Technology, Media & Telecommunications Predictions - Deloitte - 2012

Technology, Media &
Telecommunications
Predictions
2012

Contents

Foreword 3

Technology 4

Consumer tech demand defies the economic headwinds 5

It takes two to tablet: the rise of the multi-tablet owner 7

Billions and billions: big data becomes a big deal 9

Hard times for the hard disk: solid state storage surges 11

Ambient radio frequency power harvesting: a drop in the bucket 13

3D printing is here – but the factory in every home isn’t here yet! 15

Media 17

Targeted television advertisements miss the point 18

The schedule dominates, still 21

All aboard for the catch-up commuter thanks to the portable DVR 23

A “brand” new day for online ads 25

Market research is all in your head: MRI machines and media 27

Extracting the premium from social games 29

Online coupon intermediaries: from novelty, to celebrity, to sizeable niche 31

Telecommunications 33

The $100 “smartphone” reaches its first half billion 34

NFC and mobile devices: payments and more! 36

Web bypass: delivering connectivity without the Internet 38

Here come more data caps: it’s the end of the (wire)line 40
for unlimited Internet

So many apps – so little to download 42

Endnotes 44

Recent thought leadership 53

Contacts 54

Technology, Media & Telecommunications Predictions 2012 1

Our aim with Predictions is
to catalyze discussions around
significant developments that may
require companies or governments
to respond.

2

Foreword

Welcome to the 11th edition of Deloitte’s Predictions • ccountability: Our aim is to provide clear
A
for the technology, media & telecommunications (TMT) Predictions endpoints, so that our accuracy can be
sector. evaluated annually. In 2011, we were just over
80 percent accurate, up about 10 percentage points
This annual publication presents Deloitte’s view of key on 2010.
developments over the next 12-18 months that are
likely to have significant medium- to long-term impacts Our aim with Predictions is to catalyze discussions
for companies in TMT and other industries. around significant developments that may require
companies or governments to respond. We provide a
We would like to stress that latter point this year: view on what we think will happen, what will occur
across every global industry, knowing what will come as a consequence, and what the implications are
next in TMT trends has become a key competitive for various types of companies. We never however
differentiator. From big banks harnessing big data presume that ours is the last word on any given topic:
to auto manufacturers using MRI machines to fine- our intent is to kindle the debate.
tune their marketing messages, this year’s report
has analyses that most C-level executives should find We hope you and your colleagues find this year’s
relevant. Predictions for the TMT sector useful. As always, we
welcome your feedback. In addition to the text version
As in 2011, this year’s Predictions report is published of Predictions in this report, a discussion around each
as a single report rather than three separate ones. Prediction is available as a video, a podcast and an app.
Deloitte’s view is that developments in each sub-sector
are now so inter-linked and interdependent that TMT Whether you are new to this publication, or have been
executives need to be cognizant of key trends across all following our Predictions for years, we thank you for
sectors. your interest. And to the many executives who have
offered their candid input for these reports, we thank
I am often asked what differentiates Deloitte’s you for your time and valuable insights.
Predictions different from other perspectives. I believe
it is all about the methodology: We look forward to continuing the conversation.

• Rigorous research: We use both primary and
secondary sources, fusing quantitative and qualitative
analysis, based on hundreds of depth discussions,
polling tens of thousands of individuals, reading
thousands of articles.

• obust testing: We test out emerging hypotheses
R Jolyon Barker
with Deloitte member firm clients, analysts and Managing Director
at conferences throughout the year. For example, Global Technology, Media & Telecommunications
Deloitte held a special Predictions session for key Deloitte Touche Tohmatsu Limited
Asia Pacific leaders in Beijing in June 2011, and their
contributions are reflected in this year’s report. As used in the Predictions, “Deloitte” refers to the
Deloitte Touche Tohmatsu Limited (DTTL) Technology,
• nnovation: We publish only perspectives that we
I Media, and Telecommunications (TMT) Industry Group
think are new or counter to existing consensus. – a group comprising DTTL member firm
This includes calling a market where most TMT professionals.
commentators expect there to be none, or identifying
markets where the hype is ahead of reality.


Consumer tech demand defies the
economic headwinds

Deloitte predicts that overall global demand for It is an exceptional tech purchase that cracks four
consumer technology will likely grow in 2012. Record figures in dollar terms today, while a decade ago the
numbers of smartphones and tablet computers are average PC or big screen TV typically cost more than
likely to be purchased, and more computers of all $1,000. Three decades back, the average television cost
descriptions are likely to be bought. Global television an inflation-adjusted $1,800. Today that $1,800 could
sales may see only modest growth on average, but get you two large flat screen televisions, two tablets,
sales are forecast to be robust in emerging countries1. two netbooks, three smartphones, and still leave
Even countries that are experiencing stagnant growth change to take the family out for dinner.
or mild recessions should see overall growth in
consumer technology unit shipments, although the Most consumers do not quantify value for money to
total dollar value may be flat as prices come down due the exact cent when buying or upgrading a device or
to Moore’s Law and new form factors. service. But many are likely to have a rough idea of
how much they might use it. Consumer technology
While global economic growth forecasts for 2012 are generally fares well in this type of analysis. The average
weaker than those at the start of 2011, the outlook $500 tablet is used for 350-700 hours per year,
remains positive for most regions2. However, developed implying an hourly cost as low as $0.70, assuming
markets are likely to see the weakest growth. In these the tablet is kept for just one year5. The average living
countries, consumers may defer spending on big-ticket room TV is typically used for three to five hours per
items while maintaining spending on smaller items, day. Given that the price for an entry-level flat panel
including consumer technology3. Emerging markets, television is about $400, the hourly cost is $0.45 or
where the installed base for many types of consumer less, again assuming the TV is kept for one year only6.
technology remains relatively low, should still enjoy By contrast, the cost of a car, overseas vacation, music
relatively robust overall growth (mid to high single concert or sporting event is at least ten dollars per
figures). Lower entry-level prices for computers, as well hour, and major events can cost hundreds of dollars
as the availability of a widening range of less expensive per hour.
smartphones, should further drive demand for devices
in those countries. Consumer tech provides such good value for several
reasons. Moore’s Law allows vendors to offer ever-
Personal technology in 2012 will likely provide improving devices for ever-lower prices. Another driver
outstanding ’bang for your buck’. Although it may is the high degree of competition for many categories
seem that modern society spends a lot on technology, of consumer technology7. Margins for some TV vendors
the actual amounts are less than one might expect: the have been estimated by analysts at below two percent8;
average US household spent only $1,200 on consumer for others they are negative. Margins for some tablets
technology in 2011, or less than 2.5 percent of median are in the low single figures, with profits being primarily
income4. Consumer tech purchases start at the low tens generated from accessory sales9.
of dollars for basic mobile phones, and rise to hundreds
of dollars for high-end smartphones, tablets, laptop
computers and televisions.


Spending on consumer technology in 2012 may also In emerging countries, consumer technology seems
be stronger than expected due to a structural shift in likely to remain a key purchase as households emerge
priorities. A growing number of individuals, across all from a subsistence-level existence. A television set is
regions, may be placing more emphasis on purchasing, often one of the first items purchased in emerging
owning and enjoying technology than ever before. countries with demand for TV sets even ahead of
At one time, the rite of passage for becoming an refrigerators, showers and electricity (many TV sets
adult may have been buying a car and then a house. are powered by car batteries)13. In emerging markets
However, in 2012 the rising cost of running a car10 the entry-level price for a television can be significantly
and buying a house11 may well cause priorities to be lower than in developed countries, with thicker flat
reset. Renting may become more acceptable, and screen TVs (four centimeters vs. one centimeter) and
taking public transportation, taxis and renting cars cathode ray tube (CRT) TVs still selling well14.
may become preferable to owning them, particularly in
cities with highly congested roads12. Spending less on
housing and transportation enables more money to be
spent on technology devices.

Bottom line
Consumer technology has many reasons to perform well in 2012, even in markets with little growth,
declining incomes and rising prices. There are several major advantages that should be emphasized: new
markets enabled by the seemingly inexorable rise in different types of consumer technology; a steady
increase in value for the money of many devices; and the growing importance of technology as a status
symbol.

Consumers’ budgets may be limited, but how they allocate their spending varies. In many cases, consumers
can be readily persuaded to shift spending between seemingly un-connected categories – and marketing
should exploit these tendencies. For example, consumers with constrained budgets may not be willing to
choose between a television or computer; instead they may opt to stay close to home for vacation and then
use the resulting travel savings to buy both devices15.

6

It takes two to tablet: the rise of the
multi-tablet owner

Deloitte predicts that in 2012 almost five percent of Purchasers of lower cost seven-inch tablets are likely
tablets sold will likely be to individuals or households to comprise first-time tablet owners, as well as existing
that already own a tablet, which equates to five 10-inch tablet owners simply wanting an additional
million tablets16 worth between $1.5 and $2 billion in smaller, lighter tablet that fits into a purse or pocket23.
revenue. Although this represents a small percentage
of total tablet sales, given that the tablet market is only Smaller tablets are likely to be used differently
three years old it likely marks the most rapid ‘multi- than their ten-inch equivalents, due to the reduced
anything’ market penetration in history. It is also worth processing power that many smaller tablets are likely
remembering that in January 2010, aside from the to have. Smaller tablets may be more frequently used
Predictions estimate, the most aggressive forecast for for reading books, using apps designed for phones,
total next-generation tablet sales that year was one showing photos to friends and family, and reading
million units. e-mail24. But smaller tablets may be less useful for
browsing full versions of Web sites, flicking through
It took several decades after introduction for more magazines, reading business documents, analyzing
than five percent of households to have more than one data, writing documents, reviewing presentations, or
car, phone, radio or TV. More recently, over ten years watching long-form video.
passed before five percent of homes had more than
one personal computer or cell phone. Seven-inch tablets will likely mainly be sold at a lower
price than 10-inch equivalents, from as little as $100,
The emergence of a multi-million strong cohort of users but more typically at $200. The principal impact of
with two tablets in 2012 is part of a long-term steady quality tablets at a lower price point will likely be a
increase in the number of computers used and owned wider addressable market; however one group of
per person17. Often called “scatter cushion computing” purchasers of these lower-priced tablets will likely
the main driver for multi-tablet individuals and include individuals who have been issued a high-end,
households will be size, new form factors, price points relatively powerful tablet for work purposes but who
and vendor business models. also want an additional tablet for private, home or
family use.
The 75 million modern tablet computers sold since
they launched in 2010 have clearly proven the demand The business model should also have an impact.
for a device with dimensions and processing power A growing share of the tablet market is likely to be
somewhere between a smart phone and a laptop18. taken by devices with a purchase price that is at or
But thus far tablet demand has been largely below the manufacturer’s cost, with all margins being
homogeneous, even if the offer has been varied19: over made on subsequent service revenues, in the forms of
80 percent of all tablets to date have been roughly content purchases (predominantly books, games and
10 inches in size, with a single LCD capacitive touch music), subscriptions and rentals. Content owners
screen, weighing about 650 grams, Wi-Fi but no 3G (from music companies to handheld games publishers)
radio, and an average selling price of about $60020. and retailers may want to actively forgo hardware gross
margins on smaller tablets as a way of encouraging
In 2012, the supply of tablet choices is likely to become existing customers to move to digital, lower-cost
even more varied, and demand is likely to follow suit. distribution models.
As with smart phones, a category which now describes
multiple types of devices21, tablets will become Another driver of multiple ownership will likely be
increasingly diversified by size, processor power, enterprise deployment of specific tablet models that
operating system and business model. workers are required to use, instead of generally
available tablets. Possible reasons for this deployment
Size will be a key driver for multiple tablet ownership. approach include greater security, better compatibility
There is likely to be a marked increase in the number with existing operating systems, and improved
and popularity of smaller tablets, ranging in screen size ruggedness25.
from five to seven inches22, with tens of millions sold
by year-end, compared to a few million in all of 2011.


Bottom line
Device vendors, content owners and connectivity providers should all get ready to respond to the rise in multi-tablet households.

Content owners should ensure that the content and services available are optimized for different types of tablets based on size, type,
capabilities and target market. Tablet usability will be compromised if content is repurposed from existing devices such as smartphones
and other tablets with different capabilities.

Just as customers have shown a willingness to purchase multiple variants of the same product for everything from smartphones to
sweaters, demand for tablets will likely follow suit as the devices become more specialized. Any vendor that is able to offer seamless
content sharing among families of devices – as well as a common user interface – is likely to enjoy a competitive advantage.
Content owners should enable owned digital content to be accessible across all devices (to the extent that regulations allow it).
This may well involve replication of data across devices, rather than assuming constant access to media in the cloud.

Network operators should expect a steady rise in tablet ownership, and evaluate the impact this will have on connectivity. Tablet utility
will depend on connectivity: the more useful and used a tablet, the more bandwidth it is likely to consume. End-users will of course
hope for faster bandwidth and bigger monthly data allocations, all at a lower price. The demands for faster bandwidth and more data
are not necessarily impossible to accomplish if users shape their data consumption to align demand with network availability, rather
than expecting on-demand service at all times. Users can and should be encouraged to download tablet content, such as magazines,
TV programs and movies, during off-peak periods, ideally using Wi-Fi; data back-ups between tablets and other devices can be sent via
short-range networks, such as Bluetooth and Wi-Fi Direct, bypassing the Web altogether26, yet still satisfying the need for connectivity.
Operators should not assume that the places where tablet users want to connect will be the same as those for smartphone users, much in
the same way that mobile data has a different usage footprint than mobile voice.

Primary and secondary tablets are likely to continue driving significant Wi-Fi traffic; hotspot providers will probably need to upgrade
technology, deploy a denser grid of access points, and provision more and faster backhaul. Many hotspots were deployed at a time when
tablets had not even been invented; demand for Wi-Fi connectivity will likely surge along with the growth in ownership of all types of
mobile data devices.

8

Billions and billions: big data becomes a
big deal

Deloitte predicts that in 2012, “big data”27 will
likely experience accelerating growth and market
penetration. As recently as 2009 there were only a
handful of big data (BD) projects and total industry
revenues were under $100 million. By the end of 2012
more than 90 percent of the Fortune500 will likely
have at least some BD initiatives under way. Industry
revenues will likely be in the range of $1-1.5 billion.
But the industry is still in its infancy. Big data in 2012
will likely be dominated by pilot projects; there will
probably be fewer than 50 full-scale big data projects
(10 petabytes and above) worldwide.

Historically most of the world’s accessible data has
been located in traditional relational databases,
accessed and managed with a certain set of tools and
analyzed and reported on with business intelligence
software. The ability of those tools and software
applications to cope with larger and larger data sets
has grown over time, but in general any set of data that
was viewed as being “too big” or needing results “too
fast” was seen as requiring an entirely new set of tools,
most commonly referred to as big data tools. Not all industries are likely to benefit from big data
projects equally, and uneven distribution of BD across
Until the last year or two, traditional data tool capacity verticals is already perceptible. Not surprisingly, the
had more or less managed to keep pace with the first movers were Internet companies: in fact, the
growth in data sets. However social networks, real most popular big data tools are being built on top of
time consumer behavior, mobility, sensor networks software that was originally used to batch process
and other data generating sources have caused many data for search analysis32. The fast follower sectors are
organizations’ data warehouses to overflow. Data sets likely to be public sector, financial services, retail, and
an order of magnitude (or two) larger than before are entertainment and media33.
either happening today, or are seen as likely within the
next 12 months. Even when the size of a data set has Like many emerging technologies, BD can be easy
not grown so quickly, if organizations now want to do to read about, but hard to picture in real world
analysis in real-time, sometimes traditional tools are not applications. A recent example from the media industry
adequate and big data is again being considered. may help:

From being the sort of tool that was only needed “The Financial Times uses big data analytics to
for meteorology or physics simulations, big data has optimize pricing on ads by section, audience, targeting
recently moved into the mainstream: individual big data parameters, geography, and time of day. Our friends
conferences28 are drawing thousands, BD companies at the FT sell more inventory because the team knows
are attracting funding rounds of over $50 million29, what they have, where it is and how it should be
BD venture funds are being created30, and large priced to capture the opportunity at hand. To boot,
existing software players are validating the markets analytics reveal previously undersold areas of the
by partnering with or acquiring outright early stage publication, enabling premium pricing and resulting in
leaders in the space31. found margin falling straight to the bottom line.34”


Like many nascent IT spaces, big data has been difficult
to size35. Estimating the market size is challenging for Bottom line
several reasons: there are varied definitions of what Traditional DB, ERP and BI companies will likely not be hurt in 2012, or even
BD is, it is still early in the adoption cycle of big data the longer term: big data will coexist with the existing DB management
technologies, and most of the companies who are stack. At a recent BD conference, a survey showed that over 60 percent
doing BD do not disclose their spending. Another of respondents believed that their “Existing data warehousing/BI analytics
barrier is that BD work is primarily based on open supplier…will deliver big data technologies and solutions.39”
source code: the initial software is free, and the real
spending comes from internal IT staff adapting the Further, just having the BD tools isn’t enough, enterprises need to know what
code. Unlike measuring sales of a new kind of router, questions to ask, actually ask them, and then translate that into strategy
BD spending is not easy to count. or tactics. Moreover, a recent survey of chief marketing executives found
that “…more than 60% of knowledge workers at large enterprises say their
Assuming moderate growth in 2012 over 2011, global organizations lack the processes and the skills to use information effectively for
spending on all information technology is projected decision making40.”
to be roughly $3.7 trillion36. Of that, total enterprise
software should be about $270 billion. And of that, Even though BD is still in its early stages, the growth suggests that the
database management systems spending (DB) will likely industry needs to develop talent with big data skill sets: 140,000 to
be over $27 billion, enterprise resource planning (ERP) 190,000 skilled BD professionals will be needed in the US alone, over the
software about $25 billion, and business intelligence next five years41.
(BI) roughly $17 billion. Combining the DB, ERP, and
BI markets the total could be about $70 billion. It will be important for enterprises to develop new policies around privacy,
security, intellectual property, and liability. BD isn’t just about technology and
According to some sources, more than 90 percent of employees with the right skill sets, it will also require businesses to align work
analytic systems/data warehouses have less than five flows, processes and incentives to get the most out of it42. It is important to
terabytes of data, and can be handled by traditional note that enterprises should not concentrate on big data at the expense of
database tools and analytics37. This would suggest that “current data”, or business information as normal. There is still a lot of value left
the value of the DB+ERP+BI requiring big data solutions to be extracted from the information inside their traditional databases!
would be at most $7 billion in 2012. Further assuming
that it is still relatively early in the adoption cycle, There are plenty of reasons to be skeptical about the BD market. But big
15-20 percent of that total might be converted in 2012, data probably deserves a place in overall enterprise IT strategy for generating
which drives a range of roughly $1-1.5 billion38. business insight. Best practices include generating a list of important challenges
or questions that the current approach to data does not address. Could big
data deliver the answers enterprises are looking for? If so, then it’s all about
discipline. A disciplined, targeted approach to big data – one focused on
answering very specific questions for the business – is one that many companies
can probably take on today without abandoning their current efforts43.

Big data’s potential is likely to pivot on context: when organisations recognise
that big data’s ultimate value lies in generating higher quality insights that
enable better decision making, interest and revenues should accelerate sharply.

