As more noise about a bubble is coming up, I decided to do some quick review of assumptions about the marketplace: in this entry, I will look at the market opportunity that exist for today’s startups as opposed to the ones that existed at the height of the dotcom era.
The mobile era is here
Since 2007, with the introduction of the iPhone, the smartphone age has moved to an accelerated speed. More an more startups, including my own, have started to focus on opportunities in the mobile space. But how big is that market? And how does it compare to what’s available in terms of the regular PC-based internet market?
To answer those questions, I pulled data from two different lists: Wikipedia’s list of countries by number of mobile phones in use and Internet Stats’ list of the top 20 countries by internet users. When taken side by side, the data looks like this:
|Country||Mobile users (in millions)||Internet Users (in millions)|
|Pakistan||102||18 (Not in top 20)|
|Bangladesh||65||.6 (Not in top 20)|
|Thailand||56||17 (Not in top 20)|
|Ukraine||54||15 (Not in top 20)|
|Iran||52||33 (Not in top 20)|
So, at first glance, the natural inclination would be to say that the mobile opportunity is over twice as large as the internet opportunity would be (or two and a half time, to be more correct). That screams extreme opportunity and you would be dumb to not invest in this.
But there’s a cautionary part to the story that is not being covered. An assumption being made when looking at mobile numbers is that we are at the beginning of the revolution and numbers will go up from there. A main issue I would take with that approach is when looking at the penetration rates. For that, it’s useful to look at the actual population data for countries involved.
|Country||Population(in millions)||Mobile Penetration (in %)||Internet Penetration (in %)|
This table seems to tell us an interesting tale: of the top 20 countries by mobile users, it seems we are seeing an average penetration rate of 91 percent. That would point to those markets being mostly saturated at this point.
Mobile devices have been on the market for around 20 years and, for many countries, have served as a way to leapfrog the landed phone revolution. While people in the developed world look as mobile as an extra line and talk about abandoning landlines for mobiles, the reality in a lot of the world is that the landline was never much of a mainstream offering and mobiles quickly became the way most people dealt with phone service. And for large segment of the global population, the concept of a phone tied to a cable in the wall is as foreign as the idea of using a telegraph to send a message is to us.
So where does that leave us in terms of market opportunity? Does the opportunity encompass those 91% o the population that use a mobile phone?
I’d say no.
A substantial portion of that number is, unfortunately, functionally illiterate. They may know how to get a phone number but a lot of mobile users in underdeveloped countries simply cannot read. Reading is still, in large part, a privilege reserved to a small portion of the overall public.
But we do know about people who can read and have used the internet. This is what we currently see as the internet population. So if we are to recontextualize the internet population as the user groups most likely to get and use smartphones in the future, the picture may look like this, assuming that the percentage of internet users remains constant:
|Country||Mobile users (in millions)||Mobile Internet Users (in millions)|
This is still a pretty substantial number, representing an untaped opportunity equivalent to the internet today.
What’s the market today?
But if 1.2 billion is the total addressable market, what is today’s addressable market? A few weeks ago, Apple reported that it had now sold over 100 million iphones. Meanwhile, there were around 20 million Android devices sold in the last quarter of 2010, probably putting the total number of such devices at the current time at somewhere between 20 and 30 million globally. So we’re looking at roughly 130 smartphones available globally. This means that we are barely 10% of the way to the addressable market being saturated. By comparison, it took 8 years for the internet to get to that kind of level.
So if you want to place bets on the future of the mobile internet but are not sure of whether it exists, ask yourself if you would have bet on the growth of the internet in September 2003.
If the answer is no, you may look at this as a bubble. If the answer is yes, you may be looking at a growth period that includes the invention in the mobile space of such companies as Facebook (created in February 2004) or Twitter (created in March 2006).
On top of that, you still have to consider that the internet itself is still growing and new devices like tablet computers are adding to the fray. With all those things taken in mind, there seems to be ample opportunities to justify the amounts of money being invested into the next generation of technology leaders.