mobile world congress - the value of emerging markets in the mobile ecosystem

www.inmobi.com

THOUGHTSERIES

LEADERSHIP

MOBILE WORLD CONGRESS

THE VALUE OF EMERGING MARKETSIN THE MOBILE ECOSYSTEM

14 - 17 FEB, 2011

© 2011 InMobi. The Value Of Emerging Markets In The Mobile Ecosystem Page 1 www.inmobi.com

13 February, 2011

As 2010 came to a close, it was clear that the debate over if “this will be the year of mobile advertising” ended with it. Good riddance! Mobile advertising is clearly here to stay and it’s absolutely huge. Ad spending figures aside, consumers have announced their intentions by flocking to mobile, and advertisers have no choice but to follow.

While the journalists and bloggers busily draft lists and make predictions, at InMobi, we decided to take a slightly different approach. Rather than simply add to the noise, we took a step back and asked ourselves “what will define the next phase of mobile advertising?”

We chose to develop a series of whitepapers and offer in depth analysis, for a select number of topics. For the series we discuss three concepts that we think will define the next phase of mobile advertising. We invited partners in the industry to collaborate with us, and invite you to join the conversation on twitter@inmobi or on our blog at www.inmobi.com/inmobiblog.

James LambertiVP, Global Marketing and ResearchInMobi

THOUGHT LEADERSHIP SERIES:DEFINING THE NEXT PHASE OF MOBILE ADVERTISING

InMobi is the world’s largest independent mobile advertising network. With offices on four continents we provide advertisers, publishers and developers with a uniquely global solution for advertising. Our network is growing fast and we now deliver the unprecedented ability to reach 194 Million consumers, in over 115 countries, through more than U.S. $31.5 Billion mobile ad impressions monthly. We recently were selected as a 2010 AlwaysOn Global 250 Company to Watch in Silicon Valley.

InMobi is venture-backed with marquee investors including: Kleiner, Perkins, Caufield & Byers and Sherpalo Ventures. The company has offices in London, San Francisco, Bangalore, Tokyo, and Singapore.

ABOUT INMOBI

INMOBI MOBILE WORLD CONGRESS

THE VALUE OFEMERGING MARKETS IN THE MOBILE ECOSYSTEM

© 2011 InMobi. The Value Of Emerging Markets In The Mobile Ecosystem Page 1 www.inmobi.com

13 February, 2011

As 2010 came to a close, it was clear that the debate over if “this will be the year of mobile advertising” ended with it. Good riddance! Mobile advertising is clearly here to stay and it’s absolutely huge. Ad spending figures aside, consumers have announced their intentions by flocking to mobile, and advertisers have no choice but to follow.

While the journalists and bloggers busily draft lists and make predictions, at InMobi, we decided to take a slightly different approach. Rather than simply add to the noise, we took a step back and asked ourselves “what will define the next phase of mobile advertising?”

We chose to develop a series of whitepapers and offer in depth analysis, for a select number of topics. For the series we discuss three concepts that we think will define the next phase of mobile advertising. We invited partners in the industry to collaborate with us, and invite you to join the conversation on twitter@inmobi or on our blog at www.inmobi.com/inmobiblog.

James LambertiVP, Global Marketing and ResearchInMobi

THOUGHT LEADERSHIP SERIES:DEFINING THE NEXT PHASE OF MOBILE ADVERTISING

InMobi is the world’s largest independent mobile advertising network. With offices on four continents we provide advertisers, publishers and developers with a uniquely global solution for advertising. Our network is growing fast and we now deliver the unprecedented ability to reach 194 Million consumers, in over 115 countries, through more than U.S. $31.5 Billion mobile ad impressions monthly. We recently were selected as a 2010 AlwaysOn Global 250 Company to Watch in Silicon Valley.

InMobi is venture-backed with marquee investors including: Kleiner, Perkins, Caufield & Byers and Sherpalo Ventures. The company has offices in London, San Francisco, Bangalore, Tokyo, and Singapore.

ABOUT INMOBI



© 2011 InMobi. The Value Of Emerging Markets In The Mobile Ecosystem www.inmobi.com

THE VALUE OF EMERGING MARKETS IN GLOBALEmerging markets continue to garner much media attention. But is it all just hype? The industry is still questioning whether emerging markets are really valuable. The common misperception in the developed world is that the U.S., UK, France, Germany, Japan, Australia, and Singapore, still represent the vast majority of revenues in the mobile ecosystem. Most people in developed markets find emerging markets interesting and exotic, but don’t believe they are actually very valuable.