10

Hard times for the hard disk: solid state
storage surges

Deloitte predicts that in 2012 the storage world will Figure 1. Projected use of storage technologies for new storage in 2012
likely reach a turning point. Although the traditional
100%
hard disk drive (HDD) is far from extinct, there will likely
be a dramatic increase in adoption of solid state drive
(SSD) technology across a number of markets. 80%

By the end of 2012, storage for small mobile devices – 60%
such as MP3 players, smartphones and tablets – is likely
to be over 90 percent SSDs44, versus just 20 percent 40%
in 2006. By year-end, up to 15 percent of laptops and
netbooks are expected to use SSDs, four times higher
20%
than in 201045. Finally, even in the data center market –
long an exclusive bastion of HDDs – SSDs could be used
0%
for up to 10 percent of new storage. Small mobile Mobile PC Data Center

The hard drive is not dead by any means. Global SSD HDD
storage demand in all forms continues to rise, and both
Source: Deloitte Global Services Limited, 2011
storage technologies are likely to grow in 2012 and
201346. What has changed is SSD’s rapidly rising share
in some markets.
In the 1980s, many PC manufacturers and buyers
Solid state drives are not new. The technology has been questioned the need for the 20MB hard drive option,
around for decades in various forms47, but has suffered confident that no one could possibly require more
from some fundamental limitations. While making a than 10MB. However, rapid exhaustion of hard drive
storage device out of silicon chips instead of spinning capacity quickly led to the belief that storage needs
disks was technically possible, the resulting device had rise inexorably and that ‘there is no such thing as too
too little capacity and was too expensive. In 2005, the much storage.’ Now, we could be seeing the end of
largest commercially available SSDs cost thousands of that trend. Even in an era of 18 megapixel cameras,
dollars and could hold only a few gigabytes (GB). more MP3 music files than a person will ever listen to,
And in 2008, a PC with a 64GB SSD drive cost $1,000 and hundreds of hours of HD video, the capacity of
more than the same machine with an 800GB HDD. high-end storage devices may be growing larger than
the average consumer can use or justify49.
SSDs have become steadily cheaper, following a
Moore’s Law progression, with price per GB declining Even people who store massive amounts of data may
about 50 percent every 18 months. However, HDD not need a hard drive on every computer they own.
prices have declined even faster than expected over In many markets, PC penetration is mirroring the
the past three decades – at a remarkably rapid and adoption of smartphones, music players and tablets,
constant rate of about 50 percent every 14 months48. with individuals owning multiple devices in the same
Solid state drives are still roughly ten times more category50. Laptops and netbooks are often used as
expensive per GB than hard drives. However, there secondary PCs, and for this purpose 120GB (or even
are a number of other factors that are making storage 60GB) may be more than adequate – putting them into
buyers look beyond the price/GB metric. the range where SSDs can compete. Also, more and
more consumer data is being stored or backed up in
Solid state drives may not be as large and affordable as the cloud, potentially reducing the need for HDD-sized
hard drives, but their size and cost is sufficient for many storage and making SSDs a viable option for a growing
applications – even computer use. Although HDDs will number of buyers.
continue to be bigger and less expensive than SSDs,
their capacity will increasingly overshoot the needs of
most computers.


The two biggest advantages of a solid state drive are Solid state drives are also quieter, more reliable, and
size and power. On average, an SSD takes up half the enable faster start up. SSDs are completely silent,
space of an HDD, weighs half as much, and uses half which can be a critical advantage for music applications
the power. In a smartphone or similar sized device, and quiet environments. They are also significantly
these considerations virtually require the use of SSDs. more reliable. Devices that use SSDs are less sensitive
Tablets and netbooks, with their small form factors to shock, and failures tend to be less catastrophic54.
and relatively small batteries, also benefit greatly from Devices that use SSDs also boot up to full functionality
an SSD’s compactness and power efficiency. These about 25 percent faster than devices using HDDs55.
benefits are less significant in standard laptops, but
as ‘ultrabooks’ (thin and light laptops) become more SSD adoption has temporarily benefited from the
popular, SSD use will likely grow51. Further, SSDs can be disastrous flooding that hit Thailand in October
created with non-standard form factors, which allows 2011. Before the floods, half of all HDD parts were
for potential new designs and products. manufactured or assembled in the affected areas.
The resulting plant closures and supply interruptions
Even corporate data centers are proving to be an created a global HDD shortage and caused prices
interesting and surprising market for SSDs. Historically, to spike 20-30 percent. Many device manufacturers
data center storage purchases were driven almost could not procure enough HDDs and had to use SSDs
entirely by cost per GB, meaning that SSDs were instead to get products onto store shelves in time for
seldom considered. However an increasing number the peak winter selling season. Others shifted toward
of data centers are facing physical constraints: they SSDs because higher HDD prices narrowed the price
have a limited footprint; finite heating, ventilating and premium and made SSD’s other advantages more
air conditioning (HVAC) capacity; and they can’t keep compelling. Although normal HDD supply levels are
using more electrical power. All of a sudden, small, expected to resume by late spring 2012, the increased
cool, power-sipping SSDs are becoming an attractive momentum toward SSDs may prove difficult to reverse.
option for some locations52. The environmental benefits
of SSDs are significant too. One study suggests that
global data centers shifting even partly to SSDs could
save 167,000 megawatt hours over a five year period53.

Bottom line
In the past, most consumers were not involved in picking their storage technology: they simply accepted whatever the manufacturer
installed. But in 2012 and beyond, buyers may have the option to consciously choose between SSD and HDD storage. Many people do not
know one technology from the other and will need to be educated about the costs and benefits of each. Consumers that hoard data will
likely opt for the higher capacity of HDDs, while those most concerned about battery life or weight will likely choose SSDs.

At some point, hard drives may no longer be offered on some devices. But during the transition period, device manufacturers will need to
adapt their sales processes, after-market support, and hardware designs so that buyers can get the full benefits of each technology.

Data centers will need to develop best practices around a more heterogeneous storage environment. Hybrid solutions that combine the
speed and rapid access of SSDs with the superior storage capacity and price to GB ratio of HDDs are already being tested. The result could
be performance synergies that go beyond the standard SSD benefits of reduced size and power consumption.

12

Ambient radio frequency power
harvesting: a drop in the bucket

Deloitte predicts that in 2012 ambient Radio Frequency Ambient RF harvesting faces four fundamental
(RF) power harvesting products will likely remain a challenges:
niche market with only moderate growth potential
due to fundamental limits with the technology itself. There is not enough ambient RF energy available.
While it is expected that beamed power products56 Given the seeming ubiquity of RF transmitters, it may
will enjoy relatively greater success, combined global seem that transmissions from TV stations, cellular
revenue for both products is likely to remain modest – network towers and Wi-Fi hot spots would bathe us
probably below $100 million. While revenue may rise in in a steady source of energy just waiting to be tapped.
the coming years, increases will likely be steady rather However, this is not the case: there is 25 times more
than dramatic. Those who imagine a future in which ambient solar energy available than RF. Putting a
handheld devices and tablets are powered by the sea of solar panel on the back of a wireless device would be
ambient RF energy that surrounds us are almost certain more practical than installing an equivalently-sized RF
to be disappointed. harvesting antenna. Existing communications networks
are unlikely to generate significantly more RF energy in
Since 1898, when Nikola Tesla first proposed the the future: current FCC guidelines60 limit RF exposure to
concept of wireless power transmission57, the idea of the general public to less than 1000 µW/cm2. This is the
extracting ‘free’ energy out of the air has excited public highest level of RF power one would normally expect to
interest. The concept is particularly appealing given encounter. Currently, though, there is much less power
today’s ever-expanding constellation of mobile devices coming from cell towers, which are limited to 580 µW/
and the constant risk of experiencing a dead battery in cm2 at ground level61. Compare this to an average
your smartphone, tablet, GPS or other portable data of 25,000µW/cm2 of solar radiation that is typically
device. available.

Several high-profile laboratory demonstrations have Distances are too great. Just like all electromagnetic
showcased ambient RF energy harvesting: in 2009, radiation, RF is subject to the inverse square law.
scientists were able to power a digital thermometer Increasing the distance between the source and
with a large antenna array pointing at a nearby TV receiver by four times results in a 16-fold drop in power.
tower58. But in other real-world applications there are Directional antennas can be used on the broadcast side
a number of serious challenges – including the laws in other wireless power transmission schemes to reduce
of physics – that fundamentally limit the technology’s this effect but these techniques cannot be applied to
usability59. ambient power harvesting as these are mobile targets
with no fixed location or orientation. The result is that
It can be challenging to understand the limits of power density falls off dramatically as one moves away
harvesting ambient RF power because of the many from an RF source, meaning the amount of power to be
units (volts, amps, and watts) and metric prefixes harvested can vary considerably depending on where
(millis, micros, picos and femtos) involved. While most you are and which way you are facing.
people know how bright a 60W light bulb is, many are
less familiar with a milliwatt or microwatt. To facilitate
comparisons, all units are stated in microwatts (µW).
Using this scale, the familiar 60W light bulb now
equates to 60,000,000 µW!


Converting ambient energy into usable power Environmental factors interfere with RF power
is too inefficient. At high power densities, such as harvesting. Objects around an RF device can reflect
those at or near FCC exposure limits, RF harvesting and absorb radio waves, causing areas of increased and
systems can be relatively efficient, with some vendors decreased power. This is best seen through the number
demonstrating conversion rates of 60-70 percent62. of “bars” on a wireless device and how much they can
However, as power density drops, so does conversion vary over time and across location. Simply placing a
efficiency. Simply walking a few meters further away phone into a pocket, next to all of the RF absorbing
from an RF source can drop conversion efficiency water in the human body, can virtually eliminate the
from 60 percent to less than five percent63. This is in power available for harvesting66. Further, while a single
addition to the drop in power density caused by the device harvesting ambient RF may be able to extract
increased distance. Antennas and power conversion some power, a bus full of people with similar devices
devices are tuned to operate most efficiently at would reduce the amount of power available to almost
specific frequencies: an 850 MHz device designed to nothing.
efficiently harvest ambient 3G energy will be largely
ineffective with Wi-Fi at 2.5 GHz64. Supporting
multiple frequencies is possible, but requires additional
conversion hardware, cost and complexity65.

Bottom line
The combination of low power density, distance, efficiency and interference, means that under real-world
conditions ambient power harvesting systems with practical antenna sizes can recover only 10-100 µW of
electrical power. Since the typical tablet battery has a capacity of 15,000,000 – 25,000,000 µWh, recharging
it with a RF harvesting antenna is like filling a backyard swimming pool with a shot glass. Even under ideal
conditions, charging a smartphone’s smaller battery would still take decades67.

While a smartphone powered or even recharged by ambient RF will not likely be available any time soon,
there are niche areas where the technology can be useful. Small sensors, that periodically build up enough
charge to report back, or that rely on separate readers to give them the RF surge needed to transmit data
could be powered by RF68. An example would be a sensor to monitor ceiling temperature where there is no
power supply and is too high to easily change batteries.

There is also potential for beamed or broadcast power solutions that use similar technology combined with
tuned RF sources to power or charge devices at a distance of several meters. Next generation TV or game
consoles could be equipped to wirelessly charge associated remotes and controllers from across the room.
Also, heating, ventilation and air conditioning (HVAC), warehouse and building-telemetry solutions based on
short-range (tens of meters) wireless power transmission are starting to enter the market69.

In summary, harvesting ambient RF power will likely remain a niche solution with moderate growth potential
in 2012. While this technology is impressive on the lab bench, physical constraints and real world limitations
will likely prevent widespread adoption. Although some of these challenges could likely be surmounted by
increased research, others such, as distance and interference, are dictated by fundamental laws of physics.
That being said, adjacent technologies, such as beamed power, could have greater long-term potential.

14

3D printing is here – but the factory in
every home isn’t here yet!

In 2012, Deloitte predicts that 3D printers will likely 3D printers are extremely useful for creating
become a viable segment in several markets including prototypes, highly customized items, or small
the $22 billion global power tools market70, and the production runs, but they do not scale well beyond
industrial manufacturing market with growth rates of 10 items. Due to economies of scale, traditional
greater than 100 percent versus 2011. 3D printers are manufacturing techniques are likely to always be much
also expected to enjoy success in several niche areas faster and far more efficient when mass production
such as the “do it yourself” home hobbyist market is required. In this way, 3D printing is a lot like
and various after-market support chains with long tail paper printing. Making fifty copies on a printer or
characteristics (such as small appliance and auto repair). photocopier is economical and reasonable, but
There is also significant interest in the application of making a thousand copies shifts the advantage to an
3D printing in the biomedical sector71. However, total offset press.
combined printer sales will likely remain in the sub
$200 million range, and those expecting a “replicator” While there have been recent experiments in
for use at home will be disappointed. embedding electrically conductive traces into printed
objects76, 3D printers are not capable of producing
Although 3D printers hold considerable promise, one complex electronic components such as processors,
must be wary of the hype surrounding the technology. memory or other integrated components. So while
Some have heralded 3D printers as the first step toward someone could easily print a new case for their
the “democratization” of production72, calling them smartphone, no one will be printing a complete
“desktop factories”73; others have speculated that smartphone at home.
consumers will soon be able to download open source
designs for anything they can imagine and then use 3D printing is generally limited to producing relatively
3D printers to instantly fulfill their needs and desires74. homogeneous objects made up of a small number
However, the current technology is subject to several of distinct materials (and for most entry-level units,
significant limitations. While some of these will be just a single material). This means that printing
overcome in the medium term, others are the result items requiring multiple materials, such as a running
of fundamental constraints that are unlikely to be shoe77, is not possible without substantial increases
resolved. in complexity. Nor can 3D printers capitalize on the
material equivalent of “primary colors” that traditional
Today, 3D-printed objects are rarely as durable as paper printers use to generate a rainbow of hues from
their traditionally manufactured counterparts. While a limited set of different inks.
some exceptions do exist, using a 3D printer tends
to be extremely expensive and is only practical when Lastly, many items derive their utility from the physical
conventional production techniques are not feasible. properties of the materials they are made from – for
For example, a printed wrench, while functional, will example, Pyrex cookware, or NiChrome heating
simply not last as long as one produced through drop elements. 3D printers are not capable of “synthesizing”
forging, which can potentially survive generations of these materials and are entirely dependent on the
hard use. feedstock material provided. To produce even a subset
of consumer goods used in the average household
Mass produced objects are still substantially cheaper would require dozens to hundreds of different
to manufacture than their 3D-printed counterparts feedstock materials, many of which are not suited to
due to the costs of feedstock material. So although the processes used in 3D printing.
a consumer could print dinner plates at home, they
would cost 30 times more than simply buying them at
a store75. In the same way, while most people already
have the capability to print novels and textbooks at
home, they find it cheaper and more convenient to buy
books through online or local bookstores.


Despite these limitations, there are significant markets The range of materials supported by 3D printing is
where 3D printers will likely enjoy success in 2012. expected to broaden, with some advanced processes
Entry-level prices are expected to drop below $1,00078 allowing objects to be printed with extremely accurate
in 2012, placing them well within the range of dimensions, including those with moving parts86.
hobbyists and determined consumers. While it is not Businesses requiring rapid prototyping and highly
expected that 3D printers will become mainstream customized or small production runs will likely continue
in the next 12 months, early adopters will likely to be the primary customers for commercial 3D
demonstrate that a viable market does exist, and printers in the near term, but new niches may begin
one can expect to see growing interest from larger to develop as prices and sizes begin to come down.
appliance, tool and industrial machinery producers. One area where early adoption is likely in 2012 is in
after-market service industries that need to manage a
At the low-end consumer level, the dominant process long tail of large inventories made up of unique items
will likely remain single color thermoplastic extrusion. with low individual demand, such as small appliance
This method uses a print head to deposit small amounts and automotive repair87, 88. Rather than having to stock
of melted ABS (or other plastic) in a manner similar rarely used replacement parts, or make customers wait
to an inkjet printer. There are several limitations with for ordered parts, the required parts could be printed
this method, most significantly the high cost of raw on demand. In this scenario, it is not unreasonable to
feedstock plastics, which will likely remain in the envision a 3D printer in a technician’s vehicle or garage
$35-$45/kg range79. For 2012 the niche for these allowing him to print parts as needed.
consumer units will typically be limited to artists,
crafters, hobbyists and those within the growing
“maker” community80. An equivalent comparison in the
home market would be table saws versus toaster ovens: Bottom line
the former is limited to large numbers of enthusiasts, While 3D printers will likely remain a niche
but the latter is in virtually every home. product in 2012, with purchases primarily made by
early adopters, several developments that might
While the consumer market will likely grow in 2012, demonstrate the technology are becoming mature
most revenue will likely come from commercial users. and have begun to “cross the chasm”. While the
Continued price pressure on commercial 3D printers technology has several unique applications and
with some products approaching the $10K price point is expected to experience considerable growth in
can be expected81. The diverse set of processes used the long run, for the foreseeable future it will likely
within commercial 3D printers will help ensure a broad remain a specialized application that for the most
range of price points with technologies including multi- part will complement, not replace, traditional
color thermoplastic extrusion82 (similar to the process forms of production.
described above), photo-catalyzed resins83 (using light
to harden liquid plastics), deposited binders84 (applying
resin binders to powders) and laser sintering85 (using
lasers to melt powder together).

16

Media


Targeted television advertisements miss
the point

In 2012, Deloitte estimates that targeted TV advertising Every year, the technology to deliver targeted
will likely represent less than one tenth of a percent of advertising improves. The array of data on customer
global television advertising revenues, which is less than purchasing patterns, income levels and browsing
$200 million out of a total market of $227 billion89. behavior is constantly growing; and the processing
A targeted TV ad, also known as an ‘addressable ad’, is power available to analyze this data increases every
a conventional TV commercial spot served specifically year. Options for delivering targeted ads are constantly
to a television set or computer. The ad is selected improving as well. One approach, for example, is to
according to contextual data, such as income level, download commercials appropriate for a household to
purchasing history or stage of life, for an individual a set-top box (also known as a cable or satellite box).
viewer or household90. These ads can then be inserted during commercial
breaks. Targeted ads can also be inserted at the point
The clamor for targeted television advertising dates of transmission when delivering individual streams of
back to the origins of TV ads. One of advertising’s video to a household.
fundamental objectives is to target specific customer
segments, such as those who allocate a household’s The ability to deliver television signals on-demand via
spend on cleaning products, or specific demographic the Web enables advertising to be allocated according
groups. Yet television is a mostly mass-market medium, to geography, even down to specific streets in a
which means that many people who view a TV ad are neighborhood.
not its main targets. On this basis, TV advertising could
be criticized as wasteful and inefficient, particularly Some metrics show targeted TV ads to be more
when compared to the targeted advertising that the effective than regular television advertising. Viewers
Web is perceived as delivering91. shown targeted ads appear less likely to change the
channel during commercial breaks94, and brand recall
Targeted television advertising seeks to mitigate the can be higher 95. Hundreds of millions of dollars have
inherent inefficiency of TV ads while incorporating the been invested in companies focused on delivering
best of traditional media and new technologies: keeping targeted TV advertising96.
the power of TV, but only showing an ad to an audience
that is most likely to be receptive. Targeted advertising Targeted TV ad campaigns enhanced by technology are
would enable ads to be selected for the specific certainly attractive in principle, but execution remains a
viewer, using principles similar to those for Web-based challenge. And in 2012, it is unclear whether the need
advertising92. For example, dog food ads would only be to deliver further degrees of advertising is sufficiently
shown to pet owners; luxury car commercials would only widespread to justify the required investment: many
be shown to viewers likely to purchase top-of-the-line broadcasters offer hundreds of different customer
models; and ads for a local restaurant would only be categories, but advertisers rarely ask for more than
shown to people who live nearby93. 10 different segments. This is why, despite the
hypothetical attraction of targeted TV ads, the market
in 2012 is likely to remain small.

18

The high cost of creating a television commercial means Current TV advertisements are already targeted to a
that advertisers are very unlikely to make multiple considerable degree, a fact that is often overlooked.
versions for a single campaign. TV ads are generally Every TV program attracts a certain, relatively
becoming more expensive. The cost of creating a TV predictable type of viewer, against which relevant
advertisement focused on brand-building is likely to advertising that is likely to resonate with
exceed $500,000, while major campaigns with well- the program’s expected audience can be sold.
known celebrities or complex special effects often cost Multi-channel television, available in any country with
more than a million dollars. digital distribution of a TV signal, enables general and
specialized programming to be broadcast. With the
The rising cost of producing a television commercial guidance of a good media agency and planner, this can
makes it less likely that small businesses with modest provide sufficiently accurate allocation of commercials
marketing budgets (who might want to target ads just on a per-program basis.
to households in their area) will be able to advertise on
TV. Although airtime may be available for relatively low Although such targeting may not be precise down
cost, creative costs are far harder to economize on. to the household level, deeper targeting based
on detailed data analytics may deliver only limited
Traditional TV ads, while relatively expensive to produce, incremental benefits – often at significantly higher
can enjoy major economies in preparation and allocation costs. That said, it should be noted that in many
compared to targeted advertising. Determining who markets advertisers do not pay for “wastage” (reached
exactly to target can be resource intensive. Aligning viewers who are not the core target for the campaign).
multiple sets of data, such as matching households to Ads are not sold in terms of total audience, but total
individual purchasing history, or identifying viewers most target audience. Advertisers purchase a volume of
likely to be interested in premium kitchen utensils, can targeted individuals, such as decision-makers for
require significant resources. Traditional TV campaigns, purchases of cleaning products. Anyone else who views
the largest of which involve billions of impressions, lack the ad in that household is not charged for, even if they
this degree of precision but require much less labor- may be influencers of near-term purchases or potential
intensive preparation. customers in years (or even decades) to come.

In addition, delivering targeted ads via a set-top
box requires boxes with uniform specifications and
capabilities. Yet the installed base of set-top boxes
varies widely, with some units up to ten years old97.
Advertisers generally want TV ads to have as wide a
reach as possible – even if they intend to target specific
households within this base.


