The Future of Mobile in Asia - Echelon 2013

CONFIDENTIAL www.bubblemotion.com 1

The Future of Mobile in Asia Echelon 2013

Information contained in this presentation is confidential & proprietary in nature and contains information pending patent protection. This document is meant strictly for the addressee and may not be copied or redistributed without prior authorization from Bubble Motion, Inc.


Asia is Different

Mobile Trends Across the Region

The OTT App Explosion

The Messaging App Phenomenon


First… Why Does Asia Matter?

The Majority of the World’s Population lives within this tiny circle


However, Within the Circle, Things are Very Diverse

•  Consumer loyalty for mobile services is the lowest in the world –  Consumers are extremely price sensitive and willing to trade off inconvenience for savings

•  Credit card penetration is minimal –  Only real electronic payment system is fragmented prepaid card systems or operator billing

•  Feature phone users outnumber smartphone users 4-to-1 –  2.4B+ feature phone users still represent the masses –  Japan and Korea growing fast, but India, China, Indonesia are much slower –  Many countries have limited data plan penetration – even with smartphones

•  3B+ mobile subs vs. ~1B Internet users –  Majority of Internet usage is mobile –  Prepaid users outnumber postpaid 5-to-1

•  Highly diverse population –  52 primary languages with 1,000+ regional dialects –  27 currencies with some of the lowest and highest GDPs per capita in the world –  Very different political and legal systems


Asia Accounts for 65% of World’s Internet Growth

Rank Country

2008-‐2012 Internet User Adds (M)

2012 Internet Users (M) Y/Y Growth

PopulaBon PenetraBon

1 China 264 564 10% 42% 2 India 88 137 26% 11% 3 Indonesia 39 55 58% 23% 4 Iran 35 42 205% 55% 5 Russia 33 70 6% 49% 6 Nigeria 31 48 15% 30% 7 Philippines 28 34 32% 35% 8 Brazil 27 88 6% 45% 9 Mexico 19 42 9% 37% 10 USA 18 244 3% 78% 11 ArgenGna 17 28 57% 68% 12 Egypt 17 30 11% 38% 13 Colombia 14 25 39% 54% 14 Turkey 13 35 17% 47% 15 Vietnam 12 31 7% 35% Top 15 654 1,473 15% 34% World 902 2,406 8% 34%

Source: Mary Meeker, “2013 Internet Trends”


Asia Represents 77% of the BRIC’s GDP and Southeast Asia itself could be a BRIC Country

Giving Asia 3 of the World’s 5 Leading Economies


Asia is Different





By 2015, 65% of the World’s Mobile Users in Asia

Asia Mobile Subscribers

Source: ROA Holdings Analysis


Mobile Penetration Continues to Grow Rapidly

Asia Smartphone Penetration Forecast

And while ARPUs will decrease slightly in some markets, it is less dramatic than in Western markets



Asia is ‘Mobile First’ because of the Inverse Correlation between Income and Mobile Centricity

Source: Mobile Monday SE Asia Mobile Report 2012


Smartphone Penetration in Asia Still Lags Sizably

More than 2B+ mobile subs will still be on feature phones in Asia through 2015 Source: ROA Holdings Analysis


Thus, Massive Reach in Asia via 2B+ Feature Phones



Asia is Different





China is now the largest App Market in the World – and All Asian countries are still growing rapidly

Smartphone App Growth is Massive in Asia

Source: Distimo


But Monetization of Apps Still is still Very Low in Asia

Price sensitivity to Apps is much higher in Asia – users are 6X more likely to purchase the ‘paid’ vs. the ‘free’ version of an App in Western countries

Source: Distimo


Macro Factors Drive Need for Different Monetization Strategy in Asia

•  Lower purchasing power with higher price sensitivity –  Excluding Japan, consumers are much more price sensitive and have lower purchasing power; –  Thus, their likelihood to pay for an app is 1/6th of that in Western markets

•  Digital ad spend is still in its infancy –  Online and mobile ad spend in Asia is significantly smaller than Western markets –  Thus, companies cannot rely on an ad-funded monetization strategy

•  Low credit card and electronic payment system penetration –  Even if consumers want to pay for an app, low credit card penetration makes it impossible

for most users –  Thus, while virtual goods are a very popular model in the online world throughout Asia, it

still lags in smartphone app world


Asia is Different





First, Where There Were Once Many…

QQ

Facebook

Orkut

hi5

Friendster

Wretch

Mixi

Cyworld

Zing

Most Popular Social Networks 2 Years Ago

Source: WPP Presentation


… Now There is One

Source: Edelman


…With Some of its Largest User bases in the Region

Source: Salingsilang


Asians Have Always Been Much More Blog Savvy

Source: We Are Social report


And Now They Love Sharing Everything Online

% of Population that Shares ‘Most Everything’ Online

Source: Mary Meeker, “2013 Internet Trends”


