Smartphones Now Dominant, Growth Accelerating

In the US smartphone penetration crossed the 50% threshold earlier this year. And two new reports show that smartphone growth and dominance are accelerating.

The first is a forecast from IHS iSuppli, which projected that 54% of mobile handset shipments in 2013 would be smartphones. This would mark the first time that smartphone shipments will dominate feature phones. It wasn't supposed to happen for three more years. 

Part of the popularity of smartphones is driven by "culture," as well as the convenience and value of having a smartphone. But smartphone adoption is also being driven by price. Subsidized smartphone pricing in the US often makes the devices as cheap to buy ($49 - $99) as feature phones.  

Separately, Flurry Analytics said in a recent report that 78% of US mobile phone users now own smartphones (iOS or Android devices).

This caught my attention because this figure (78%) is obviously much larger than the Nielsen and Pew numbers that show 50%+ smartphone adoption. Pew, comScore and Nielsen extrapolate from survey samples to calculate the total number of smartphones in the US market.

I exchanged emails with Flurry seeking clarification of this 78% figure and what it represented. Flurry confirmed my interpretation was correct.

The company is saying that 78% of US adults with active mobile devices are on iOS or Android devices. Flurry says that its data are based on actual usage and its population of device owners globally is in the hundreds of millions. 

Flurry now says there are 165 million active smartphones in the US today. That compares to a PC Internet population of roughly 220 million. 

Survey: Mobile Payments Face Uphill Battle

My view about mobile payments is the following: once people have a positive concrete experience of using mobile payments they'll be sold, so to speak. Most people haven't had those experiences yet. Accordingly there's skepticism or indifference about mobile payments in the US. This, despite more than 20 companies scrambling in a kind of land grab that anticipates a glorious future right around the corner.

Several consumer surveys in the past 12 months indicate Americans are concerned about security and privacy or don't see the need for mobile payments: "see no benefit," "easier to pay with cash or credit cards" are some of the obstacles facing mobile payments adoption. Roughly 70%-75% of survey respondents say they aren't interested.

I'm the first to point out that attitudes and behavior are often two different things. The survey data are surprisingly consistent. Also consistent are findings that consumers in the 25-55 age range are typically the most interested in mobile payments. More educated, urban and usually more affluent consumers are also typically more interested.

We just completed a survey (n=1,501 US adults), which asked whether people were interested in using their phones as mobile wallets, instead of cash or credit cards. The results are very consistent with other surveys from UC Berkeley Law School, the US Federal Reserve and others.

About 29% of respondents (a decent number) say they have varying degrees of interest. Those who are most enthusiastic, however, are a tiny minority (6.8%).

Again, as people start to have real experiences of mobile payments, I believe these numbers will start to rise. But these findings reinforce the notion that there's a mountain to climb. Providers must educate consumers, reassure them on security/privacy and offer them tangible benefits for trying and using mobile payments systems.

An exception to all this is Square and its various imitators (PayPal Here, Intuit's GoPayment, PayAnywhere, etc.). In most of these scenarios the consumer isn't doing anything new; there's a familiar card swipe. The change is all on the merchant side. However as consumers develop familiarity with and start to trust these providers that becomes the basis for trying some of their "more exotic" payment services, where there is a behavior change (e.g., Pay with Square, PayPal Mobile apps).

While we believe that the mainstreaming of mobile payments is "inevitable," the timing and the specific services/platforms that will mainstream them have very much yet to be determined.

Study: 19% Said Retailers Without Mobile App 'Old Fashioned'

Apigee released new survey findings about mobile attitudes and usage in anticipation of Holiday 2012 shopping. The survey polled 2,200 US adults this month and was conducted by Harris.

It found that 57% of respondents "would consider" buying holiday gifts on their mobile devices. Currently the number of Americans who've made an "m-commerce" purchase stands at about 35%, according to 2012 survey data from IPSOS.

In order, Apigee survey found the following to be the most likely m-commerce categories:

• Books – 32%
• Electronics – 31%
• Gift cards – 27%
• DVDs/Blu-ray discs – 26%
• Clothing – 24%
• Toys – 20% 

The survey didn't ask about specific retailers but all of the above categories (maybe clothing excepted) are popular on Amazon, which continues to be the single biggest beneficiary of mobile commerce (perhaps after Apple iTunes).  