Joint decision-making on some items means that the Joint viewing of television, particularly in the living
shotgun approach to delivery that is inevitable with room, means that one aim of deeply targeted
traditional TV advertising is potentially more effective advertising – delivering a commercial specific to an
than strictly targeted advertising, since it reaches individual – would still result in wastage if others in
a large number of influencers as well as decision- the room were not also targets for that particular
makers98. Purchases of high-priced items, such as campaign. Thus, the most fertile ground for targeted
vacations and cars, are often based on collective advertising is likely to be video-on-demand TV
decisions. While one individual may pay for an item, programming that is watched on a computer or
other members of the household are likely to have smartphone, which is more likely to be viewed alone.
a significant influence on the choice. For example, a While video-on-demand is growing, viewing volumes
parent purchasing a car may well base part of his or her are still relatively small, at less than ten percent of all
selection, consciously or otherwise, on the approval of viewing of video content. And online viewing of TV
his or her children99. programs is less than a tenth of that100.

Bottom line
There are actually very few TV ads that will never influence what we purchase, either today or in the future.
Ads for diapers and pet food are often cited as examples of campaigns that are irrelevant for vast segments
of the population, since many people will never own a pet, or will not be buying diapers at any point in the
future. Yet product categories such as these are rare indeed.

Before TV executives become either petrified or over-excited by precision targeted advertising, they must
understand how big this market really is: online advertising, after all, has so far been led by search, not
contextual advertising. And online advertising’s biggest growth is likely to come from display ads that do not
rely on context.

The main advantage of TV targeting is that the audience is self selecting. Viewers do the hard job of
matching themselves to ads that are expected to be relevant to them through their viewing choices.
If planners have done a good job of matching advertisements with programs, ads shown should be mostly
relevant to the audience. With Web-based advertising, serving relevant ads can actually be harder. If the
context for selecting an ad is browsing history, this can mislead as a high proportion of computers are
shared. Furthermore, some individuals use multiple machines, and browsing on these machines is not
necessarily amalgamated.

One of TV’s biggest roles is launching new products and brands – an activity where companies do not
always know exactly who is going to be in their target market. In situations like this, a shotgun approach
may well be an advantage. When people watch television, they are generally passive, and a variety of
marketing messages tends to work well in this context.

Television advertising should be blended more closely with online advertising; however, the focus
should be on matching TV viewing to browsing patterns. TV’s ability to influence search patterns is well
documented101: it can effect an 80 percent uplift in searches on a brand over the duration of a TV ad
campaign102. Yet, at present, there is little widespread conjoined monitoring of TV viewing’s impact on
search. Mapping an individual’s TV viewing to his or her searches could quantify a TV campaign’s ability to
influence people’s interests and purchases.

20

The schedule dominates, still

In 2012, Deloitte predicts that 95 percent of television Despite these factors that should be luring consumers
programs watched will likely be viewed live or “near away from traditional broadcast TV, the schedule
live”, that is within 24 hours of broadcast. This is little remains surprisingly powerful111. Humans seem to
changed from a decade ago. People will allow the TV prefer structure, stability and predictability. In one
schedule to guide almost all of their viewing choices, study, the predictability of a reward stimulus was
regardless of whether they are watching shows on more important than the actual stimulus112. We may
a conventional TV, computer, or smartphone; and be biologically and neurologically “hard-wired” to
regardless of the network technology used be it cable, prefer schedules and routine, no matter how often we
satellite, phone line or conventional antenna. profess a desire to watch “what we want, when we
want, where we want.”
Contrary to some expectations, technology has not
shattered the TV schedule, but rather made it stronger What’s on TV can signal our brains about the time
by making it more flexible103. Adherence to the of day, day of week, and season of the year; a good
broadcast schedule does not appear to be an artifact scheduler knows how best to arrange programs to
of limited choices imposed by technology, but rather a align with and reinforce these expectations. Anyone
fundamental aspect of TV viewing for most people. who has watched a Christmas special in July will
understand why the schedule exists.
As in previous years, in 2012 technology that enables
the schedule to be averted will likely reach deeper into The schedule has been variously portrayed as a
our homes, with ever improving specifications. Digital straitjacket, a waste of precious spectrum113, and
video recorder (DVR) storage will likely increase and dictatorial. But for the majority it is a resounding
penetration rates will likely rise104; in several major TV positive; a well-constructed schedule provides structure
markets, including the US and the UK, DVR penetration for what to watch and when to watch.
has already exceeded fifty percent105. Devices that
further enable consumers to watch non-broadcast The best channels maintain their popularity due to their
television, such as PCs, tablets, game consoles and ability to commission and purchase programs which
connected TVs106, will likely be found in a growing they know will appeal to their audience at each time
number of homes107. In some markets, penetration of day.
rates for computers may near 80 percent of homes.
Choice is cherished, but choosing is a chore114. Beyond
These devices are connecting to ever faster and a certain point, the more choice there is, the more likely
popular108 video-friendly broadband networks. we default to a guide. This applies across all aspects
Broadband speeds are increasing by double digits; of our lives: we look to the Oscars to guide our choice
video compression technologies are reducing the of movies, to sommeliers to select our wines, to radio
bandwidth required for video streaming; streaming stations to choose the music we listen to. And we
services offer adaptive bit rates to reduce the load on value television channels partly because of their ability
the network; fiber optic technology is being rolled out to curate what we watch. Their challenge is to show
further; and content delivery or distribution networks programs that we are most likely to enjoy watching.
(CDNs) move frequently-watched video files closer to
the consumer109. These advances improve the video-on- The tedium of choosing is why hundreds of millions
demand proposition and can make network congestion of pay TV subscribers with subscriptions that include
and the resulting buffering almost a thing of the past hundreds of channels constrain most of their viewing to
over wired networks. just a handful115.

Finally, every year the library of video content available
online stretches closer to infinity110. Much of it is on
Websites for zero cost, or for just a few seconds of
pre-roll and mid-roll ads.


For thousands of years, humans consumed content
communally. Whether enjoying Shakespeare at the Bottom line
Globe, gladiators in the Coliseum, or merely a well- The public’s use of television technology to cling as closely as possible to
positioned table in a café, being part of a group the regular schedule raises the question of how exactly viewing should be
enhanced the experience. As indicated by the phrase measured. Current classification of viewing by technology, such as on-demand,
“the thrill of the crowd,” there can be as much pleasure DVR or live broadcast may not accurately reflect underlying consumer behavior.
in the massed spectators’ reaction as in the spectacle
itself. Compliments and heckles alike have far less On-demand platforms can be used to watch a program live, but they count
resonance and relish when they are not shared. as an on-demand view117. DVR playback may be just a few minutes later than
TV viewing is more often prolonged when undertaken live, but again this may not be counted as live, even if the viewer subsequently
with company than alone. caught up with the live feed. To better understand why people watch when
they do, measurements and terminology should reflect consumer behavior,
And for many decades, rigidly-scheduled broadcast rather than the underlying delivery platform. After all, viewing behavior is
TV programs have largely defined the “national driven primarily by content, not technology.
conversation.” The events covered on last night’s news,
and the happenings on last night’s serial or sitcom are In a world where schedules are sticky, conventional broadcasters will
often the most common topics of conversation with want to build on the power they hold. They can show advertisers the
co-workers and friends. A common viewing schedule advantages of the schedule, and why it is not going away any time soon.
brings us together and gives us something to talk Further, to stress their competitive differentiation versus other media,
about. broadcasters can continue or even increase their efforts to build themed chunks
of time, such as “comedy Thursdays.” Equally, broadcasters will likely continue
Online social networks are likely to enhance the to use “counter-programming” (scheduling shows with a specific demographic
schedule’s appeal, not diminish it. Social networks target at the same time as a competitor’s show that targets a different
enable the commentary on programs to be shared not demographic) to boost their audience and ad sales.
just with those in the same living room, but also with
friends, families and strangers anywhere else. Social Businesses providing alternate solutions for viewing video may want to
networks and their many-to-many communications rely less on “schedule-shifting” as their primary value proposition. A large
can create additional interest about a program, with video-streaming company has already acknowledged it is not competing
the greatest buzz typically for programs with youth directly with scheduled television, jestingly referring to itself as “re-run
audiences116. Whether contributing or only consuming TV.118” Similarly, DVR companies may want to stress how their devices can
the social chatter on a program, you need to be be used to let viewers better enjoy the TV schedule, rather than focusing
watching it when everyone else is. on schedule aversion. When DVR viewers miss the first few minutes of a
show, they can use the DVR to catch up and thus have the same experience
The video-on-demand platforms that are likely to be everyone else is having.
most successful in 2012 are those with the closest
proximity to the regular schedule; other platforms Advertisers and agencies will likely still need to think about ad campaigns
whose content is further from the schedule are likely to within the context of a schedule, rather than buying spots or inserting product
have less success, no matter how vast their libraries. placements under the assumption that shows will predominantly be viewed at
random times.
The dynamics that maintain the schedule’s strength are
not one-off, or even cyclical. Those betting against the Finally, city planners will still need to specify their water system requirements
schedule are likely to be disappointed not just this year, with the TV schedule in mind. If viewers stick to the schedule, there will
but in years to come. continue to be sudden changes in water pressure as millions of sports fans
simultaneously take a break at half time!

22

All aboard for the catch-up commuter
thanks to the portable DVR

In 2012, Deloitte predicts that full-screen smartphone Tablets and smartphones can be thought of as
owners and tablet owners will likely use their devices portable DVRs. The falling price of memory means
as portable digital video recorders (DVRs) to catch up that storing video in sufficient quality is not a major
on five billion hours of TV while commuting on public challenge – a 32 GB SD card, sufficient to record tens
transportation. This assumes an installed base of at of hours of content, is now available for under $40124.
least 400 million full-screen, high-end smartphones119 Downloading content at home, either through a
and over 100 million tablets120 at mid-year, and once Wi-Fi connection or even over a short-range wired or
weekly usage121. wireless connection from a living room DVR removes
the reliance on cellular mobile to stream content while
This will represent an acceleration in the of use of travelling.
commuting time to watch programs – especially
among younger viewers who typically have the most Catching up on television is likely to become an
devices, and who currently spend the least amount attractive option for commuters to while away their
of time in front of a TV122. Almost all of the video journey, in addition to reading paid-for and free
content will have been pre-loaded onto the device at newspapers, playing video games or listening to music.
home; network congestion, data caps, and uneven or
inadequate mobile broadband speeds mean that TV As cities experience increased traffic congestion, the
streamed while commuting will likely be less than one appeal of catch-up TV during the commute should also
percent of all video watched123. increase.

Commuters have always needed something to pass the Catch-up commuting is likely to be hindered in 2012
time, and many of them discuss the previous night’s by the technological complexities around recording
television shows with colleagues and friends at the television content onto phones and tablets. And in
office. Combine these two habits with the increasing some cases, it isn’t even legal to do so. As rights
ubiquity of tablets and full-screen smartphones and it owners, broadcasters, and device manufacturers work
is easy to see why the catch-up commuter concept is more closely together, the copying of content should
taking off. become increasingly automated, and demand will likely
rise accordingly.
People hate missing their favorite TV shows. Two of the
most popular recent innovations in television watching The use of commute time to watch television will be
– the DVR and on-demand services – are primarily used bolstered by the growing availability of TV programs
to catch up on missed shows within seven days of the and movies for download on airplanes, long-distance
initial broadcast. trains and buses. Seat-back entertainment has been
common on planes for decades, but represents a major
capital investment, as well as significant operational
cost. Transport providers are increasingly offering Wi-Fi
networks to passengers125. Adding a pre-loaded multi-
media server into any plane, train or bus that already
offers Wi-Fi enables video to be streamed to the
devices customers are already travelling with.
In the medium-term this could even enable transport
companies to remove existing seat back systems,
which would reduce maintenance costs and increase
fuel efficiency by reducing the carried weight in the
vehicle126.


Bottom line
Catching up on television while commuting is a service for which there is already strong latent demand. A minority of commuters on
public transportation already watch television programs and movies on their phones and tablets, sometimes by modifying the device
firmware to enable easier content transfers.

Making TV content available to commuters can do much to increase perceived value provided by various players across the entire business
ecosystem.

For content providers, offering TV shows to commuters should be broadly positive, as it will generally mean more time for their content
to be consumed. Catch-up commuters are unlikely to reduce the amount of time spent watching television at home; rather, they will
probably watch more of the content they like. This is similar to what happened with DVRs: households ended up watching more
television, not less127.

For pay TV platform owners, catch-up commuting should be a way to manage churn among existing customers. It could provide an
additional way for customers to access premium content.

Commuters watching pre-loaded video on mobile devices could be a benefit for mobile network providers. Watching stored programs
instead of streaming Web content or video frees up bandwidth, enabling stressed networks to handle more lucrative traffic128.

For content providers that already serve commuters, such as publishers of free newspaper and video game vendors, the consumption of
TV while commuting is likely to be a threat. Even if the overall amount of commute time is steadily rising due to greater urbanization and
worsening congestion, the growth in on-the-go TV viewing may well be greater.

24

A “brand” new day for online ads

Deloitte predicts that in 2012 global spending on Direct-response online ads gave advertisers a new
brand advertising online will likely grow faster than and much valued tool: the ability to precisely measure
either traditional advertising or direct-response online cost per thousand views (cost per mille, or CPM), click
advertising. This is not a zero sum game: all advertising through rates (CTR) and return on investment (ROI).
will likely grow five percent in 2012129 and all Internet This precision was often the first thing that lured some
advertising is likely to grow 11 percent130. However, portion of ad budgets online, and direct-response
total advertising and overall Web advertising will spending benefited disproportionately from 2000-2010.
likely grow slower than online branding, which we Meanwhile, the metrics that worked so well for direct
expect to rise 50 percent year-over-year to $20 billion online seemed to suggest that online brand advertising
as marketers realize and invest in online advertising’s was not performing well: fewer than one in a thousand
ability to build long-term value for brands. display ads were clicked on135.

Direct-response online advertising is defined as During 2011, the ad industry began to question
embedded email ads, lead generation and paid search. whether CPMs and CTRs were the only metrics that
Online branding is defined as banner ads, rich media, mattered – or even if they were useful at all for
sponsorships, social media and video. A shift toward determining the success of online branding. After all, in
online brand spending would be a new trend: online the traditional advertising world, no one ever clicks-
advertising has historically been dominated by direct through on a billboard or TV ad. But those two media
response ads. Of the $26 billion of online advertising account for a combined 50 percent of global ad dollars.
in the US in 2010, about $20 billion was for direct Further, consumers were spending more and more time
response campaigns131. Brand spending was only online: almost 2.8 hours per day, second only to time
23 percent of all online dollars132. spent watching TV136. Given all those hours, it seemed
as if there ought to be some way to make online brand
This contrasts sharply with the traditional media spending work better.
world, where branding accounts for 61 percent of
all spending: $91 billion out of $149 billion133. Some Data from 2011 shows that advertising buyers were
products are only advertised through direct response starting to accelerate online branding spend. In the
and some are only advertised through branding third quarter, online display spending grew 21 percent
techniques; however, most are marketed using a while search was up seven percent. That was off a
combination of the two. Direct is good for stimulating low base – by our estimates online display grew from
short-term results and is more easily measured. Brand $3.3 billion to $4 billion, while search grew from
spending is more powerful over the long term, but is $10.2 billion to $11 billion, so absolute search dollars
harder to measure. Based on a couple of centuries of grew more than online. Although brand advertising
advertising experience, the optimal mix appears to be was gaining market share, so was online advertising
about 3:2 brand:direct for the global industry, with as a whole: up 10 percent versus five percent for
variation by product and by region. traditional ad spending137.

The pronounced difference in the branding/direct
spending mix between the online and traditional media
worlds has prompted some to speculate that brand
might not be well suited to online: one critic labeled
online “the greatest branding disappointment ever.134”
Online, it was argued, is not effective at building up the
emotional connection that makes for effective brand
advertising; advertisers have no control over where
their ads appeared, leading to possible brand dilution.
And as with branding in the traditional world, success
is much harder to measure than for online direct-
response.


What is causing the online pie to be carved up Finally, online branding has been climbing a learning
differently? curve. In the past, many display ads were simply
traditional brand ads resized for a smaller screen, or
The most important factor is the development of used techniques that were technologically easy to
new tools that allow ad buyers to have control over implement but offensive to consumers. Today, flashing
placement. In the past, major consumer brands text and pop-ups that won’t go away are in retreat.
worried that a traditional display ad buy might end Advertisers are increasingly producing special content
up advertising their product or brand on an unsavory for the online world, rather than just re-purposing print
Website or adjacent to other ads or content that were ads. Further, targeting technology and geo-location are
not suitable for their brand image. Real Time Bidding making even traditional banner ads more relevant and
(RTB) technology changes that by allowing brands to effective.
specify exactly where and in what contexts their ads
will appear138. RTB enables a buyer to see every other Although online branding is growing from a low
ad that will appear on the Web page, as well as to be base, if advertisers can make it deliver ROI similar to
“above or below the fold” (in traditional ad parlance), traditional branding, at some point it will likely match
while automating what had previously been a labor- the market share for online direct-response advertising
intensive process139. – perhaps as early as 2015.

In addition, the options available for online branding
have broadened. In the early days of online advertising,
the only option was the standard banner ad, albeit Bottom line
in different sizes. But in 2011, advertisers also spent When thinking about brand advertising online, it may be necessary to unlearn
money on brand ads in videos and social networks. some old habits. Most traditional media is consumed passively, and the most
Successes included video ads for soap and scent that successful ads (such as TV ads) seem to be best delivered in a passive way.
increased sales and attracted hundreds of millions of Traditional online advertising tricks such as pop-ups might not work for online
views140, and social pages that allowed packaged goods brand building, as they may conflict with consumer preferences for passive
makers to reduce ad spending while growing both consumption.
reach and engagement, and boosting sales141. One
large advertiser has stated that 20 percent of its total Talent may need to change as well. Ad buyers, media companies, and ad
ad spend is now on social media142, suggesting that agencies all will likely need to increase, acquire or develop new skills. In the
online brand is already larger than online direct – at future, online advertising will go far beyond display ads and search: new
least for that particular company. talent will be needed for social, video, and real-time bidding – and these
competencies are likely to be in high demand for the immediate future.

Moreover, talent may need to be organized differently. When online branding
accounted for less than a quarter of all online ad spending (and therefore less
than 5 percent of total ad spending) it made sense to run it from a company’s
online department, usually overseen by a search expert. But in the future, if
online brand advertising reaches parity with online direct, it might be better to
structure companies along the lines of brand and direct divisions, rather than
splitting them into traditional and online departments.

Finally, it is still unclear how online branding can best tap into the human
emotions that make traditional branding so effective. Although some online
video campaigns have been very successful and had an emotional impact
similar to the best TV commercials143, further work can be done using
neuromarketing tools such as functional Magnetic Resonance Imaging to
increase the overall impact of online brand campaigns.

