Market movements that will impact digital media market players
Australia's digital media market has seen tremendous growth in various areas, including a significant rise in use of smartphones and tablets, an increase in online retail and a surge in the online advertising and video market. "Common patterns such as younger age group markets dictating new directions and methods though their preferences and demands impact the way messages are transmitted to them. Often a multi-prong communication strategy is required as connectivity and mobility are ubiquitous trends impacting many of these markets," says Phil Harpur, Senior Research Manager, Australia & New Zealand, Frost & Sullivan.
Frost & Sullivan has identified the top six predictions in digital media that are expected to be game changers, challenging market players to up the ante and be a step ahead of the competition.
1. Android will continue to take market share away from Apple in the smartphone market
Up till two years ago, Apple dominated Australia's smartphone market. In 2012, Android and Apple held equal market share (44%). In 2013, Android (50%) overtook Apple iOS (39%) as the most popular smartphone operating platform, and is continuing to capture market share.
HTC, ARM, Motorola and Samsung, which in particular has grown its market share significantly over the past 12 months, all use Android operating systems. Smartphone ownership levels in Australia were at 73% penetration of the 15 to 65 age group in 2013, compared to 68% in 2012. By 2018 Frost & Sullivan predicts that virtually all mobile phones will have smartphone functionality built-in and penetration amongst the 15 to 65 year old age group will reach 93%.
By 2017, Apple's market share of smartphones is predicted to be less than 30%. Market players will improve functionality at cheaper price points, and smartphone prices will continue falling. Business models will be based on apps, as device sales margins decline.
2. Tablets will further become mainstream consumer devices
Australia's tablet ownership amongst the 15 to 65 year old age group increased from 20% in 2012 to 31% in 2013. Tablet ownership is highest amongst the 35 to 44 age group. Tablet household penetration, or households where at least one member owns a tablet, rose from 33% in 2012 to 49% in 2013 and will reach 80% in 2018. Adoption rates are stimulated by more manufacturers, such as Samsung, selling tablets at lower price points.
Mobile devices now are multi-functional with usage centred around mobile media capabilities. Smartphones and tablets though primary devices for voice communication and information consumption, offer a range of applications for communications, productivity, learning, entertainment and gaming.
77% of Australian tablet owners play games at least once a month on their tablet. 67% of tablet owners access social media via an app at least once a month and 60% perform mobile banking.
Viewing of online video is expected to increase significantly over the next five years, especially in the home environment as more consumers watch video content on tablets in preference to TVs. As tablet sizes and weights reduce, tablets will become more portable, increasing usage whilst consumers are on the move.
Apple's iPad dominates the tablet market, both locally and internationally, but other vendors are fast gaining ground. Apple's tablet market share in Australia dropped from 69% in 2012 to 60% in 2013 and by 2018 is predicted to drop to less than 40%, as an increasing number of vendors enter the market with cheaper price points.
3. Strong momentum in the Australian mobile advertising market will continue
The mobile advertising market grew over 100% in 2013. A similar growth rate is predicted for 2014, driven primarily by high penetration rates of smartphones and tablets. Use of mobile devices multi-functions centred around mobile media capabilities, in particular, access to web browsing and apps, is driving many opportunities for advertisers.
Agencies and brands have become very aware and accepting of the importance and effectiveness of mobile advertising. There is higher demand for premium mobile ad solutions, now regarded as an essential part of an integrated advertising campaign buy covering both traditional / offline channels and online channels. More retail companies are integrating mobile advertising into their advertising campaigns.
Australia is among the leading nations for rich media ad production and rich media ad formats will continue to grow strongly. A high proportion of rich media are entering the Australian mobile advertising market. Australia's fast 3G and 4G mobile networks and high penetration of smartphones and tablets, makes for an ideal environment for the creation of rich media content by online publishers and mobile agencies. Mobile ad networks / agencies such as Big Mobile, InMobi and MobeSeek produce the majority of their new inventory using rich media.
4. More online video ad inventory will be traded via ad exchanges
An estimated 30% to 35% of online video ad buying is purchased via programmatic methods in Australia. By end 2014, this will exceed 40%. The majority of this ad inventory is of non-premium / remnant inventory. Most premium ad inventory sold by publishers is via clients rather than through ad exchanges. Due to the increasing adoption of private video ad exchanges, online publishers have some control over the ad buying process, enabling them to manage the rules as to how inventory is sold and controlling which buyers are invited to participate in the exchange. Online publishers will move a higher proportion of the ad buying to private ad exchanges during 2014.
The Australian market for ad buying via ad exchanges is relatively mature. The video ad buying market has progressed significantly over the last 12 months. Video ad exchanges now play an important part in the video ad market ecosystem. There is less distinction between traditional roles of a video ad platform/exchange and a video ad network. A number of video ad networks such as TVN, TubeMogul, Volt Media and Adap.TV now participate in the ad exchange market by essentially operating as Demand Side Platforms (DSPs) or Supply Side Platforms (SSPs).
5. Online video will make significant inroads into the broadcasting and Pay TV markets
Australia's online video market is being driven by the growing popularity of mobile devices and tablets and boosted by the preference of younger consumer age groups towards online video channels as a direct substitute for traditional TV.
In 2012, 94% of consumers watched TV shows and/or movies on a TV screen at least once month. In 2013 this declined to 87% and is expected to drop to 80% in 2014. Meanwhile, the frequency of consumer viewing on tablets and smartphones increased from 20% in 2012 to 24% in 2013. 27% of smartphone users watch user generated content on sites such as YouTube on most days, while 60% do so at least once a month. Larger and higher resolution smartphone screens have improved the viewer experience significantly, whilst monthly data cap limits offered by mobile operators have risen significantly.
Live and sporting events and news will be a key driver in taking the online video experience to a mainstream audience. For example, watching live news on devices while commuting on a train is becoming more common and offers a real substitute to the TV lounge room viewing, Video content producers and production houses are increasingly releasing content directly to the consumer, rather than releasing the content only via the TV broadcasting and/or pay TV networks. This growing market trend poses a level of competitive threat to the stranglehold that the major free-to-air (FTA) broadcasters have on the consumption of video content in Australia.
The Voice Australia, and sporting shows V8 Supercars and AFL TV are such examples, and more direct to the consumers releases like these will be seen during 2014.
6. Mobile commerce will continue high growth
Smartphones and tablets have extended the Australian online shopping experience for both consumers and retailers. Mobile commerce provides consumers with a channel to shop at home and whilst on the go, and is used as a tool in the overall shopping process. 52% of smartphone users have used their smartphone to find a nearby store; 38% have used it to compare prices. Location Based Services can be used to geo-locate customers and send them offers as they are passing a store, encouraging them inside and stimulating purchase. Location Based Services are still not widely available in Australia but more services will be released in 2014.
In 2013, purchases via mobile devices, ie., smartphones and tablets grew by 30%, accounting for $4.9 billion or 27% of all online shopping purchases. Online spending on tablets increased from 5% in 2011 to 8% in 2012 and 10% in 2013. Purchases via mobile devices are predicted to grow strongly in 2014, growing by 27% and predicted to reach $14.1 by 2017, growing at a CAGR of 30% over the next four years.