In the history of the world of business, very few industry sectors have enjoyed the stellar growth that we have seen in electronic media and entertainment over the past few decades. There is every reason to think this rapid growth will continue, and in many cases accelerate, due to two basic factors: Booming growth in the number of people around the world who use the Internet on a regular basis, whether by fixed means, wireless devices or both; and the continuing and dramatic evolution of electronic platforms, such as smartphones, tablet computers and game consoles.
Personal electronics have quickly evolved in the following order:
1) Sometimes on (think dial up and Internet service providers like AOL.com)
2) Always on, thanks to the rapid adoption of broadband, whether via DSL, cable modem or smartphone, and ever higher Internet access speeds
3) Always with you, thanks to the proliferation of mobile devices
4) Always around you, where, in the near future, the advent of pervasive computing devices and remote wireless sensors will connect us to, or collect data from, an astonishing array of objects ranging from appliances and air conditioning systems to monitors that record our individual health statistics.
Globally, by the beginning of 2012, there were nearly 6 billion active wireless device subscriptions in a world of fewer than 7 billion people, and 2 billion people worldwide were Internet users. These numbers will continue to grow. In particular, the number of cellphone subscribers who adopt smartphones and use them to access the Internet, games and apps (unique, downloadable applications that enable users to enjoy instant access to media) will soar, as will the number of people carrying app-laden tablets such as the iPad.
Three extremely important sectors of this evolving personal communications and media world are electronic games, apps and social media (GASM), and the lines between these three sectors frequently blur. For example, multiplayer online games encourage communication between communities of players, while social media like Facebook are often the platforms that support the most popular games, like FarmVille. Meanwhile, apps are rapidly becoming the tool of choice for launching a wide variety of communications and entertainment tools and Internet sites.
The global electronic games industry is so vast that it already rivals the categories of adult and children’s books in terms of total revenues. The advertising industry has jumped into the GASM field in a massive way, as the number of hours spent by consumers accessing GASM daily has become much too large to ignore. Likewise, media, professional sports and entertainment giants have entered the field with great enthusiasm.
The growth in the user base of GASM worldwide has been nothing short of stellar. By early-2012, Facebook had approximately 830 million users, LinkedIn more than 100 million, Twitter more than 200 million and Microsoft’s Xbox Live more than 30 million paying subscribers. (Note the “paying” subscribers factor in the Xbox online games services—a significant factor compared to the free accounts provided to users of social media services like Twitter.)
Meanwhile, approximately 200 million seventh-generation game consoles (referring to recent units on the market like the Sony PlayStation 3) had been sold worldwide by early 2011, along with about 700 million Wii games, 425 million PlayStation 3 games and 500 million Xbox 360 games. In fact, the global games industry, including hardware and software, had reached the $60 billion per year range. While the global recession of 2008-09 was hard on the games industry, new games and enhanced console technology have put life back into the business.
Apps, including those for magazines, information services such as health site WebMD, games, newspapers, catalogs and ebook readers, to name but a few of the tens of thousands of uses, didn’t really exist before the introduction of the iconic iPhone smartphone a few years ago. For 2010, Gartner estimated global app store revenues at $6.77 billion. That was only an early stage in this soaring business sector. For example, the Apple iTunes App Store launched in July 2008 with only about 500 apps available. By June 2011, Apple had approved more than 500,000 apps, and more than 400,000 of them were live in the iTunes App Store. Analysts at Gartner estimated that 4.5 billion apps were downloaded in 2010. Gartner predicted volume to grow to 21.6 billion downloads by 2013 that will produce $29.5 billion in revenue.
By mid 2011, figures for apps for Apple products alone indicated there were at least 85,000 app creators worldwide. By one estimate, 37% of all apps are free downloads, while the average price for paid apps is $3.64.
Meanwhile, more than 200,000 apps were also available for the Android mobile phone operating system (the world’s leading smartphone platform), as well as thousands more for the Blackberry and other devices. Android is the mobile operating system developed by Google. On all platforms, the most popular apps include games, such as Angry Birds, tools such as Google Maps, the Facebook app and entertainment and media related apps, such as those for Pandora Internet-based radio and for leading newspapers. At the same time, important apps provide tools for business people, travelers, students, hobbyists, wine drinkers, people who like to cook, job seekers, students, children, sports fan, shoppers, car enthusiasts and myriad other special interest niches.
Since apps require extensive programming and creative services, the app industry encompasses revenues and fees far beyond app store revenues. A 2011 report by analysts at Forrester anticipated that app store sales would top $5.6 billion for 2011, but corporate spending on app development and third-party services that provide app management would total the much higher amount of $17 billion. Combined, the forecast for app sales, development and management spending for 2015 is $54.6 billion. (Meanwhile, Forrester’s estimates for 2010 app sales revenues were lower than those from Gartner, at $2.2 billion.)
Social media was on the minds of investors in the first months of 2011, as LinkedIn announced an IPO. In early 2012, a Facebook IPO would soon follow. Since most social media accounts and activities are free of charge, the challenge for social media firms has been to monetize their vast user bases. LinkedIn not only sells advertising, but also sells account upgrades for users who are interested in deeper services. Since LinkedIn, largely aimed at business professionals and job seekers, is a popular way for salespeople to initiate conversations with potential customers, and for corporate recruiters and human resources managers to seek new hires, the site has had reasonable success in generating recurring revenues.
Facebook, with a vastly larger audience, was reached nearly $2 billion in revenues by 2010, largely through advertising. The question is whether, and how, Facebook will be able to grow the number of ways in which it is able to generate fees. According to eMarketer, Facebook’s market share of online display ads rose from 2.9% to 13.6% in two years. Facebook is also working with retailers to open pages on the site where merchandise can be sold to users. J.C. Penney and Delta Air Lines as well as European fashion retailer Asos have become “e-tailers” on Facebook. According to market research firm IDC, by 2016, 10% to 15% of total consumer spending in developed countries may take place on social networking sites.
Meanwhile, Twitter, while very popular, struggles to monetize its service. MySpace, once the darling of the social media sector, has stumbled. Corporate owner News Corp., which paid $580 million to acquire MySpace in 2005, reconsidered its strategy by 2011, deciding to unload the firm.
While the social media pioneers were largely U.S.-based, and the audiences of leading sites like Facebook are global, many nations can boast of their own local social media success stories. This is particularly important in China, where the government limits access to many of the outside world’s most popular sites such as YouTube and Facebook. China’s leading firm social media firm, renren.com, has tens of millions of users, and it launched an IPO of its stock in 2011. Additional popular Chinese services include 51.com and Kaixin0001.com. Moreover, Ushi.cn is a Chinese service targeted at the Linkedin-type of professional user.
Security of user data and customer privacy remain significant concerns in the GASM business, particularly after Sony suffered a major hacking of its Sony Online Entertainment network accounts in early 2011. Elsewhere, customer privacy issues have been major points of concern at Facebook and other social media services. Customers want to play games online and they want to interact on social networks, but they want to own their own personal data and they certainly want to feel their credit card information is secure.
In 2010, a Wall Street Journal investigation reported that a number of apps often used on Facebook had been transmitting identifying information to a group of advertising and Internet tracking firms. The investigation found that all 10 of Facebook’s most popular apps (including FarmVille, Phrases, Texas HoldEm and Mafia Wars) were sending users’ IDs to outside companies. ID information includes names, ages, places of residence, occupations and photos. This impacted even those who set their Facebook profiles to the highest available security levels.