26

Market research is all in your head:
MRI machines and media

Deloitte predicts that the marketing and advertising The first study of using fMRI for market research
industry will likely have brains on the brain for 2012. purposes, known as neuromarketing,145 was published
Technology called functional Magnetic Resonance in 2004. It showed that a relatively small number of
Imaging (fMRI) that provides a real-time, non-invasive subjects (only 67, in this case) were needed to provide
window into the activity of living human brains will be statistically significant data that shocked the ad world.
used for market research and media creation. In 2012 An initial blind soft drink taste test revealed that
an increasing proportion of all MRI machines and MRI the subjects had a modest preference for Brand A,
hours will likely be spent fine-tuning products, services and the parts of the brain that showed activity were
and marketing messages144. not surprisingly those associated with the physical
mechanisms of taste. But when specific brand logos
Fifty years ago, advertising executives relied primarily and imagery were shown as the subjects tasted the
on their own instincts and industry knowledge to soft drinks, they instead preferred brand B by 3:1, and
create an ad campaign. Twenty years ago, market the activated brain areas were those associated with
research was conducted by polling thousands of memory, presumably of all those ads they had seen.
consumers and interviewing smaller focus groups. But Put simply, the test showed that advertising actually
there have always been two big problems with asking works – and why146!
people what they want to buy: they might not always
tell the truth; and they might not know themselves. There have been criticisms of the concept of analyzing
brain images to study consumer preferences. Some
Traditional MRI machines can cost millions of dollars, suggest that results should be treated cautiously147,
and are the size of an average car. They use very strong some point out the very real limitations148, and others
magnets to affect the atoms inside our bodies, causing dismiss it as a fad and go so far as to call it “iffy
certain atoms’ nuclei to spin and produce magnetic technology.149”
fields that can be interpreted by sensors, eventually
producing a detailed picture that is particularly good But the advertising and marketing communities do
at imaging soft tissues. For example, MRI can show not seem as skeptical. Major market research firms are
damage in knee ligaments that an X-ray cannot. investing in neuromarketing companies, or acquiring
them outright150. There are a large (and growing)
fMRI machines are essentially identical to the MRI number of firms that offer neuromarketing research
machines one might see on a TV show, but have a services151. Long established brands of baby food,
different purpose and way of working. Our blood soup and cookies are redesigning their packaging, and
has very slightly different magnetic properties when even their flavors, based on neuromarketing studies152.
oxygenated or deoxygenated. As areas of our brains Movie studios are still doing advance screenings – but
become more active, they use more oxygen, and it now, while the audience is watching the big screen,
shows up on functional MRI images. In 1991 scientists scientists are watching their brains on small screens.
were able to show that an fMRI taken of the brain Movie trailers are being tweaked with neuromarketing
over time could show areas of activity within the brain. insights; and scripts, characters and scenes are
Because certain brain functions are relatively localized sometimes being determined by daily MRIs, rather than
to one area, neuroscientists believe fMRI can show by reviewing daily footage153.
that activity in certain regions correlates with specific
emotions and types of thinking. This isn’t mind reading,
so it cannot determine whether a subject is thinking
of a black cat or white dog; however, it can show that
a photo of an adorable puppy activates the emotional
pleasure centers of the viewer’s brain.


Being able to optimize packaging, ad campaigns and Social media is not the only form of media that has
actual media content through use of fMRI is likely to been shown to affect or at least be correlated with
be a growth market, and is even contributing to the brain structures. Recent studies suggest that brain
push for newer and more powerful MRI machines. activity and possibly structure could be altered by
A normal MRI machine costs about $1 million and as little as one week of playing video games159, and
produces magnetic fields around one to two teslas, TV watching in children has also been shown to be
the international unit that denotes the magnitude of correlated with changes in brain activity160.
magnetic flux density. But the effect fMRI relies on
becomes much more detectable with higher field It is important to note that the use of fMRI in analyzing
strengths, and work is ongoing on machines of media and advertising is in its infancy. However, based
eight to 12 teslas154. on the increased frequency of scientific papers161 and
published corporate studies, as well as the unique
Most fMRI work has looked at the brain and how it insights offered by these reports, it appears that fMRI
perceives media or advertising at a single moment and neuromarketing will likely be a key tool for 2012
in time, with an eye to improving the media or the and beyond.
marketing. New studies are indicating another possible
application for fMRI data: improving the human brain
itself.

The adult human brain is not as static as once thought:
it is not set in stone at age 14. Instead, due to a process
Bottom line
called neuroplasticity, the human brain can be like a
The implications are intriguing, with media articles suggesting that one could
muscle enlarged through exercise. Certain regions can
deliberately harness the putative ability of social networks to re-shape human
become larger or denser through increased use, or
brains to enhance social, and perhaps selling skills. Some companies still ban
become smaller or less dense through lack of use.
their employees from using social networks at the work place, believing it will
The most famous example is that the hippocampus –
lead to lower efficiency. Could we one day see companies requiring employees
a region of the brain responsible for spatial sense –
to be on social networks a certain number of minutes per day, in an effort to
grows over time in people who become taxi drivers155.
make them better salespeople?

In a recent experiment, students who had more
Best practices suggest that MRI and fMRI work best as part of a broader
than a certain number of friends on a popular Web-
package. They do not replace traditional focus groups or years of experience
based social networking site turned out to have
or insight from a marketing executive. Also, they can be combined with other
well-developed brain regions that are associated
biological measurements like eye-tracking software, blood pressure readings,
with sociability. The result was highly statistically
pulse measurement and EEG to provide a more complete picture of the human
significant156, although the researchers cautioned that
reaction.
they couldn’t be sure which was the cause and which
was the effect. Did using the social network make
fMRI is not cheap, but it is important to stress that the use of this technology
those areas bigger, or were they already bigger in those
for marketing purposes does not appear to be having any negative impact on
subjects, causing them to have more friends157?
the cost of machines for the health system; i.e., demand is not driving up the
price. Nor are marketing uses of MRI machines diverting hours from required
Another study using MRI images, published in late
health care uses.
2011, provides some evidence that there may indeed
be a causal link. In an animal study, primates had their
The most important caveat is that the links between brain structure, brain
brains imaged before and after being placed in social
activity and media or marketing impacts are poorly understood at this time.
groups of certain sizes. Those placed in larger social
Correlation and causation are confounding factors, plus the science is still in its
groupings demonstrated superior growth in areas of
early stages. We will learn more over the next five years, but in 2012 the media
the brain associated with social cognition and social
industry would be well advised to explore this new window on the human
success158. To quote the researchers: “Social network
brain – but to also remember that it may be a pretty foggy window.
size, therefore, contributes to changes both in brain
structure and function.”

28

Extracting the premium from social
games

Deloitte predicts that in 2012 revenue growth for the Due to their crossover nature, mass market audience,
social games industry may slow to less than 20 percent. platform-neutrality, and low entry costs for players
This compares to the period 2008 to 2010, when social and developers alike, social games were expected to
gaming revenues grew 20-fold162. Slowing growth transform the entire industry. At first, this seemed likely:
makes it probable that social games makers will begin the easy-to-enter freemium revenue model coupled
experimenting with different business models. Shifting with social rewards166 rapidly proved a compelling
the mix to more advertising and less virtual goods looks combination for hundreds of millions of consumers.
likely, and at least some games companies are likely to
move away from the hallowed “freemium” model and However early growth numbers have proved difficult
start charging for games up front, especially for those to sustain. By some metrics, and for some developers
games with higher production values and complexity. on certain platforms, the trend was actually negative
in 2011167.The social games user base grew very little
Social games are online games, typically played within over the past two years168, even though revenues have
a Web browser via a social network. They typically continued to grow. Although the percentage varies
include light multiplayer elements and asynchronous across games and over time, it appears that only about
(not real time) activity. The predominant business model one to three percent of those playing social games
up until now has been freemium: it costs nothing to spend real money on virtual goods (known as the
start playing the game and there is no subscription to conversion rate169). Further, the core group of paying
pay. Aside from advertising, monetization occurs when users, or “whales”170, already provides an outsize
players pay for extra content, such as additional virtual portion of social game revenues. 46 percent of one
artifacts or access to new levels of games. company’s revenue comes from the top one percent
of users. This group may be reluctant to up its spend
Social games enabled the addressable market for video beyond the hundreds, and in some cases thousands of
games to reach men and women of all ages: effectively dollars invested per year in their virtual ecosystem.
anyone with a computer of any description, from a
MP4 player and up. One sixth of social gamers are over
60163. The majority are female164. As recently as 2008,
the traditional console game player was predominantly
male, and aged 18-49165.


Social gaming companies can also generate revenues Another approach is to add another layer to the social
from other sources such as in-game advertising, but at games business model: pay. This may seem counter
present virtual goods remain the largest piece of the to the spirit of social games. But today’s leading
pie. One large social games company gets only five social games boast ever higher production values and
percent of its revenues from advertising171, and even storyboarding. In other media, and in other gaming
across the broader industry the average ad contribution sectors, consumers are willing to pay for content
appears to be only about 14 percent172. that they previously received for free, especially if it is
perceived as being of high quality. Pay TV is a prime
If the audience cannot be grown, and users are example of this in traditional media, and in the games
reluctant to play, one approach for social games sector, enthusiasts already pay for access to massively
companies could be to increase the number of titles multiplayer online role-playing games (MMORPGs), or
each user plays or the number of hours they spend on to access the online services for consoles.
each game. But the average person is already spending
almost eight hours per month on even the most
popular social networks, and that number has risen
only slightly in recent quarters173.

Bottom line
Social and casual games are likely here to stay, but it may prove challenging to increase their share of
the total $63 billion global video games market significantly beyond its current two percent174, if the
monetization model remains constant.

Social games’ path to higher revenue may lie in iterating the business model, and charging to play games.
Revenue models for social games have been primarily dependent on three factors: increasing the installed
base, usually measured as “monthly active users” or MAU; increasing the portion of users who pay for
content; and increasing the amount that each user pays. All three approaches are valid, but it may now be
the time to add a fourth approach – charging to play at the outset.

The social games sector should also learn from the console gaming industry. Developing strong franchises
and quality sequels may not be cheap, but it can be very lucrative. The media title that reached $1 billion
in revenues faster than any title in history is not a famous 3D movie about aliens… but a video game from
a franchise in its eighth iteration and over eight years old175. It may be time for the leading social games
companies to recognize the much-changed quality of their latest titles and charge for them.

30

Online coupon intermediaries: from
novelty, to celebrity, to sizeable niche

Deloitte predicts that in 2012 the number of people In 2012, the majority of companies that hire
signed up to receive online coupon newsletters may intermediaries to offer discount coupons for their
decline moderately, as may the number of online products and services are likely to be small businesses
coupon intermediaries (companies that aggregate that lack the marketing capability to raise brand
discounts from retailers and distribute them to potential awareness on their own and have a hard time coping
consumers via e-mail). However, the total value of with the fire hose of demand that Internet aggregation
coupon deals enabled by intermediaries around the can send their way178. Larger companies are likely to
world should remain in the tens of billions of dollars, have their own distribution lists and will offer discounts
and the revenues to those intermediaries will likely directly to their own customers179, rather than using a
remain in the billions – a small amount within the third party – especially one that charges up to
context of all consumer retail, but still a significant sum. 50 percent commission180.

Everyone loves a discount… except for most retailers, Although the online coupon business is relatively
who remain focused on their bottom lines176. young, it may already be approaching maturity.
The intermediated online coupon model has its appeal There are already hundreds of millions of subscribers to
and its limitations: discounts drive consumer interest, online coupon newsletters. And in two of the largest
but erode margins. And when an intermediary is paid a markets, China and the US (which are also two of the
commission on every coupon sold, the profit hit is even world’s largest Internet markets), there are thousands
greater. Also, offering discounts too frequently can lead of companies offering online coupons181. One reason
existing customers to expect perpetual discounts – a the online coupon business has grown so quickly is that
perilous predicament for retailers. barriers to entry have been relatively low – requiring
little more than a Web site, a sales force, and good
For this reason there likely will never be many copywriters. There are arguably few magic algorithms
major retailers whose business model is predicated involved, although over time brand will become
on continuously offering coupons via third-party increasingly important.
intermediaries. While some retailers may take this
approach occasionally, for most it is simply not One of the challenges of the online coupon model is
sustainable. Long-term discounting is only possible that, unlike other online services such as search, it is not
for companies that have high nominal gross margins, a self-service, largely automated business. An online
and little or no direct competition (which makes direct intermediary needs writers to create advertising copy
comparison difficult). Service companies, such as those for the newsletter. Further, the sales model relies on a
offering non-standard beauty treatments (e.g., teeth dedicated sales team, as well as a strong technology
whitening), leisure experiences (e.g., hot air ballooning) team. So as sales volume grows, the organization must
and other relatively irregular services may fall into this grow as well.
category177.


The sector’s rapid evolution means that it is likely to
lose hundreds of players (out of thousands) in 2012 Bottom line
as competition ramps up and margins decline182. End-customers that use online coupons will continue to do so as long as there
Despite this gloomy forecast, additional companies is a continued flow of offers that appeal to them. However, part of the appeal
are likely to enter the market, particularly in places hinges on obtaining a significant perceived discount on products and services
such as emerging economies where Internet use and they wish to consume. A major challenge for online coupon intermediaries in
digitization are rapidly rising. Yet the overall number of 2012 will be to increase the quality and variety of offers available. Another
intermediaries globally should decline. key challenge could be how to increase interest from retailers who may
have been less than happy with their first experience183. Although satisfying
Online coupons offered by intermediaries are not going consumers and retailers is likely to become markedly harder in 2012, it won’t
to go away, much as discounting or paper coupons be impossible. But in order to succeed, online coupon intermediaries will likely
will never disappear. However, the notion of a growing need to rapidly evolve what they offer.
market of consumers responding on a frequent basis
to a daily stream of discounted products and services is In the near-term, intermediaries may have to accept lower commissions on sales
unlikely to materialize. of coupons. This could entice more retailers to consider using their services,
which in turn could increase the variety of offers available.
The online coupon intermediary industry began as a
novelty; as demand ramped up in 2011 it became a Intermediaries also should consider whether to focus on narrower categories
celebrity; and in 2012 it is likely to settle into a small of products and services across a wider geographic area, rather than just
niche, albeit one that can still generate billions of pushing deals within the subscriber’s local neighborhood. Intermediaries might
dollars in revenues globally. While it may not be the then be able to sell more coupons based on their ability to offer an appealing,
future of retail marketing, it is likely to remain an specialized range of products and services, instead of relying on size of discount
important component. as their major selling point.

In addition, the industry should address one of the major criticisms leveled
against it – that of encouraging bargain hunters to make one-off purchases.
One way to address this would be to offer coupons that focus on economies of
scale (e.g., repeat visits to the same establishment), rather than just discounts
on one-time visits or purchases.

By shifting the focus from discount size to value, utility or even rarity, online
coupon intermediaries could change the perception of their offering from
a last-ditch sales effort to a deliberate and innovative part of a company’s
marketing strategy.

32

Telecommunications


The $100 “smartphone” reaches its first
half billion

In 2012, Deloitte predicts that by year-end over The devices are likely to support e-mail and instant
500 million184 smartphones with a retail price185 of messaging (IM) services, and to feature a selection of
$100 or less will likely be in use worldwide186. pre-loaded apps and widgets including a Web browser
that works best with, but is not restricted to, mobile-
The definition of a smartphone for this prediction is specific sites and apps. In many $100 smartphones, the
based on consumer perceptions of what a smartphone OS may be closed, curtailing the ability to download
is, rather than the standard industry definition, which apps; however, this may not matter to customers
pivots on the type of operating system (OS) used. Many interested in low-end smartphones. What is possible on
consumers, particularly middle majority adopters, are these devices is still far superior to what most feature
likely to consider phones as smart if they have touch phones offer. Further, a closed OS has lower processing
screens or full keyboards and not what intangible OS requirements, enabling lower-cost CPUs190.
is under the hood187. Consumers may regard $100
smartphones as superior to feature phones from the At the start of the year, the processor in a $100
same manufacturer, even though the two form factors smartphone is likely to be about 200-600 MHz, well
might well share many components. below the processing power of high-end smartphones,
some of which will have multiple cores and clock
The $100 smartphone could be considered analogous speeds of over 1.5GHz191.
to the netbook – a lower priced, less powerful version
of the PC, which has served the needs of tens of The $100 smartphone will also likely include a basic
millions of individuals who want a computer, but do camera with at least 2 megapixel resolution that is
not necessarily require the computing power, memory, good enough for basic snapshots in natural light and
graphics capability or broad functionality of a standard ad hoc videos.
laptop.
Due to the lack of widespread 3G data network
Deloitte predicts that the $100 smartphone will sell coverage in some target markets, $100 smartphones
at least 300 million units in 2012, representing about will often come preloaded with a suite of apps and
20 percent of all mobile phone shipments in 2012, features that a typical user would be most likely to use
and about a third of all smartphone production (based and value. Mapping and navigation features may also
on our broader definition of smartphones). Deloitte be included to drive sales, but weaker digital mapping
estimates that the installed base of $100 smartphones data in the developing world may limit utility in those
stood at roughly 200 million at the end of 2011188. markets.

As for connectivity, most $100 smartphones that ship
in 2012 are likely to have GPRS and EDGE. Few $100
smartphones are expected to have 3G, unless the cost
of an integrated 2G and 3G chipset falls to that of an
EDGE chipset, whose cost should be well under $10
in 2012189. A key upgrade in the $100 smartphone
between 2011 and 2012 will be the incorporation of
Wi-Fi as a standard part of the feature set.

34

The $100 smartphone is likely to appeal to many In developed countries with stagnant economies the
different market segments. device might offer a way of retaining the smartphone
look, but at much lower cost.
The largest of these is likely to be the hundreds of
millions of mobile phone users that have not yet The price may also appeal to parents looking for the
acquired a smartphone192. In developing markets, perfect teenage ‘starter’ phone.
consumers may consider the $100 smartphone as
their first trade-up, having previously owned a feature The $100 smartphone is also likely to appeal in markets
phone. In those countries, penetration of personal where the cost of devices is not subsidized, and to
computers and home Internet access is also relatively pre-paid customers who want to upgrade from their
low: often less than 20 percent of households. But existing feature phones.
with demand for communication and information
rising everywhere, the $100 smartphone may offer the
easiest, most affordable way to satisfy communication
and information needs in the developing world, even if
$100 for a device will still remain an inaccessible price
for hundreds of millions in emerging countries.

Bottom line
Operators should consider how best to ease these customers into using data; to that end, predictability of the data bill will be absolutely
key. With voice service there is a relatively simple relationship between time spent and cost, but with data the bill for watching a few
minutes of video could deliver a “bill shock” to a new data user – causing them to shy away from all future data services. Data offerings
that are more appropriate for people with constrained budgets, such as apps with bundled connectivity, may entice more customers to
use data.

Handset vendors should constantly revise their $100 smartphone offering; a specification that was perceived as market leading at the
start of 2012 may well be considered market trailing by year-end. The price of many components is steadily falling – for example the cost
of touch screens has dropped by about 30 percent annually in the recent past. This will enable the specification of the $100 smartphone
to continue rising for years to come.

App developers should note that $100 smartphone users might not download very much content and may be even less likely to pay
for it. Some users will have less technical ability than existing smartphone owners and could find downloading apps over the air more
mystifying than magical. And some may not have data network access. Also, many $100 smartphone owners will not have credit cards.
In some cases operator billing might be the answer; in others, sales of pre-paid cards might be a better solution.

In addition, app developers may need to create variants of their apps that are suitable for lower priced smartphones that come with
relatively low-powered processors.

Growing sales of $100 smartphones are likely to cause downward pressure on prices for the whole supply chain. Component
manufacturers may come under growing pressure to lower their prices193; this could give component suppliers from emerging markets an
opportunity to break into the smartphone market194.


NFC and mobile devices: payments
and more!

Deloitte predicts that in 2012 shipments of devices But what about 2012? Many consumer perceptions
equipped with near field communications (NFC) and concerns in the aforementioned survey are not
capabilities will likely grow about 100 percent to almost well-founded. NFC uses barely any battery power and
200 million. In 2013 there may be as many as 300 is significantly more secure than many other forms of
million NFC smartphones, tablets and eReaders sold. payment technology, including magnetic stripe credit
This compares to a 2010 when fewer than and debit cards205. But until the industry can correct
50 million devices were purchased195. Over the long those misperceptions, consumer adoption of NFC for
run, NFC-enabled devices are likely to find a wide array payments may lag. Although virtually all new retail POS
of uses – especially for payments. But even in 2012, terminals are capable of interacting with NFC-enabled
NFC capability will likely be used for a surprisingly mobile devices, the large installed base of older POS
diverse range of non-payment applications, including terminals might hold NFC transaction levels down until
gaming, security, authentication and information. early 2013. Only two percent of merchant locations
in the United States had incorporated NFC readers as
NFC technology enables a secure exchange of of mid-2011, and terminals are only replaced every
information between devices over a very short distance seven to ten years206. Finally, consumer adoption of
(usually up to four cm) at a relatively low transfer rate196. NFC payment using smartphones may be slowed by
NFC is not suited for high-bandwidth applications such alternative contactless payment solutions, principally
as video but is ideal for transmitting small amounts the 200 million contactless credit and debit cards
of information with minimal set-up time and power forecast to be in circulation by the end of 2012207.
consumption. In these respects it outperforms other
wireless technologies such as Bluetooth, SMS and Even if 2012 turns out to be what one payments
infrared197. executive referred to as “a transitional year for mobile
payments,”208 those NFC chips on smartphones won’t
It has long been believed that a critical mass of NFC go to waste.
readers at retailers – combined with ubiquitous
smartphones and tablets – would provide the required An obvious near-term market for NFC is replacing the
environment for the ‘digital wallet’ to take off198. access cards that adorn hundreds of millions of workers
In the short term, however, consumers may not yet be around the world. Carriers working with phone
comfortable using a mobile phone as a payment device. manufacturers have already launched trials for phones
In one recent survey, over a quarter of respondents that replace those cards209, and 2012 will likely see
were concerned about security, battery life, or simply larger rollouts. While replacing one card, NFC phones
preferred to use their phone only for voice – perhaps can also help get rid of another: with a single tap, all
out of habit199. That could change quickly though. of the information on a traditional paper business card
One analyst has forecast $50 billion of NFC-enabled (and more) can be seamlessly transferred to another
payments by 2014200. Currently the global payments phone’s contact file210.
market turns over more than $30 trillion per year,
generating revenues of $900 billion201.