Apigee also asked consumers about the perceived benefits of using mobile (apps):

• Browsing for deals wherever you are – 50%
• Performing price comparisons inside a store – 48%
• Using a mobile device to find a retail store – 40%
• Redeeming electronic coupons – 38%
• Secretly shopping without a spouse/significant other knowing – 25%
• Buying embarrassing or personal items without using a work computer – 14%
• Sneaking shopping time in at work – 12%

Just over half of the survey respondents had a negative reaction to the idea that a retailer wouldn't have a mobile presence or offer a mobile app. Most damning, 19% said "it makes me think the retailer is old-fashioned" and 7% said it might hurt their loyalty to the store. Younger users were mostly likely to have a negative attitude toward retailers without mobile apps.

Clearly e-commerce isn't the only reason to offer a mobile site or mobile app. There are many other reasons, including getting shoppers into stores, CRM and providing better customer service in the store (or overall). 

I wrote earlier this week about a GroupM survey that offers some very interesting insights about mobile showrooming and in-store shopping. That study suggested ways that retailers can integrate mobile into a larger strategy to lure and keep shoppers in stores and combat the showrooming challenge. 

Study: Most Showroomers Will Abandon Stores if Price Difference Is 5% Less Online

Electronics retailer Best Buy just reported this week that Q2 profits dropped by 90%. That's partly attributed to the weak economy and partly to the phenomenon of "showrooming," where shoppers look at products in stores and buy them later online. That phenomenon has always existed but it has been "exacerbated" by the rise of smartphones and in-store price comparisons. 

As more people buy and carry smartphones they're more inclined to use them in traditional retail environments.  

Consumer surveys have indicated anywhere from 50% to 80% (or more) of US mobile consumers now use their phones in stores for product and price information, as well as comparison shopping. Amazon and eBay have been big beneficiaries of this trend, but especially Amazon. Traditional retailers have in some cases suffered and in a few instances (i.e., Best Buy) showrooming has become something of a crisis.

Agency GroupM recently released some survey findings and analysis addressing the phenomenon of showrooming. Roughly 1,000 US adults were surveyed and asked about shopping scenarios and attitudes. 

As one might expect, the larger the price difference between in-store items and online prices the more likely buyers said they would be to abandon the store. But somewhat surprisingly GroupM found that even a 2.5% discount could have a significant impact on store abandonment: 45% of survey respondents reported they would leave the store. If prices were 5% lower online, 60% of respondents said they would leave. 

There is a difference between self-reported survey data and actual behavior. But the GroupM findings reflect the new consumer mindset.

GroupM identified the profile of a likely "showroomer": younger, female, heavy online shopper and lower income. It also found at the other end that 10% of respondents (loyal to the retailer) wouldn't leave the store regardless of online price discounts. However there's a "marginal showrooming" group that is somewhat price sensitive but can be influenced to "stay in the store."

Factors that GroupM identified to help retailers combat showrooming included the following: 

• Good service and in-store sales help
• Channel agnosticism, so if an item isn't in the store it can be ordered online and shipped via the same retailer
• Retailer apps that offer useful information, including inventory 
• In-store loyalty programs
• Better online marketing to create additional incentives to come into stores (e.g., deals)
• Price awareness that helps ensures prices remain within striking distance of online retailers which may have lower costs  

Providing good in-store service, which extends to retailer apps, is a key variable here and one that might cause retail executives to balk. They have generally been de-skilling their workforces for years. However they'll suffer the consequences of poor service and indifferent consumers if they don't do something.

Beyond this, a multi-faceted approach is called for, one that implies a great deal more sophistication than what's on display for most traditional retailers today. 

Report: iPhone Owners Most Receptive to Mobile Ads

The Online Publishers Association has published some new survey data (n=2,450 US Internet users) which mostly duplicate pre-existing smartphone survey research: size of user population, activities, attitudes and so on.

While the data are generally consistent with prior research, a few of the findings appear to contradict or argue with earlier findings. For example, the OPA found that its respondents spent more time "accessing content" via the mobile Web vs. apps. Comscore, by contrast, has reported that more than 80% of consumer time spent on the "mobile Internet" is in mobile apps and only 20% of time spent is with the mobile web.  

Beyond this there are a considerable number of findings in the study. Because they are largely duplicative of earlier work, they're not terrifically interesting to me. You can download the entire slide presentation from the OPA site. However I'll pull out a few items that are worth highlighting. 

The first is that more than half of survey respondents said they preferred using a smartphone for certain types of content or online activities to PCs and tablets. The question was, "When doing the following activities, which type of device do you most prefer to use?" 

