If you go by the predictions heard during the last ten years of industry conferences, mobile search’s tipping point is perpetually 18 months away. But now we’re in a stronger position than ever, thanks to quickly evolving device standards and open source mobile platforms that welcome third party innovation.
This of course was ushered in with the iPhone, but will continue with a second wave of devices and the continued death of the carrier-controlled environment that has caused a sub-par set of products to dominate the market over the last 10 years.
And though the iPhone only represents about one percent of the global cell phone market, sales have been ramping up quickly. It’s now the top selling cell phone in the U.S. according to NPD group (beating out the Motorola RAZR V3) with 6.9 million phones sold last quarter.
This trend will continue as prices drop and as it becomes more of a mass market device. A big step was taken in this direction this week when iPhones began selling in 2500 nationwide Walmart stores.
All You Can Eat
The key point here is that the iPhone’s user-friendly interface will cause the growth of mobile data consumption to correlate with this market penetration. iPhone users map to greater data consumption, supported by Net Applications data that show iPhone web browsing share ramping since the June ’08 release of the iPhone 3g.
ComScore VP of Marketing Brian Jurutka meanwhile presented data at The Kelsey Group’s ILM:08 conference that showed mobile data subscriptions up 37 percent in June (year over year). Unlimited data plans account for nearly all of this growth and the use of mobile browsers has grown in step.
But it’s not just iPhone penetration causing the rise in mobile data consumption; smart phone penetration has also outpaced the market overall. Going forward, it will be less about the iPhone’s direct impact on data consumption than the device’s influence on the rest of the market.
Copycat devices that compete on price will continue to flood the market, driven by evolving consumer expectations and competitive pressures. As this happens, iPhone-like features will essentially become commoditized and will become standard issue for the mobile mainstream.
We could even see a touch screen-based smart phone with mobile browsing, GPS, games, local search apps, etc. for under $100 this year. loxitane
Think Mobile, Act Local
Local will be the big winner in all of this. There is a strong correlation between local search and the mobile use case, which will cause a good portion of the explosion in third party app development to focus on local.
The touted location awareness features (GPS, etc.) of the iPhone and other devices will push this. But it will be more about local search’s ties to the immediacy and geographic relevance inherent in mobile search.
Think of it this way: If 20 percent of online searches have local intent, my hypothesis is that local will represent an even larger stake of search activity on the mobile device. Many other search categories like product research, reference, image search, will conversely make up smaller shares of mobile search — due, again, to the form factor and basic mobile use case.
Already, about 15 percent of iPhone apps are local. The Kelsey Group’s Mobile Market View (MMV) survey also reported in October that 15.6 percent of mobile users searched for local products and services, up from 9.8 percent the year before. This will continue to grow.
Meanwhile, social media could buttress the apex of mobile and local, as a consumer use case continues to develop around finding things to do and buy locally, while connecting with friends (i.e. Yelp, Loopt, WHERE, etc).
Supporting this, MMV shows that the number of mobile users who access social networks tripled to 10 percent from the previous year. eMarketer also projects mobile social network users to go from 82 million in 2007 to 800 million in 2012.
This will be about 20 percent of overall mobile users, but will constitute an “influencer” segment which will represent a disproportionate share of the marketing opportunity
Now, the Hard Part
So how will all of this be monetized? That’s the 12 billion dollar question (literally).
As with online search, we’ll see lots of shapes and sizes of advertising develop that mirror advertisers’ goals (i.e. clicks, phone calls, branding, foot traffic, conversions, etc.). In this sense, mobile marketing will have some limiting factors compared to online (small screen, etc.). But it will conversely have unique opportunities tied to the mobile device’s portability and location awareness.
Mobile’s proximity to the point of purchase (i.e. in your pocket), for example, opens up possibilities that haven’t really gotten off the ground in online search. These include transactional or cost-per-action models such as mobile coupons or product reservations. Picture standing in front of a store shelf and being able to find cheaper items at another store.
And since the device is, after all, a phone, there will be lots of opportunity to serve local content that is tied to pay-per-call models. Voice search will grow in’09 for the same reason. This will come from continued growth of early movers in the space such as Google (goog411), Tellme (Microsoft) and Vlingo. Each has extended its reach with on-deck voice search applications for the iPhone and others.
More so, voice search could be an opportune area if you consider the majority (86 percent) of the 228 million consumers in the U.S. who are non-smartphone users. For many of these users, voice will continue to outweigh browsing as a preferred search input; thus representing a more immediate opportunity.
Reality Check
Before we get too far ahead of ourselves, it should be acknowledged that we’re not quite there yet.
Mobile advertising was a 2.7 billion industry in ’08 (Gartner) and it will remain relatively flat in ’09. Volume isn’t where it needs to be to attract advertisers on a wide scale. More so, mobile’s experimental nature combined with a down economy will keep many advertisers away.
So mobile marketing’s real opportunity is further off. It could begin to take tangible form in 2010 as the economy improves, mobile technologies continue to improve, and mobile data consumption continues to increase. As all of these factors come together, advertiser interest/adoption will slowly follow, as it often does.
That said, now is the time for anyone interested in this space to start to develop a mobile brand. This lead time will be required to not only build a user base, but to also gather intelligence and learn what user and advertiser proclivities will be in this quickly evolving medium.
This will be vital for mobile search product development. In other words, you’ll have to be ready with a certain degree of momentum when the fabled “tipping point” arrives; when mobile local search becomes a mass market medium and marketing channel.
When will that be? 18 months. We mean it this time.
Michael Boland is an analyst with The Kelsey Group who focuses on mobile and local search. For more TKG reports, data and analysis, contact Michael directly at mbolandATKelseygroup.com.