Mobile banking and payments have already enjoyed
significant success in emerging markets where many
people have cell phones but few have credit cards or
banks accounts202. It is possible that NFC mobile devices
could do well in similar markets, particularly in major
cities, which are more likely to have NFC-enabled point-
of-sale (POS) terminals. Numerous initiatives between
local operators and financial services providers have
been launched203. It is expected that 700 million people
in emerging markets will be using mobile money
services by the end of 2015, and many of those services
could be enabled by NFC204.

36

The video gaming industry is always looking for fresh Other vertical markets examining the use of NFC
ways to engage with players. One online video shows phones include the automotive217 and healthcare
some early ideas of how an NFC-enabled phone could industries218. NFC phones could work with a car’s
be used in gaming. The examples are fairly simple, with sound system or act as the vehicle’s key. And in a
children playing card-matching games, or gaining new home health care setting, NFC could be used to
levels by tapping phones together211, but the concepts transmit patient vital signs and other physiological
are interesting (and simple concepts can hold surprising measurements to healthcare workers at a central site.
mass-market appeal212). Other gaming applications
include the ability to interact with real-world objects, As over 200 million NFC-enabled mobile devices are
such as figurines or even bird-shaped plush toys, in deployed in 2012, many headlines will probably focus
the case of one popular casual game often played on how much or how little they are being used for
on mobile devices213. Or the technology could enable payments. The vast market potential for payments
a real-world treasure hunt used to promote a movie justifies this focus; however, it is worth remembering
or film festival214. The gambling industry is also that there will be literally thousands of other
experimenting with NFC phone enhancements. applications for NFC, and that payments are not the
whole story.
Another market that will likely emerge as an NFC
success in 2012 is as a potential replacement to QR
codes. Those 2D-barcodes are ubiquitous, but seldom
scanned. They convey limited information, and many Bottom line
users find them unreliable or finicky to use. In fact, Given the possibly slow adoption of payment solutions on NFC phones,
only five percent of US adults scanned a QR code in device manufacturers need to weigh the benefit of adding NFC technology
2011215. As a result, some technology companies are to mobile devices. The incremental cost is relatively small (probably around
embracing NFC solutions that can be read by phones $3-$5 at present, but declining sharply as volumes rise219) but it is not zero.
as an alternative to QR codes216. mobile phone vendors need to assess the value of offering an NFC-enabled
mobile device as a source of competitive differentiation. They may also need
to encourage the development of non-payment applications, and work with
standards bodies to help NFC take root.

Application developers need to be involved in the NFC ecosystem in order
for non-payment applications to emerge. The promise of increased in-app
purchases could help entice developers to create NFC-enabled applications.
Corporate adoption of NFC phones as ID cards could also be a key driver and
significantly enhance the perceived value of owning an NFC-enabled phone.

The complexity of the NFC value chain is a possible barrier to expanding the
NFC payment market. Increased adoption of NFC payment services could be
influenced by improved collaboration between the different players in the
space. Operators, who have existing billing relationships with customers,
merchants, OEMs and financial institutions, need to ensure that the business
model they choose will ultimately benefit the end-user. To promote NFC
adoption, they need to offer a wide range of merchants and value-added
services, including promotional discounts and coupons via smart tags, as well
as loyalty schemes that consumers find appealing.


Web bypass: delivering connectivity
without the Internet

Deloitte predicts that by year-end 2012 over 80 percent Demand for data connectivity is likely to grow in
of all wireless traffic going over short-range (under line with the installed base of data-centric devices
10 meters) connections will likely be data; the volume in the market. In 2012, tens of millions of tablets
of data carried over those connections will likely have and hundreds of millions of computers223 and
doubled year-on-year, and that over one percent of all smartphones224 will likely be added to the world’s
wireless data will likely be exchanged directly between installed base of connected devices. Added to that,
devices instead of being routed through the Internet a growing number of media devices, from Internet
– a 100 percent year on year increase. Although connected TVs, and Wi-Fi radios (which receive at up
wireless data traffic will likely still be dominated by to 300 Kbit/s) will likely further strain the Internet225.
cellular and Wi-Fi for the near future, short range And that strain will likely grow, regardless of the
wireless connection technologies are likely to double connection to the Internet: wired, Wi-Fi or cellular.
in bits carried every year through 2015 and most likely
beyond220. Further, the growing number of devices owned by
individuals and households is catalyzing the offer
Short range wireless connections are far from new. In of services that harmonize data, such as music files,
the 1990s, the most common approach to exchanging photos and videos, across all owned devices.
data directly between computers and mobile phones The updating of all devices, if undertaken entirely via
was via infrared (IR). This worked, but was slow, and the Web, could represent significant additional traffic.
required precise positioning: pairs of IR ports needed to
be in each other’s line of sight. How can demand for connectivity be satisfied while
also containing capital investment in access and core
Bluetooth, in all its iterations, offered an upgrade to networks?
infrared as a way to connect devices and has been used
predominantly for voice communications, connecting The answer is likely to lie in a greater use of short-range
hundreds of millions of phones to personal hands-free wireless connectivity, which will be increasingly used to
kits and to hands-free car kits. However Bluetooth has exchange data directly between devices, rather than via
seldom been used for data. the Web. This is a logical progression in the evolution
of data connectivity. Much as data transmission from
In 2012, a spike in demand and an improvement in mobile networks does not necessarily need to go via
supply are likely to lead to a doubling in the volume of cellular networks, file transfer between devices does
data sent via short range wireless networks. not necessarily need to be routed via the Internet.

Data demand from fixed and mobile subscribers Exchanging files between groups of workers on the
continues to grow at a double digit rate. Growth in same project team, and working within the same
fixed network traffic is rising at such a pace – over project room; relaying media files to wireless speakers
30 percent year-on-year – that over 100 million and displays; sending photos from a smartphone to a
fixed broadband users may be migrated to a capped tablet computer or printers will likely all increasingly be
service in 2012221. Mobile users have already largely undertaken using short range wireless technologies.
been moved over to caps, which in turn has caused a
change in network behavior, as more and more data Web bypass will not just take data traffic off the Web:
exchanged between mobile devices has been sent via it will also catalyze the flow of data between devices in
Wi-Fi, a practice known as “Wi-Fi bypass” or “Wi-Fi close proximity. Video files that are generally too large
offload”222. to send via even the most generous of e-mail services
will now be sent between devices when they are within
close proximity.

38

To meet this demand, a growing number of wireless
technologies are likely to be promoted. Iterations Bottom line
of Bluetooth, wireless USB and further proprietary Networks offering high utility will always tend to become congested.
technologies are all being launched226. As bottlenecks approach there are two solutions. One is to increase capacity,
the other is to smooth or lower throughput. The capacity of public and private
But the biggest supply shock may simply be the wireless networks, such as cellular mobile and Wi-Fi will keep expanding. But
ultimate disruptor – ease of use. Multiple short range demand for data capacity appears to be growing at a faster pace – it may prove
technologies are becoming increasingly available, and hard to build a network, based on a single technology that can cope with a
they all have different capabilities in terms of power doubling in demand every year – and still make money227.
consumption, power up time and data transmission
speeds. The short-range wireless technology that ends Fortunately connectivity needs vary and so do network technologies. It is not
up becoming dominant may well be that which offers optimal to use the same network technology for all communication needs. It is
the best user interface, rather than the one with the making less and less sense, for example, to use the Web as the default network
best technology. for exchanging data between devices that are within close physical proximity.

Network operators should therefore consider Web bypass as a third approach
to delivering wireless connectivity, in addition to cellular mobile and fixed
broadband connected Wi-Fi. Operator differentiation is likely to become
dependent on their ability to offer their customers an appropriate range
of network technologies, and to manage most, if not all of the network
deployment and network selection challenges. The network operator is
becoming more and more a networks provider, and their value add will be
in simplifying the underlying complexity of multiple co-existing network
technologies.

Device vendors should evaluate all available short-range wireless connectivity
options and determine which individual or multiple technologies to incorporate
and promote. Battery usage and throughput may be key factors. Device
vendors should also include software that determines which network
technology is best to use for each type of communication, be this an e-mail or
a video.

Short range wireless technology vendors are likely to need to work with device
vendors, chipset vendors, app developers and other entities to ensure that their
technology attains critical mass. But they should also note that there is likely to
be room for more than one provider in this space.


Here come more data caps: it’s the end
of the (wire)line for unlimited Internet

Deloitte predicts that in 2012 a further one hundred According to one study, the demand for data per
million Internet users will likely need to start watching subscriber is growing at over 30 percent year-on-year,
the meter on their wired broadband connection. to almost 15GB per month. Email is only 0.23 percent
Although most users of wireless data around the world of that traffic. Video is over 100 times larger, at
have become accustomed to monthly bandwidth caps, 26 percent, and expected to keep growing faster than
the majority of broadband connections – over phone, overall data demand230. Further, that demand is neither
cable or fibre – have been unlimited until now. But a evenly spread over the day nor across all users. Average
recent acceleration in data usage is causing Internet data demand in ISP networks between 7 am and 11 pm
Service Providers (ISPs) to rethink their all-you-can- is four times higher than between 2 am and 5 am, and
eat pricing approach. At least an additional 20 ISPs, 25 per cent of all downloaded data is consumed by less
in five countries, serving more than 100 million users than one per cent of subscribers231.
(or about 20 percent of the more than 500 million
broadband subscribers globally228) will likely have Uneven data demand by time and user puts stress on
explicit monthly bandwidth caps by the end of the year. ISPs’ networks. Pressures to maintain profitability and
constrain capital expenditures while retaining market
OECD data from late 2010 demonstrates how rare share mean that relentlessly adding network capacity is
bandwidth caps have been for landline Internet access. likely to become increasingly challenging, so many ISPs
Across 34 countries surveyed, there were just four are instituting bandwidth caps. There is tremendous
countries all of whose ISPs had caps. In another five variability in the caps being proposed: globally they
countries, 50 percent or more of the ISPs surveyed can be as low as 1 GB per month or (from one ISP
had caps. In the remaining 25 countries no ISP or only in Japan) as high as 900GB232. While there are no
a minority of ISPs had a cap – and these represented reliable surveys of average data cap size around the
many of the largest countries in Europe, Asia and the world, it appears that roughly 100-250GB per month is
Americas229. increasingly frequent 233. At the 250GB level, it appears
that less than one percent of all users will be affected
What would cause the end of all-you-can-eat data by the cap234.
plans for wireline? The same phenomenon as in
wireless: if you offer unmetered data, users, particularly
a small proportion of them, will take full advantage
of that offer. Until 2010, Internet access was primarily
for services that benefited from broadband, but were
not reliant on high speed, especially Web browsing
and email. More recently, growth in streaming video,
social networks, torrents, cloud services and gaming
have thrown a tidal wave of demand at ISPs’ networks.
As various wireless carriers have moved away from
unlimited data plans, many consumers have pushed as
much of their data traffic from cell phones and tablets
onto their home Wi-Fi networks. This has helped ease
cellular wireless congestion, but at the cost of the
wireline congestion.

40

Many methods are used to enforce the bandwidth
caps. Some ISPs bill overage charges automatically, Bottom line
others send a warning for a first time over the cap, and A few years ago, it was assumed that any ISP that had previously offered
then bill for subsequent overages on a per GB basis. unlimited data would find it impossible to “put the genie back in the bottle” and
Also used (at varying levels of transparency) is speed impose a cap. More recent experience has shown that if consumers are involved
based enforcement: as users go over the bandwidth in a conversation about the benefits of caps (less network congestion, higher
cap their data rate is throttled back, sometimes to as speeds at peak times) and the facts that caps are likely to affect only a very small
low as 64 Kbit/s235. minority of subscribers, the consumer reaction can prove entirely manageable.

But whether it is a billing-based cap, or a speed-based Most users whose behavior causes them to hit the ceiling have been consuming
cap, the net intent is to moderate demand. data at that rate because it was unmetered. Once the meter is on, their usage
patterns generally change. This helps reduce network congestion, but means that
data caps are not likely to be material revenue generators for ISPs.

Further, ISPs can offer ways of softening the impact of a cap, which may not
necessarily mean that consumers have to curtail their data use. For example,
consumers can use various short-range data transfer technologies, rather than
using the Internet to send videos, photos and other files between devices.
(See 2012 Prediction “Web Bypass: delivering connectivity without the Internet”).
Over time, as ISPs install more sophisticated technologies, including Deep
Packet Inspection (DPI), there is also the potential for more flexible data caps.
For example, caps may be more restrictive during peak-usage periods; but more
generous otherwise. Or caps could vary by application, with steeper caps for
latency-sensitive traffic like video or gaming; lower-priority, “best efforts” traffic
for e-mail could be unlimited.

Finally, the trend towards more capped wireline data plans is likely to be reversed
over the long term. As caps are used to manage network congestion, the
rollout of much higher capacity wireline technology like the various fibre optic
technology solutions may mean that either caps are removed, or are set so high
as to be practically unlimited for virtually all users.


So many apps – so little to download

In 2012, Deloitte expects the number of apps available In fact, what the market really needs is more and newer
from all application stores to exceed two million236. apps, not fewer. And the supply is likely to reflect this.
The size of the apps market more than doubled in Even when the two million milestone is reached, the
2011, reaching one million in December237. As the number of apps should continue to rise. The principal
global supply of apps grows, the proportion that are driver for this growing catalog is the rising installed
paid for (or even downloaded) by anyone other than base of smartphones and tablets. This base is becoming
the developers and their immediate families is likely to increasingly heterogeneous, reflecting the continued
become ever smaller238. Even considering branded apps strength of the five main operating systems for mobile
alone, only 20 percent are downloaded more devices, the evolution of new apps markets in emerging
than 1,000 times239. countries, and the widening capability gap between
high-end and entry-level smartphones and tablets.
This dearth of downloads does not necessarily mean
the ‘apps model’ is fundamentally flawed. Instead, it In the future, the global apps market will likely be
reflects the ‘winner-takes-all’ nature of most online characterized by the co-existence of multiple platforms,
content markets, ranging from music tracks to countries, languages, genres, manufacturers, file sizes
television shows to online videos240. and even model-specific application stores. To reach
more than 90 percent of all apps users, a developer
may need to create versions for five different operating
systems (plus HTML5), five major languages, three
different processor speeds, and four different screen
sizes. In other words, 360 variants of a single app may
need to be created in order to fully cover the global
market. Each variant would count as a distinct app.

The feature and capability gap between high-end and
entry-level smartphones is likely to grow, which will
likely necessitate multiple versions of the same app,
optimized for different processor speeds. In 2012,
the fastest smartphones will likely offer quad-core
1.5-2.5GHz processors241 while the growing number
of $100 smartphones is likely to have processors with
speeds between 200MHz and 600MHz.

42

Today’s largely homogeneous tablet market may also In countries with more mature apps markets,
become far more diverse in 2012 in terms of operating production and marketing costs are likely to be far
systems, processors and screen sizes242. higher as competition intensifies. In 2012, the most
expensive apps could cost millions of dollars to
In developing countries with emerging application produce243.
stores, apps are likely to be simpler and more
reminiscent of the first ones for mobile phones, which The file size of apps is also likely to become more
appeared in 2009. In these markets, apps built in diverse, with the largest apps being several gigabytes
garages or bedrooms may still be able to achieve critical in size244. Large apps are fine in countries with fast,
mass; with their success possibly driven by how well extensive networks; but in other countries apps might
they provide locally made content in local languages. need to be built with lower speeds in mind. This means
including less video, lower resolution images, and
perhaps breaking app downloads into multiple parts.

Bottom line
As the catalog of apps continues to swell, the gulf between the blockbuster hits and everything else is likely to continue widening in 2012
and beyond.

A few years ago, it was feasible for developers to write apps in their spare time that might rank as a Top 10 download. In mature
apps markets, those days are largely over. The market has become more professional, and is increasingly dominated by major content
developers, although there are still many tens of thousands of smaller companies and individuals developing new software.

Apps should exploit what the technology is able to deliver. But showcasing technology should not be an app’s primary objective, but
rather a by-product of it. App developers should be careful not to ’kitchen-sink’ their creations – that is, throw every piece of functionality
and every piece of multimedia content into it. Leaner apps may be just as appealing. They will also be cheaper for developers to create,
and quicker for users to download.

As smartphone penetration rises around the world, the need for apps in local languages is likely to grow. ‘Early adopter’ users of apps
were, given the price of devices, more likely to be professionals and people who have travelled and can speak English. The need for local
language content was probably lower. As of December 2011, many top selling apps in non-English-speaking countries around the world
are in English245.

In emerging markets, application stores need to ensure they have billing relationships with local network operators to accommodate
users who do not have a bank account.

The more apps that are available, the higher the marketing costs are likely to be for those apps that are marketed at all. Most apps
will never benefit from significant marketing campaigns, a predicament common to other media formats. Only a tiny proportion of
unpromoted apps will likely become successful, as too few potential customers will be aware of their existence.

To stand out, application store providers should consider improving and assuring the quality of their programs. A store that can offer apps
with superior power management, security and ease-of-use is more likely to catch the eye of potential customers.

Application stores that are looking to differentiate themselves may want to consider subscription models that offer hand-picked apps
from various genres – apps bundles, in effect246. Emerging app developers may welcome such an approach as a way of introducing their
content to a wider audience.


