Tuesday, December 1, 2015

How Mobile is Disrupting Multiple Markets

Posted on December 1, 2015 - As the mobile device revolution of the past decade continues, the amount of time people spend on PC's and laptops continues to drop in favor of mobile devices. Since the introduction of the first iPhone in 2007, and as the capability of mobile devices has evolved, people are performing more daily tasks on their smartphones. Starting with entertainment including music, movies and games, to connectivity such as email and social networking, and even productivity such as document creation and editing, traditional voice calls are now a minor part of what a smartphone is used for.

This trend has been observed for a number of years and continues to escalate, and has resulted in companies by prioritizing their offerings on mobile at the expense of PC's. While this has been true for smartphones, it appears that tablet computers have yet to find their niche, as sales continue to be flat in recent years. However, companies continue to experiment with variations on tablet computers to try to find a sweet spot with a combination of features and price that will put a fire under sales. For example, Apple recently introduced the iPad Pro, adding new features such as a stylus and larger nearly 13" screen. Google also recently introduced the Pixel C, with an innovative keyboard experience. Of course, Microsoft's Surface line of tablets has been on the market for a few years, but adoption is still been lagging.

Nonetheless, there is no doubt that mobile devices, or at least smartphones, have completely disrupted the traditional PC and laptop market, and will continue to do so for the foreseeable future. It is not that PC's will be completely replaced. They will continue to have their place in the market. However, growth will be flat or declining as people prefer to spend their money on new and replacement mobile devices.

This has opened up a great opportunity for another disruption in the market, specifically the internet service provider (ISP) market. Traditionally, internet access has been available through telephone and/or cable companies. However, as we spend more and more of our time on mobile devices, and especially because they are with us wherever we go, the trend will be for more internet consumption on mobile devices. Also, as 4G and LTE coverage continues to expand, and with 5G eventually coming into service, download speeds on mobile data plans are becoming very competitive with what you typically get from your traditional ISP. Therefore, consumers will likely shift much of their usage to their mobile data plan. Traditional ISPs will have to adjust their pricing to be competitive, or risk losing business.

Incidentally, as internet speeds continue to increase enabling us to consume more and more content online, the traditional TV market is being disrupted by streaming video services such as Netflix and Hulu. That topic warrants its own discussion in another post. 

One competitor worth mentioning is Google Fiber. It currently offers speeds of 1 Gbps and no bandwidth cap, making it a very competitive option worth keeping an eye on. However, at some point, a saturation point in terms of download speeds will be reached. After all, we can only consume so much data. Most consumers would probably be very satisfied with a download speed of 50 Mbps, and are unlikely to pay much more for faster service. The competition will likely turn to the issue of bandwidth caps, for both traditional ISPs and mobile operators. Those companies that are able to provide unlimited, uncapped service will likely find significant consumer demand, as many consumers would enjoy the peace of mind of having a flat monthly fee, without having to worry about how much data they have consumed each month.

One last market to mention in this context is the software market. On mobile platforms, software tends to be monetized with advertising and with in-app purchases, rather than an up-front fee as was the case with PC software. For example, mobile games are either free or cost a few dollars, where as an average PC game typically costs $50-$60. Mobile devices come pre-installed with an operating system, whereas with PCs, Microsoft was able to sell its OS for hundreds of dollars for many years. This approach is untenable in mobile, especially since there is fierce competition between iOS and Android, with Microsoft attempting to find a foothold as well. So in the software industry, the traditional business models are being disrupted. Rather than selling software as a product, the trend is to sell software as a service with a monthly subscription fee, or to monetize through advertising, app stores and selling content such as music or movies.

What are your thoughts on markets that the mobile industry is disrupting? Please share your thoughts and ideas through the comments below.

photo credit: iPad Air 2 via photopin (license)

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