Extrapolating $3 trillion in value from the mobile industry
“A billion here, a billion there; pretty soon you’re talking real money.”
–Attributed to Everett Dirksen, Wikipedia
All of us know mobile is big business: just look at what it costs when you get a new smartphone and again when you pay your monthly bill to the wireless operator.
Let’s see if we can estimate how a $3 trillion figure is calculated. First, there’s the device itself that often costs $500 to $700, although most of us now pay for it through monthly payments added into our wireless operator’s monthly bill. Let’s call it roughly $600 per year.
Next you add on the service that while getting more cost effective every year (more services for the same money), typically costs around $75 per month or $900 per year plus the monthly amortized cost of the smartphone.
The average user has 40 applictions that on average cost a little over $1. Most of them are upgraded each year for another $1. That’s $40 per year.
You also have to add in the broadband service at your home that most typically results in your paying $50 per month or $600 per year.
There are roughly 300 million wireless subscribers in the U.S. If we do the math, that’s $600 for the phone, $900 for the service, $600 for your home Wi-Fi and $40 for apps. That’s $2,140 per person times 300 million subscribers. That adds up to 300 million x $2,140 = $642 billion.
Now, you have to add in the cost of the wireless operators to build the network. That is about the same amount, bringing the total of end user and infrastructure costs to $1.284 trillion.
The U.S. is about one-third of the total mobile market, so that brings the total above $3 trillion without even trying. A Boston Consulting Group study found the same total using a different methodology.
You can immediately see this is a low estimate. We haven’t included anything about tablets. And, there is a lot of spending by the government in mobile and wireless.
Perhaps the most important thing to realize here is the mobile economy enables millions of people and companies to directly benefit from this large market besides the benefit to the mobile user. Software developers build apps that are sold to mobile users. Component manufacturers produce the parts that go into mobile devices. And systems and advisory firms provide organizations with advice, systems development and operation services that help their clients design and deploy mobile systems for both internal (employee) and external (customer) use.
Just about everyone participates in the mobile economy today, whether it is as a user or as part of the ecosystem that enables mobile devices. Remember that the next time you use your smartphone: you’re a member of the mobile economy.
J. Gerry Purdy, Ph.D. is the principal analyst with Mobilocity LLC and a research affiliate with Frost & Sullivan. He is a nationally recognized industry authority who focuses on monitoring and analyzing emerging trends, technologies, and market behavior in mobile computing and wireless data communications devices, software and services. Dr. Purdy is an “edge of network” analyst looking at devices, applications and services as well as wireless connectivity to those devices. Dr. Purdy provides critical insights regarding mobile and wireless devices, wireless data communications, and connection to the infrastructure that powers the data in the wireless handheld. Dr. Purdy continues to be affiliated with the venture capital industry as well. He spent five years as a venture advisor for Diamondhead Ventures in Menlo Park where he identified, attracted and recommended investments in emerging companies in the mobile and wireless industry. He has had a prior affiliation with East Peak Advisors and, subsequently, following their acquisition, with FBR Capital Markets. Dr. Purdy advises young companies who are preparing to raise venture capital. Dr. Purdy has been a member of the Program Advisory Board of the Consumer Electronics Association that produces CES, one of the largest trade shows in the world. He is a frequent moderator at CTIA conferences and GSM Mobile World Congress. Prior to funding Mobilocity, Dr. Purdy was chief mobility analyst with Compass Intelligence. Prior to that, he owned MobileTrax, LLC and enjoyed successful stints at Frost & Sullivan, Dataquest (a division of Gartner) among other companies.
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