Kapitel 05 / GLOBALIZATION & LOKALE MÄRKTE

MOBILE

OR DIE:

The singularity

of mobile ages

Of the 7.4 billion people on this Earth, 40%, or three billion, use the internet, and two billion own smartphones. It is estimated that more than half of the world’s population will be using a smartphone by 2018.

The internet and smartphone era has revolutionised our lives and is spinning the worldeven faster on its axis. But are smart- phones mere technology? Accelerated by mobile, what has hap- pened to us and what does the future hold?

In Goethe’s Faust, Mephistopheles says that “the substance of a man is trapped by the net of time and space”. In 2007, Steve Jobs introduced us to the very first concept of the smartphone, with which he brought us the ubiquitous and God-like iPhone, like Prometheus who stole fire from Mount Olympus, triggering massive change.


ILLUSTRATION // MARIO WAGNER

AUTHOR // JULIE KANG, GENERAL MANAGER, SERVICEPLAN KOREA

Now people are going beyond the limits of time and space with their smartphones, communicating, working and living freely at all ends of the globe. In an era in which we own networks via the cloud, there is a reorganisation of humane communications, behaviours, ruling structures and the influence on political deci- sion-making. It is not exaggerating to say that the life of hu- mankind has evolved from Homo sapiens to Homo smarticus as a result of smartphone technology, changing how we communicate, build relationships, think, express, buy and act.

The emergence of the smartphone was not merely the advent of a new device or technology, but the manifestation of a new paradigm and lifestyle for humans. And as the way we use smart- phones changes, so does our lifestyle.


Mobile first: Korea now

In 2016, Korea seemed happily occupied with the latest technologies. We had a very interesting spring witnessing the Go matches between Google’s artificial intelligence Alpha Go and Go grandmaster Lee Sedol. Google co-founder Sergey Brin and Stanford Presi- dent John Hennessy, a leading figure in artificial intelligence and machine learning in the 21st century’s Silicon Valley, also visited Korea, catapulting the city of Seoul into the glob- al spotlight.

Korea boasts the highest smartphone penetration rate, and Koreans benefit from light-speed internet access underpinned by the nation’s world-class broadband penetra- tion. In fact, accustomed with and spoiled by these ‘super-speed’ LTE connections, Kore- ans would never realise that they have the best ICT environment unless they go abroad.

In early June I travelled to Austria and Germany to attend the Serviceplan Group’s KIKK-OFF event and I experienced at first-hand the significant difference between LTE and 3G. This is when I became aware of the power of Korean broadband for the first time. Above all, it was the relatively big gaps in the connection speed that drove me crazy. Wi-Fi access at the hotel I stayed in was impossibly slow. And they even charged me five euros a day for it! It’s difficult to imagine anyone ever charging you to use Wi-Fi in Korea.

This July, Ericsson and Korea’s number one telecom company SK Telecom signed an MOU to collaborate for 5G test networking building that is 200 to 300 times faster than LTE. 5G is predicted to become popular in five or six years. Indeed, Korea Telecom is advertising that they will operate 5G re- lays during the 2018 Pyeongchang Winter Olympic Games. Even for Koreans, it is becoming hard to catch up with the acceleration of speed and the de- velopment of infrastructures.

I would now like to mention three key points for us all to consider regarding Korea’s mobile de- velopment:

First of all, mobile is about changes in lifestyle. The introduction of mobile environments has a di- rect influence on the way we live and our behaviour. Mobile service is becoming the foundation of these changes, which are accelerating from day to day. Just look at how people use their smartphones. Pre- viously people used to spend 90% of their time spent on smartphones for calls, but now 80% of the time is spent on data communications.