The OPA found that smartphone users downloaded an average of 36 apps over the past year. The study also found that 56% of respondents used at least half of the apps they had downloaded on a regular basis. Only 14% of those apps were paid, however. 

The survey also found that 70% of iPhone "content consumers" bought paid apps but only 34% of Android users paid for content-related apps. That smartphone content-buying population is more receptive to mobile advertising and more likely to take action in response according to the OPA findings. 

Owners of the iPhone were the most positive about mobile ads and most likely to act in response:

At the highest level the findings underscore that there's a very large audience out there that in some cases is more interested in content on smartphones. While there were no earthshattering discoveries in the study, it adds to the growing body of research that reflects the importance of mobile distribution for both publishers and advertisers -- and the missed opportunity for those not currently participating in mobile. 

The Right Approach to Mobile Can Boost In-Store Sales

Many retailers are wringing their hands over the so-called "showrooming" phenomenon, where consumers visit stores to investigate and try products but ultimately make purchases through Amazon and other e-commerce sites. There have been various articles written about how traditional retailers can combat this. Some emphasize loyalty programs while others focus on more "defensive" measures such as developing proprietary SKUs (e.g., Target) so consumers can't scan products in the store and obtain competitive pricing information.

Yet the use of smartphones in stores will only continue grow. It's important for retailers not to fight but to embrace the trend. 

While a recent Google survey found only 31% of smartphone owners used them in stores (among apparel shoppers), another survey of 1,557 US adults, conducted in March by Deloitte, found that 61% of respondents used their smartphones in stores.

Source: Deloitte

In addition, data from multiple sources (i.e., InsightExpress, Google, Nielsen) published last year and earlier this year indicate much higher numbers: up to 80% or more use or have used their devices in stores while shopping. 

The flip side of "showrooming," the discussion of mobile consumer shopping continues to focus on "m-commerce." However mobile's biggest impact wil be on in-store sales (just as the PC Internet's biggest impact is on in-store sales and not e-commerce). The Deloitte study confirms or reinforces this notion.

The chart below mashes up data from several sources to project that mobile will influence almost $700 billion in offline shopping by 2016. 

Source: Deloitte

As with most forecasts these figures are likely to be wrong but it's directionally accurate to say the influence of mobile on traditiona retail will grow dramatically.  

What's interesting about the first chart above is how progressively more people use their smartphones as they approach "shopping day." This argues that retailers can provide mobile sites and apps that will support and address consumer needs along a spectrum of time and need: when they're planning to shop to when they're actually in the store.

Mobile apps can provide information that supports the sales and customer service function in stores. (Store and inventory maps could help customers find products; out of stock intems could be ordered for home delivery.) These things can be combined with loyalty incentives and even (eventually) mobile payments in stores. US retailer JCPenney, for example, is ditching its current POS and cash register systems for mobile payments and new payment kiosks. 

The larger point is that a great mobile retail app can improve and enhance the customer experience. Retailers don't have to fear mobile.

As Deloitte commented in its report, mobile can increase in-store sales: "Our survey shows that 85% of consumers surveyed who used a retailer’s native app or site during their most recent shopping trip actually made a purchase that day, compared to only 64 percent who didn’t use the retailer’s app or site."

Survey: Most Consumers Using Tablets 1 to 4 Hours Daily

Last week Adobe released a report, based on US consumer survey data (n=1,200), about smartphones, tablets and user behavior. There are numerous findings in the document.

Some of the most interesting concern the specific features or functionality that would help consumers buy via mobile devices (chart below). There were also numerous complaints about the speed of mobile websites (load times) and poor site navigation as areas for improvement. 

I'm not going to dig deeply into design and functionality related findings, which amount to specific product recommendations for e-tailers and developers. Most of my focus here will be on tablet usage.

Most Adobe survey respondents reported using tablets "a few hours every week" or at least 1- 4 hours daily. The array of answers is very awkward and probably confused some of the respondents and results accordingly. Previously (October 2011) Pew found that 77% of survey respondents used their tablets daily. As a general matter people report very high levels of tablet engagement and daily usage (at least of the iPad). 

Like many other surveys before it, the Adobe data also show that the majority of tablet owners use their devices at home. As I've argued in the past this may change somewhat as the 7-inch tablet category gains momentum. That remains to be seen however.

The most common activities on tablets were email, games, shopping, reading and video viewing. This is generally consistent with other data, however the video viewing response rates in this survey are somewhat lower as is the amount of news consumption. Pew survey data indicate that 53% of tablet owners consume news on their iPads/tablets on a daily basis. 