In order to help establish the real value of emerging markets InMobi has used the latest market data from Informa Telecoms & Media. We combined their research on Mobile Data Services Revenues & Growth with our InMobi Network Data report, to form a more complete picture of the emerging mobile ecosystem. Together our research demonstrates that emerging markets are not just hype. Globalization is in fact real, and emerging markets are positioned to become the most important mobile media markets in the world.

Informa Telecoms & Media estimates that the global mobile data services market , including mobile advertising, was worth U.S. $224 billion in 2010. Over the next four years the market will increase to U.S. $340 billion in 2014.

With limited growth prospects in developed countries, the emerging markets represent high growth areas and are becoming a key focus for the mobile industry including: mobile operators, handset manufacturers, infrastructure vendors, as well as the data services platform, advertising and technology vendors. It’s our belief that these emerging markets will soon eclipse the developer world and represent the vast majority of the global mobile ecosystem. Why? Because mobile adoption in the developed world is happening at blistering pace and the sheer scale of these markets will soon dwarf that of developed markets.

Informa Telecoms & Media defines mobile data services, also referred to as value-added services, as all mobile services except voice calls. Mobile messaging, including P2P SMS, is also considered to be a mobile data service.

Page 2

(US$ bil.) 2008 2009 2010 2011 2012 2013 2014 CAGR (%)

DATA SERVICES ARE PROJECTED TO GROW OVER 14% ANNUALLY THROUGH 2014. GLOBAL MOBILE DATA SERVICES REVENUES, 2008 - 2014

Source: Informa Telecoms & Media

Global Total 175.2 200.8 224.1 248.0 276.8 307.0 240.8 14.2%

160

140

120

100

80

60

40

20

02008 2009 2010 2011 2012 2013 2014

Asia Pacific

FIGURE 1. MOBILE DATA SERVICES REVENUES BY REGION, 2008-2014

North America

Western Europe

Eastern Europe

Latin American

Mob

ile D

ata

Serv

ices

Rev

enue

s (U

S$ b

il.)

Middle East

Africa

1

1




FIFTEEN EMERGING MARKETS HAVE SIGNIFICANT SCALE IN MOBILEToday fifteen emerging markets account for more mobile subscriptions than the rest of the world combined and this trend will continue over the next five years. These markets are China, India, Indonesia, South Africa, Nigeria, Egypt, Turkey, Israel, Saudi Arabia, Brazil, Mexico, Argentina, Russia, Poland and Ukraine. Due to the sheer volume of mobile subscriptions in these markets, and continuing mobile penetration, they offer substantial investment opportunities for the telecom and advertising industries.

Market data from Informa Telecoms & Media indicates that these 15 emerging markets generated around 30% of mobile data services revenues in 2010, globally. With the revenue contribution expected to continue increasing over the next four years. In 2014, these 15 markets are expected to account for close to 36% of the global mobile data services revenues.

The key driver of mobile data services growth in emerging markets is the increasing availability of low-cost feature-rich mobile phones. Mobile Internet and multimedia-capable handsets are now available for under U.S. $50 in most emerging markets. When we combine low fixed-Internet penetration with availability of these low-cost Internet-capable devices, strong adoption and increased usage of mobile data services, the logical outcome fuels the underlying growth that is projected in these developing economies.

FIGURE 2. MOBILE SUBSCRIPTIONS IN THE 15 GROWTH MARKETS ALREADY REPRESENT MORE USERS THAN THE REST OF THE WORLD.

Note: Figures refer to year-end estimates Source: Informa Telecoms & Media

Page 3

2008 2009 2010 2011 2012 2013 2014

3,500

3,000

2,500

2,000

1,500

Subs

crip

tions

(m

il.)

Mobile Subscriptions Growth, 2008-2014

15 Growth Markets Rest of World

1,000

500

0




FIFTEEN EMERGING MARKETS HAVE SIGNIFICANT SCALE IN MOBILEToday fifteen emerging markets account for more mobile subscriptions than the rest of the world combined and this trend will continue over the next five years. These markets are China, India, Indonesia, South Africa, Nigeria, Egypt, Turkey, Israel, Saudi Arabia, Brazil, Mexico, Argentina, Russia, Poland and Ukraine. Due to the sheer volume of mobile subscriptions in these markets, and continuing mobile penetration, they offer substantial investment opportunities for the telecom and advertising industries.

Market data from Informa Telecoms & Media indicates that these 15 emerging markets generated around 30% of mobile data services revenues in 2010, globally. With the revenue contribution expected to continue increasing over the next four years. In 2014, these 15 markets are expected to account for close to 36% of the global mobile data services revenues.

