The Number of Smartphone Users Will Reach Half a Billion in 2012

Bratislava, January 17, 2012 – The sale of “smartphones” costing less than USD 100 will increase significantly this year. By the end of 2012, the number of users will have risen to half a billion: a share of approximately 20% of the mobile devices market. In the media sector, traditional TV will continue to thrive. In 2012, 95% of television programmes will be watched during their current broadcasting time or within the next 24 hours. These data are based on Deloitte’s new predictions for technology, media and telecommunications in 2012.

“Record sales of smartphones are expected this year. Primarily low-cost devices with “smart” specifications will be used by 20% of all mobile phone users by the end of 2012. ”

— Ivan Lužica,
Consulting Partner, Deloitte Slovakia

“Record sales of smartphones are expected this year. Primarily low-cost devices with “smart” specifications will be used by 20% of all mobile phone users by the end of 2012,” said Ivan Lužica, Consulting Partner, Deloitte Slovakia.

“The tablet market, like that of smartphones, will diversify in 2012 based on item size, power and operating system. Companies will expect tablets to have enhanced protection and resilience. This is a challenge for content owners, network operators and retailers, who need to prepare for increased tablet use in households,” stated Martin Hudák, Consulting Manager, Deloitte Slovakia.

Consumer tech demand defies the economic headwinds
Demand for consumer technology will continue to advance in 2012 with record numbers of smartphones and tablets likely to be sold and demand from emerging markets for lower-cost televisions and computers boosting volumes.

It takes two to tablet: the rise of the multi-tablet owner
The tablet explosion has shown little sign of slowing down since the format hit the market in 2010 and it is set to take the mantle of the most rapid ‘multi-anything’ market penetration in history. Roughly five million tablets will be sold to people that already owned one in 2012 generating up to $2 billion in revenue. In contrast, it took several decades for one household to have more than one car, phone, radio or television and ten years for a similar landmark to be reached in the computing and mobile phone markets. However the tablet market will diversify around size, processing power, price and operating system in 2012 as was the case with smart phones.

Hard times for the hard drive: solid state storage
The storage technology used for the world’s consumer devices is mostly taken for granted by consumers by the increasing desire for smaller, lighter gadgets and the advent of the cloud could provide a boost for the solid-state drive providers. By the end of 2012, solid state storage for small devices such as MP3 players, smartphones and tablets will likely account for 90 per cent of the market, compared to 20 per cent in 2006, and a sixth of the laptop segment. Even in data center market could turn to smaller, cooler, power-sipping solid state drives as an alternative to more traditional hard drives.

Ambient Radio Frequency Power Harvesting: A Drop in the Bucket
Wireless power transmission - where TV towers and mobile phone masts could be used to create a sea of ambient Radio Frequency energy to power devices - has been a dream since the age of Nikola Tesla. One issue is the scarcity of ambient RF energy with solar a much more plentiful resource. Another problem is that the amount of power density from a RF source varies dramatically depending on the distance and location of the user. Interference from other environmental factors and the conversion process also add hurdles.

Main Media Trends in 2012

Targeted television advertisements miss the target
The technology to deliver targeted advertising - marketing served specifically to a specific TV set or computer based on contextual data such as income or age – is improving all the time. However such advertising will account for less than a tenth of one percent of the $227 billion total global television advertising market in 2012, as the investment required to develop such specific campaigns remains prohibitive. Even developing targeted advertising for video-on-demand programming, the most fertile ground for such campaigns, is problematic given total viewing volumes are relatively small. Television advertising should be blended more closely with online advertising and mapping an individual’s viewing to his or her searches could quantify a TV campaign’s ability to influence people’s interests and purchases.

The schedule still dominates
For all the talk of the death of linear television, 95 per cent of all television programmes watched in 2012 will be live or within a day of the original broadcast. Technology has not shattered the TV schedule which has remained surprisingly powerful. A leading video-streaming company has even acknowledged that it is not directly competing against traditional linear television and offered a service it dubbed “re-run TV

A “brand” new day for online ads
The advertising market is set to expand across the board in 2012 but the online branding segment is set to outpace the traditional and online markets in terms of growth. While the overall advertising sector will grow 5 per cent, online branding will expand 50 per cent to $20 billion as more companies look to digital to build the long-term value for their brands. More sophisticated methods for measuring the success of online branding campaigns - such as Real Time Bidding which allows companies to specify exactly where and in what context their ads will appear - have transformed digital marketing campaigns from its humble beginnings of banner ads. Advertisers have also increasingly turned their efforts to tailoring adverts specifically for the online world via videos and social media campaigns although companies will need to develop new skills as the prominence of digital branding increases.