KOREA'S SMARTPHONE OWNERSHIP +90%

From 3G to LTE: A transition from download-based to streaming-based video watching

Currently there are over 19 million mobile data service subscribers in Korea. Many of them spend more than 50,000 KRW just on data services. In the era of 3G, transmis- sion speed for texts, sounds, images and movies and the accompanying charges for heavy data usage were obstacles to boosting data consumption. But with LTE, faster transmis- sion allows people to watch videos via streaming. And they will never break up or discon- nect. It has already become a typical scene in subway trains in Korea: everyone with bowed heads, headphones on, watching videos, streaming entertainment shows or dramas on their journey.

INCREASE IN DATA PLAN SUBSCRIBERS IN KOREA

(WITHIN TOP 3 TELECOM COMPANIES)

The way we watch videos is also gradually changing from real-time to video-on-de- mand (VOD). The old scenario of the whole family sitting on the sofa together, eyes glued to the TV so as not to miss an episode of a TV drama, is a thing of the past. Now we watch what we want anytime, anywhere. Fifteen years ago in Korea, a soap opera was recognised as a national hit when it achieved a 50% viewer rating, but now there’s a big fuss made if it exceeds 20% and then it’s regarded as a mega hit. The Descendants of the Sun, a drama series aired early this year on KBS2 that made Song Joong-ki a superstar and captured the hearts of countless women in China, barely hit the 20% mark.

According to a survey by the KT Economic Research Institute, more than 60% of Koreans under 30 use VOD. While they are the core generation of the VOD transition, there are increasing numbers of VOD viewers who are in their thirties or older.

And this is a global trend too. The 2015 Ericsson TV Media Report revealed that smartphone users who use their smartphones to watch TV or video content have in- creased by 71% in only three years compared to 2012. Also, 42% of the respondents said that accessing content anytime and anywhere was a major priority for them.

SHARE OF TOTAL TV TIME BY AGE GROUP,

MEASURED ON RESPECTIVE DEVICES IN 20 MARKETS

The way we watch videos

is also gradually changing from real-time to video-on-demand (VOD).

VIDEO VIEWING METHOD BY GENERATION

To my greatest surprise, one of the lifestyle changes triggered by the evolution of the mobile-first environment was that the introduction of mobile work environments greatly influences work performance. Can you believe that mobility carried out using mobile tech- nology has a direct influence on business outcomes? According to this study, approximate- ly half (49%) of the respondents found flexible work environments, which allow them to work at their desired time in their desired place, to be a factor that greatly influences their productivity or creativity and has a decisive impact on their loyalty. Employees should be allowed to work whenever and wherever they want, to collaborate using mobile-based digital tools including consumer messaging apps like WhatsApp, and to have access to in- house information via their mobile devices: the study showed that these factors substan- tially influence business outcomes. The results are even more significant as they were based on answers from 1865 workers from various disciplines in nine countries/regions including the US, Europe and Asia.

Of course, in Korea media articles are highlighting that real-time communication ac- celerates decision-making and promotes cooperation, and companies are increasingly em- bracing it. For example, the social commerce company Ticket Monster introduced a group messenger app Jandi, which resulted in an 80% decrease in the number of e-mails and ac- celerated decision-making. News broad-caster JTBC’s News Fact Check team found digi- tal tools useful for eliminating inconveniences in file delivery and exchanging ideas and feedback on equal terms.

According to the market research firm IDC, Korea’s mobile UC&C (Unified Commu- nication and Collaboration) solution market, which covers everything from e-mail, inte- grated messaging and instant messaging to web voice conferencing, enterprise video con- ferencing, team collaboration, and enterprise social networking, will grow on an annual average of 24.5% and generate 107.5 billion KRW by 2019, demonstrating the birth of an emerging market.

FORECAST OF KOREAN MOBILE UC & C MARKET

The second major change is regarding mobile commerce.

Korea is one of the leading countries when it comes to mobile shoppers. British consulting firm WeAreSocial’s January stats put Korea at the top of the global list with 43% of Korean shopping being carried out online. Indeed, Asia seems one step ahead of the US and Europe in terms of mobile commerce: the top 10 in the list included five Asian countries – China, Hong Kong, Malaysia, South Korea and Singapore – followed by the UK (9th) and the US (10th).

