Overview:

Real world utility’ for consumer use of the Internet today and in the near- to mid-term future will continue to change dramatically, destroying existing business models and creating new opportunities as it develops.

This report aims to highlight the opportunities and threats inherent for stakeholders in the development of consumer use of the Internet over the period 2010-2020, with particular emphasis, and quantification of revenue opportunities, on the next 5 years. It provides unique data and analysis showing how consumer Internet revenues will be segmented by region, type of stakeholder, and category.

Scope of this research

• Access unique and quantified data and analysis of direct consumer Internet revenues over the period 2005-2020.
• Examine how consumer Internet revenues will be divided by region, stakeholder and category.
• Understand why dominance of the consumer Internet will shift eastwards towards Asia, and what the implications of this shift will be for stakeholders.
• Understand how state and corporate interests will move the Internet away from the concept of neutrality.
• Analyze the competitive responses of key players throughout the consumer Internet value chain to the coming opportunities and challenges.

Research and analysis highlights

Direct consumer Internet revenues are sustaining high double digit rates of growth, and are forecast to reach $1 trillion globally by 2020. The Asia Pacific region will overtake both North America and Western Europe to account for 35% of total spending by 2015 and will continue to drive and dominate total revenues.

The ubiquity of Mobile Internet access devices is increasing dramatically, while the ability to access and use the Internet over mobile devices is also contributing to the globalization of Internet use. Revenues from touchscreen mobile phone device sales will grow from $361m in 2010 to $1.6bn in 2020.

The shifting dynamics of the consumer Internet represent a great threat as well as opportunity to stakeholders. Dominant incumbents are in the most testing positions, since the dynamics of the future – moves to mobility, towards Asia and to greater operator power – mitigate against their established revenue base.

Key reasons to purchase this research

• How much direct revenue will consumer use of the Internet generate over the next decade? How many people will have access to the Internet by 2020?
• Which countries, regions, and market segments present the biggest opportunities in terms of revenue generation?
• What will be the impact of the huge growth in numbers of Internet users in economies such as China and India?
• Will the Internet adhere to the concept of net neutrality, or will it become more closed and regulated through corporate and state pressure?
• How will key players adapt their strategies to deal with changes in consumer use of the Internet in the coming years?

Andrew Nuttney 2
Gary Eastwood 2
Disclaimer 2
Executive summary 11
Introduction 11
Consumer Internet revenues 2010 to 2020 11
Going mobile 12
Eastwards revenue migration 12
The myth of net neutrality and privacy 13
Competitive situation analysis 13

Chapter 1 Introduction 14
Summary 14
Introduction 15
Report purpose, value, and interested parties 15
What is the Internet? 17
Introduction 17
The structure of the Internet 17
A brief history of the Internet 18
Microsoft and the mass consumer Internet 21
Business implications of the development of the consumer Internet 23

Chapter 2 Consumer Internet revenues 2010 to 2020 25
Summary 25
Introduction 26
Notes on methodology and sources 26
Definition of ‘direct’ and ‘indirect’ revenues 27
Revenue category definitions 28
Devices 28
Advertising 28
Applications 29
Goods 29
Contracts and subscriptions 29
Other services 29
Revenues by stakeholder (recipient) 29
Mobile operators 30
Fixed line ISPs 30
Device manufacturers 30
Developers 30
Internet properties 30
Other 31
Market analysis and sizing 31
Total consumer Internet revenues 31
Internet revenue growth by geographical region 32
Internet revenue share by geographical region 33
Internet revenue growth by major category 35
Internet revenue share (%) by major category, 2005 to 2020 37
Internet revenues by major category by geographical region, 2010 39
Internet revenues by major category by geographical region, 2015 40
Internet revenue growth by major stakeholder 42
Internet revenue share by major stakeholder 43
Summary 45

Chapter 3 Going mobile 47
Summary 47
Introduction 48
The growth of mobile data traffic 52
Mobile data traffic by geographical region, 2010 and 2013 52
Mobile enablers remain robust 56
Mobile revenue recipients 59
The business impact of the mobile-led Internet 63
Wider business implications 63
Leading players’ response 64
Summary 65

Chapter 4 Eastwards revenue migration 67
Summary 67
Introduction 68
Total Internet users by geographic region and by top 10 countries, 2010-2020 68
Internet revenue shift by major category by geographical region ($bn), 2010–15 72
The development of Asian consumer Internet revenues 74
Overview of Asian national markets 75
China 75
Rapid urbanization drives up income and growth 76
Internet users are young and mobile 76
Affordability is still an issue in purchasing decisions 76
Domestic players dominate the market 77
Japan 77
Consumer purchasing behavior is changing in an ‘age of frugality’ 77
Consumers spend more time at home and on the Internet 78
Mobile connectivity drives non-hardware revenues 78
Language and culture present challenges to non-domestic players 78
South Korea 79
Investment in broadband infrastructure has a significant impact 79
Popularity of the mobile Internet offers big opportunities 79
Korean players make their mark on the global stage 80
India 80
Internet usage set for a dramatic increase, but lack of 3G coverage holds it back 80
Market fragmentation and low incomes inhibit growth 81
Complex market provides big opportunities for indigenous players 81
South East Asia 82
Thailand 82
Indonesia 82
The coming East-West consumer Internet ‘trade war’ 84
Asia as a consumer market 85
Western corporations and governments face a threat to their Internet dominance 85
Growing Asian consumer class is the basis of this threat 86
Cultural and linguistic differences provide further challenges to western players 87
Asia as a center of innovation 88
Asian high-tech graduates return from the west to overturn the innovation gap 88
Multinational companies setting up R&D centers in India 88
Blending intellectual and technological potential into successful firms 88
A looming trade war 89
Chinese interests re-shape the Asian market and beyond 89
India looks for a bigger part on the world stage 90
The EU’s role remains peripheral 90
How the consumer Internet trade war will develop 91

