The Mobile Internet Economy in Europe

The Mobile Internet Economy in Europe

          
Article image

The Mobile Internet Economy in Europe

The Connected World
  • Add To Interests
  • SAVE CONTENT
  • PRINT
  • PDF

  • The Mobile Internet Takes Off—Everywhere

    Each successive technological revolution of the modern age—industrial, informational, digital, and mobile—has played out more rapidly and more uniformly than its predecessors. The current mobile revolution is a supercharged global phenomenon; its impact on individuals, businesses, countries, economies, and societies is already felt just about everywhere. The smartphone, along with the tablet—and a fast-expanding family of wearables and other “smart” devices—have totally transformed the way people around the world live, work, play, connect, and interact.

    ABOUT THIS REPORT

    The mobile Internet is having an enormous economic and social impact as it continues to grow in size and reach. In Europe and elsewhere, it is an important factor in daily life, as well as a significant generator of economic activity.

    To better understand this impact, Google commissioned The Boston Consulting Group to prepare this independent report. The results have been discussed with Google executives, but BCG is responsible for the analysis and conclusions.

    Both Google and BCG are pleased to present these findings.

    In less than a decade, the mobile Internet revolution has overtaken the digital revolution and is still accelerating. 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, data security, and personal privacy, 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 first in a two-part series, looks at the impact of the mobile Internet in Europe—specifically, in the big economies of the EU5 (Germany, France, the UK, Italy, and Spain)—as well as in 8 other countries. Together, these 13 countries make up 70 percent of global GDP. The report 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 to foster continued growth. The second report in the series will assess the mobile Internet’s global impact.

    The 13 countries surveyed were Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, South Korea, Spain, the UK, and the U.S.
    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. In Western Europe, there are 530 million mobile subscriptions, or about 1.33 for every person, of which more than half are for smartphones. Research firm eMarketer expects that in 2017, seven of the top ten countries for smartphone penetration will be in Europe (the U.S. will rank 11), and in three European nations (Norway, Demark, and Finland), smartphone penetration will exceed 90 percent.

    Several factors are fueling this growth, including greater access, increasingly sophisticated mobile-device functionality, fast-rising device sales, an ever-increasing range of devices and device types, and sharply falling prices. Another factor is more reliable data connections that enable increasingly data-intensive activities. Some 60 percent of the world’s population is covered by 3G connectivity—the EU has 90 percent 3G coverage—and large swaths of territory are covered by 4G service.

    While much has been written on the challenges facing mobile technologies in Europe, 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. In Western Europe, demand for such services will drive data traffic up sixfold by 2017, from 187,000 terabytes to 1.1 million terabytes a month, supported by more 4G networks coming online and existing operators increasing their speed, coverage, and capacity. (See Exhibit 1.)

    exhibit
    More Capabilities for the User

    As the mobile revolution has gathered steam, intensifying competition in operating systems and technology has led to more and more innovations in smart-device functionality. Nokia and Ericsson (both European companies) launched the first smart devices with multimedia features in 2000. BlackBerry developed major advances between 2001 and 2007 with such innovations as push e-mail and encryption. The launch of Apple’s iOS and Google’s Android operating system led to a step change in the user experience with the widescale adoption of the touch screen and easy-to-use, full-featured mobile Web browsing, and the 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 the EU, smartphones have rapidly come to dominate the mobile phone market 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. In Europe, average selling prices are projected to fall even faster—by nearly 38 percent in 2017—for a variety of reasons, including market saturation and prolonged upgrade cycles. (See Exhibit 2.) In France, for example, Wiko devices (launched in 2012) sell for about €70 and captured nearly 7 percent of sales in 2013. Wiko expanded into the UK market in 2014.

    exhibit

    Choice and new products 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 surpass 260 million units in 2014, including 72 million in Europe. TVs are increasingly becoming connected devices that can run apps and perform computing functions as well as 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. Smartphone technology is being built into more and more automobiles. 

    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. (See “Spotify Soundtracks Your Life.”) Continuous access to information, communication, friends, and entertainment—among myriad other things—is changing the way billions of people go about their daily lives.

    SPOTIFY SOUNDTRACKS YOUR LIFE

    Launched in Sweden in 2008, Spotify has become a highly popular service and one of the Internet’s household names. The company 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. Users can stream or download from a library comprising some 20 million songs.

    Spotify offers both a free, ad-supported service that gives users limited access to songs and a premium version that lets users download songs and playlists. It provides access via the Web and multiple mobile devices, including those operating iOS, Android, and Windows. Users build playlists tailored to their tastes or to accompany different tasks or activities, which they can listen to at home or in the office and while commuting, shopping, working out, or traveling. They can share songs and playlists through social media such as Facebook and Twitter.