Endnotes

1 The forecast for 2011 (a post World Cup year) was for a small decline in sales, to 250 million units, down about one percent year-on-year. The forecast for
2012 is for about five percent growth in units to 262 million. Source: World Market of Consumer Technics, GFK/CEA 2011:
http://www1.messe-berlin.de/vip8_1/Website/Internet/Internet/www.ifa-gpc/pdf/IFA_Press_Conference – 2011_GfK – Boyny.pdf
2 As of November 2011, the OECD’s forecast for Eurozone growth was positive, at 0.2 percent for 2012, as was Goldman Sachs’ outlook for Europe in October
2011, at 0.1 percent for 2012. Source: OECD calls for urgent action to boost ailing global economy, OECD, 28 November 2011:
http://www.oecd.org/document/47/0,3746,en_21571361_44315115_49095919_1_1_1_1,00.html; Source: Global Themes and Risks, Goldman Sachs
Research, October 2011: http://www2.goldmansachs.com/our-thinking/global-economic-outlook/global-themes-and-risks-OCT-2011.pdf
3 In a country experiencing low levels of growth (by historical standards) following a recession, such as the United States in 2011, spending on smaller ticket
items has returned to pre-recession levels, with spending on personal technology particularly resilient; however, spending on larger ticket items such as cars
and housing remains slow. Source: What Americans are(n’t) buying, Financial Times, 7 November 2011: http://ftalphaville.ft.com/blog/2011/11/07/731141/
4 American Households Spend More Than $1,100 Annually On Consumer Electronics, CEA Study Finds, EON, 23 May 2011: http://eon.businesswire.com/news/
eon/20110523006914/en/Consumer-Electronics-Association/consumer-electronics-spending/household-spending
5 In India, basic seven-inch tablets are available at a retail price of $100. See: Indian tablet market abuzz with low-priced entrants starting at $99, The next
Web, 22 August 2011: http://thenextWeb.com/in/2011/08/22/indian-tablet-market-abuzz-with-low-priced-entrants-starting-at-99/
6 In Korea, 32-inch flat panel full HD LED screens are available for about $440. See: Samsung TVs feel the squeeze, Beyondbrics, 24 November 2011:
http://blogs.ft.com/beyond-brics/2011/11/24/samsung-tvs-feel-the-squeeze/#axzz1f5JUqIys ; In the United States, the cheapest 32-inch televisions cost
about $250 as of December 2011, based on pricing at http://www.amazon.com/ for a 720p 60Hz LCD HD TV.
7 In Japan, the average price of a 32-inch LCD TV fell from Y62,000 ($800) to Y47,000 ($610) in the year to May 2011. See: Japan ponders pulling the plug on
TVs, Financial Times, 16 August 2011: http://www.ft.com/cms/s/0/309d0d38-c405-11e0-b302-00144feabdc0.html#axzz1ewc8wE5Q
8 Samsung TVs feel the squeeze, Beyondbrics, 24 November 2011: http://blogs.ft.com/beyond-brics/2011/11/24/samsung-tvs-feel-the-squeeze/#axzz1f5JUqIys
9 The iPad’s other big advantage: Retailers only get 3% off, Tech Republic, 11 March 2011: http://www.techrepublic.com/blog/hiner/the-ipads-other-big-
advantage-retailers-only-get-3-off/7880?tag=content;siu-container
10 In the United Kingdom, according to one motoring association, the average cost of running a car, considering fuel costs, depreciation and insurance is about
$10,000. This represents a year-on-year rise of 14 percent. See: Cost of motoring increases at three times rate of inflation, The Telegraph, 23 November
2011: http://www.telegraph.co.uk/finance/personalfinance/insurance/motorinsurance/8909027/Cost-of-motoring-increases-at-three-times-rate-of-inflation.
html. For further information on the cost of motoring see: Ever wonder how much you’re really paying to drive your car each year, AAA Exchange Website:
http://www.aaaexchange.com/main/Default.asp?CategoryID=16&SubCategoryID=76&ContentID=353, Private Ownership Costs, New - 5 years @ 15,000km
per year, RACQ 2011: http://www.racq.com.au/__data/assets/pdf_file/0004/69205/RACQ-Private-Vehicle-Running-Costs-2011.pdf
11 First-time buyers: Life begins at 40, The Independent, 20 November 2011: http://www.independent.co.uk/money/mortgages/firsttime-buyers-life-begins-
at-40-6265083.html
12 Cities where there has been a significant shift from driving to public transportation include Nairobi, Mexico City, Shenzhen, Buenos Aires and Beijing.
See: IBM Global Commuter Pain Survey: Traffic Congestion Down, Pain Way Up, Armonk, 8 September 2011: http://www-03.ibm.com/press/us/en/
pressrelease/35359.wss.For information on the extent and rise of traffic congestion see: Traffic Congestion in Europe, INRIX Website:
http://www.inrix.com/pressrelease.asp?ID=108; UK is Europe’s most traffic-clogged nation, ClickGreen, 3 November 2010:
http://www.clickgreen.org.uk/analysis/general-analysis/121603-uk-is-ranked-europes-most-traffic-clogged-nation.html
13 In Mexico, more houses have televisions (93 percent) than fridges (82 percent) or showers (65 percent). The number of homes without a bare earth floor
is just one percent lower than those without a television. See: TVs outnumber fridges, The Economist, 28 April 2011: http://www.economist.com/blogs/
americasview/2011/04/mexico%E2%80%99s_census
14 Fatscreen is the new flatscreen, Beyondbrics, 25 October 2011: http://blogs.ft.com/beyond-brics/2011/10/25/em-consumers-fatscreen-is-the-new-
flatscreen/#axzz1f5JUqIys
15 Spending on technology and communications products is forecast to rise by 20 percent between 2010 and 2015 in the United Kingdom. In 2010, half of UK
adults perceived a vacation as a luxury, up from 38 percent prior to the recession. See: Essential items top consumer shopping lists but economic worries
top woes, Mintel Oxygen Reports, August 2010: http://www.mintel.com/press-centre/press-releases/589/essential-items-top-consumer-shopping-lists-but-
economic-worries-top-woes
16 Figure for multi-tablet ownership volume and the total tablet market for 2010, 2011 and 2012 are estimates based on conversations with industry players,
existing knowledge, and published industry estimates and forecasts, including: Apple to sell 149 million iPads in ‘15, researcher says, CNET News,
22 September 2011: http://news.cnet.com/8301-13506_3-20110077-17/apple-to-sell-149-million-ipads-in-15-researcher-says/, Tablet Demand and
Disruption, Morgan Stanley Research, 14 February 2011: http://www.morganstanley.com/views/perspectives/tablets_demand.pdf, Media Tablet and
eReader Markets Beat Second Quarter Targets, Forecast Increased for 2011, IDC Press Release, 14 September 2011: http://www.idc.com/getdoc.
jsp?containerId=prUS23034011
17 From a computer per continent in the early 1950s, to a computer per upper-quartile home in developed countries at the start of the millennium, to multiple
smartphones among early adopters at the start of the decade, our lives are steadily, and seemingly inexorably, becoming immersed among a range of
increasingly specialized computers. Just ten years ago, the personal computer was a multi-purpose, multi-tasking device that served a range of functions,
from e-mail to playing games and from browsing to radio listening.
18 Shipments of tablets in 2010-2011 have been estimated at 81 million. Sales are several million units less than shipments. Source: Apple to sell 149 million
iPads in ‘15, researcher says, CNET News, 22 September 2011: http://news.cnet.com/8301-13506_3-20110077-17/apple-to-sell-149-million-ipads-in-15-
researcher-says/
19 For example in Western Europe, sales of seven-inch tablets in August 2011 were estimated at two percent. See: Why analysts can’t tell you how iPads are
selling – so tell you about others, The Guardian, 25 November 2011: http://www.guardian.co.uk/technology/blog/2011/nov/25/apple-tablet-context-npd
20 Prices refer to the advertised, unsubsidized prices to customers (before sales tax or VAT).
21 According to research undertaken in January and February 2011 with 30,000 respondents across 15 countries, of respondents that owned or had access to
a smart phone, about 27 percent of respondents owned, or had access to, more than one smart phone. For more information, see: Addicted to connectivity,
Deloitte Global Services Limited, 14 February 2011, http://www.deloitte.com/tmt/mobile
22 For example, see: Lenovo unveils three new Android tablets--5, 7, and 10 inchers, CNET, 29 November 2011: http://news.cnet.com/8301-1023_3-57332892-
93/lenovo-unveils-three-new-android-tablets-5-7-and-10-inchers/

44

23 Source: Samsung Galaxy Tab 7.0 Plus, PCMAG, 30 November 2011: http://www.pcmag.com/shop/product/samsung-galaxy-tab-7/899149998
24 For a discussion on how smaller tablets may be used, see: Smaller, cheaper tablets could become a big deal, CNN Tech, 26 October 2011: http://www.cnn.
com/2011/10/25/tech/gaming-gadgets/smaller-cheaper-tablets/index.html
25 Specialized rugged tablets will also be launched in 2012: these will be for industrial use in most cases and are likely to have much higher prices. Source:
Getac Releases World’s Smallest, Toughest Tablet, EON, 30 November 2011: http://eon.businesswire.com/news/eon/20111130006020/en/Getac/rugged/
tablet ; Motorola unveils rugged ET1 Android tablet for enterprise types (video), Engadget, 10 October 2011: http://www.engadget.com/2011/10/10/
motorola-unveils-rugged-et1-android-tablet-for-enterprise-types/; Panasonic Toughbook to address market void by delivering enterprise-grade Android
tablet, Business Computing World, 20 June 2011: http://www.businesscomputingworld.co.uk/panasonic-toughbook-to-address-market-void-by-delivering-
enterprise-grade-android-tablet/
26 For further discussion, please see the 2012 Prediction: Bypassing the Web: alternative short range transmission solutions, Deloitte Global Services Limited
27 Big data is a term applied to data sets whose size is beyond the ability of commonly used software tools to capture, manage, and process the data within
a tolerable elapsed time. Big data sizes are a constantly moving target currently ranging from a few dozen terabytes to many petabytes of data in a single
data set.
28 Enterprise Applications: Hadoop World 2011: 15 Key Takeaways, Slide 2, eWeek, 15 November 2011: http://www.eweek.com/c/a/Enterprise-Applications/
Hadoop-World-2011-15-Key-Takeaways-566207/
29 ‘Big Data’ Firm Raises $84 Million, The Wall Street Journal, 14 September 2011: http://online.wsj.com/article/SB100014240531119035328045765691339571
45822.html
30 Accel Makes Big Commitment To Big Data With $100M Fund, The Wall Street Journal, 8 November 2011: http://blogs.wsj.com/venturecapital/2011/11/08/
accel-makes-big-commitment-to-big-data-with-100m-fund/
31 Teradata to introduce new ‘big data’ analytic solutions to Egypt, Daily News Egypt, Dec 13, 2011 http://thedailynewsegypt.com/it-a-telecom/teradata-to-
introduce-new-big-data-analytic-solutions-to-egypt.html
32 Hadoop: The Definitive Guide, Tom White, 2009, O’Reilly Media, Inc., http://db.trimtabs.com:2080/mindterm/ebooks/Hadoop_The_Definitive_Guide_Cr.pdf
33 This assessment is based on publicly disclosed big data project announcements and Deloitte member firm interviews.
34 How Big Data Analytics Can Save Publishing, AdAgeDigital, 5 December 2011: http://adage.com/article/digitalnext/big-data-analytics-save-
publishing/231363/
35 Sizing the big data problem: ‘big data’ is the problem, The 451 Group, 9 December 2010: http://blogs.the451group.com/information_management/
2010/12/09/the-big-data-problem/
36 Global IT Spending 2011 Projections Revised Upward to $3.7 Trillion, IT channelPlanet, 11 July 2011: http://www.itchannelplanet.com/trends/article.
php/3937061/Global-IT-Spending-2011-Projections-Revised-Upward-to-37-Trillion.htm
37 Big Data consolidation march continues: Teradata buys Aster Data, OnStrategies Perspectives, 3 March 2011:
http://www.onstrategies.com/blog/2011/03/03/big-data-consolidation-march-contines-teradata-buys-aster-data/
38 As a fact check, we have interviewed a sample of enterprises that are budgeting for 2012 Big Data projects. Average spend per company is about
$10-15 million. Assuming that about 1000 companies do similar sized pilots also yields a $1-1.5B market.
39 Hadoop World 2011: The State of Big Data Adoption in the Enterprise, Slide 20, Slideshare, November 2011: http://www.slideshare.net/cloudera/the-state-
of-big-data-adoption-in-the-enterprise-tony-baer-ovum
40 Beware The Big Data Hype, Forbes, 11 September 2011: http://www.forbes.com/sites/patrickspenner/2011/11/09/beware-the-big-data-hype/
41 Big data: The next frontier for innovation, competition, and productivity, McKinsey, May 2011: http://www.mckinsey.com/mgi/publications/big_data/
42 Big data: The next frontier for innovation, competition, and productivity, McKinsey, May 2011: http://www.mckinsey.com/mgi/publications/big_data/
43 Is Big Data Just a Big Distraction?, Deloitte: http://www.deloitte.com/view/en_US/us/Insights/Browse-by-Content-Type/deloitte-debates/
ac39f372efd73310VgnVCM3000001c56f00aRCRD.htm
44 Small mobile device include MP3 players, smartphones and tablets. Today, MP3 players represent almost all of the HDD storage in this market: there are
some HDDs used in phones and tablets today, but less than 1 percent.
45 Some PCs use HDDs only, some use SSDs only (as a pure HDD replacement), and a growing number are using hybrid SSD/HDD configurations. These attempt
to offer the rapid boot speeds and access time of SSDs, but also the low cost per GB of HDDs. See: Hybrid hard drive: Dead end or the future of storage?,
FierceCIO:TechWatch, 2 December 2011: http://www.fiercecio.com/techwatch/story/hybrid-hard-drive-dead-end-or-future-storage/2011-12-02
46 Total storage growth estimates for 2012 and 2013 are based on non-public broker estimates published in November and December 2011.
47 Origin of Solid State Drives, StorageReview, 20 March 2010: http://www.storagereview.com/origin_solid_state_drives
48 A History of Storage Cost, Matthew Komorowski Web Page: http://www.mkomo.com/cost-per-gigabyte
49 To Artfully Capture Memories, Try These Cameras, The New York Times, 6 December 2011: http://www.nytimes.com/2011/12/07/technology/personaltech/
to-artfully-capture-memories-try-these-cameras.html
50 PC penetration has been rising for years, and in the US is forecast to be 1005 PCs per 1000 inhabitants. Table 1.3, Worldwide PC Market, eTForecasts, 2010
http://www.etforecasts.com/products/ES_pcww1203.htm
51 Why 2012 Will be the Year of the Ultrabook, Wired, 21 November 2011: http://www.wired.com/gadgetlab/2011/11/ultraportable-ultrabooks/
52 CloudSigma adds SSDs to its public cloud, GigaOM, 8 November 2011: http://gigaom.com/cloud/cloudsigma-adds-ssds-to-its-public-cloud/
53 Electricity Savings from Data Center SSDs Could Power an Entire Country, Researcher Says, eWeek, 5 June 2009: http://www.eweek.com/c/a/Data-Storage/
Researcher-Electricity-Savings-from-Data-Center-SSDs-Could-Power-an-Entire-Country-669508/
54 When a hard drive fails, usually none of the data is retrievable without significant effort. SSDs tend to fail bit by bit (as it were) meaning that only smaller
chunks of data are lost.
55 Boot Time Comparison with 200GB RPM HD and 64GB SSD, SysAdminGear, 2007: http://sysadmingear.blogspot.com/2007/12/boot-time-comparasion-with-
200gb-rpm-hd.html
56 Rather than relying only on a passive device to harvest ambient RF, beamed power products pair a receiver with an optimally tuned RF transmitter designed
to transfer power over ranges of centimeters to meters.
57 Tesla Biography, Tesla Website: http://www.teslasociety.com/biography.htm
58 Experimental Results with two Wireless Power Transfer Systems, Intel Research Seattle http://Web.media.mit.edu/~jrs/WISP-WARP.pdf
59 This should not to be confused with beamed power products designed to transmit power over short distances (centimeters to meters), or high-powered
microwave and laser based wireless power transmission technologies which have been successfully used to power devices as large as aerial drones.


60 Questions and Answers about Biological Effects and Potential Hazards of Radiofrequency Electromagnetic Fields, Federal Communications Commission,
August 1999: http://transition.fcc.gov/Bureaus/Engineering_Technology/Documents/bulletins/oet56/oet56e4.pdf
61 Questions and Answers about Biological Effects and Potential Hazards of Radiofrequency Electromagnetic Fields, Federal Communications Commission,
August 1999: http://transition.fcc.gov/Bureaus/Engineering_Technology/Documents/bulletins/oet56/oet56e4.pdf
62 Powercast Wireless Power Calculator, Powercastco: http://www.powercastco.com/wireless-power-calculator.xls
64 Conditions vary, but outside of its optimal frequency, power harvesting antennas are able to yield less than 0.1 percent of the power that they can achieve at
their optimal frequency.
66 Microwave Absorption in Humans, Antennex: http://www.antennex.com/preview/Folder03/Jul3/mwabsor.htm
67 Although in reality the self-discharge rate of the batteries used in mobile devices is greater than the re-charge rate generated by any practical ambient RF
technology: the battery drains faster than you can fill it!
68 Passive RFID Basics, Microchip, 1998: http://ww1.microchip.com/downloads/en/appnotes/00680b.pdf
69 RF Energy Harvesting and Wireless Power for Low-Power Applications, PowerCast, 2011: http://www.powercastco.com/PDF/powercast-overview.pdf
70 3D printers are more akin to tools like table saws and drill presses, rather than consumer electronics. The $22 billion power tool market gives an idea of the
size of the total addressable market. Forecast Source: World Power Tools to 2015, Freedonia Group, June 2011:
http://www.freedoniagroup.com/World-Power-Tools.html
71 There is considerable research on using 3D printers for biomedical applications. Some examples include:
• Printing custom disposable drill guides used in knee replacement surgery;
• Printing custom prosthetics (such as titanium knee joint components);
• Printing cartilage scaffolding for use in growing replacement hearts;
• Full scale printing of artificial organs.
Source: Wake Forest Institute for Regenerative Medicine Website: http://www.wakehealth.edu/WFIRM/
72 Shapeways is the company which coined the phrase “Democratization of Production” comparing 3D printing to similar revolutions in user-generated
content. Source: Shapeways & the democratization of production, Slide Share, 15 October 2008: http://www.slideshare.net/jochem/shapeways-the-
democratization-of-production-presentation
73 “Desktop Factory” bankruptcy. Source: THE ‘END OF THE ROAD’ OR A NEW BEGINNING, Desktop Factory news, August 2009: http://www.desktopfactory.
com/news/08_12_09.html
74 3D printing: a replicator and teleporter in every home.Source: Extremetech, August 5, 2011: http://www.extremetech.com/extreme/92042-3d-printing-a-
replicator-and-teleporter-in-every-home
75 A standard popular kitchen plate weighs 450g and sells for $0.79. A 1kg spool of ABS filament runs ~$43 per kg so the 3D printed plate is almost 30 times
more expensive (not including depreciation on the printer). Using the IKEA examples:
• he Lugn plate (stoneware) weighs 1lb and costs $0.79, while natural ABS filament for a 3D printer runs ~$43 per kg (3D printing is 27 times more
T
expensive) – Source: IKEA Products, IKEA Website: http://www.ikea.com/ca/en/catalog/products/00133123/
• he Kalas plate (plastic) weighs 300g (for 6) and costs $1.99 (for 6), while colored ABS filament runs ~$48 per kg ( 3D printing is more than 7 times more
T
expensive) – Source: IKEA Product Information, IKEA Website: http://www.ikea.com/ca/en/catalog/products/90096908/
76 The University of Western Michigan is currently a global leader in making printed electronic components: http://www.wmich.edu/engineer/cape/pdf/
CAPE%20brochure.pdf
77 The number of different materials that go into something as ordinary as a shoe is impressive, from fabrics and leathers, to various rubbers, foams, plastics,
metals and adhesives. This makes it a challenge to “print” even mundane household items. Source: Anatomy of a running shoe, ASICS Website:
http://www.asics.co.uk/running/knowledge/anatomy-of-a-running-shoe/
78 MakerBot introduces 3D printer kit for the home market at just over $1000. We expect 2012 to see the first sub $1,000 hobbyist units. MakerBot Thing-O-
Matic kit w/Stepstruder MK7 $1099, MakerBot Store Website: http://store.makerbot.com/thing-o-matic-kit-mk7.html
79 Typical consumer ABS feedstock prices at $48. Source: Yellow ABS 1kg Spool 1.75mm Filament, MakerBot Store Website: http://store.makerbot.com/
yellow-abs-1kg-spool-1-75mm-filament.html
80 Maker Magazine Website is devoted to the maker community – literally, a group of people who like making things: http://makezine.com/
81 Z-corp is selling entry level printers at $14,900 for monochrome units. We expect 2012 to see the first sub $10,000 commercial units. Source: ZPrinter 150 &
250, ANVIL Protype & Design Website: http://www.anvilprototype.com/PrototypingTools/3DPrinters/ZPrinter150250/tabid/98/Default.aspx
82 These are typical commercial multi-color thermoplastic extrusion 3D printers. Similar approaches can be used in the production of ceramic items.
Dimension Website: http://www.dimensionprinting.com/default.aspx
83 Typical commercial photo catalyzed resin 3D printer. Object Website: http://www.objet.com/
84 Typical commercial deposited binder 3D printer. 3D Systems Website: http://www.zcorp.com/en/home.aspx
85 Typical commercial laser sintered 3D printer, both plastic and metal models exist. 3DSystems Website: http://production3dprinters.com/sls/selective-laser-
sintering
86 Objects with moving parts can now be printed in single passes (rather than separate parts that need to be assembled), due to extremely high spatial
accuracy. Source: ZCorp’s 3D Printer replicates a wrench, YouTube, 11 July 2011: http://www.youtube.com/watch?v=jQ-aWFYT_SU
87 In contrast to the plate example from above, printing a small dishwasher-safe cutlery basket of about 500g would cost about $22 (not including the
depreciated cost of the printer, and the cost of a template, if any) while ordering a custom part from the manufacturer costs $48. Further, the time required
for shipping would be days, whereas the part could be printed in tens of minutes.
88 Jay Leno has been 3D printing rare auto parts for two years now. In some cases he prints resin versions that can be given to machinists to produce accurate
metal copies, but in other cases the resin components are being used. Source: Jay Leno’s 3D Printer Replaces Rusty Old Parts, Popular Mechanics, 8 June
2009: http://www.popularmechanics.com/cars/jay-leno/technology/4320759
89 This Year Next Year, GroupM, December 2011
90 We consider online TV as a subset of online video, and online TV ad spend as a subset of online video ad spend.
91 The ultimate marketing machine, The Economist, 06 July 2006: http://www.economist.com/node/7138905

