Data Crush: How the Information Tidal Wave Is Driving New Business Opportunities

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data crush

how the information tidal wave is driving new business opportunities

AMACOM

mobility

smartphones, tablets, and the "internet of things"

AS OF 2013, if you're a typical American, there's about a 60 percent chance that you've got a smartphone in your purse or pocket. You use it to tweet with colleagues, shop for goods, take photos, and make videos to share with friends. Perhaps you use this same device to play games while you're waiting in line to buy a coffee at a store that you found on Google maps. You may be using an electronic coupon sent to you by an "app" that you recently downloaded, based upon recommendations from some of your "friends" on Facebook. And, you may synchronize this smartphone with your home computer, work laptop, and spouse's smartphone using a cloud computing service.

It's a pretty remarkable thought that all these activities were unheard of just a decade ago. Indeed, it wasn't that long ago that people used their cell phones just to talk to one another. Today, cell phones are bringing dramatic shifts to every aspect of our lives. In fact, according to Google, one in seven online searches now originates from a mobile device and 72 percent of smartphone owners use their phones to enhance their shopping experiences.

Mobile computing, made possible with smartphones, is perhaps the fastest growing and most prolific form of technology in human history. In terms of adoption, mobility is right up there with the creation of fire and electricity. In 2010, 4.5 billion people worldwide owned a mobile phone. Remarkably, in that same year, only 4.2 billion people owned toothbrushes. In 2012, between 1.5 and 1.7 billion phones were sold worldwide, meaning that one-fifth of the total human population bought a new phone that year. And, by 2013, the number of mobile users had grown to over 6.8 billion, or almost 90 percent of all humanity. Indeed, mobile phones are no longer a luxury. Rather, they are an individual's dominant point of interaction with the modern world; an item that is so critical to our lives that we'll forego other needs to stay connected.

Mobile phones are so deeply integrated into our day-to-day lives that it's hard to imagine a world without them. As a result of this level of adoption, the market for mobile communications now represents $1.3 trillion, or approximately two percent, of the world's Gross Domestic Product (GDP). And the growth of this market is far outpacing the growth of GDP in general.

Traditional cell phones (dumb phones, if you like) are still the majority of those in use throughout the world (approximately 70 percent of all phones), but smartphones are rapidly taking over the mobile market. While the total annual sales of mobile phones has seemed to peak due to market saturation, significant numbers of users are trading in traditional mobile phones for smartphones. Indeed, the market for smartphones has turned the mobile industry on its ear, with new players Apple and Google completely annihilating former stalwart mobile players, such as Nokia and Research in Motion (RIM).

Today, it's difficult to remember just how much Nokia and RIM dominated the mobile industry only a decade ago. In 2000, I was one of the millions of people caught up in the craze for the ultimate fashion-statement phone: the chrome-plated Nokia 8810. Although this "dumb phone" retailed for nearly $1,000, Nokia couldn't manufacture them fast enough. Even famous-for-being-famous celebrity Paris Hilton was an early adopter. And, of course, there was the Nokia 7110 with which Keanu Reeves costarred in the movie The Matrix.

Nokia saw its fortunes change as phones became smarter and users grew to care about function as much as form. Nokia invested a great deal of time and energy into expanding the functionality of its phones, but it seemed that the company was trying to take giant leaps by creating an entirely new operating system: Symbian. While users wanted more functionality (phones like the BlackBerry, which could send and read email), they didn't necessarily want to learn a whole new operating system to obtain this capability. As such, Symbian languished in obscurity, and few people bought into the big, heavy, and complex phones on which it ran.

As for RIM, its BlackBerry was the technological precursor to the smartphone, allowing users to access email as well as make calls and text. Again, the BlackBerry was a major fashion statement, and Paris Hilton quickly changed over to this new superphone. So addictive were the new capabilities of this phone, that it quickly gained the title of "Crackberry," after the highly addictive, cocaine-based street drug. The BlackBerry was THE phone to own as late as 2008, when presidential nominee Barack Obama refused to surrender his "Crackberry" to members of the Secret Service, despite their concerns over his privacy and security. The Crackberry was so addictive that in the early 2000s, I had a manager with whom you could not make eye contact during a discussion because he was so busy reading his email on his Crackberry.

