Internet Eyeballs Shift to Smartphones and 4G

(Apr 6 2011) 4G , Mobile Broadband , Mobile Internet , Smartphones

1. By Tole Hart, Senior Analyst, Yankee Group

   Yankee Group’s consumer survey finds 34 percent of all U.S. mobile phone users own smartphones today. We estimate this base will grow to close to 50 percent of all mobile users by year-end 2011, and to over 70 percent by year-end 2014. Eighty-five percent of those smartphone users already access the mobile Internet. The smartphone has become the de facto source for the Internet—the place to get instant information—away from the home and workplace.

   When we compare the popularity of Web sites on smartphones and PCs, we find:

   • Search sites are the most popular destinations for both smartphone and PC users. More than half of each user group visits search sites regularly.
   • Some sites are more popular on PCs than smartphones. Sites like shopping and Web portals, where the experience is more conducive to a bigger screen, are more popular with PC users than smartphone users.
   • Other sites roughly track PC popularity. The percentage of users who access news and sports sites from PCs is similar to the percentage of smartphone users who access those sites; 31 percent of PC users access sports sites compared with 29 percent of smartphone users.
   • Some sites are more popular on smartphones. Sites that specialize in mobile content—weather, directions, ring tones, games—rank higher with smartphone users than PC users.

   Different Internet usage patterns on smartphones compared with PCs will mean changes in advertising, digital content access, and sales of tangible goods and services. In addition, new or existing competitors will gain a greater foothold in their respective markets if they are able harness the mobile Internet. We see this shift in eyeballs from PCs to smartphones changing the Internet ecosystem by:

   • Making traditional Web portals less valuable. Web portals such as Yahoo!, AOL and MSN rank as the second most popular type of site accessed on PCs, but they tie for fourth on smartphones. Smartphones display rows of widgets users can click on to access specific information like news, sports and weather, enabling users to access personalized content without having to go to a traditional portal. Further, the traditional portal experience doesn’t translate well to smartphones; the highly aggregated content creates a cluttered appearance and poor experience on a small screen.
   • Driving Google to mobile to defend its business model. Search represents the No. 1 point of access on the PC, smartphone and feature phone. Google adopted a strategy to give away its Android smartphone OS because it could not afford to let other manufacturers such as Apple, RIM or Microsoft dictate the placement of its search engine on a mobile phone.
   • Forcing operators to adopt tiered data pricing plans. Streaming video destinations are the tenth most popular PC site category, and they tie for ninth most popular on smartphones, but streaming video on smartphones demands gigabytes of wireless network bandwidth. Increased video traffic on smartphones will require mobile operators to drop unlimited data plans and move to tiered pricing.

   The mobile Internet, powered by 4G, is quickly becoming mainstream. Companies that profited from the PC Internet boom but do not adjust to this new Internet reality will be marginalized and eventually become irrelevant.

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