46

92 For example, one recruitment campaign was based on four different types of users. An ad was created for each type. Source: TV’s Next Wave: Tuning In to
You, The Wall Street Journal, 7 March 2011: http://online.wsj.com/article/SB10001424052748704288304576171251689944350.html
93 For more information on the data approach that could be used with this, as well as pros and cons, see: In Defense of Targeted TV Ads, Time, 10 March 2011:
http://techland.time.com/2011/03/10/targeted-tv-ads/
94 One test found that homes receiving targeted ads were less likely to change channels during commercial breaks. Source: Calculating the Benefit of a
Targeted TV Ad, The Wall Street Journal, 7 March 2011: http://blogs.wsj.com/digits/2011/03/07/calculating-the-benefit-of-a-targeted-tv-ad/
95 According to one trial, recall can increase by 40 percent. Source: Will Targeted TV Ads Justify Higher Fees?, Bloomberg Businessweek, 7 April 2009:
http://www.businessweek.com/magazine/content/09_16/b4127000389178.htm
96 Google Boosts TV Ads With Invidi Investment, GigaOM, 05 May 2010: http://gigaom.com/video/google-boosts-tv-ads-with-invidi-investment/;
Cable Firms Join Forces to Attract Focused Ads, The New York Times, 10 March, 2008: http://www.nytimes.com/2008/03/10/business/media/10cable.html
97 Will Targeted TV Ads Justify Higher Fees?, Bloomberg Business Week, 07 April, 2009:
http://www.businessweek.com/magazine/content/09_16/b4127000389178.htm
98 For one example of targeting to the entire family, see this commentary on a dog food ad aimed at the end-user (the dog) rather than the purchaser. The TV
commercial that targets your dog, The Week, 4 October 2011: http://theweek.com/article/index/219921/the-tv-commercial-that-targets-your-dog
99 For a further discussion on this topic, see: blog strategy “waste”, DDB, 1 March 2011: http://www.ddb.com/ddblogs/strategy/waste.html
100 Analysis based on data from comScore, March to September 2011. Source: comScore Releases September 2011 U.S. Online Video Rankings, comScore
Website, 21 October 2011: http://www.comscore.com/Press_Events/Press_Releases/2011/10/comScore_Releases_September_2011_U.S._Online_Video_
Rankings
101 One example of how TV has been used to influence search was a campaign for an online comparison company that had an advertising objective to get
viewers to search on “meerkat” rather than “market”. One rationale for doing this was the difference in cost per click on each term – the latter was priced
100 times higher, at £5 (about $7.50), rather than at 5 pence (about 7.5 cents). For more information see: The search strategy behind Compare the Meerkat,
blogstorm, 1 September 2009: http://www.blogstorm.co.uk/the-search-strategy-behind-compare-the-meerkat/
102 Source: The value of a Super Bowl ad: A performance marketer’s perspective, 3 February 2011: http://blog.efrontier.com/insights/2011/02/the-value-of-a-
super-bowl-ad-a-performance-marketers-perspective.html
103 In United Kingdom, 60 percent of shows recorded on one broadcaster’s DVRs were watched within one day; in DVR households, about 85 percent of
television was watched live; in Germany, one broadcaster with an online TV service found that online viewing peaked within a day of broadcast. Source:
How people really watch television, The Economist, 29 April 2010: http://www.economist.com/node/15980817
104 A growing number of 1 terabyte DVRs are now available; the first DVRs had about 80GB capacity available
105 Top UK media trends for 2011, Investor Today, 24 January 2011: http://www.investortoday.co.uk/News/Story/?title=Top%20UK%20media%20trends%20
for%202011&storyid=4957&type=news_features
106 Connected TV penetration has been forecast to reach 20 percent (551 million homes) by 2016, compared to 10 percent in 2010. Source: Connected TVs will
reach 20% penetration, Broadband TV News, 1 November 2011: http://www.broadbandtvnews.com/2011/11/01/connected-tvs-will-reach-20-penetra/
107 Penetration rates for computers and other connected devices vary significantly by country. For information on device ownership in the US, see: Gadget
ownership over time, Pew Internet, 2011: http://www.pewInternet.org/Trend-Data/Device-Ownership.aspx
108 For more information on broadband speed improvements in OECD countries, see table 1f at the OECD Broadband Portal Webpage: http://www.oecd.org/do
cument/54/0,3746,en_2649_34225_38690102_1_1_1_1,00.html
109 For example, see: CDNs Enjoy Double Digit Growth in 2010, Streaming Media.com, 5 November 2010: http://www.streamingmedia.com/Articles/News/
Featured-News/Report-CDNs-Enjoy-Double-Digit-Growth-in-2010-71249.aspx
110 Eight years of content (if all content were to be played sequentially) is uploaded to YouTube every day. Source: Statistics, YouTube Website: http://www.
youtube.com/t/press_statistics
111 In Tokyo, a city which benefits from among the fastest broadband networks in the world, viewing of TV rose by 10 minutes per day between 2000 and
2008, to 216 minutes. Over the same period, roll-out of fiber to home networks increased significantly. Source: Changing the channel, The Economist,
29 April 2011: http://www.economist.com/node/15980859
112 Predictability Modulates Human Brain Response to Reward, The Journal of Neuroscience, 15 April 2001: http://www.jneurosci.org/content/21/8/2793.short
113 The Long Tail, Wired, Issue 12. 10, October 2004: http://www.wired.com/wired/archive/12.10/tail.html
114 Barry Schwartz on the paradox of choice, TED, September 2006: http://www.ted.com/talks/barry_schwartz_on_the_paradox_of_choice.html
115 In the US, the average household tunes into less than 15 percent of the channels it has available for 10 minutes or more per week. This is equivalent to
16 or so channels out of an average of 118.6 channels available. Between 2006 and 2007, the average number of channels per US household jumped by
14 percent, but the number of channels watched stayed the same, and the proportion of channels watched fell. Source: Nielsen data cited in: Avg. U.S.
homes Watch Same Number of Channels Weekly, Adweek, 6 June 2008: http://www.adweek.com/news/advertising-branding/nielsen-avg-us-homes-watch-
same-number-channels-weekly-108685
116 For an example, see: 20 TV Shows With the Most Social Media Buzz This Week, Mashable Entertainment, 1 November 2011: http://mashable.
com/2011/11/01/social-tv-chart-11-1/
117 Between 13 percent and 15 percent of requests for the BBC iPlayer television service are simulcasts. Source: Monthly Performance Pack, BBC, September
2011: http://downloads.bbc.co.uk/mediacentre/iplayer/iplayer_performance_monthly_0911.pdf
118 Netflix Executives Agree: Streaming Is ‘Rerun TV’, PCMAG, 25 April 2011: http://www.pcmag.com/article2/0,2817,2384292,00.asp
119 The volume of the installed base for the full-screen, high-end smart phones are estimates based on existing knowledge, conversations with industry players
and published industry estimates and forecasts, including: CIO mission: ‘Reimagine IT’, CIO New Zealand, 16 November 2011: http://cio.co.nz/cio.nsf/news/
EB7766A85703C6CDCC25794A00116619; Smartphone usage set to rocket to 1.7 billion by 2014, The Independent, 27 April 2010: http://www.independent.
co.uk/news/business/news/smartphone-usage-set-to-rocket-to-17-billion-by-2014-1955258.html
120 The volume for the installed base of tablets are estimates based on existing knowledge, conversations with industry players and published industry
estimates and forecast including: Morgan Stanley Blue Paper on Tablet Demand and Disruption, Page 7, 14 February 2011: http://www.morganstanley.
com/views/perspectives/tablets_demand.pdf ; Andy Rubin: There Are 6 Million Android Tablets Out There, Mashable, 19 October 2011: http://mashable.
com/2011/10/19/6-million-android-tablets/


121 This is equivalent to about double all long-form television content watched online in the United States in 2011. Data for online video is from comScore.
It is assumed every smartphone owner watches an average 10 minutes TV on their smartphone, and every tablet owner watched 15 minutes weekly on their
tablet.
122 Younger viewers generally have more technology, and are more likely to use technology to manage their consumption of television. For example see:
Younger TV Viewers Use Tech More to Catch Up on Favorite Shows, Nielsen Media Research cited in Marketing Charts: http://www.marketingcharts.com/
television/younger-viewers-use-tech-more-to-catch-up-on-favorite-tv-shows-2624/nielsen-broadcast-tv-episode-catch-up-streaming-Websites-by-age-
genderjpg/
123 BBC survey shows 3G coverage in the UK far more patchy than mobile operator coverage maps suggest, Unwired insight, 25 August 2011:
http://www.unwiredinsight.com/2011/bbc-3g-coverage
124 Based on pricing of 32 GB SDHC cards on http://www.amazon.com/ as of December 2011.
125 For example: Gogo to bring enhanced Wi-Fi to Virgin America, expands video streaming on American Airlines, Engadget, 16 September 2011: http://www.
engadget.com/2011/09/16/gogo-to-bring-enhanced-wifi-to-virgin-america-expands-video-str/; Wi-Fi coming to international flights, CNN, 14 November
2011: http://edition.cnn.com/2011/11/14/travel/united-wifi-international-flights/index.html
126 American Airlines to expand Gogo Wi-Fi streaming across 400 planes, Australian Business Traveler, 6 October 2011: http://www.ausbt.com.au/american-
airlines-to-expand-gogo-wifi-streaming-across-400-planes; Qantas begins iPad trials for Wi-Fi movie streaming this month, Australian Business Traveler,
20 October 2011: http://www.ausbt.com.au/qantas-begins-ipad-trials-for-wi-fi-movie-streaming-this-month
127 DVR households in the United States watch more television than non-DVR households. Source: DVR use in the U.S., Nielsen’s State of the Media report,
December 2010: http://blog.nielsen.com/nielsenwire/wp-content/uploads/2010/12/DVR-State-of-the-Media-Report.pdf
128 AmtrakConnect Wi-Fi - the Official Wi-Fi Network of Amtrak, Amtrak Website: http://www.amtrak.com/servlet/ContentServer?c=Page&pagename=am/
Layout&cid=1246044330724
129 MagnaGlobal Cuts Global Ad Forecasts for 2011, 2012, The Hollywood Reporter, 5 December 2011: http://www.hollywoodreporter.com/news/magnaglobal-
cuts-global-ad-forecasts-269544 and U.S., Global Ad Growth to Accelerate in 2012 Driven by Special Events, The Hollywood Reporter, 4 December 2011:
http://www.hollywoodreporter.com/news/us-global-ad-growth-accelerate-2012-269442
130 Magnaglobal downgrades 2011, 2012 ad growth estimates, Radio & Television Business Report, 5 December 2011: http://www.rbr.com/media-news/
advertising/magnaglobal-downgrades-2011-2012-ad-growth-estimates.html
131 Campaign Optimization in Real-Time, Slide 2, SlideShare, October 2011: http://www.slideshare.net/CMSummit/950-com-score
134 When Will Brand Dollars Move Online? Maybe Never, Advertising Age, 25 October 2011: http://adage.com/article/digitalnext/brand-dollars-move-
online/230622/
135 Click This: Why Banner Ads Are Having a Banner Year, Mashable, 23 June 2011: http://mashable.com/2011/06/22/banner-ads-success/
136 TV, Mobile See Gains in Viewing Time, eMarketer, 12 December 2011: http://www.emarketer.com/Article.aspx?R=1008728
137 Q3 Online Advertising Growth Gives Rise to Cautious Optimism for Q4, IgnitionOne, 5 December 2011: http://www.ignitionone.com/press/q3-online-
advertising-growth-gives-rise-cautious-optimism
138 Casale Media Offers Real-Time Bidding on Premium Media, Casale Media News Release, 10 August 2011: http://www.casalemedia.com/newsroom/08.10.11/
139 The Advertising Industry’s Balance Of Power Is Changing Big Time, Business Insider, 13 December 2011: http://articles.businessinsider.com/2011-12-13/
news/30510864_1_digital-advertising-digital-media-ad-network
140 The Benefits of a Successful Viral Campaign and How to Achieve One, TechnoStreak, 18 July 2011: http://technostreak.com/uncategorized/the-benefits-of-
a-successful-viral-campaign-and-how-to-achieve-one/ and Axe vs. Old Spice: Whose Media Plan Came Up Smelling Best?, 31 March 2010: http://adage.com/
article/mediaworks/axe-spice-media-plan-worked/143066/
141 Food Brands Get Sociable on Facebook and Twitter, The New York Times, 30 June 2010: http://mediadecoder.blogs.nytimes.com/tag/oreo/
142 Shaking Things Up at Coca-Cola, Harvard Business Review, 1 October 2011: http://hbr.org/product/shaking-things-up-at-coca-cola/an/R1110F-PDF-ENG
143 CHIPOTLE – Back to the Start video advertisement had 3.3 million views on YouTube as of December 2011, and was one of the 10 best commercials of 2011
according to Ad Week, 28 November 2011: http://www.adweek.com/news/advertising-branding/10-best-commercials-2011-136663?page=9
144 There is no public data on the exact spending of time or dollars on fMRI. But interviews suggest that growth is significant and accelerating.
145 Neuromarketing also includes other research tools, such as EEGs, galvanic skin receptors and respiratory measurement (similar to those used in polygraph,
or lie detectors) and eye tracking. But fMRI appears to the fastest growing and most influential at this time.
146 Neural Correlates of Behavioral Preference for Culturally Familiar Drinks, ScienceDirect, 14 October 2004: http://www.sciencedirect.com/science/article/pii/
S0896627304006129
147 Neuromarketing the Neurology of Facebook, The Neurocritic, 24 February 2010: http://neurocritic.blogspot.com/2010/02/neuromarketing-neurology-of-
facebook.html
148 fMRI: “The Wonder Machine”? Common Questions and Misconceptions about fMRI Research, Psychology in Action, 9 November 2011: http://www.
psychologyinaction.org/2011/11/09/fmri-the-wonder-machine/
149 Making Ads That Whisper to the Brain, The New York Times, 13 November 2010: http://www.nytimes.com/2010/11/14/business/14stream.html
150 Nielsen to Acquire NeuroFocus, Neuromarketing, 20 May 2011: http://www.neurosciencemarketing.com/blog/articles/nielsen-to-acquire-neurofocus.htm
151 Neuromarketing Companies, Neuromarketing : http://www.neurosciencemarketing.com/blog/companies
152 Neuroscience Explains the Emotional Buy, Brand Packaging, 11 July 2011: http://www.brandpackaging.com/Articles/Cover_Story/BNP_GUID_9-5-
2006_A_10000000000001076137
153 Rise of Neurocinema: How Hollywood Studios Harness Your Brainwaves to Win Oscars, Fast Company, 25 February 2011: http://www.fastcompany.
com/1731055/oscars-avatar-neurocinema-neuromarketing
154 High field functional MRI, European Journal of Radiology, 5 August 2003: http://www.ejradiology.com/article/S0720-048X(03)00243-2/abstract
155 Navigation-related structural change in the hippocampi of taxi drivers, PNAS, 2000: http://www.pnas.org/content/97/8/4398.short
156 Normally, to obtain a statistically significant result from a poll or a focus group, one would need to survey hundreds or even thousands of people.
Interestingly, the Royal Society study was done with only 125 subjects, and all published results were statistically significant with p-values from 0.05 to 0.01.
fMRI seems to be chosen not only because it can deliver insights that other technologies don’t, but also because it may require fewer subjects.

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157 Online social network size is reflected in human brain structure, The Royal Society, September 2011: http://rspb.royalsocietypublishing.org/content/
early/2011/10/12/rspb.2011.1959
158 Social Network Size Affects Neural Circuits in Macaques, Science, 4 November 2011: http://www.sciencemag.org/content/334/6056/697.abstract
159 One week playing violent video games alters brain activity, CNET, 2 December 2011: http://news.cnet.com/8301-27083_3-57335738-247/one-week-playing-
violent-video-games-alters-brain-activity/and The neural basis of video gaming, Nature, 2011: http://www.nature.com/tp/journal/v1/n11/full/tp201153a.html
160 Children’s Brain Activations While Viewing Televised Violence Revealed by fMRI, Kansas State University and The Mind Science Foundation, 2005:
http://krex.k-state.edu/dspace/bitstream/2097/838/1/MurrayMediaPsyc2006.pdf
161 Connecting the dots, Nature, 2009: http://www.nature.com/neuro/journal/v12/n2/full/nn0209-99.html
162 HIS Screen Digest News Flash: Zynga Preliminary IPO Filing Legitimizes Social Gaming Market, June 30, 2011, http://www.isuppli.com/Media-Research/
News/Pages/IHS-Screen-Digest-News-Flash-Zynga-Preliminary-IPO-Filing-Legitimizes-Social-Gaming-Market.aspx
163 PopCap/Information Solutions Group, 2011: http://www.infosolutionsgroup.com/pdfs/2011_PopCap_Social_Gaming_Research_Results.pdf
164 PopCap/Information Solutions Group, 2011: http://www.infosolutionsgroup.com/pdfs/2011_PopCap_Social_Gaming_Research_Results.pdf
165 2008 Sales, Demographic and Usage Data, The Entertainment Software Association, http://www.theesa.com/facts/pdfs/ESA_EF_2008.pdf
166 Exposing Social Gaming’s Hidden Lever, Gamasutra, 8 November, 2011, http://www.gamasutra.com/blogs/TylerYork/20111108/8849/Exposing_Social_
Gamings_Hidden_Lever.php
167 An In-Depth Look at the Social Gaming Industry’s Performance and Prospects on Facebook, InsideSocialGame, 24 January 2011:
http://www.insidesocialgames.com/2011/01/24/an-in-depth-look-at-the-social-gaming-industry%E2%80%99s-performance-and-prospects-on-facebook/
168 Zynga Builds Its CastleVille Walls, As Its Facebook Traffic Flattens And Falls, TechCrunch, 27 November 2011: http://techcrunch.com/2011/11/27/
towerdefense/
169 Social Gaming Monthly, Thomson Reuters, September 2011, Rpt. 18160425 http://www.industrygamers.com/news/social-games-see-just-1-3-of-players-
convert-to-paying-customers-says-crowdstar/
170 Zynga’s Quest for Big-Spending Whales, Bloomberg Businessweek, July 2011: http://www.businessweek.com/magazine/zyngas-quest-for-bigspending-
whales-07072011.html
171 This Is Zynga’s IPO Road Show Presentation, Business Insider, 2 Dec 2011: http://www.businessinsider.com/its-out-this-is-zyngas-ipo-show-presentation-
2011-12?op=1
172 eMarketer, Virtual Goods and Currency: Real Dollars Add Up, July 2011 (includes PC-based social game revenues only.)
173 Nielsen, August 2011: http://blog.nielsen.com/nielsenwire/online_mobile/august-2011-top-us-Web-brands
174 IHS Screen Digest, IHS Screen Digest, DTTL analysis
175 The Telegraph, Call of Duty: MW3 breaks $1bn sales record, December 2011 http://www.telegraph.co.uk/technology/video-games/8951477/Call-of-Duty-
MW3-breaks-1bn-sales-record.html
176 In Luxury Sector, Discounting Can Be Dangerous, Bloomberg Business, 23 July 2009: http://www.businessweek.com/magazine/content/09_31/
b4141049551979.htm
177 For further information, see: Don’t be fooled by illusory numbers Financial Times, 11 January 2011: http://www.ft.com/cms/s/0/c52d7d8c-1dbd-11e0-aa88-
00144feab49a,s01=1.html
178 Groupon demand almost finishes cupcake-maker, The Telegraph, 22 November 2011: http://www.telegraph.co.uk/finance/newsbysector/
retailandconsumer/8904653/Groupon-demand-almost-finishes-cupcake-maker.html
179 According to Deloitte research undertaken in September 2011, with 2,000 respondents across the UK, 29 percent of respondents that spent less on grocery
shopping for food and soft drinks, identified discount vouchers and coupons as being one of the reasons why they spent less in the last three months. For
more information see Deloitte Multichannel Survey, Deloitte LLP, September 2011, http://www.deloitte.com/assets/Dcom-UnitedKingdom/Local%20Assets/
Documents/Industries/Consumer%20Business/uk-cb-the-deloitte-consumer-review.pdf.
180 Commissions can be negotiated down from 50 percent to about 20 percent. Source: Groupon Competitors, Clones, And Cousins Are Growing Insanely
Quickly, Business Insider, 6 July 2010: http://articles.businessinsider.com/2010-07-06/tech/30027016_1_daily-deal-cities-arps
181 In China, there were at peak 6,000 online coupon intermediaries in 2011.See: China’s group-buying sites struggle to survive, People’s Daily Online,
23 November 2011: http://english.peopledaily.com.cn/90778/7653908.html. In the US, one aggregator tracks offers from over 750 intermediaries.
Source: Complete Daily Deal Data, Yipit Website: http://yipit.com/data/
182 To see the acceleration in daily deals offered in the US between November 2008 and March 2010, see:
Decentralization of the Daily Deal Space, Yipit, 19 April 2011: http://blog.yipit.com/2010/04/19/decentralization-of-the-daily-deal-space/;
Groupon ‘Clones’ Dish on Future of Online Deals in China, The Wall Street Journal, 1 November 2011: http://blogs.wsj.com/chinarealtime/2011/11/01/
groupon-clones-dish-on-future-of-online-deals-in-china/; Competition squeezes Chinese coupon Websites, Financial Times, 4 December 2011:
http://www.ft.com/cms/s/0/0bf5ddb6-1cde-11e1-8daf-00144feabdc0.html#axzz1fviWCkKU China’s Most Audacious Groupon Clone on the Brink, 80% of
Staff Fired, Do News: http://www.penn-olson.com/2011/09/28/groupon-china-clone-tuanbao/
183 Coupon Sites Are a Great Deal, but Not Always to Merchants, The New York Times, 1 October 2011: http://www.nytimes.com/2011/10/02/business/deal-
sites-have-fading-allure-for-merchants.html
184 The figures for $100 smartphone shipments and total smartphone and mobile phone market volume for 2011 and 2012 are Deloitte estimates based on
existing knowledge, industry conversations, and published industry estimates and forecasts, including: Cellphone Shipments on Pace to Set New Record
High in 2011, IC Insights, 14 June 2011:http://www.icinsights.com/news/bulletins/Cellphone-Shipments-On-Pace-To-Set-New-Record-High-In-2011/ ; Gartner
Says Android to Command Nearly Half of Worldwide Smartphone Operating System Market by Year-End 2012, Gartner, 7 April 2011: http://www.gartner.
com/it/page.jsp?id=1622614;$100 Smartphone to Shake Up Asia Telco Sector in 2012, CNBC, 25 November 2011: http://www.cnbc.com/id/45433194; Full-
Year Handset Sales May Miss Forecast, Gartner Reports, Bloomberg, 19 May 2011: http://www.bloomberg.com/news/2011-05-19/full-year-handset-sales-
may-be-lower-than-expected-gartner-says.html
185 Prices refer to advertised, unsubsidized prices to customers before sales tax or VAT.
186 The $100 price point compares to an average selling price in 2012 of between $130-170 across all phones, $600 for high-end smart phones, and a few tens
of dollars for basic entry-level phones.