Adobe neglected to ask about tablet substitution for PC usage. Several surveys make clear that people who own iPads are using their PCs somewhat less to a lot less than prior to owning a tablet.

Adobe's survey showed that people are also conducting e-commerce on their devices. Nothing new there. Unfortunately the responses aren't broken out by tablet vs. smartphone. If so we'd probably see much more activity on tablets: smartphones are for research/shopping, tablets are for buying. 

The data in the following chart reflect the cumulative value of e-commerce spending over the past year, not average purchase value.

Finally, 60% to 70% of Adobe's respondents said they'd never clicked on a mobile ad. Adobe sees the glass "half full" and says, "A high percentage of consumers surveyed report that they are clicking through mobile ads presented in both mobile websites and apps, with 42% clicking through ads on mobile websites, and 37% clicking through ads on mobile apps." 

Here's some additional color from Adobe's analysis of the data about mobile ad response: 

Consumers are reporting that a majority of advertisers are providing mobile-optimized experiences when they click through ads on both mobile websites (73%) and mobile apps (77%), suggesting that optimization of mobile ad content appears to be prevalent. Men are more likely to click through on mobile ads presented within mobile apps than women (42% versus 32%). Prioritizing a testing roadmap to include campaigns that target men could yield a strong opportunity for conversion optimization.

My anecdotal observation is that still a large percentage of mobile-ad landing pages and sites are not optimized for mobile devices.

Smartphone Demand Slips, Carrier Loyalty Trumps Smartphone OS

Yesterday I posted data from Chetan Sharma (from US carriers) that reflected growing smartphone demand and waning demand for feature phones. However Gartner's latest handset sales data reflects a decline in smartphone sales from last quarter: 

Worldwide sales of mobile phones to end users reached 419 million units in the second quarter of 2012, a 2.3 percent decline from the second quarter of 2011, according to Gartner, Inc. Smartphone sales accounted for 36.7 percent of total mobile phone sales and grew 42.7 percent in the second quarter of 2012.

Unlike other handset figures in the market these data represent actual handset sales vs. "shipments." Samsung is now the global market leader, followed by Nokia and then Apple. Nokia's share is now just under 20% of global handset sales. Half of Samsung's 90 million unit sales were smartphones according to Gartner. 

By contrast the firm said that demand for the iPhone weakened, "as sales fell 12.6 percent from the first quarter of 2012, but grew 47.4 percent year on year." This was reflected in Apple's Q2 earnings, which missed expectations based on lower iPhone sales. The suggestion is that consumers are waiting for the next iPhone to be released. 

In a related bit of data, gadget blog The Verge published results of a survey conducted by Apple at some point in the past (date unreported). The sample size was very small (n=89). The data are being exposed as part of the Apple-Samsung IP trial going on now. The survey asks why users chose an Android device over an iPhone.

Top reasons for buying an Android among those who considered an iPhone

• Wanted to stay with wireless service provider -- 48%
• Trusted the Google brand -- 36%
• Preferred larger screen -- 30% 
• Preferred the Android market for apps -- 27% 
• Wanted better integration with Google services -- 26%
• Wanted the latest and greatest smartphone -- 26%
• Wanted GPS turn-by-turn navigation -- 25%
• Wanted the latest technology -- 25%

The fact that the top reason for choosing Android is "wanted to stay with wireless service provider" indicates this survey was probably conducted before Verizon obtained the iPhone, which was in early 2011. The iPhone is now available from all major US carriers, except T-Mobile, as well as several pre-paid carriers. There's enormous pressure for Apple to deliver an exciting new piece of hardware when the next iPhone is announced in September. 

Returning to the Gartner data, the firm said that Nokia is under pressure at both ends of the market. Low-cost Chinese OEMs are hurting the company's feature phone business, while its "Lumia devices continue to struggle to find a place in consumers' minds as a replacement for Android." 

Study: Most Mobile Device Usage at Home

Late last week Google released data (captured and collected by Compete) about the role of digital media, mobile devices and video in US consumers' apparel shopping habits. Overall the data reflect the now many influences operating on consumer decision-making. It also shows how traditional media still play a meaningful role in purchase behavior: they create awareness and stimulate further research on digital devices. 

But rather than identifying "which 50%" of the media spend is truly effective, it seems that it is getting progressively more complicated for marketers and correspondingly difficult to correctly attribute sales or "conversions" to specific campaigns.

Q: How soon after the last time you saw or heard each of the following types of apparel ads did you look up the advertiser online to get more information?