The key driver of mobile data services growth in emerging markets is the increasing availability of low-cost feature-rich mobile phones. Mobile Internet and multimedia-capable handsets are now available for under U.S. $50 in most emerging markets. When we combine low fixed-Internet penetration with availability of these low-cost Internet-capable devices, strong adoption and increased usage of mobile data services, the logical outcome fuels the underlying growth that is projected in these developing economies.

FIGURE 2. MOBILE SUBSCRIPTIONS IN THE 15 GROWTH MARKETS ALREADY REPRESENT MORE USERS THAN THE REST OF THE WORLD.

Note: Figures refer to year-end estimates Source: Informa Telecoms & Media

Page 3

2008 2009 2010 2011 2012 2013 2014

3,500

3,000

2,500

2,000

1,500

Subs

crip

tions

(m

il.)

Mobile Subscriptions Growth, 2008-2014

15 Growth Markets Rest of World

1,000

500

0




THE RAPID GROWTH OF MOBILE DATA SERVICE USAGE IN EMERGING MARKETSSMS has historically been the preferred service for deploying mobile data services in emerging markets, but this will change in the coming years and is particularly true given the increasing availability of 3G services in developing markets. For example, India has recently launched 3G and continues to rollout the technology across multiple carriers in the region. InMobi network data trended over the past x months clearly shows the impact on mobile advertising of 3G competition in the 2nd largest consumer market in the world. Similar trends are occurring in the other emerging markets as well.

China and India had nearly 334 million mobile Internet users by the end of 2010, Informa believes that this number will grow to around 730 million mobile Internet users by 2014. This shows the huge potential for mobile Internet advertising growth in the Asia Pacific developing region.

What does this mean for Mobile Advertising? Informa Telecoms & Media believes that the total global mobile advertising market was worth U.S. $3.5 billion in 2010. Over the next five years, the market is expected to grow significantly and generate revenues of over U.S. $24 billion in 2015. In 2015, the largest share (around 31%) of mobile advertising revenues is expected to come from the Asia Pacific developing region, driven by strong growth in China and India.

These projections are further supported with InMobi’s network data. In January 2011, InMobi received 31.6 billion ad requests, up from 6.8 billion a year prior, growing 4.5 times over in 12 months. This growth is among both smartphones and advanced phones, with smartphones increasing at a faster rate. Smartphones now represent 36% of global ad requests, up from 13% a year ago.

FIGURE 3. EMERGING MARKETS REVENUE GROWTH WILL OUTPACE THE REST OF THE WORLD

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Mobile Data Revenues, 2008-2014

15 Emerging Market

46

2008

50

100

150

200

250

US$

Bill

ions

2009 2010 2011 2012 2013 2014

129

57

144

67

158

77

172

89

188

104

203

122

219

Rest of World



Source: Informa Telecoms & Media


When analyzing ad requests by region, emerging markets command a significant share of this ecosystem. Fifteen emerging countries represent 48% of all global impressions and continue to grow.

FIGURE 4. SMARTPHONES CONTINUE TO PENETRATE THE MARKET GLOBALLY AND GAIN SHARE.IN JANUARY 2011, SMARTPHONES REPRESENT 36% OF GLOBAL MOBILE AD IMPRESSIONS.

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Jan ʻ10.0 B

10.0 B

15.0 B

20.0 B

25.0 B

30.0 B

35.0 B Global InMobi Smartphone Impressions Growth

Source: InMobi Network Data, January 2010 – January 2011

5.0 B

Apr ʻ10 Jul ʻ10 Oct ʻ10 Jan ʻ11

FIGURE 5. THE 15 EMERGING MARKETS ALREADY REPRESENT NEARLY HALF OF THE INMOBI NETWORK.

InMobi Network Share of Impressions - January 2011

Emerging Markets 48%Rest of World 52%



Source: InMobi Network Data, January 2011


When analyzing ad requests by region, emerging markets command a significant share of this ecosystem. Fifteen emerging countries represent 48% of all global impressions and continue to grow.

FIGURE 4. SMARTPHONES CONTINUE TO PENETRATE THE MARKET GLOBALLY AND GAIN SHARE.IN JANUARY 2011, SMARTPHONES REPRESENT 36% OF GLOBAL MOBILE AD IMPRESSIONS.

