Of the 7.4 billion people on this Earth, 40%, or three billion,use the internet, and two billion own smartphones. It is estimatedthat more than half of the world’s population will be using asmartphone by 2018.
The internet and smartphone era has revolutionised our livesand 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 ofa man is trapped by the net of time and space”. In 2007, SteveJobs 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, triggeringmassive change.
ILLUSTRATION // MARIO WAGNER
AUTHOR // JULIE KANG, GENERAL MANAGER, SERVICEPLAN KOREA
Now people are going beyond the limits of time and spacewith their smartphones, communicating, working and living freelyat all ends of the globe. In an era in which we own networks viathe 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 aresult of smartphone technology, changing how we communicate,build relationships, think, express, buy and act.
The emergence of the smartphone was not merely the adventof a new device or technology, but the manifestation of a newparadigm 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 veryinteresting spring witnessing the Go matches between Google’s artificial intelligence AlphaGo 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 the21st 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 fromlight-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’sKIKK-OFF event and I experienced at first-hand the significant difference between LTEand 3G. This is when I became aware of the power of Korean broadband for the firsttime. 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 fiveeuros 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 onetelecom company SK Telecom signed an MOU tocollaborate for 5G test networking building that is200 to 300 times faster than LTE. 5G is predicted tobecome popular in five or six years. Indeed, KoreaTelecom is advertising that they will operate 5G re-lays during the 2018 Pyeongchang Winter OlympicGames. Even for Koreans, it is becoming hard tocatch up with the acceleration of speed and the de-velopment of infrastructures.
I would now like to mention three key pointsfor 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 thesechanges, which are accelerating from day to day.Just look at how people use their smartphones. Pre-viously people used to spend 90% of their timespent on smartphones for calls, but now 80% of thetime 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. Manyof 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 heavydata 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 withbowed heads, headphones on, watching videos, streaming entertainment shows or dramason 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 gluedto the TV so as not to miss an episode of a TV drama, is a thing of the past. Now wewatch what we want anytime, anywhere. Fifteen years ago in Korea, a soap opera wasrecognised as a national hit when it achieved a 50% viewer rating, but now there’s a bigfuss made if it exceeds 20% and then it’s regarded as a mega hit. The Descendants of theSun, a drama series aired early this year on KBS2 that made Song Joong-ki a superstarand 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% ofKoreans 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 thatsmartphone 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 saidthat 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 wewatch videos
is also graduallychanging fromreal-time tovideo-on-demand(VOD).
VIDEO VIEWING METHOD BY GENERATION
To my greatest surprise, one of the lifestyle changes triggered by the evolution of themobile-first environment was that the introduction of mobile work environments greatlyinfluences 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 towork at their desired time in their desired place, to be a factor that greatly influences theirproductivity or creativity and has a decisive impact on their loyalty. Employees should beallowed to work whenever and wherever they want, to collaborate using mobile-baseddigital 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 werebased on answers from 1865 workers from various disciplines in nine countries/regionsincluding 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 groupmessenger 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 andfeedback 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 annualaverage of 24.5% and generate 107.5 billion KRW by 2019, demonstrating the birth ofan 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. Britishconsulting firm WeAreSocial’s January stats put Korea at the top of the global list with43% of Korean shopping being carried out online. Indeed, Asia seems one step ahead ofthe US and Europe in terms of mobile commerce: the top 10 in the list included five Asiancountries – China, Hong Kong, Malaysia, South Korea and Singapore – followed by theUK (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 trillionKRW in 2016. Mobile shopping transactions in the first through to the third quartersamounted to approximately 17 trillion KRW, equivalent to a 71% increase compared tothe same period in the previous year. Given that the total mobile shopping transactions in2015 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 thatmobile 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 hasquadrupled 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 alarge number of convenient mobile payment systems, for example Kakao Pay by KakaoTalk, N Pay by portal site Naver, Payco, Mobi Pay by Hana Card and Samsung Card, andT-Money, firmly underpinning the growth of the mobile commerce market. The growth ofKorea’s mobile commerce market in the past two years has been led primarily by socialcommerce companies, with the three major social commerce companies – Coupang, Tick-et Monster and We Make Price – generating more than 70% in revenues from the mobilesector. Open market sites such as G Market, Auction and 11st reached the 40% mark intheir mobile transaction ratio and are expected to cross the 50% mark this year. Suchtransactions made the convenient payment service Smile Pay on Auction and G Market512% (Auction) and 478% (G Market) year-on-year increases, respectively, as of May2016.