The Google-sponsored research, as mentioned, offers a range of findings. Below I examine some of the mobile-specific data.

Q: Which of the following online sources did you access on your mobile phone?

The largest single category in the slide above is search. Google uses this data in part to impliedly make the case for mobile search advertising. But the more interesting interpretation of this slide is that search penetration on mobile devices (in this study and apparel category) is far less than on the PC where as much as 95% of the online population uses search engines. (There are other data showing greater mobile search usage.)

In the slide below, echoing lots of other data, most mobile consumers are comparing prices, looking for deals and reading product reviews on their phones (and tablets). 

Q: Which of the following did you do on your mobile device while researching or shopping for apparel?

One thing that's interesting about the findings of this Google-Compete study is the fact that most of the mobile usage happened at home vs. any other location. At least among apparel shoppers, fewer of them are using their devices in stores than other survey data have shown. In other surveys numbers have been as high as 80% - 90% of smartphone owners using devices while in retail stores for various purposes. 

Q: From which of the following locations did you use your mobile device(s) (e.g., mobile phone and/or tablet) to shop for apparel?

The fact that tablets owners and tablet usage are included in these findings may account for the smaller in-store usage figures. In addition, the sample size was relatively small (n=161). Regardless, it's accurate to point out that a considerable amount of smartphone usage happens at home. Accordingly, marketers cannot and should not assume that smartphone users are always "out and about" when consulting their devices. 

Though not explored in this study, it's also generally true that mobile research is followed up by online or in-store (rather than mobile) purchases.

The Decline of Voice, WiFi Tablets and Other Carrier Data from 1H 2012

Mobile industry and carrier watcher Chetan Sharma has pulled together mostly carrier-published data for a mid-year update across a range of topics relevant to the wireless industry. I pulled four of his slides below; however you can see the full presentation here.

The first slide below shows increasing smartphone penetration in the US and abroad. No surprise here; this has been in the survey data for months. In Q2 smartphone sales exceeded 70% of new handset sales in the US.

Outside the US smartphone penetration isn't rising quite as fast. However it will accelerate and US smartphone growth will start to slow over the next 12 to 24 months. Feature phone sales in the US are now clearly in the minority.

The next slide shows handset market share by manufacturer, with feature phone sales representing only about 30% of total handset sales this year.

Particularly striking in the chart above are the following:

• The rapid decline of feature phone sales since 2010 (orange)
• The decline of RIM over the same period (green) 
• The amazing growth of Samsung (purple), now dominating smartphone and Android sales in the US
• The relative flatness of Apple's overall share (red)

The graphic above shows the relative shares of voice and data on US carrier networks. Data, in red, now entirely eclipses voice. In 2009 the two were had nearly equal shares of traffic on carrier networks.

Finally, the following chart shows the ratio of WiFi-only tablets tablet sales with carrier network connections.

I'm drawing a few inferences but it appears the data show consumers are avoiding additional carrier fees and service plans, preferring to run tablets on WiFi networks. Notwithstanding some of the new shared data plans it appears that carriers will not derive significant new revenues from the growth of tablets.

With nearly 50 million tablets in the US market, carrier-networked devices constitute roughly 8% of the total. The lure of discounted devices in exchange for two-year contract commitments isn't succeeding in getting customers to pay additional carrier fees. Beyond basic consumer resistance to new fees, the $199 Kindle Fire, Nexus 7 and potentially forthcoming 7-inch iPad, undermine the appeal of carrier discounts.    

ShopKick Kick's eBay's Mobile Butt in Time Spent with App

Nielsen has identified the top mobile shopping apps for June in the US market. The list is as follows:

1. eBay Mobile
2. Amazon Mobile
3. Groupon
4. Shopkick
5. LivingSocial
6. Walgreens
7. Target
8. RedLaser (eBay)
9. Out of Milk Shopping List
10. SavingStar Grocery eCoupons

While eBay and Amazon have been on top of this list since its inception, ShopKick and Walgreens are a bit of surprise to me. However it's not clear precisely how Nielsen defines the "shopping" category. 

While eBay had a little over 1 million more users than Amazon (13.16 vs. 12.12 million) the time spent with the eBay app was much more than Amazon users (1:04 vs. 18 minutes). The discrepancy can likely be explained in the fact that Amazon users are probably much more directed, looking up prices, reviews and product availability while eBay users probably browse and look at many more pages. 

Beating both by a mile was ShopKick, with three hours, 19 minutes (3:19) on average June. That kind of engagement is truly impressive. 