E-COMMERCE OF SMARTPHONE ERA

KOREA RANKS NO. 1 FOR MOBILE SHOPPING

The Korean e-commerce market was estimated to be worth approximately six trillion KRW in 2016. Mobile shopping transactions in the first through to the third quarters amounted to approximately 17 trillion KRW, equivalent to a 71% increase compared to the same period in the previous year. Given that the total mobile shopping transactions in 2015 were 24 trillion and 454.5 billion KRW, almost half (46%) of the total online shop- ping transactions have been carried out on mobile devices. It is a remarkable change that mobile shoppers have developed an 18-trillion South KoreanWon (14.5 billion euros) market in the last two years and themobile shopping market relying on smartphones has quadrupled in a couple of years.

The mobile commerce market has been skyrocketing thanks to the aid of mobile pay- ment systems. Financial companies and IT service companies alike have introduced a large number of convenient mobile payment systems, for example Kakao Pay by Kakao Talk, N Pay by portal site Naver, Payco, Mobi Pay by Hana Card and Samsung Card, and T-Money, firmly underpinning the growth of the mobile commerce market. The growth of Korea’s mobile commerce market in the past two years has been led primarily by social commerce companies, with the three major social commerce companies – Coupang, Tick- et Monster and We Make Price – generating more than 70% in revenues from the mobile sector. Open market sites such as G Market, Auction and 11st reached the 40% mark in their mobile transaction ratio and are expected to cross the 50% mark this year. Such transactions made the convenient payment service Smile Pay on Auction and G Market 512% (Auction) and 478% (G Market) year-on-year increases, respectively, as of May 2016.

Home shopping and supermarkets as a traditional offline channel have begun to strengthen their mobile services.And distri-butors are getting involved in a ‘delivery war’ to become the fastest and offer the highest quality. While Coupang attracted an almost two trillion KRW investment and invested it all in its own delivery service ‘Rocket Deliv- ery’, which earned customers credit, Ticket Monster, We Make Price, and Ebay fired back with same-day or next-day delivery. In addition, offline distributors such as Shinsegye and Home Plus launched one-hour delivery services by hiring motorbike riders, allowing cus- tomers to experience new services which allows them to order anytime, anywhere and re- ceive their items in only few hours. Notably, relatively higher-income customers in their forties with strong purchasing power have emerged as a major player in the mobile daily necessity shopping market. Looking into the 2016 1H stats on Super Mart, Ticket Mon- ster’s lowest-price daily necessity shopping channel, customers in their forties and above accounted for more than one third (36%). This marks a clear change in the mobile shop- ping market, which used to be seen as marketplace for single households.

THE NUMBER OF OVER-40S IS OVERTAKING THE NUMBER OF 20S IN TICKET MONSTER’S KOREAN CUSTOMER BASE

In addition, the use of mobile shopping, food delivery, travel booking and other on- demand services is increasing and expanding to various areas. G Market and Auction have experienced 30 to 50% year-on-year increases in their on-demand service revenues. According to Auction and G Market, with the baseline revenue of 100 in May 2015 from food delivery, that is the key mobile-based, on-demand service, Auction’s May 2016 and G Market’s April 2016 revenues marked 337 and 535, respectively. This means that mobile on-demand services have become an integral part of consumers’ daily life, where they can find, buy and pay for what they want on their mobile devices.

By product category, the leading product group in mobile shopping is clothes and fashion-related products. Every year Korean customers spend 4.6 trillion KRW buying clothing on mobile devices. The runner-up is travel and booking services with revenues of 3.9 trillion KRW, followed by living and automotive products (3.3 trillion), food and bev- erages (2.5 trillion) and home appliances, electronics and communication devices (2.2 tril- lion) comprising the top five product categories. According to Statistics Korea, mobile shopping transactions accounted for more than half, 2679.6 billion KRW, of the nation’s online shopping transactions in March 2016, worth five trillion KRW.

