So far, so good for wireless data in 2004
December 27, 2004
The Yankee Group 2004 Mobile User Survey shows that awareness of wireless data services skyrocketed during the past year
Based on carrier reporting and the results of our 2004 Mobile User Survey, this year has been a good year in wireless data. By the end of the second quarter of 2004, wireless data users totaled almost 47 million (or more than one-quarter of the total wireless subscriber base), up more than 58% from 29 million in mid-2003. Wireless data revenue in the second quarter of 2004 approached $1 billion, up 160% from roughly $367 million for the second quarter of 2003. By year-end 2004, we anticipate almost one-third of wireless users will be using wireless data and annual revenue will top $4 billion.
Wireless data constitutes nearly 4% of total service revenue and is still virtually a rounding error for most carriers. However, carriers such as Sprint are driving substantially more. Trends in consumer awareness levels are even more compelling than the 2004 growth figures. Our 2004 Mobile User Survey showed that awareness levels around wireless data services skyrocketed during the past year, particularly around more mature services (e.g., text messaging and ringtones. Further, when considering the trends in the youth market -- a trailblazing segment in terms of both awareness and use -- the outlook is good.
Trend Impact
Building awareness of wireless data is the first step in driving market adoption. For those consumers who do not use wireless data, the primary obstacle to adoption is the lack of a clear value proposition. Other obstacles to adoption, particularly within younger segments, include pricing and services availability (i.e., handsets, breadth of data services available on some prepaid packages). Despite these hurdles, nearly 75% of all respondents from our 2004 survey indicated that if they had another $5 to $10 of disposable income to spend on wireless data, they would be willing to spend it. The results also show that there is no single killer app in wireless data. If carriers -- in partnership with their vendors and content provider partners -- can focus on improving the user experience, delivering targeted content and apps that appeal to a diverse customer base, and addressing pricing- and availability-related issues for select segments, the near-term prospects look good.
In September, the Yankee Group completed its U.S. wireless consumer applications forecast. By 2008, we expect consumer data ARPU as a contribution of total ARPU will grow more than threefold to 12% and the annual consumer data services market will reach nearly $14 billion. Messaging will decrease as a proportion of the total, with real growth coming from information and entertainment services.
Carrier Recommendations
-- In partnership with their vendor and content provider partners, carriers need to build more value around wireless data. Consistent with past surveys, the biggest obstacle to adoption is the lack of a clear value proposition (58% of non-users say that they don't want wireless data). During the past year, carriers delivered more content and applications. However, they must zero in on the distinct value propositions for different segments and ensure they don't overpromise and underdeliver.
-- For older adults, productivity is most important. E-mail, wireless web/browsing and location-based services, such as people finder, resonate most with this group.
-- For teens, it's about staying connected and communicating with friends and family. Teens are the most active texters (more than half are active users) and expressed a willingness to spend more (with their parents' funding, of course) on messaging (text, mobile IM and pictures).
-- Young adults want a balance of the two, demonstrating strongest interest in personalization/self-expression and communications or staying connected. The applications that resonate most for additional spending are ringtones, text messaging and people finder.
-- Because there is no killer app in wireless data, carriers must ensure they can partner with content providers and vendors to deliver a wide array of applications and content. They should provide content that appeals to different demographic and lifestyle segments, including big brands and niche, localized content.
-- Realign pricing to attract consumers who still feel that wireless data is out of reach. Twenty-three percent of young adults who are not using wireless data indicated it primarily was because the service is too expensive. As the value leader, T-Mobile is well positioned within this segment. Sprint has achieved the leadership position in wireless data ARPU. However, it should consider adding more options (beyond its current one-size-fits-all packaging) to reach more wallet-conscious segments.
-- Prepaid carriers and service providers should bolster their wireless data portfolios. Subsegments of this market, including the youth segment, show a willingness to pay but may be hindered by availability.
-- Carriers should continue to focus on the holistic wireless data experience. Our survey continually shows that wireless data and advanced services do not rank highly when choosing a service provider or when switching service providers. Carriers must break down application silos (browsing, messaging, downloads, etc.) and focus on creating an easy-to-find (discoverability), easy-to-use and integrated experience for the consumer (e.g., handset, usability). If a carrier can do something different and improve the customer experience, wireless data has the potential to become a point of differentiation.
The Yankee Group (http://www.yankeegroup.com)
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