mobile Economy

    The mobile Internet is already generating some $700 billion in revenues annually—the equivalent of $780 for every adult—in the 13 countries that make up our sample. The mobile Internet has also created approximately 3 million jobs in these countries.

    Both revenues and jobs are growing as mobile access expands and people do more things with a widening selection of devices. Mobile has only touched the surface in multiple industries that have an enormous impact on GDP—health care, for example. The Internet of Things and machine to machine (M2M) communications—two areas where the mobile Internet is expected to have widespread impact—are only in their infancy.

    The mobile Internet attracts substantial investment. For example, leading app-store operators paid developers more than $15 billion between June 2013 and July 2014. Major companies, from telecommunications and cable service providers (Verizon, Comcast, and AT&T, for example) to hardware, software, and semiconductor manufacturers (Hewlett-Packard, Microsoft, Qualcomm) to content providers such as Netflix and Pandora, invest billions of dollars in R&D and capital expenditures, and countless start-ups are also attracting investments, innovating, and launching new products.

    As the volume of mobile traffic and activity relentlessly expands, the complexity of the industry that transports and delivers millions of terabytes of information every day increases dramatically as well. The industry is evolving rapidly. Competition within and among ecosystems is fueling innovation, diversity, and choice for end users.

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