7 reasons why the mobile internet and mobile 2.0 can survive the credit crunch

So the online market is already getting hit by the recession with display advertising growth stalling big time  and layoffs aplenty amongst the web 2.0 startups.  According to Sequoia's RIP Good Times presentation, "mobile is not immune" but there are very good reasons to think that mobile can still be a growth area over the next two years even as everything else crumbles. 

Other people are already starting to say it too, like Jimmy Wales in the Telegraph the other day,

"While websites may suffer in the looming recession, Mr Wales believes mobile internet will "explode" in the next couple of years" 

So here are my 7 reasons why mobile internet and mobile 2.0 can survive the credit crunch:

1. handsets and networks are still improving 
2. consumer adoption is just moving into the mainstream
3. mobile is starting from a low base not a boom or bubble
4. the recession happened for mobile in 2005/6
5. mobile internet is being driven by hyper-growth markets
6. lots of innovation is still happening in mobile
7. multiple players are driving growth

1. Handsets and networks are still improving

For mobile internet to really take off we need mass market mobile handsets with good processing power and browser software and cheap, high speed mobile data.   These enablers already exist for some people, if you've got hold of an N95 8GB or an iphone with a flat rate data plan for example.  Over the next two years these capabilities are going to become more and more widely available as today's top of the line phones become the standard handsets with cheaper contracts and operators start pushing data bundles to lower spending customers.  In terms of network capabilities, 3.5G HSDPA is going to be more widely rolled out, 3G coverage will be almost ubiquitious and with more phones capable of using wireless LAN we are moving towards the sort of mobile network coverage people were first imagining at the turn of the millenium when the first UMTS network licences were being handed out. 

The main barrier here is probably prepaid/ younger users - we might be five years away from low cost access to mobile data on prepay in the western markets, although South African operators are managing to roll it out for <$0.1 per MB so it is possible. 

All this is largely ahead of us.  Web 2.0 was powered by the spread of broadband and faster, cheaper computers and laptops - the same is going to happen to mobile.

2. Consumer adoption is just moving into the mainstream

If you think about the classic rogers innovation adoption curve all new technologies start with the "innovators" and "early adopters" and then according to Godfrey Moore there is a "chasm" before you get the "early majority" or mass market.

Mobile internet is now moving beyond the early adopters and into the real growth phase.  According to Moore technologies which successfully "cross the chasm" typically do so by finding specific segments in the early majority that might take up the service.  If you think about it things like mobile facebook, myspace, gmail, google maps or mobile instant messaging services are filling this function. 

3. Mobile is starting from a low base not a boom or bubble

Unlike in web 2.0 there has not really been any real boom or bubble in mobile internet over the last three years.  Yes, some mobile startups have raised a lot of funding but nothing like to the level seen in the consumer PC internet space.  A year ago, it seemed that every other person in London was trying to start up an internet site - however mobile has remained an area for the real enthusiasts rather than opportunists.

This means there are still lots of untapped areas in the mobile internet market, rather than the saturation we have seen in web 2.0. 

4. The recession happened for mobile in 2005/6

When the web 2.0 boom was getting underway - mobile was in the doldrums, following the consumer backlash against subscription ringtone scams and the failure of the first generation of mobile media services (games, music, video) to take-off.  The mobile internet market was being held back by operator walled garden portals and ridiculous data charges.  I remember going to Mobile Monday events back then and the atmosphere was pretty awful compared to today. 

The point being - mobile has already been through a shake-out and the growth we are now seeing is a direct result of foundations laid during this time. 

5. Mobile internet is being driven by to hyper-growth markets

Across the world economy, businesses with a position in high growth markets like India seem to be doing better than those confined to the recession-hit US and Europe.  A lot of the new wave of mobile 2.0 startups are getting a lot of traction in exactly these kind of places, e.g. India, South Africa, Indonesia. 

This means that there is still a lot of fast growth for mobile even as the Western Economies contract and mobile services can still benefit from economic growth even if there's a recession in the developed world. 

6. Lots of innovation is still happening in mobile

New browsers like Skyfire or Mozilla mobile, new operating systems like Android, mobile widget platforms, the iphone appstore, touch screen handsets, Symbian 2.0, location based services, MoSoSo, Bluecasting ... there is still loads of innovation happening in mobile and lots of great stuff happening everywhere you look.  Every time you go to a Mobile Monday or other mobile event these days someone has something new and cool to show.  

Just as web 2.0 emerged out of the dot com crash with innovations like tagging, ajax and other new approaches mobile 2.0 can power out of the down turn if it keeps innovating in this way.

7. Multiple players are driving growth

Last but not least, mobile has a lot of different players investing in it.  Firstly, you have the VCs and the startups developing new mobile technologies and applications. Then you have the media companies from TV to Press to Music and Movies all building mobile sites and mobile services.  The major web players like facebook, myspace, twitter and co are also rolling out their own "dot m" sites and looking to mobile to provide them with the next wave of growth.  Finally, there are the brands and advertising agencies all looking to mobile for new ways to reach consumers. 

As a result growth in mobile is being supported by investment and activity from a range of different sources, which should make it much more resilient to any recession which might hit particular sub-sectors harder than others. 

What do you think?

What do you think?  Are there any other reason why mobile can survive the credit crunch or do you reckon mobile is going to be hit just as hard as everything else?  This is my completely unscientific analysis, based on no real data, so feel free to argue back if you don't agree!

Comments

[Dean Bubley]

I think it's going to be pretty patchy over the next few years, to be honest.

While I agree most of your assertions, there are a number of counterpoints:

- slowing handset upgrade cycles, and lower levels of subsidy
- possible "capacity crunch" for mobile broadband on existing 3G networks and delayed capex for upgrades. Less likelihood for operator CFOs to want to bid for spectrum, rush to LTE etc
- slow adoption by mobile operators of real "Telco 2.0" business models - too much emphasis on unwanted end-to-end controlled services like Mobile TV
- Lower consumer spending may impact the "second device" market and hence impact uptake of smartphones, 3G dongles etc
- Patchy adoption of services like Mobile IM, and a risk of cannibalisation of SMS revenues

I think that on balance, mobile will probably survive OK over the next few years. But I wouldn't be over-optimistic, there will be some pain as well.

Dean Bubley

[james (mjelly)]

Hey Dean thx for the comment - you make some good points. I agree mobile will not be completely unaffected by in contrast to other sectors I think prospects look pretty good.

[Salvador]

Hi.
I think there is a cultural phenomenon (in Europe) with mobile internet which is acting as a barrier.
If this cultural phenomenon exists, it will take a longer time of under it.
Regards.

[williams]

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