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Mobile Internet Market Size

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)
China 863 420
India 771 81
USA 293 239
Russia 214 60
Brazil 205 76
Indonesia 168 30
Pakistan 102 18 (Not in top 20)
Japan 107 99
Germany 107 65
Mexico 89 31
Italy 89 30
Philippines 78 30
Nigeria 76 44
United Kingdom 76 51
Turkey 66 35
Bangladesh 65 .6 (Not in top 20)
France 59 45
Thailand 56 17 (Not in top 20)
Ukraine 54 15 (Not in top 20)
Iran 52 33 (Not in top 20)
Total 3534 1420

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 %)
China 1,330 65 32
India 1,173 66 7
USA 311 94 77
Russia 142 151 42
Brazil 190 108 40
Indonesia 237 71 13
Pakistan 171 60 11
Japan 127 84 78
Germany 81 132 80
Mexico 112 79 28
Italy 60 148 50
Philippines 92 85 33
Nigeria 158 48 28
United Kingdom 62 123 82
Turkey 71 93 49
Bangladesh 150 43 0
France 65 91 69
Thailand 65 86 26
Ukraine 46 117 33
Iran 75 69 44
Average 91 41

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)
China 863 273
India 771 53
USA 293 225
Russia 214 90
Brazil 205 82
Indonesia 168 21
Pakistan 102 11
Japan 107 83
Germany 107 86
Mexico 89 25
Italy 89 45
Philippines 78 25
Nigeria 76 21
United Kingdom 76 63
Turkey 66 33
Bangladesh 65 0
France 59 41
Thailand 56 15
Ukraine 54 18
Iran 52 23
Total 3534 1232

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.

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2 Comments. Leave new

  • Dave Lindhout
    March 25, 2011 10:25 pm

    Very interesting analysis. I’m not sure I buy it, but I am not willing, or able to argue against it. Food for thought.

    One angle on this is that there is a huge, untapped population that is illiterate. Unfortunately, they have no money. It it a market worth going after? I think that the literate, and relatively wealthy population will continue to find value in technology.

    This post-PC era is going to be different, and I’m looking forward to it.

    • If you read through the analysis, the illiterate problem is addressed. One can safely assume that people who are currently on the net are not illiterate and that roughly the same percentages will end up in the mobile space, which sits at the key to this analysis.

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