Extracting the premium from social games
With the growth of social networks and the popularity of social gaming taking off in 2010 and 2011, the financial potential of ‘social gaming’ has been drawn to the public’s attention. However companies need to evolve away from the ‘freemium’ model that has propelled them into the spotlight to take a greater portion of the $63 billion global games market from 2 per cent this year. Growth has already started to slow for some developers while the overall community of social gamers has stuttered over the past two years. Growth in revenue across the sub-sector will slow to less than 20 per cent in 2012 which may force the hand of games developers to focus less on selling virtual goods over social networks and to consider the potential of advertising or charging for games up front. In this way it needs to adopt the business model of the more traditional console gaming industry and look to develop franchises.

Online coupon intermediaries: from novelty, to celebrity, to sizable niche
The online coupon sector has evolved rapidly from novelty to celebrity over the course of 2011 but 2012 is the year that it is likely to settle into a small niche, albeit one that generates billions of dollars in revenue. The sector’s rapid evolution means that hundreds of companies will disappear during 2012 as competition continues to intensify and margins decline. The number of people using online vouchers should also decline moderately. Intermediaries that sit between the consumer and the retailer will continue to generate billions of dollars but will need to increase the quality and variety of offers available.

Market research is all in your head: MRI machines and media
The advertising industry will have brains on the brain in 2012 as the use of functional Magnetic Resonance Imaging - fMRI - machines grows in influence. Similar to larger, more expensive, MRI machines used in the medical sector, fMRI analysis can show that activity in certain regions of the brain correlates with specific emotions and types of thinking. The controversial technique, known as neuromarketing, has already started to gain traction with food companies altering their packaging and even the flavour of their products as a result of this technique. The method has also been used to determine that people that are very active on social networks have more well-developed brain regions associated with sociability. It appears likely that fMRI will become a key tool for advertisers in 2012 but it is likely to work best as part of a package alongside more traditional marketing techniques.

Development predictions for Telecommunications in 2012

The $100 “smartphone” reaches its first half billion
Over half a billion low-cost smartphones - sold for less than $100 - will be in use by the end of 2012 as demand for basic handsets that still have computer-like functions continues to grow. The rise of the $100 smartphone is analogous to the growth of the netbook - low cost, low power laptops - as consumers look to replace more basic handsets but don’t need the power or functionality of high-end devices. Yet the $100 smartphone could also appeal to users in mature markets where it could become a perfect teenage ‘starter’ phone.

NFC and mobile devices: payments and more! 
The rise in the number of the devices with embedded near-field communications technology is set to soar to the 300 million level by the end of 2013. NFC - the transfer of small amounts of data over a very short distance - has been dominated by the ‘wave and pay’ notion of embedding a credit card into a mobile phone but the application of the technology is likely to have a wider reach. There are thousands of applications of NFC - from gambling, to gaming to healthcare - that could build up a head of steam over the course of the year even if the media continues to focus on the ‘digital wallet.’

Here come more data caps: it’s the end of the (wire)line for unlimited Internet
Demand is growing at over 30 per cent a year with traffic at peak times already forcing many network providers to throttle back speeds. The caps placed on mobile networks have forced many consumers to offload data usage onto wi-fi networks which has added further strain to the wireline world. Whether it is a billing-based cap or a speed-based cap that is introduced, the era of “unlimited” data may be drawing to a close and options such as “web bypass” may become a way for consumers to reduce their consumption to avoid breaching their limits.

So many apps - so little to download
The number of apps available surged through the one million mark in December and will double again by the end of 2012. However the proportion that are paid for remains small. Only a fifth of those that are downloaded break through the 1,000 mark and only a tiny proportion of unpromoted apps will ever become unsuccessful. The demands on the developer are increasing as the variety of smartphones and tablets increases. Stores should look to differentiate by considering subscription models focused on different genres, or selected by editors, that would create ‘app bundles’.

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