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WORKING DRAFT Last Modified 8/6/2010 2:10:55 PM India Standard Time Printed 07/22/2010 9:01:08 AM India Standard Time

Asias Digital LivesNal Gollagunta Mithun Sundar Vikram Vaidyanathan

Practice Olympics 2010 IN#3

Document type Date

CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited

7TRACKER

Already ~500 million online digital consumers across India and China, but Unit of measure potential exists due to low penetration even largerChinaU.S.

Title 384 Unit of measure228

29

233

18

74

26

Working Draft - Last Modified 8/6/2010 2:10:55 PM

73Japan India Germany U.K. France76 60

96 81 54 47

7

17++

76

2

66

26

Already the Top 3-4 markets in terms of access Yet, significant room to grow further given low penetrations

Printed 07/22/2010 9:01:08 AM

76

22 20

33

69

27

Korea Australia

77

60

43 37

80

17 29

20

1 Footnote CNNIC, 2009, for overall China population >=6 2 Based on strategy analytics, but including CNNIC China user numbers SOURCE: Source 2009, Strategy Analytics (2008); World development Indicators (World bank) CNNIC

McKinsey & Company

| 2

0TRACKER

Historically, primary consumption has centered around first gen. services Unit ofapplications supplemented by offline acquisition and measureDigital Clock (Mobile)Mobile Actual usage Minutes/week 299.0 36.3 40.2 42.7 43.4 33.7 26.7 74.3 33.4 33.7 50.6 132.0 494.0 Penetration Percent 94 13 17 16 17 15 5 46 50 25 32 63 4.6 6.6 6.3 7.3 4.9 1.3 35.9 17.6 9.1 17.4 85.9 Average usage Minutes/week 297.4Working Draft - Last Modified 8/6/2010 2:10:55 PM

Title Unit of measure1st gen. Talking Instant messaging/webchat Online DC&S 2nd gen. Browsing websites Social networking Reading/writing e-mail Streaming/watching online videos 3rd gen. 2nd gen. Offline DC&S Doing online mobile transactions Listening to downloaded music Taking photos/videos Watching offline videos Playing video games Radio/FM on mobile phone Total time spent on mobile1 Footnote SOURCE: Source Digital Consumer Research (N=5006,1028) McKinsey

Printed 07/22/2010 9:01:08 AM

McKinsey & Company

| 3

42 TRACKER

Barriers to adoption are slowly being addresses and uptake for 2nd generation Unit of measure content set to rise dramaticallyPercent of internet users

India China

Title Unit 76 measure of52X0.85 X0.74 Accesbs: Have internet enabled phone & aware

64 52 31X0.81 X0.74 Trial: Infrequent +frequent users X0.80 X0.85 23 Continuous usage: Frequent usersWorking Draft - Last Modified 8/6/2010 2:10:55 PM

1

Interest: Have tried/likely to try

Not enough handsets

Too expensive / Bad experience

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Falling handset prices Already street price of a touch screen phone reduced by 70% to Rs. 5500 in 2 years 170m mobile subscribers able to buy a 3G enabled touch-screen based phone

Transparent & affordable pricing Competitive landscape (3 different operators in each circle,Reliance broadband) likely to force prices down similar to voice Sachet pricing already a phenomenon in the market

1 Footnote SOURCE: Source Digital Consumer Research (N=5006,1028) McKinsey

Quality internet access Advent of BWA and 3G-based data services expect to resolve last-mile issues | 4

McKinsey & Company

TRACKER

With steep decline in hand-set prices ~170m+ subscribers can afford 3G Unit of measure enabled handsetsINDIA EXAMPLEAs the cost of the full-feature touch-screen 3G phone has plummeted

Title Unit of measure

the potential addressable market among the digital consumers has exploded

Street price of a touch-screen 3G phone INR

Expected purchase price of next hand-set % of consumers likely to buy

Non-usersWorking Draft - Last Modified 8/6/2010 2:10:55 PM

Users

20,000 15,000 10,000 5,000H208

19,50013,000

70 60 50 40 8,000 30 5,499 2 2016500 10 5 12

37

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1612500 9500

246500

H109

H209

H110

0

0Already, 170m mobile subscribers are able to buy a 3G enabled touch-screen based phone

Street price of a touch-screen 3G phone INR

1 Footnote SOURCE: Source Interviews; team analysis McKinsey & Company

| 5

9

TRACKER

Similarly, transparent pricing proving to be a big market disruptionAircel measure Unit of Pocket Internet Case exampleAircel launched its Pocket Internet cards in June 2009 Product Details Impact on the mobile internet browsingAdMob Impression requests Millions Airtel Aircel

