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.
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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 InternetTrends”

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

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 2Years 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 InternetTrends”

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
•  FileTransfer
•  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 withYahoo! 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 beVERY different
in Asia
2
Messaging Apps are EXPLODING, but the Battle
is far from over
3

The Future of Mobile in Asia - Echelon 2013

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