Skip to the year 2012, and both Nokia and RIM are in deep trouble. RIM continues to press forward with an independent operating system on its phones, despite seeing its market share drop from a high of 44.5 percent in 2008 to a recent low of approximately 4.6 percent in 2012. Nokia has been forced to largely abandon its own smartphone operating system and has cast its lot with Microsoft's Windows Mobile 8 operating system. Never theless, Nokia has seen its global market share plummet by over 25 percentage points in just a decade—and this in a market that has tripled in size during the same period. Combined, these two companies have lost approximately $200 billion in market value in the last 10 years, a dramatic loss in net worth caused by their failure to foresee the explosion of smartphones. The reasons for this massive upheaval in the mobile industry are both obvious and compelling. Smartphones can deeply enrich our lives at so many levels, and this transition reveals itself in looking at the growth of mobile data services, mobile apps, and location services.

Mobility and Data Growth

Which aspects of mobility are leading to the explosive growth in data volume? Four primary drivers of data growth are caused by mobility: pervasiveness, connectedness, data enablement, and context. Let's look at each of these drivers in turn.

First, there is pervasiveness, also known as the network effect. With more than six billion cell phone users on the planet right now, there is always someone you can talk to and always something to say. And, most of us take advantage of this pervasiveness all of the time. For example, in the United States in 2012, 34 percent of homes no longer had a land line phone. Rather, the inhabitants of these homes simply rely on their cells phones to remain connected to the world. Total voice service usage was over 2.3 trillion minutes in the United States in 2012 and was growing steadily at three percent year over year.

Combining pervasiveness with the second driver, connectedness, means that whenever you might have something to say it is highly likely that someone is willing and able to listen, no matter how inane the conversation might be. Not only are nearly six billion people connected to the network, they are connected almost perpetually and can interact with other people 24 hours every day should they choose to do so. Perhaps you've noticed the impact of connectedness in your work life, where the old standard 9-to-5 workday has been replaced by a workday that seems endless. In my work, it is not uncommon to have teleconferences that begin at six in the morning (because I need to talk with people in Europe) and continue on into the evening (because I need to talk with people in Asia, who are just beginning their next work day). Because of my connectedness, I have far greater opportunities to generate more and more data.

The more than 2.3 trillion minutes of talk time that American mobile phones supported in 2012 translates to about 10 hours per month for every person. So, it's safe to say that mobile phones are still used for voice communications. However, data communication has become increasingly important to users, as is shown by the over 2.27 trillion text messages Americans sent to each other in 2012. Both text message and voice traffic are growing at about three percent per year, indicating that they have reached a point of saturation—at least for now. These forms of traffic are expected to continue to grow, albeit more slowly, as more and more users communicate with each other through social platforms like Twitter and Facebook.

Mobile Data Services

Data enablement of phones gets wrapped up in a discussion of mobile data services. One of the things that makes a smartphone "smart" is its ability to access data in a wide variety of forms. Mobile data services include text messages, web browsing, accessing apps, and streaming services such as Netflix and YouTube. As smartphones replace regular mobile phones and as cellular data networks expand their footprint across vast segments of China, India, and other developing countries, data services have rapidly replaced voice services as the dominant form of mobile traffic.

In contrast to voice and message traffic, data traffic grew by more than 100 percent in 2012, reaching 1.1 billion gigabytes of data. Now that's a really big number, and a doubling of the rate of growth shows little evidence of slowing down. Rather, it is anticipated that this rate of growth will accelerate as more customers migrate to smartphones and more devices start to link into cellular networks. Smartphones have rapidly eclipsed traditional computers as points of entry for the Internet for the simple reason that we carry these devices with us nearly all of the time, allowing us to access the internet anytime, anywhere. This trend will continue to multiply as nonhuman users, or "things," plug in and start to communicate with us.

Data Enablement and the Age of the App

On March 2, 2012, Apple announced that it had reached 25 billion downloads of apps from its app store, a remarkable number given that the store didn't exist prior to July 2008. By early 2013, this number exceeded 40 billion downloads, a remarkable rate of growth. As the app store reached its five-year anniversary, it offered more than 775,000 apps to its users and is adding several thousand more every week. Not to be outdone, Goggle's app store for its Android operating system has posted similar numbers of apps and downloads, creating billions of dollars in revenue and revolutionizing the lives of billions of smartphone users worldwide. Indeed, global revenue from apps is expected to rise a full 62 percent to $25 billion in 2013, according to Gartner, Inc.