Title unlimited Introduced internet browsing pocket Unit of measure

internet cards in two variations Rs 14: 3 days Rs 98: 30 days Pay per use services : Wallpaper, Ringtones, MP3 tones, True tones, Videos, Themes and Mobile games downloads

300 250 200 150 100Apr09 50 Jun09 Aug 09 Oct09 Launch of promotion

Working Draft - Last Modified 8/6/2010 2:10:55 PM

Rationale

Differentiate from the competition through innovative pricing unlimited browsing without a monthly commitment Target the Indian youth segment which forms 80% of mobile internet users

Dec09

Printed 07/22/2010 9:01:08 AM

Related Products

Aircel later on launched INQ Mobile device promoting mobile browsing with strong focus on social networking

The mobile web traffic from 0 India on AdMob's platform stood at 1.2 billion in Mar10 growing ~100% yoy..with Aircel subscribers contributing the most, mainly owing to the launch of unlimited data plans Soon after Aircel introduced pocket Internet card in May 2009, Google saw a 50X increase in Internet usage on Google Mobile by Aircel customers McKinsey & Company

1 Footnote SOURCE: Source website; Press Company

| 66

e

TRACKER

Early indications that such an evolution to 2nd generation services already Unit of measure India, but with little pro-active shaping by the players underway inOpera mini - Top 10 sites in India # of unique users Title 1 2 . .

Unit of measureWorking Draft - Last Modified 8/6/2010 2:10:55 PM Printed 07/22/2010 9:01:08 AM

. 9 1 10 Jan09 Jun09 Dec09 Jun10

1 Footnote SOURCE: Source website; Press Company McKinsey & Company

| 77

%TRACKER

As infrastructure barriers are further addressed, we expect the Unit of measure market to evolve further to Generation 3 content/servicesEstimated revenue potential Title USD Billion Unit of measure100% = Music/Audio Video/TV Gaming Infotainment (including SN) 1 3% 5.7 8% M-commerce Education HealthcareFinancial

MOBILE MEDIA MARKET

Gen 3 (utility / services)

Gen 2 (higher end experience) Gen 1 (basic entertainment)Working Draft - Last Modified 8/6/2010 2:10:55 PM

12% 8% 8% 20%

10% 7% 7% 12%

servicesAdvertising

Printed 07/22/2010 9:01:08 AM

11%Ringtones /

CRBT / Graphics

8% 7% 50%2010 2015 (estimate)

10% 19%McKinsey & Company

1 Footnote SOURCE: Source Team analysis; Press search

| 8

TRACKER

Specifically, we believe there will be a significant appetite for third gen. Unit of measure services which address fundamental latent needs in the marketNeed for remittance options for of measureVery low banking penetration Unit the unbanked in Tier-3/4 and rural High unbanked/undocumented population High transaction cost for traditional remittances

Title

Key drivers

Potential third gen. offeringA

Picture

Domestic m-remittance platform

Working Draft - Last Modified 8/6/2010 2:10:55 PM

high-quality supplementary educational channels in Tier-2/3

Little choice/supply of quality instructors outside the Metros High appetite for prep/coaching classes for entrance exams Highly fragmented demand base across XXX towns for a franchise model

B

Picture

Tech. enabled e-education platform

Printed 07/22/2010 9:01:08 AM

channels for localized and affordable advertising for SMEs

High costs for traditional advertisement (overkill for local advertisers)

C

Picture

Mobile-based local advertisement

1 Footnote SOURCE: Source McKinsey & Company

| 9

%

TRACKER

But with this evolution, existing value-chains will be completely Unit of measure reshaped which has serious implications for incumbentsTitle Unit of measureSeveral drivers which are changing the music consumption patterns

MUSIC INDUSTRY EXAMPLE

which is fundamentally shifting the value across the value from the content owners to the operators and aggregators

Music industry revenues, India $millions +30% p.a. 610 Mobile Physical Value ChainContent publishers1

1,125

Working Draft - Last Modified 8/6/2010 2:10:55 PM

Increased digitization of content Close to 50% of unconnected digital consumers have listened to MP3 either on their PC or mobile phones Increased mobile phone penetration More than 50% of urban population listen to FM radio on a regular basis

396 228 2006 168 35% 12% 40%

1,000

+64%

450 125 07 26% 15% 52% -9%

160

2010 17% 18% 62%

H