Twitter has Now Taken Off as well

Indonesia is Twitter’s 3rd largest market in terms of tweet volume and Japan is its 2nd largest market in terms of revenue

Source: Salingsilang


Twitter & FB Both Focusing on Feature Phones Now for Growth in Asia

•  Nearly 90% of mobile users in India still do not access data

•  75%+ of users across SE Asian mobile do not have data plans

•  FB & Twitter both have teams in the region focused on operator partnerships in Asia now

•  FB acquired Snaptu solely to build a feature phone accessible version of the FB app

•  Twitter now focused on building lightweight apps for low-end feature phones

Source: Analysis Mason


And Messaging is becoming Ubiquitous Across User’s Lives…

Family

Friends

Work

Applications

•  Text •  Photos •  Voice •  Video •  Group Chat

•  Text •  Photos •  Voice •  Video •  Games •  Group Chat

•  Text •  Voice •  File Transfer •  Appointments •  Group Chat

•  Text •  Voice •  Photos •  Video


Leading to the Explosion of Social Apps Across Asia


Asian Users Love a Fun & Cheaper Way to Communicate

OTT Messaging •  Innovative services and very

consumer driven •  Across top layer of network only •  Limited interop so far, but likely to

change quickly •  Reliability is lower than operators

today, but improving fast •  Free – monetization

experimentation •  Little-to-no customer support

Operator SMS •  Seen as ‘old school’ and pay-per-

message •  Still viewed by many though as the

most reliable •  Interoperable across platforms /

operators / devices •  Direct monetization via usage or

subscription •  Strong customer relationships

including billing

Being replaced by


It’s a Crowded Space, but Players as Largely Coming from 3 Different Angles & Quickly Merging

Messaging Social Media VoIP


Time to Critical Mass has Decreased Dramatically

Time to Reach 50M Users

Line 384 days

Draw Something 50 days

Instagram 612 days

WhatsApp 438 days

Twitter 1,218 days

SMS 3,120 days

Mobile Subs 4,422 days

Facebook 1,321 days


Who is Winning in the Messaging Battle Asia?

Source: TechCrunch


What is Happening on the Ground?

•  Only Korea has a clear cut winner – KaKaoTalk –  Korea’s local app is used by 90%+ of Korean smartphone users

•  In Japan – Line dominates, but others are growing –  Increasingly crowded space with KaKaoTalk teaming with Yahoo! Japan and both DeNA (COMM)

and GREE launching their own competitive apps

•  Much of Southeast Asia dominated by Line –  Thailand is dominated by Line with Indonesia and Philippines tipping in that direction as well

•  WeChat is growing outside of China, but unclear how strong –  Only messaging app with a “17+ rating” – seems to be strong among pockets of users

•  WhatsApp is an early leader in India, but still quite fragmented –  Also, BBM is still much larger than any of the OTT messaging apps


Globally, Each Country Shows a Different Winner

Messaging Apps Market Share

Source: TechCrunch


Monetization Strategies Varying Widely by Region

•  Ad-rev model – free with lots of ad placement potential

•  Charging brands to send out promoted messages to Korean user base

•  Charging users for packs of emoticons/stickers, manga, games, etc

•  Selling virtual goods and gifts

•  Free – money made from iOS device lock in

•  Initially free, but now charge $0.99 as one-time purchase

•  Charge $9.99 for the app for unlimited SMS/text messaging


The Future of Messaging Apps in Asia…

•  Each country is exploding into a different battle ground –  First battle is domestically in each country, but the bigger war is regionally, then globally –  Winner likely to come from Asia

•  Due to strong network effects, it’s a Winner takes all market –  Could be divided by country or communication type though

•  Switching costs are minimal and decreasing –  With FB connect and deep contact list integration on the phone, it is extremely easy to migrate –  This war will never be over – its going to be very long and ongoing

•  UI & UX are key – not feature breadth –  FB spun off Messenger for exactly this reason; Instagram the best example of UX vs. Features

•  Careful curating of the community early on is extremely important –  Facebook and Twitter did it extremely well early on – not as good though early in Asia


In Summary…

Asia is a MASSIVE Mobile Market, but Extremely Diverse

1

Monetization approach has to be VERY different in Asia 2

Messaging Apps are EXPLODING, but the Battle is far from over 3

The Future of Mobile in Asia - Echelon 2013

Technology

Transcript of The Future of Mobile in Asia - Echelon 2013