Travel Goes from #9 to #3 in Mobile Ad Spending in a Year

Millennial Media a couple of days ago released its latest SMART report. This one focuses on the travel vertical (like the one in July 2011). According to the data travel is now the third largest advertiser category on the Millennial network.

In Q1 2011 travel was ninth in terms of advertiser spend, while retail & restaurants was number one. The latter has now slipped to number four.

In terms of the composition of advertisers in the vertical (Chart A below), "booking agents and sites" remains the largest single sub-category. However it now represents a larger percentage of spend than last year (47% in 2011 vs. 57% in 2012). The remainder of the sub-categories are largely the same, although there have been some shifts in the overall share of spend. 

As mentioned, Chart A below reflects the advertiser composition of the travel category on Millennial's network. Chart B is the same data from one year ago.

Finally the actions that travel advertisers were seeking to drive consist mostly of mobile app downloads. That in turn suggests mobile booking and e-commerce or loyalty/CRM functions. Surprisingly, relatively few of advertisers are seeking drive telephone calls, which is a major way that travel companies still do business. 

Mobile to Be 25% of E-Commerce in Five Years? Not So Fast

ABI Research is projecting that mobile devices will account for just under one quarter (24.4%) of all e-commerce by 2017. If "mobile" is defined to include tablets, then maybe. But if we're talking about smartphones largely or exclusively there's a long way to go before that happens.

Despite the fact that the data now show a majority of smartphone users have made purchases on their devices, most people don't routinely engage in e-commerce via smartphones. Security fears and the problem of entering credit card numbers are major barriers to so-called "m-commerce." Tablets by contrast are driving lots of purchase behavior. 

A majority of smartphone owners (80% to 90%) use their devices in stores to check prices and get reviews and product information. However most don't go on to buy -- unless it's through eBay or Amazon. 

As a general matter, if people are going to buy "online," they later go to their PCs and make purchases. Nielsen data, compiled by eMarketer, show that a minority of users (5% of smartphone owners) are buying things directly through mobile devices -- in this case in response to a mobile ad. But these data are also reflective of the general fact that most people don't buy on smartphones. 

According to Nielsen the top mobile "shopping" apps are the following

1. eBay Mobile
2. Amazon Mobile
3. Groupon
4. ShopKick

Amazon and eBay in particular have invested hugely in mobile and it has paid off -- literally. Amazon in particular has your credit card on file and can enable a mobile transaction with a single click.

By contrast, most e-commerce sellers lag far behind these leaders. And to drive the kind of shopping volume that ABI is projecting the "credit card problem" needs to be solved. Large retailers with whom shoppers have direct relationships (e.g., Target, Macys, Wal-Mart) can store credit cards on file and remove friction accordingly. 

However "no-name" e-commerce sellers are not going to be able to participate in smartphone-based commerce unless they address the payments problem, which could be via PayPal or using a solution such as the one offered by Card.io. Indeed, it's far from clear that the ABI prediction will come to pass.

We're probably looking at a situation for the medium term foreseeable future where smartphones are aggressively used by consumers for research and price comparisons but generally not used for conventional e-commerce transactions except in select situations such as I've described. 

US Smartphone Ownership Now 55%, 'Second Screen' Phenomenon Nearing 90%

According to Nielsen's latest data, 55% of US mobile phone owners now have smartphone phones. Previously comScore reported that fully half of feature phone owners buying new phones were upgrading to smartphones (a majority to Android devices). Nielsen says that two-thirds of new mobile phone buyers are opting for smartphones. It's likely therefore that smartphone ownership will reach at least 60% in the US by the end of Q4. 

Data reflect that the overwhelming majority of smartphone owners access the mobile Internet. Accordingly, smartphone penetration is generally equivalent to mobile Internet penetration. 

The smartphone audience is creeping closer to PC audience levels. By the end of 2012, if smartphone penetration reaches 60%, there will be nearly 150 million users in the US. Nielsen says that mobile audience is 237 million subscribers, while comScore puts it at 234 million. These figures are probably slightly low. A better "base" is closer to 250 million, although CTIA says there are more than 300 million wireless subscriptions in the US (indicating some level of duplication). 

According to Nielsen, time with apps (vs. the mobile web) has increased from 72% to 81%. In other words, people are spending only 19% of their time on the mobile web. This flies in the face of the "cross platform" conventional wisdom which argues: build an HTML5 app instead of native apps because it will provide greater reach.

The amount of time consumed by the top 50 apps has apparently decreased, which means people are spending more time with a wider range of apps. 

