Why Push Smartphones - Because We're in a Recession?
Posted Tue, 9 Jun 2009 20:09:42 EDT by Dan Shey
Smartphone growth has slowed in 2009 from 2008 shipment levels. However based on recent mobile operator smartphone advertisements of buy-one-get-one free and sub $50 pricing you would think that nothing has changed over the last year. The common wisdom for driving a higher penetration of smartphones into the customer base is to increase adoption of mobile internet services – mobile web access, e-mail, location-based services, application downloads, etc. It could also be the case that current operator promotions are for clearing out inventory based on economically-induced lower demand levels. But at this time in history, increasing smartphone penetration could also have a longer tem purpose - to limit revenue loss from a prolonged economic recession. What operators fear from the recession is a readjustment of customer usage and adoption behavior of mobile services. This readjustment will occur if the duration of the recession continues into 2010 marked by continued low GDP growth and elevated unemployment levels. The average purchasing power of the mobile consumer will decrease but more ominously all customers will migrate to a “save” mentality causing them to use less and not even try new mobile services.
This is where smartphones come into play. If customers have a powerful device in their hands such as smartphones, it removes a barrier to adoption and usage which is needed during depressed economic conditions. This benefit plays out in three ways. First is the smartphone will increase the probably of adoption of mobile internet services. These are services that are higher margin and are counteracting the loss in revenues from mobile voice services. The second way is that smartphone customers are simply higher usage customers across all services – which can be a combination of voice, SMS and mobile data services. This characteristic is in part due to the customer type – smartphones tend to be in the hands of mobile business customers. But it is also because smartphones with better screen resolution and input functions are more enjoyable to use which drives up adoption and usage. Finally, when economic conditions improve, operators who have a higher distribution of smartphones within their customer base will be positioned well to increase adoption and usage of all mobile services versus operators with a lower embedded customer base of smartphones.