April 19, 2008

Build it and they will come. While penetration is still low – iPhone users make up just 0.5% of the total mobile subscriber base – it has forever changed mobile media consumption. Nielsen Mobile reveals just how this highly anticipated device has been reshaping the consumer mobile and media experience. Passing fad it is not. Who would have ever guessed we could want so much from a phone?

Revolutionary. Sleek. Innovative. Call a friend, listen to music or stream a video. There is no doubt that Apple set a new benchmark when it launched the iPhone in June 2007. While dozens of new mobile phones were released in the U.S. last year, this one changed the way people think about wireless.

Monumental effects

The only people more anxiously awaiting iPhone’s arrival than Apple’s devoted consumer base, were mobile and entertainment executives who eagerly anticipated both the direct and indirect effects the device could have on elevating consumer awareness of, and interest in, mobile media. For AT&T executives – the exclusive U.S. carrier of the iPhone – the device promised to entice subscribers over to their service. In the meantime, competing operators scurried to release their own media-centric devices to capitalize on momentum around media-centric handsets. The launch of a phone so squarely designed to expand media capabilities would also underscore the importance of emerging mobile pursuits for media companies.

A window into the future of mobile media consumption...

Today, just over seven months after launch and well more than a million unit sales later, Nielsen Mobile reveals just how this highly anticipated device has been reshaping the consumer mobile and media experience. Though iPhone users made up just 0.5% of the total mobile subscriber base and 1.7% of AT&T’s subscriber base in Q4 2007, it’s already clear that iPhone users are a unique breed of mobile consumers. Their behavior is a window into the future of mobile media consumption.

Voracious users

With a slick user interface, the ability to load full web pages, access to Wi-Fi networks and enhancements that allow users to access thousands of YouTube videos, it comes as no surprise that iPhone users substantially over-index in key areas of mobile data use. In fact, according to Nielsen Mobile, in Q4 2007, iPhone owners ages 18 and older were five times as likely as overall mobile users 18 and older to use mobile Internet in the past month and 11 times as likely to use mobile video or TV. Interestingly, Nielsen Mobile has noticed that iPhone owners use other, more traditional aspects of the mobile device more, as well. For instance, iPhone users are 70% more likely than overall subscribers to have used SMS (Short Message Service) text-messaging in the previous month and they are twice as likely to have used ringtones.

Fringe benefits come with a price tag...

Talk isn’t cheap

Fringe benefits come with a price tag . While iPhone users are getting perks from the devices, they pay accordingly. Calling plans for the iPhone on AT&T’s network start at $59.99, but many iPhone users don’t stop at the basic level of service. Nearly one-third (30%) of iPhone users 18 and older are spending more than $100 monthly on their associated wireless plan in total (compared to just 18% of all wireless subscribers 18 and older who pay that much). Notably, coverage from employers helps to foot that pricey bill – 25% of iPhone users’ bills are covered by their enterprise, compared to just 7% of total subscribers 18 and older.

Higher satisfaction translates to a lower likelihood of subscriber churn...

For AT&T, the expanding usage of data services for iPhone users is important – as high dollar data services increase ARPU (Average Revenue per User), but the perceived satisfaction the device offers subscribers is at least equally as important to carriers. In Q4 2007, iPhone users were, on average, 10% more satisfied than the average smartphone owners. For AT&T, that higher satisfaction translates to a lower likelihood of subscriber churn – a critical measure of success.

Media savvy and smart

While the advanced capabilities of the iPhone contribute to the unique behavior of its audience, it’s also likely that a segment of consumers purchasing the iPhone were distinctively prone to these behaviors. Consider that iPhone owners were 43% more likely than overall subscribers 18 and older to fall in the mobile media-rich 18-34 age segment. They were highly educated, too – iPhone users were 62% more likely to have an advanced degree beyond a BA or a BS.

Nielsen sister company Claritas has taken an advanced segmentation look at the iPhone consumer. In addition to the young, high income, urban segments expected as iPhone early adopters, iPhones are also popping up in the homes of other unique but coveted segments within the PRIZM segmentation system, such as “New Homesteaders”, young, middle-class families who escape suburban sprawl to small townships and live comfortable, child-centered lifestyles.

Bring on the foray

For all of the statistical good news the iPhone brings the market in terms of subscriber adoption of mobile media, increased revenue per user and user satisfaction, perhaps one of the biggest effects on the market is less measurable: increasing consumer awareness of advanced data capabilities on phones.

The buzz-worthy nature of the iPhone took on like wild fire, and quickly educated consumers that it was more than just a phone, but a device of Swiss-army capabilities. Online buzz and sentiment for both the January 2007 announcement and the June 2007 launch set an unprecedented level. According to Nielsen BuzzMetrics, online buzz for the iPhone reported higher levels than the launches of the Wii, Zune or Vista – and considerably more buzz than the Sopranos final episode. A syndicated Nielsen BuzzMetrics report on iPhone buzz shows that, while buzz eventually leveled off, enthusiasts were spreading the word about their changing mobile experience.

Awareness yielded high degrees of consumer interest...

Buzz quickly turned to more than just the iPhone. The talk online and around the water cooler centered on new phone capabilities. Wifi on a phone? YouTube in my pocket? That awareness yielded high degrees of consumer interest. According to Claritas’ Convergence Audit, a survey of 35,000 respondents conducted both online and through the mail, consumer interest in purchasing cell phones with streaming video or MP3 capabilities doubled between 2006 and 2007 growing from 4% to 8%.

It’s no surprise that other device manufacturers have entered the game with devices intending to capitalize on the momentum around media phone capabilities. A simple search for “iPhone killer” on Google News yields half a dozen devices in or heading to market that mobile pundits propose are superior to the iPhone for demonstrable reasons. As of February, specs were leaked for a Nokia device and Sony Ericsson made an announcement about phones designed to compete directly with the iPhone.

The market has reached critical mass...

The next generation

As consumer interest expands with the availability of capable devices, the pervasiveness of mobile media will also expand. Already the market has reached critical mass, experiencing considerable year-over-year growth. In Q4 2007, 87 million U.S. mobile subscribers subscribed to mobile Internet and 14 million subscribed to mobile video, representing year-over-year subscriber growth of 19% and 100%, respectively.

For marketers, ongoing growth in the mobile media market will create more innovative opportunities to touch the consumer through a most portable and personal medium. Today, while penetration is still relatively low and the platform is one of experimentation, leading companies have an opportunity to leverage the capabilities of the iPhone and other media-centric handsets in a way that demonstrates innovation and addresses a market of cutting edge early adopters.

For its effects on the consumer and carriers, and the opportunities it evolves for marketers and media companies, the iPhone, indirectly and directly, has given the mobile media market clear and actionable momentum over the past seven months since its launch. Over the next six to twelve months, as companies try to infuse the market with more mobile media capabilities, the expanding growth of mobile media will continue to change the way we think about media and marketing.

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For more information at http://www.nielsen.com


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