187 One definition of a smartphone is if a manufacturer makes a software developer kit (SDK) available to developers, who can use native application
programming interfaces (APIs) to write applications. Source: Gartner Says Android to Command Nearly Half of Worldwide Smartphone Operating System
Market by Year-End 2012, Gartner, 7 April 2011: http://www.gartner.com/it/page.jsp?id=1622614
188 In 2009, netbook sales recorded 40 million representing around 20% of all laptop sales.
189 In-Stat: 339 million low-cost Android smartphones to ship worldwide in 2015, In-Stat, 26 October 2011:
http://www.intomobile.com/2011/10/26/instat-339-million-lowcost-android-smartphones-ship-worldwide-2015/
190 Not-As-Smart Phones to Drive Sales and Data Revenue, iSuppli, 2 September 2011:
http://www.isuppli.com/mobile-and-wireless-communications/marketwatch/pages/not-as-smart-phones-to-drive-sales-and-data-revenue.aspx
191 In-Stat: 339 million low-cost Android smartphones to ship worldwide in 2015, In-Stat, 26 October 2011:
http://www.intomobile.com/2011/10/26/instat-339-million-lowcost-android-smartphones-ship-worldwide-2015/; for a view of comparison of processor
speed among the fastest smartphones as of September 2011, see: ARM’s Mali-400 MP4 is the Fastest Smartphone GPU...for Now, AnandTech, 9 November,
2011: http://www.anandtech.com/show/4760/arms-mali400-mp4-is-the-fastest-smartphone-gpufor-now
192 According to research undertaken in January and February 2011 with 30,000 respondents across 15 countries, about 35 percent of the respondents owned,
or had access to, at least one smart phone. For more information, see: Perspectives on the global mobile consumer, 2011 , Deloitte Global Services Limited,
14 February 2011:http://www.deloitte.com/tmt/mobile
193 Mediatek to drop their chipset prices by 20 percent. Source: $100 Smartphone to Shake Up Asia Telco Sector in 2012, CNBC, 25 November 2011:
http://www.cnbc.com/id/45433194/100_Smartphone_to_Shake_Up_Asia_Telco_Sector_in_2012
194 Chip design firms such as MediaTek, Infomax, Rockchip and Leadcore launched solutions for low-priced Android handsets. Source: Low-priced Android
handset shipments to boom in 2011, Digitimes, 26 April 2011, http://www.digitimes.com/Reports/Report.asp?datepublish=2011/4/26&pages=PR&seq=201
195 US Wireless Carriers Partner with Big Credit Card Companies Boosting Cell Phone NFC Market, IHS iSuppli, May 12, 2011: http://www.isuppli.com/Mobile-
and-Wireless-Communications/News/Pages/US-Wireless-Carriers-Partner-with-Big-Credit-Card-Companies-Boosting-Cell-Phone-NFC-Market.aspx
196 The maximum bit rate supported by NFC is 424 kbit/s, which is acceptable for most applications, but not video. Further, that maximum bit rate is seldom
achieved in real world settings.
197 SMS is not a short range technology, but it is used as a mobile payments technology, so we have included it in the list. Essentials for Successful NFC Mobile
Ecosystems, MFC Forum, October 2008: http://www.nfc-forum.org/resources/white_papers/NFC_Forum_Mobile_NFC_Ecosystem_White_Paper.pdf
198 Mobile Wallet Gaining Currency, The New York Times, 6 September 2011: http://www.nytimes.com/2011/09/06/technology/mobile-wallet-gaining-currency.html
199 Consumers Weigh In on the Digital Wallet, Complete, 1 June 2011: http://blog.compete.com/2011/06/01/consumers-weigh-in-on-the-digital-wallet/
200 Juniper: NFC Payments To Reach $50 Billion Worldwide By 2014, TechCrunch, 7 June 2011: http://techcrunch.com/2011/06/07/juniper-nfc-payments-to-
reach-50-billion-worldwide-by-2014/
201 Global perspective on payments: The McKinsey Global Payments Map, McKinsey, April 2009: http://www.mckinsey.com/clientservice/Financial_Services/
Knowledge_Highlights/Recent_Reports/~/media/Reports/Financial_Services/Global_Perspective_on_Payments1.ashx
202 Mobile payments go viral: M-PESA in Kenya, World Bank Website: http://Web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/0,,contentMDK:2
2551641~pagePK:146736~piPK:146830~theSitePK:258644,00.html
203 For example, ABSA and Vodacom have formed a strategic alliance to accelerate the pace of innovation in mobile financial services; the first trial commenced
in December 2011; Source: Absa and Vodacom form mobile financial services partnership, NFC World, 19 December 2011: http://www.nfcworld.
com/2011/08/19/39183/absa-and-vodacom-form-mobile-financial-services-partnership/; Source: Absa begins South Africa’s first NFC pilot, NFC World,
8 December 2011:http://www.nfcworld.com/2011/12/08/311815/absa-begins-south-africas-first-nfc-pilot/ ; Absa starts NFC trials for retail, IT News Africa,
6 December 2011:http://www.itnewsafrica.com/2011/12/absa-starts-nfc-trials-for-retail/ ; Airtel and Vodafone to implement SIM-based NFC solutions,
Voice&Data, 16 November 2011: http://voicendata.ciol.com/content/news1/111111606.asp
204 700m to use mobile money in emerging markets by 2015, NFC World, 6 June 2011: http://www.nfcworld.com/2011/06/06/37841/700m-to-use-mobile-
money-in-emerging-markets-by-2015/
205 Also, its extreme short range makes it more secure than some other wireless technologies whose signals travel further. For a hacker to gain access to the
signal, they would need to have an antenna within 20 cm or 8” of the phone, which is difficult to do surreptitiously.
206 Will 2012 Be the Year of Mobile Payments? No, PC MAG, 26 September 2011: http://www.pcmag.com/article2/0,2817,2393629,00.asp
207 Publicly available data shows that there were about 130 million contactless credit cards in circulation by the end of 2011. Given announced launch plans,
200 million seems a reasonable minimum by year end 2012.
208 Will 2012 Be the Year of Mobile Payments? No, PC MAG, 26 September 2011: http://www.pcmag.com/article2/0,2817,2393629,00.asp
209 T-Mobile begins internal NFC payments and access control trial in Czech Republic, NFC World, 23 April 2010: http://www.nfcworld.com/2010/04/23/33501/
t-mobile-begins-internal-nfc-payments-and-access-control-trial-in-czech-republic/
210 Business Cards Will Never Be the Same Again, The Wall Street Journal, 15 February 2011: http://blogs.wsj.com/tech-europe/2011/02/15/business-cards-will-
never-be-the-same-again/?KEYWORDS=business+card
211 Nokia 603 packs Symbian Belle, NFC, Angry Birds Magic, CNET, 17 October 2011:
http://crave.cnet.co.uk/mobiles/nokia-603-packs-symbian-belle-nfc-angry-birds-magic-50005648/
212 Nokia dabbles with NFC gaming, Pocket-Lint, 20 October 2011: http://www.pocket-lint.com/news/42643/nokia-nfc-future-mobile-gaming
213 How the Gaming Industry Is Using NFC Technology, X.commerce Website, 24 May 2012: https://www.x.com/devzone/articles/how-gaming-industry-using-
nfc-technology
214 NFC will catch on ‘like wildfire’ says Sundance festival game creator, NFC World, 20 March 2011:
http://www.nfcworld.com/2011/03/20/36516/nfc-will-catch-on-like-wildfire-says-sundance-festival-game-creator/
215 2D Bar Codes: Driving Consumers To Purchase, Forrester Research, 14 November 2011: http://www.forrester.com/rb/Research/2d_bar_codes_driving_
consumers_to_purchase/q/id/60906/t/2
216 Google Kills Off Those Little Square Codes You Scan With Your Phone, Business Insider, 31 March 2011:http://articles.businessinsider.com/2011-03-31/
tech/29979593_1_qr-codes-android-nfc-forum
217 World’s top auto makers to work on putting NFC in cars, NFC World, 18 March 2011: http://www.nfcworld.com/2011/03/18/36499/worlds-top-auto-makers-
to-work-on-putting-nfc-in-cars/
218 Design Watch: miniMe Biometric Device Wins iF Award, MDDI, 7 November 2011: http://www.mddionline.com/blog/devicetalk/design-watch-minime-
biometric-device-wins-if-award

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219 The cost of an NFC chip is estimated based on existing knowledge, conversation with industry players and published industry estimates including Nokia’s
Smart Phones To Feature NFC Chips In 2011, Payments Source, 18 June 2010: http://www.paymentssource.com/news/nokia-smart-phones-to-feature-nfc-
chips-3002165-1.html.
220 Assumptions on the doubling of volumes are based on the growing number of portable data devices (tablets, smartphones, computers, wireless speakers,
wireless SD cards, wireless digital terrestrial TV transmitters etc...). Also note the assumptions on doubling of data volumes year-on-year in the following
report: Cisco Visual Networking Index: Forecast and Methodology, 2010-2015, Cisco, June 2011: http://www.cisco.com/en/US/solutions/collateral/ns341/
ns525/ns537/ns705/ns827/white_paper_c11-481360_ns827_Networking_Solutions_White_Paper.html
221 For further discussion, please see the 2012 Prediction: Here come more data caps: it’s the end of the (wire)line for unlimited Internet
222 According to one study, 65 percent of a typical smartphone user’s data traffic can be off-loaded to Wi-Fi: Mobile Wi-Fi Offload, Light Reading, 7 April 2011:
http://www.lightreading.com/document.asp?doc_id=206545; Mobile Data Offloading: How Much Can WiFi Deliver?, December 2010: http://research.csc.
ncsu.edu/netsrv/sites/default/files/CoNEXT2010.pdf
223 The installed base of PCs will increase to 2.3 billion by 2015 from 1.4 billion in 2010 by an average rate of 23.1%,
Source: Forecast: PC Installed Base, Worldwide, 2006-2015, March 2011 Update, Gartner, 24 March 2011: http://www.gartner.com/id=1602818
224 According to Gartner, the smart phone installed base was 800 million in 2011. The smart phone installed base will grow at an annual rate
of 32 percent, according to Analysys Mason. Sources: CIO mission: Reimagine IT, CIO, 16 November 2011: http://cio.co.nz/cio.nsf/news/
EB7766A85703C6CDCC25794A00116619 and Smartphone usage set to rocket to 1.7 billion by 2014, Independent, 27 April 2010: http://www.independent.
co.uk/news/business/news/smartphone-usage-set-to-rocket-to-17-billion-by-2014-1955258.html
225 The number of Internet connected devices is set to explode in the next four years to over 15 billion. Source: Cisco predicts Internet device boom, BBC News,
1 June 2011: http://www.bbc.co.uk/news/technology-13613536
226 For example see: Qualcomm’s Peanut challenges ZigBee, Bluetooth for control of your personal area network next year, Computerworld data cited in
engadget, 24 September 2010: http://www.engadget.com/2010/09/24/qualcomms-peanut-challenges-zigbee-bluetooth-for-control-of-yo/; Outlook: The
future of Bluetooth is High-Speed, Low-Power, Smart and Ready, the:unwired, 12 December 2011: http://www.theunwired.net/?item=outlook-the-future-
of-bluetooth-is-high-speed-low-power-smart-and-ready&category=general-news&category=general-news&6045 ; WiGig Alliance hits new alliance in race
to multi-gigabit wireless, v3.co.uk, 13 December 2011: http://www.v3.co.uk/v3-uk/news/2131879/wigig-alliance-hits-milestone-race-multi-gigabit-wireless;
Wi-Fi Direct and DLNA get friendly, make streaming media a little bit easier, engadget, 16 November 2011,: http://www.engadget.com/2011/11/16/wifi-
direct-and-dlna-get-friendly-make-streaming-media-a-little/
227 Cellular mobile networks in the United States are already operating at 80 percent capacity; The global average peak network utilization is 65 percent and
estimated to reach 70 percent in 2012. Western European networks are at 56 percent and growing. Source: Credit Suisse: Wireless network utilization levels
globally are at threshold levels, Fierce Wireless, 18 July 2011: http://www.fiercewireless.com/story/credit-suisse-report-us-wireless-networks-running-80-
total-capacity/2011-07-18
228 World Broadband Statistics: Short report, Q4 2010, Point Topic, March 2011: http://broadband.cti.gr/el/download/broadbandshortreport2010.pdf
229 OECD Broadband Portal, Chart 5j, December 2011: http://www.oecd.org/document/54/0,3746,en_2649_34225_38690102_1_1_1_1,00.html
230 Cisco Visual Networking Index: Usage Study, Cisco Systems Website, 25 October 2010: http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/
ns705/Cisco_VNI_Usage_WP.html
231 Global Internet Phenomena Report, Sandvine, Spring 2011: http://www.wired.com/images_blogs/epicenter/2011/05/
SandvineGlobalInternetSpringReport2011.pdf
232 How Bad Do We Really Have it? Bandwidth Caps Around the World , Maximum PC, 16 June 2011: http://www.maximumpc.com/article/features/how_bad_
do_we_really_have_it_bandwidth_caps_around_world
233 Do Data Caps Make Good Business Sense for ISPs?, DSLReports.com, 4 November 2011: http://www.dslreports.com/shownews/Do-Data-Caps-Make-Good-
Business-Sense-for-ISPs-116896
234 Frequently Asked Questions about Excessive Use, Comcast Customer Central Webpage: http://customer.comcast.com/Pages/FAQViewer.
aspx?Guid=ce29dfac-73d9-4cb4-b433-70abe3b295e6#excessive1
235 BigPond Broadband Internet Plans: http://go.bigpond.com/broadband/?cid=ZBP_access_4_highspeedbb_280710
236 This refers to the number of apps concurrently available; the catalog of application stores is constantly being refreshed. The one million apps milestone was
reached in 16 September 2011. See: http://blog.appsfire.com/1-million-apps-ios-android/
237 It’s a 1 million mobile app world, GigaOM, 2 December 2011: http://gigaom.com/2011/12/02/its-a-1-million-mobile-app-world/
238 iOS users buy more apps and pay more for them, GigaOM, 11 July 2011: http://gigaom.com/apple/ios-users-buy-more-apps-and-pay-more-for-them/Android
Still Trails iOS as a Money Maker for Devs, GigaOM, 27 May 2011:
http://gigaom.com/2011/05/27/android-still-trails-ios-as-a-money-maker-for-devs/
239 Most branded apps are a flop says Deloitte. But why?, The Guardian, 11 July 2011: http://www.guardian.co.uk/technology/appsblog/2011/jul/11/branded-
apps-flopping
240 A very small proportion of content generates the vast majority of usage. In the music industry, about 80 percent of the online catalog in the United Kingdom
(equivalent to 10 million titles) does not sell a single copy. And 0.5 percent of the market generates 80 percent of all sales. In the US book industry, in
2006, almost 1.5 million titles were on sale, of which 483 sold more than 100,000 copies. See: Behind the music: Is the long tail a myth?, The Guardian, 8
January 2009: http://www.guardian.co.uk/music/musicblog/2009/jan/08/long-tail-myth-download; also see: Under the Radar, BIGS: http://www.bisg.org/
publications/product.php?p=8
241 Quad Core Phones: What to Expect in 2012, PC World, 11 December, 2011, http://www.pcworld.com/article/246011/quadcore_phones_what_to_expect_
in_2012.html
242 For further discussion, see: “It takes two to tablet: the rise of the multi-tablet-owner prediction”.
243 Sting’s Message in an iPad, The Wall Street Journal, 11 November 2011: http://online.wsj.com/article/SB10001424052970204554204577026312266905128.
html?mod=googlenews_wsj
244 The largest file size for an app on iOS is 2GB. Source: iTunes Connect Developer Guide 7.2, Page 180, Apple, 17 October 2011: https://itunesconnect.apple.
com/docs/iTunesConnect_DeveloperGuide.pdf. The maximum file size for Android is 50 MB. Source: The maximum file size for Android is 50 MB: Android
Market for Developer, Google: http://www.google.com/support/androidmarket/developer/bin/answer.py?hl=en&answer=113469
245 Research based on application stores in various countries as of December 2011.
246 Intel Pushes Subscription Model for Tablet App Store, PC World, 25 June 2011: http://www.pcworld.com/businesscenter/article/231150/intel_pushes_
subscription_model_for_tablet_app_store.html


Recent thought leadership

The 2011 Shift Index: Measuring the forces of long-term change, TV+ perspectives on television in words and numbers, Deloitte LLP,
Deloitte Development LLP, 2011: www.deloitte.com/us/shiftindex 2011: www.deloitte.co.uk/tv

State of the Media Democracy Survey, sixth edition, Deloitte Deloitte’s Technology Trends 2011: A Federal perspective,
Development LLP, 2011: www.deloitte.com/us/mediademocracy Deloitte Development LLC, 2011: www.deloitte.com/
view/en_US/us/Industries/US-federal-government/
The impact of 4G technology on commercial interactions, economic f59e718e22a12310VgnVCM3000001c56f00aRCRD.htm
growth and U.S. competitiveness, Deloitte Development LLP, 2011:
www.deloitte.com/us/impactof4g Addicted to Connectivity, Deloitte Global Service Limited, 2011:
www.deloitte.com/addictedtoconnectivity
The Deloitte Consumer Review: Serving the connected consumer,
Deloitte LLP, 2011: www.deloitte.com/view/en_GB/uk/industries/ TMT Predictions 2011, Deloitte Global Service Limited, 2011:
consumer-business/4aa60ac6a4ef3310VgnVCM1000001a56f00aRC www.deloitte.com/tmtpredictions
RD.htm

52

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54

Notes


Researched and written by:

Paul Lee Duncan Stewart
Director, Head of Global Director of TMT Research
TMT Research Canada
Deloitte Touche Tohmatsu +1 416 864 3536
Limited dunstewart@deloitte.ca
+44 20 7303 0197
paullee@deloitte.co.uk

For more information, please contact:

Amanda Goldstein Karen Hogger Yvonne Dow
TMT Marketing Leader EMEA TMT Marketing Asia Pacific TMT Marketing
Deloitte Touche Tohmatsu Deloitte Touche Tohmatsu Deloitte Touche Tohmatsu
Limited Limited Limited
+1 212 436 5203 +44 20 7007 5405 +852 2852 661
agoldstein@deloitte.com khogger@deloitte.co.uk ydow@deloitte.com

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Technology, Media & Telecommunications Predictions - Deloitte - 2012

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