Chapter 5 The myth of net neutrality and privacy 93
Summary 93
Introduction 94
State threats 95
CyberCom launch indicates US desire to monitor and protect state interests 95
Governments worldwide assert their authority 96
The development of regionally defined Internets 97
Corporate threats 98
Google’s power is based on consumer’s personal information 98
Mobile operators influence Internet access in their own interests 98
The Internet is an unstudied commercial system 99
The context aware Internet as a non-private space 100
Ubiquitous connectivity leads to ubiquitous monitoring 100
Social networks need personal information to monetize 101
Privacy becomes the domain of a privileged and wealthy elite 101

Chapter 6 Competitive situation analysis 102
Summary 102
Introduction 103
Mobile and fixed line operators: competitive response 103
Vodafone 103
China Mobile 104
Device manufacturers: competitive response 105
Apple 106
Nokia 107
Internet properties: competitive response 108
Google 109
Microsoft 111
Tencent (QQ.com) 112
Facebook 113

Table of figures
Figure 1: Global online consumer revenues, including ecommerce ($bn), 2005–20 31
Figure 2: Consumer Internet revenue growth by geographical region ($bn), 2005–20 33
Figure 3: Internet revenue share by geographical region (%), 2005–20 34
Figure 4: Internet revenue by major category ($bn), 2005–20 36
Figure 5: Internet revenue share (%) by major category, 2005–20 38
Figure 6: Internet revenues by major category by geographical region ($bn), 2010 39
Figure 7: Internet revenues by major category by geographical region ($bn), 2015 41
Figure 8: Internet revenues by major stakeholder ($bn), 2005–15 42
Figure 9: Internet revenue share by major stakeholder (%), 2005–15 44
Figure 10: Internet access device sales (units, m), 2005–20 48
Figure 11: Internet access device revenue share by device category (%), 2005-2020 50
Figure 12: Mobile data traffic usage by geographic region (TB per month), 2010–13 53
Figure 13: Mobile data traffic distribution by geographic region (%), 2010–13 55
Figure 14: Global 3G subscribers and penetration, 2010-2018 56
Figure 15: Global mobile consumer Internet revenues by stakeholder ($bn), 2005–15 59
Figure 16: Global mobile consumer Internet revenues ($bn) excluding mobile operators, 2005–15 62
Figure 17: Total Internet users by region (m), 2010–20 69
Figure 18: Internet user distribution by Top 10 countries (%), 2010 and 2015 70
Figure 19: Internet revenue shift by major category by geographical region ($bn), 2010–15 72
Figure 20: Asian consumer Internet revenues by category ($bn), 2010–15 74

Table of tables
Table 1: Global online consumer revenues, including ecommerce ($bn), 2005–20 32
Table 2: Consumer Internet revenue growth by geographical region ($bn), 2005–20 33
Table 3: Internet revenue share by geographical region (%), 2005–20 35
Table 4: Internet revenue by major category ($bn), 2005–20 36
Table 5: Internet revenue share (%) by major category, 2005–20 38
Table 6: Internet revenues by major category by geographical region ($bn), 2010 40
Table 7: Internet revenues by major category by geographical region ($bn), 2015 41
Table 8: Internet revenues by major stakeholder ($bn), 2005–15 43
Table 9: Internet revenue share by major stakeholder (%), 2005–15 44
Table 10: Internet access device sales (units, m), 2005–20 49
Table 11: Internet access device revenue share by device category (%), 2005-2020 51
Table 12: Mobile data traffic usage by geographic region (TB per month), 2010–13 53
Table 13: Mobile data traffic distribution by geographic region (%), 2010–13 55
Table 14: Global 3G subscribers and penetration, 2010-2018 57
Table 15: Rank of 3G coverage (%) by major country (2010) 58
Table 16: Global mobile consumer Internet revenues by stakeholder ($bn), 2005–15 60
Table 17: Global mobile consumer Internet revenues ($bn) excluding mobile operators, 2005–15 62
Table 18: Total Internet users by region (m), 2010–20 69
Table 19: Internet users distribution by country (%), 2010 and 2015 71
Table 20: Internet revenue shift by major category by geographical region ($bn), 2010–15 73
Table 21: Asian consumer Internet revenues by category ($bn), 2010–15 75