Among the top 15 apps, 12 have a "social and/or local component." Straddling the categories are Twitter, Facebook and top photo-sharing site and social network Instagram (bought by Facebook). 

The Nielsen data also reveal the increasing degree to which smartphone and tablet owners now use these devices while watching conventional TV. Large majorities approaching 90% now use their mobile devices simultaneously according to Nielsen. I suspect these numbers are somewhat higher than actual usage, but the findings argue that TV advertisers must be conscious of these "second screens" when creating ad content.  

The data below report that people are doing various things on smartphones and tablets "during the program." However I suspect much of this activity amounts to ad avoidance. Meaningful minorities of people appear to be responding to TV ad content by doing searches or looking up product information. 

Finally, according to Q3 2011 Nielsen data, mobile ads are the least trusted form of advertising. Paradoxically, however, they tend to be more effective than other ad categories, especially PC advertising. Yet mobile ads have quite a way to go before they reach trust levels comparable to conventional media ads.

Mobile Ad Survey: Coupons Still King, Brands Mostly Missing the Boat

Mobile ad network HipCricket released its latest mobile advertising survey. The poll of 650 US mobile phone owners asked a range of questions about mobile advertising and device ownership. Among the survey respondents, 73% said they owned smartphones while 43% reported owning tablets.

These percentages are higher than US national averages, which are closer to 50% and 30% respectively. Among smartphone owners, the HipCricket survey was comprised of 43% iPhones, 38% Android handsets and 16% BlackBerry devices. 

The survey found that those with higher incomes were the most engaged with mobile advertising: 

• 55% of those who have clicked on a mobile advertisement have an annual income of more than $75,000.
• 29% of those who have clicked on a mobile advertisement have an income of more than $100,000.
• 45% of those with an income of more than $75,000 have made a purchase as the result of a mobile ad.

Younger users (25-34) were also more engaged with mobile ads than the overall group. Among this group, 70% "have made a purchase as a direct result of a mobile ad." In addition 48% of these users "think more positively about their favorite brands after interacting with them via their mobile device," which was "significantly more than any other age group."

Below are a selection of the charts from the survey. The first one indicates the most frequently encountered mobile ad categories. SMS ads come in at a surprising number two, just above ads in mobile apps:  

Just under a third of these users had redeemed a mobile coupon, although a substantial number hand "never engaged" with a mobile ad.

The principal reason survey respondents did not click on or otherwise engage with mobile ads was due to a lack of perceived "relevance." Interestingly there were also several security related fears associated with mobile ads (spam, source uncertainty). This is an education problem for the industry. 

Consistent with many past surveys, offers and coupons were a major incentive for consumers to respond to mobile ads. While many brands and agencies don't want mobile advertising to be "just about coupons," it's clear that offers drive engagement. 

HipCricket also found that most respondents' "favorite brands" were not advertising in mobile. This is clearly a missed opportunity for the brands. 

Finally, the survey found that a large majority of respondents had made a purchase after viewing a mobile ad. 

While self-reported data must always be "taken with a grain of salt," these survey findings reinforce a considerable body of other data in the market showing that for younger, more educated and more affluent users mobile is now a critical medium. Yet brands and major advertisers continue to miss out on a significant opportunity to reach these audiences through their failure to aggressively pursue mobile. 

Tablets Demand Attention As Separate Device Category

Last week mobile ad network inMobi released tablet survey findings, drawn from 9,600 respondents in seven international markets. US responses were just under 1,000 (904). The company asserts that "tablet use has risen quickly to 29.5 million U.S. users, 11% of the total U.S. population." 

By comparison, in January of this year the Pew Internet Project released survey data that showed 19% of US adults owned tablets (mostly iPads). And comScore released data showing that roughly 24% of smartphone owners also have tablets. If we extrapolate these numbers, the Pew data suggest that there are roughly 42 million tablet owners in the US (as of January 2012). The comScore data argue the number is closer to 56 million.

The inMobi number is too small, while the comScore number is probably too large. Pew is likely closer to the actual number of tablet users in the US at this point. However, by the end of the year it could be closing in on 70 million. 

The inMobi survey data are from a report entitled, The Role of Connected Devices in the Consumer Sales Journey. Below are some of the top-level findings: 

General consumption habits

• Over 60% of US tablet owners spend at least 30 minutes each day accessing media content on their tablets
• 52% use a tablet to fill what previously would have been “dead time.” 
• 29% of US tablet users said they have reduced reading books in print.
• 29% of tablet owners claimed they reduced surfing the internet via their PC and/or laptop.
• 48% of respondents agree that tablets’ appealing design and accessibility make it is easier to access media content than on a PC or laptop.