Given how popular "apps" are, I suspect you're at least familiar with them. But for the uninitiated, an app, or mobile app, is generally defined as a software application designed to operate on a mobile computing device, such as a smartphone or tablet. Apple, Google, and other platform sponsors provide similarly vague definitions, so I'd like to add to them by defining some key characteristics of successful apps:

1. Apps are inexpensive to use: A key to successful apps is a low barrier to entry. Not all apps are free, but most cost less than $10, and a majority are under $5.

2. Apps take advantage of the mobile platform: Apps are designed for use on smartphones and tablets, and therefore should take advantage of the unique benefits of these platforms. Namely, they can be used anywhere at any time by anyone who has a specific need. Beyond that, successful apps allow users to do things that they cannot readily do with a laptop or desktop computer, which means that the app takes advantage of the mobile platform.

3. Apps meet a specific need: Most successful apps fulfill a focused, specific user need. Whether the user is looking for five minutes of entertainment from a game app, the closest gas station, or someone nearby with whom to have lunch, apps should provide a valuable service to the user when and where that service is needed.

4. Apps know their owner: Apps that are really successful keep track of their users. This can be as simple as Angry Birds keeping track of your personal high scores or as complicated as an app knowing your favorite shopping or dining venues. The better a given app knows you, the more likely you are to use it. This creates a self-reinforcing relationship that makes some apps almost addictive to their users.

Other apps might have additional characteristics, but these four are the keys to an app's success. That many apps miss these marks is apparent when one realizes that of the over 750,000 apps in the Apple App Store, more than 400,000 have never been downloaded. Given the 40 billion downloads that have taken place, it should also be apparent that successful apps are often wildly so. One need only consider the universal backlash against Apple when it dropped Google maps in favor of its in-house-developed iMaps in 2012 to realize that people take their apps personally!

Apps are relevant to this discussion of data growth because they are both consumers and creators of vast quantities of data. For example, apps that work off of a user's location generate data on that location every time the app is used. The creation of these time and date stamps, which was originally unknown to users and undisclosed by app creators, led to several high-profile scandals in 2010. While there was initially some backlash against Apple and Google for keeping and using these records for unknown purposes, users quickly got over their initial concerns and kept on downloading newer and more sophisticated apps, which tracked their activities even more closely. This aspect of apps will become more and more prevalent as they grow in sophistication and capability. Hence, they will generate an ever-growing torrent of information. In Chapter 10, we will return to the world of apps and how they are changing the way businesses will have to engage with their customers over the coming decade.

Location Services and Contextual Computing

The final driver of mobile data growth mentioned earlier is context. Context on mobile devices refers to a user's location in time and space; it leads to a wide range of apps that take advantage of a person's location in delivering content to a user. These location services, or contextual computing, further increase the value of smartphones, as seen by the steady growth of location-based services in Figure 1.1. Since the turn of the century most mobile phones have been able to tap into signals from the Global Positioning System (GPS), a constellation of satellites orbiting the earth that allows devices to determine their location in space and time with remarkable accuracy. Using this information, mobile phones can tell their users both where and "when" they are, otherwise known as location services. When you combine location services with the powers of a smartphone, you can create what is called contextual computing.

Contextual computing combines the where and when of a user with other relevant data available to a smartphone, thereby creating a result that is relevant to that user's particular when and where. A simple example is when you perform a search for "gas station" with a mapping application on a smartphone. Unless you enter another specific location, the results that are returned are those gas stations closest to your present position. If you don't specify otherwise, the app assumes that you're searching for gas stations closest to where you are, or your present context in the world. The unique combination of where you are, when you are timewise, and who you are creates nearly limitless opportunities to sell you something 24 hours a day. As such, contextual computing will create several orders of magnitude more data for each of us to create and consume.

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Excerpted from data crush by CHRISTOPHER SURDAK. Copyright © 2014 Christopher Surdak. Excerpted by permission of AMACOM.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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