    Spotify is available in 58 nations. It was one of the early pioneers of legal music downloading and sharing, with a business model that provides users with access, choice, and convenience at low cost, while also ensuring that songwriters and rights owners receive compensation.

    Spotify reached the 10 million user mark in 2010. Its user base doubled by 2012 and doubled again by 2014, to 40 million. 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 video cameras but on smartphones.

    Travelers today use their phones to board planes, unlock hotel rooms, monitor devices at home (temperature 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, mobile technologies and apps provide a bespoke service to countless subsegments of consumers with highly particular needs. (See “Providing the Disabled with Accessibility Information While On the Go.”)

    PROVIDING THE DISABLED WITH ACCESSIBILITY INFORMATION WHILE ON THE GO

    Launched in Germany in 2010 by Raul Krauthausen, Wheelmap provides accessibility information to wheelchair-bound people worldwide. The wheelmap.org 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.

    Wheelmap was always intended for mobile use. As the company’s Andi Weiland puts it, “The potential to have this tool available whilst out and about is what our users really appreciate. People no longer have to plan their day in advance, or from a laptop, before they leave the house.”

    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. In the EU5 alone, the benefit accruing to consumers is about €770 billion ($1 trillion) a year. The mobile Internet’s total consumer surplus across the 13 countries surveyed is approximately €2.8 trillion ($3.5 trillion) a year.

    Consumer surplus and the other benefits of the mobile Internet are only set to increase—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 2013 survey by Telefónica found that 79 percent of so-called Millennials in Western Europe and 60 percent of those in Eastern Europe own a smartphone. Smartphone penetration among 16- to 24-year-olds in the UK is 88 percent, compared with 65 percent for other age groups. Young users spend on average 2.5 times more time on their smartphones every day than the rest of the UK’s adult population. 

    Businesses Are Benefiting, Too

    The mobile Internet is creating entirely new businesses as well as transforming traditional companies. A technology entrepreneur in Europe today is more likely to be building a business around a mobile application than a website. 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 Tesco, IKEA, and Media Markt, or from online shopping platforms such as Amazon, eBay, and Net-a-Porter.

    The app economy is flourishing. There have been more than 200 billion cumulative downloads from the various app stores since 2008. The rate of growth is mind-boggling: more than 100 billion downloads took place in 2013 alone, of which around 20 billion were in the EU.

    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 the UK, but banks in Europe (as in other developed markets) are using mobile apps to transform the banking experience for consumers (you can deposit a check by taking a picture)—and winning plaudits from their customers in the process.

    Retailers are embracing m-commerce. 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. UK retailer John Lewis reports that more than half its online traffic comes from smartphones and tablets. The company’s mobile app topped a 2014 UK user poll of the best mobile shopping experiences, outpacing Amazon, among others.

    Mobile commerce in the EU5 reached €23 billion in 2013 (up 76 percent from 2012) and accounts for 13 percent of all e-commerce. Nearly two-thirds of EU5 e-commerce purchases occur on tablets; the analogous figure for the U.S. is about 50 percent.

    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 56 percent of B2B customers read reviews, 55 percent access product information, and 50 percent compare features using mobile devices. Mobile commerce accounts for 3 to 5 percent of B2B sales, and mobile drives 7 to 10 percent of B2B traffic for tasks such as search. These numbers are bound to grow as more B2B users apply the lessons of the B2C marketplace to their businesses.

    The Impact of the Mobile Economy

    In the EU5, the mobile economy generated about €90 billion ($120 billion) in revenue in 2013, and it is responsible for approximately half a million jobs, of which about half are physically in EU5 countries. In the 13 countries surveyed for this report, the mobile Internet is already generating some €512 billion ($682 billion) in revenues annually—the equivalent of almost €585 ($780) for every adult in the surveyed countries. The mobile Internet economy employs approximately 3 million people in those countries.

    The mobile Internet attracts substantial investment. For example, leading app-store operators paid developers over $15 billion between June 2013 and July 2014. Major companies, from telcos (such as Telefónica, Deutsche Telekom, and Orange) to hardware, software, and semiconductor manufacturers (such as Ericsson, ARM, and SAP) to content providers (such as Spotify, Pearson, and Yudu) invest billions of euros in R&D and capital expenditures, and countless start-ups are also attracting investments, innovating, and launching new products.

    Mobile has only begun to touch the surface of multiple industries that have an enormous impact on GDP—health care, for example, where wearable devices are beginning to monitor data related to consumers’ health and well-being. Travel and transport are going mobile, and the opportunities to expand educational opportunity are endless. These are only a few of the countless potential applications.

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


  • Add To Interests
  • SAVE CONTENT
  • PRINT
  • PDF