Shopping and e-commerce 

• 22% of tablet users claim they have shopped less in physical stores since purchasing a tablet
• 55% of tablet owners make purchases on their device in an average month. 

According to the survey data, "tablets have become the preferred device at home and smartphones are preferred on the go." These devices play different roles in the "purchase consideration cycle." Tablets are used in a "lean back" mode in the evenings and on weekends, almost exclusively at home. 

A recent tablet-centric e-commerce report from Monetate also observed that tablets are used primarily at home, as a PC substitute, and offered the following advice:

With increases in website traffic from devices such as the iPad and Kindle Fire, e-commerce businesses must treat customers using tablets as a unique audience segment. Tablet users expect a different experience that takes advantage of their devices’ features, such as touch/swipe functionality and screen rotation.

Accordingly it's not enough to simply assume the PC site will translate onto tablets. While non-flash PC sites often render relatively well on tablets they typically fail to take full advantage of the tablet opportunity.

Monetate: Non-PC Devices to Grab 25% of Traffic in Less than a Year

E-commerce optimization firm Monetate has published its latest "E-commerce Quarterly" report. The report addresses a number of issues including social commerce. For purposes of this post, I'll focus on the mobile and tablet findings.

The data in the report are drawn from "analyzing a random sample from over 100 million online shopping sessions on 100-plus major e-commerce websites." Here are some of the major findings: 

• 88% of website visits now come from PCs, down from 92.1% in the prior quarter.
• Tablet traffic increased 348% in one year, while visits from smartphones increased 117% during the same time period.
• More than 6% of all website visits now come from tablet users; 95% of this traffic is from iPads.

Website Traffic Sources

Q1 2012 Conversion Rates by Device Category

Compare similar data from Marin Software. Directionally they're almost identical to the Monetate findings.

What both the Marin and Monetate conversion findings lack, however, is data about offline conversions. If those were tracked and factored in I suspect we'd see mobile conversion figures outstrip the PC and potentially tablets.

Monetate's focus is strictly on e-commerce conversions. But most people don't buy conventional products on their smartphone, though they may do things like banking transactions or buy apps or rent movies. 

The use cases for smartphone are different than PCs and tablets, which are mostly used at home and often as a substitute for the PC. According to Monetate's report:

It seems clear that smartphone users are either doing more comparison shopping or are dissatisfied with the user experience. In fact, a recent study from comScore Inc., Shop.org, and The Partnering Group revealed that 43% of smartphone owners have used their mobile device while in a store for a shopping purpose.

Monetate also argues, despite that at-home usage of tablets, that there's a different user expectation vs. the PC experience:

With increases in website traffic from devices such as the iPad and Kindle Fire, e-commerce businesses must treat customers using tablets as a unique audience segment. Tablet users expect a different experience that takes advantage of their devices’ features, such as touch/swipe functionality and screen rotation.

This argues in favor of tablet apps as well as a tablet-optimized HTML5 site. Finally, the firm predicts that at current growth rates, "website traffic from PC users will dip below 75% in less than one year" -- meaning that smartphones and tablets will represent 25% of site traffic. 

Pew: 45% of Younger Users Access the Internet Primarily via Mobile

The US Center for Disease Control tracks the number of mobile-only and mostly mobile households. Today 30% of US homes have no landline with an additional percentage making and receiving most of their calls via mobile. In that scenario the landline becomes a kind of "spamcatcher" reserved for telemarketers and fundraising calls.

The combined number of mobile-only and mostly mobile homes in the US is now above 45%. That's an amazing statistic if you think about it. 

An analogous, emerging statistic is the number of people who primarily access the Internet on their mobile phones. This morning the Pew Internet Project published survey data that show 17% of all mobile phone owners use their phones as their primary Internet access device. However, if the population is narrowed to all mobile phone owners who access the mobile Internet (55% of mobile phone owners according to Pew) the "primarily mobile" percentage jumps to 31%.

In other words, according to Pew, "31% of these current cell internet users say that they mostly go online using their cell phone, and not using some other device such as a desktop or laptop computer." Even more striking, 45% of 18-29 year olds who access the Internet on their phones are in this "primarily mobile" category.

We found previously (n=1,504) that 17.6% of Internet users went online primarily via a non-PC device (smartphone/tablet). Regardless, these numbers will will only grow larger over time.