Looking at trends in Asia, the world’s biggest e-commerce market China is joining the craze for mobile shopping. The number of Chinese mobile users has already exceeded 620 million. Given that the nation has a total of 690 million online users, this means that mobile has become the core medium for online channels.

Mobile shopping transactions in China last year were estimated to be 684 trillion KRW. WeChat, a messaging app developed by Tencent, allows managers of small and medium-sized enterprises to build virtual stores to directly sell their products, and Aliba- ba’s Taobao introduced barcode-scanning functions to help with sellers’ merchandising. Free of temporal and spatial restrictions, the growth of mobile shopping is likely to fur- ther accelerate in the future. 

  And thirdly, mobile is having a gigantic impact on the advertisement industry. G Mobile advertising has grown 1800 times in the last five years and is expected to occupy half of the online ad market in four years. In 2015, the size of the online advertisement market was three trillion KRW, catching up with 75% of the ATL ad- vertisement market revenue of four trillion. The share of mo-bile ad in online ad spending accounts for approxi- mately 33%, or 980 billion KRW, and this figure is contin- uing to skyrocket. This marks a 1800-fold increase in five years since 2010 when mobile ad stats started counting. The KT Economic Research Institute estimated spending on mobile ads to reach a 52% share by 2019, overtaking PC ads (48%). This means that the online ad market is be- ing reorganised with a focus on mobile.

And this change is a global trend. According to mar- ket re-search firm eMarketer, the share of mobile ads in online ad spending in the US increased from 39% in 2015 to 52% in 2016 and is estimated to reach 70% by 2019. This seems to be attributable to the transition from the mobile-first era, where we prefer mobile devices to other media, to the era of mobile-only, where our daily lives and work solely depend on mobile. Internet access via mobile devices has already exceeded 60% of total internet traffic and 40% of YouTube traffic is via mobile. “Mobile has positioned itself as an important medium in the media market, with many people watching TV shows on their smartphones. Mobile advertisements will be the mainstay of the ad market,” according to an industry source.

The remarkably fast growth of mobile ads poses a huge opportunity for the mobile advertisement market in Korea that has long since been in stagnation. It is significant that Korea’s number one portal site Naver.com generated double the amount of combined rev- enues of the nation’s three terrestrial TV broadcasters in the first half of 2016. Among Naver’s revenues from ads, mobile and PC, ads account for 60% and 40% respectively, implying the company’s streamlined approach to the mobile-first strategy. While so far in Korea game companies have been big players in the mobile advertisement field, with a few mobile first companies such as e-commerce traders and shopping malls actively involved in mobile ads, advertisers in various industries will be increasingly focusing on mobile ads in the future.

So what should we keep in mind regarding mobile advertisements?

In order to ensure compatibility across all screens we need to find the link between consumers and mobile optimisation. We should also pay attention to advertisements en- abled by new mobile-connected communication technologies such as virtual reality (VR). There is an estimate that 90% of content consumed by mobile users will be videos in 2020. Demand for video content and video advertisements will keep increasing in the so- called ‘N-Screen’ era in which we will have multiple displays including IPTV, PC and PAD mobile. Indeed, 74% of mobile traffic in Korea is already video. While YouTube videos ac- count for the majority of video traffic on smartphones, 73.1%, in the past year, Facebook has outsailed YouTube in terms of global video uploads. With the focus of video consump- tion shifting to mobile, the ability and power of content to attract attention is becoming more important than anything else: watching mobile leads to watching in real time, there- by increasing audience ratings.