Home shopping and supermarkets as a traditional offline channel have begun tostrengthen 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 almosttwo 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 backwith same-day or next-day delivery. In addition, offline distributors such as Shinsegye andHome 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 theirforties with strong purchasing power have emerged as a major player in the mobile dailynecessity 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 aboveaccounted 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 TICKETMONSTER’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 Auctionhave 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 fromfood delivery, that is the key mobile-based, on-demand service, Auction’s May 2016 and GMarket’s April 2016 revenues marked 337 and 535, respectively. This means that mobileon-demand services have become an integral part of consumers’ daily life, where they canfind, buy and pay for what they want on their mobile devices.
By product category, the leading product group in mobile shopping is clothes andfashion-related products. Every year Korean customers spend 4.6 trillion KRW buyingclothing on mobile devices. The runner-up is travel and booking services with revenues of3.9 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, mobileshopping transactions accounted for more than half, 2679.6 billion KRW, of the nation’sonline shopping transactions in March 2016, worth five trillion KRW.
Looking at trends in Asia, the world’s biggest e-commerce market China is joiningthe craze for mobile shopping. The number of Chinese mobile users has already exceeded620 million. Given that the nation has a total of 690 million online users, this means thatmobile has become the core medium for online channels.
Mobile shopping transactions in China last year were estimated to be 684 trillionKRW. WeChat, a messaging app developed by Tencent, allows managers of small andmedium-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 onthe advertisement industry. G Mobile advertising hasgrown 1800 times in the last five years and is expected tooccupy half of the online ad market in four years. In2015, the size of the online advertisement market wasthree trillion KRW, catching up with 75% of the ATL ad-vertisement market revenue of four trillion. The share ofmo-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 fiveyears since 2010 when mobile ad stats started counting.The KT Economic Research Institute estimated spendingon mobile ads to reach a 52% share by 2019, overtakingPC 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 inonline ad spending in the US increased from 39% in 2015to 52% in 2016 and is estimated to reach 70% by 2019.This seems to be attributable to the transition from themobile-first era, where we prefer mobile devices to othermedia, to the era of mobile-only, where our daily lives andwork solely depend on mobile. Internet access via mobiledevices has already exceeded 60% of total internet trafficand 40% of YouTube traffic is via mobile. “Mobile haspositioned itself as an important medium in the mediamarket, with many people watching TV shows on theirsmartphones. Mobile advertisements will be the mainstayof the ad market,” according to an industry source.
The remarkably fast growth of mobile ads poses a huge opportunity for the mobileadvertisement market in Korea that has long since been in stagnation. It is significant thatKorea’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. AmongNaver’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 inKorea game companies have been big players in the mobile advertisement field, with a fewmobile first companies such as e-commerce traders and shopping malls actively involvedin mobile ads, advertisers in various industries will be increasingly focusing on mobile adsin 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 betweenconsumers 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 in2020. 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 PADmobile. 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, Facebookhas 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 becomingmore 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’, wherevideo 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 suchas 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 oftheir 2016 Nike Woman campaign. They rejected the existing method of delivering shortand intuitive messages, instead opting for storytelling as content, but in a way that adaptsto 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 creativesoptimised to mobile feeds. They should have compositions and stories comprehensible tocustomers and be structured to be watched frequently, even without components andsounds to attract customers’ attention at first glance. Mobile-optimised advertisementsfeature 7% higher recall rates than TV ads, 68% more users watch for longer than threeseconds, 103% more users recall them for longer than five seconds, and 136% for longerthan ten seconds, as explained by an ad man at Facebook. Facebook has launched anauto-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 factthat mobile can approach the targets of ads andyield instant effects more directly. Mobile adver-tisements are evolving with the combination ofcontents and technologies, for example nativeads that are so seamlessly integrated into socialmedia content that they are hardly perceived asan ad at first glance, and ads that are convergedwith IoT and location-based services to enablecommunications with consumers. Recently VRhas emerged as a hot topic in the industry, asdemonstrated by Mark Zuckerberg’s keynotespeech at Facebook’s F8 conference, which high-lighted VR as one of the company’s key businessareas in the coming decade. In Korea, there arealready many active pilots of 360/VR video con-tent advertisements.
We can no longer conceive of an advertise-ment market without technology and are seeingmore and more new communication technolo-gies emerging from the mobile sector. Now mar-keters are no longer asking themselves “Whymobile?” – 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 wavesin every aspect of business. In the past, mobile was a subordinated consideration whendrawing up marketing strategies, but surveys show that it is now the top priority. Mobile isat the centre of the advertising media ecosystem and this trend does not seem likely tochange in the short term.
In his book ‘The Essential Drucker’, social ecologist Peter Drucker said: “…there is a newworld. 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 justsuch a transformation.”
We are indeed undergoing a period of transformation and transition, and the only path tosuccess is to embrace the changes and technology-led innovations. Mobile has become thekey 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. Appservices 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 maywell 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 shouldstart thinking of links beyond mobile.
We can no longerconceive of an adver-tisement marketwithout technologyand are seeing moreand more new com-munication technolo-gies emerging fromthe mobile sector.