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Jan ʻ10.0 B

10.0 B

15.0 B

20.0 B

25.0 B

30.0 B

35.0 B Global InMobi Smartphone Impressions Growth

Source: InMobi Network Data, January 2010 – January 2011

5.0 B

Apr ʻ10 Jul ʻ10 Oct ʻ10 Jan ʻ11

FIGURE 5. THE 15 EMERGING MARKETS ALREADY REPRESENT NEARLY HALF OF THE INMOBI NETWORK.

InMobi Network Share of Impressions - January 2011

Emerging Markets 48%Rest of World 52%




© 2011 InMobi. The Value Of Emerging Markets In The Mobile Ecosystem www.inmobi.comPage 6

Much of this growth in mobile advertising comes from emerging markets including India and Indonesia. In these emerging markets, identifying and sourcing compelling content from publishers for mobile Internet display advertising and making sure that the ads are relevant to a large audience despite the diverse cultural differences is a big challenge. Another issue is to ensure the delivery of the ads on a large number of different devices, including legacy devices, feature phones, basic handsets and smartphones. Informa Telecoms & Media believes that mobile will become an integral part of the advertising mix of more and more brands in the emerging markets over the next five years. Due to the high level of interactivity possible on mobile phones, brands will increasingly depend on mobile advertising to boost customer retention and loyalty, and also to drive sales for their business.

A Lack of Channels Options in Emerging Markets Will Make Mobile a Primary One for AdvertisersAnother key factor that will influence the value of mobile advertising in developing markets relative to the established economies is more subtle and amount to the classic business paradigm of the innovator’s dilemma. In developed markets, there are several established media channels with nearly 100% consumer penetration and long entrenched businesses built around these channels. These include TV, Print, Radio, Fixed Internet, and even Outdoor. With the onset of mobile, despite its incredibly appealing media dimensions, major agencies and advertisers will be slow to move given the wealth of other options in media. Said another way, there is no forcing function for rapid change. The exact opposite is true in developing markets. Not only are there fewer channels overall, but those that exist have less penetration in comparison to developed markets. In developing markets, mobile already offers better reach than existing media and the pace of adoption along with composition of spend will be much higher in these regions as a result.

MOBILE ADVERTISING MONETIZATION BY REGION

Monetization of impressions in these emerging markets is a key factor to total ad revenues generated. It is apparent from the InMobi network data that the inventory exists and consumer demand will increase, but how does monetization in these emerging markets compare to developed mobile markets? The answer is not what many industry veterans would guess. When analysing eCPMs across regions, InMobi data shows that Western European countries lead monetization, followed by Africa, North America and Middle East.

FIGURE 6. ECPMS BY REGION, DO NOT VARY BY ORDERS OF MAGNITUDE. THE DELTA IS NOT NEARLY AS GREAT AS MANY EXPERTS BELIEVE.

50 100 150 200 250

239

152

120

102MIddle East

Latin America

Eastern Europe

Asia Pacific69

50

44

MOBILE eCPM INDEX BY REGION

North America

Africa

W. Europe





Looking at the data, we see that eCPMs range from Latin America on the low-end to Western Europe on the high-end, where monetization in Western Europe is 5 times greater than Latin America. This contradicts common perceptions in the industry, likely based on fixed PC web monetization, that Western Europe and US monetization is 10 times higher than any developed markets. Over time, as advertisers perceived value of mobile advertising increases, eCPMs in emerging markets will continue to grow and close the gap with Western Europe and North America.

CONCLUSIONThe sheer size and scale of emerging markets mobile user base combined with, the rapid growth of data services and the lack of alternatives to for advertising channels all will create significant monetization opportunities in emerging markets. These markets currently defined as “emerging” will soon constitute the majority of mobile advertising revenues and redefinition of the term “emerging markets” will be in order.

Informa plc is the leading international provider of specialist information and services for the academic and scientific, professional and commercial business communities. Informa has over 150 offices in more than 34 countries and employs 9,250 staff around the world.

Informa is the largest publicly-owned organiser of conferences and courses in the world with an output of over 10,000 events annually. Informa publishes over 2,500 subscription-based information services including academic journals, real-time news and structured databases of commercial intelligence. Informa's book business has more than 40,000 academic and business titles in print.

Informa's products are founded on high value content in a wide variety of subject areas. These range from the arts and humanities through social sciences to physical science and technology; from the professional domains of finance and the law through to commercial fields such as telecommunications, maritime trade, energy, commodities, and agriculture. Informa Telecoms & Media delivers strategic insight founded on global market data and primary research. We work in partnership with our clients, informing their decision-making with practical services supported by analysts.

www.informatm.comTwitter: @informatm

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