As a result, we are facing the challenge of how to make mobile-optimised videos. Nike is a prime example. We have witnessed the emergence of a ‘snack culture’, where video advertisements are designed to be appreciated in a short period of time while com- muting and taking a break and in which people enjoy watching entertaining content such as videos, mobile films and online dramas. Accordingly, Nike released eight highly ac- claimed episodes of their short online scripted series entitled MARGOT & LILY as part of their 2016 Nike Woman campaign. They rejected the existing method of delivering short and intuitive messages, instead opting for storytelling as content, but in a way that adapts to the whole culture of people splitting their time into shorter bitesize slots.

More than 90% of Facebook traffic is from mobile calls for ad contents and creatives optimised to mobile feeds. They should have compositions and stories comprehensible to customers and be structured to be watched frequently, even without components and sounds to attract customers’ attention at first glance. Mobile-optimised advertisements feature 7% higher recall rates than TV ads, 68% more users watch for longer than three seconds, 103% more users recall them for longer than five seconds, and 136% for longer than ten seconds, as explained by an ad man at Facebook. Facebook has launched an auto-play video banner ad product, which is expected to improve the attractiveness of ad- vertisements on mobile media, thereby contributing to mobile market growth.

Another point worth mentioning is the fact that mobile can approach the targets of ads and yield instant effects more directly. Mobile adver- tisements are evolving with the combination of contents and technologies, for example native ads that are so seamlessly integrated into social media content that they are hardly perceived as an ad at first glance, and ads that are converged with IoT and location-based services to enable communications with consumers. Recently VR has emerged as a hot topic in the industry, as demonstrated by Mark Zuckerberg’s keynote speech at Facebook’s F8 conference, which high- lighted VR as one of the company’s key business areas in the coming decade. In Korea, there are already many active pilots of 360/VR video con- tent advertisements.

We can no longer conceive of an advertise- ment market without technology and are seeing more and more new communication technolo- gies emerging from the mobile sector. Now mar- keters are no longer asking themselves “Why mobile?” – the future potential of brands is di- rectly determined by mobile’s role as a market- ing tool.

Mobile singularity is already here. It is undeniable that mobile is making huge waves in every aspect of business. In the past, mobile was a subordinated consideration when drawing up marketing strategies, but surveys show that it is now the top priority. Mobile is at the centre of the advertising media ecosystem and this trend does not seem likely to change in the short term.

In his book ‘The Essential Drucker’, social ecologist Peter Drucker said: “…there is a new world. The people born in 1990 cannot even imagine the world in which their grandpar- ents lived and into which their own parents were born. We are currently living through just such a transformation.”

We are indeed undergoing a period of transformation and transition, and the only path to success is to embrace the changes and technology-led innovations. Mobile has become the key foundation of the change leading our life. Some are even predicting that the smart- phones of the future will be used merely as a screen with the emergence of the IoT. App services currently loaded in smartphones will be transferred to things surrounding our life- cycle: most notably represented by the Amazon Dash Button and Google Home. This may well be a mere overture preceding bigger changes such as The Fourth Industrial Revolu- tion. Now we are passing or have already gone past the singularity at which we should start thinking of links beyond mobile.

We can no longer conceive of an adver- tisement market without technology and are seeing more and more new com- munication technolo- gies emerging from the mobile sector.

REFERENCE SOURCES

KISKI STAT / NPR 2015

STATISTICS KOREA (WWW.KOSTAT.GO.KR)

KTOA (WWW.KTOA.OR.KR)

KOREAN TELECOM LAB OF ECONOMY & MANAGEMENT (WWW.DIGIECO.CO.KR)

THE ERICSSON CONSUMERLAB TV & MEDIA REPORT 2015 (HTTPS://WWW.ERICSSON.- COM/RES/DOCS/2015/CONSUMERLAB/ERICSSON-CONSUMERLAB-TV-MEDIA-2015.PDF)

IDC 2015 (WWW.IDCKOREA.COM)

WEARESOCIAL (WEARESOCIAL.COM)

REFERENCE ARTICLES