While 2020 will mostly be remembered for COVID-19, it was also a year of tremendous resilience. Teachers and schools around the world transitioned from in-class learning to full-time distance learning in a matter of weeks. Workers created home offices and took to meeting on Zoom instead of in conference rooms. People found ways to exercise outside of the gym with apps and peripherals like Peloton. And the mobile industry is poised for meaningful transformation in 2021. In this piece, Flurry reveals its top five predictions for mobile in 2021.
1. The 5G Revolution Finally Arrives
You’ve been hearing a lot of buzz about 5G for a couple of years now. It promises wifi-like speeds from nearly anywhere, less latency, and better video quality. Ultimately, the rollout has been slow as carriers have had to build massive infrastructure and OEMs needed to develop 5G-compatible devices. The tipping point came this Fall when Apple joined the party by introducing the iPhone 12 series, complete with four 5G-enabled devices spanning the price spectrum. Let’s take a look at how 5G is now beginning to take off in earnest.
In the chart above, we show worldwide 5G-enabled device activations by month during 2020. In March, Samsung launched the Galaxy S20 series, and in August, they launched the Galaxy Note 20 Ultra. But the true accelerant came in October and November when Apple released the iPhone 12 series. With the world’s two largest smartphone OEMs manufacturing quality 5G devices, we expect adoption to increase substantially in 2021. As this adoption increases, we also expect app developers to capitalize on the innovation 5G delivers, namely with AR and VR functionality. The search for the 5G killer app starts now.
2. “Digital At Home” Innovation Will Soar
COVID-19 has completely disrupted life as we know it. In a matter of days in March, employees and students suddenly shifted to working and learning from home. Restaurants, gyms, and retail establishments closed and adapted as people sheltered in their homes. And as some restrictions were lifted, many people chose to remain isolated to avoid contracting the virus. Amidst this abrupt change, companies and schools adapted. Gym classes, meetings, and school all shifted to functioning over a series of apps, including video conferencing. Although a vaccine is on the horizon, it won’t happen overnight and people will not immediately -- or ever-- resume their pre-COVID-19 life. So much innovation has already happened around “Digital At Home” and we expect that trend to drive more innovation in 2021. Let’s review how a couple of examples, Education and Health & Fitness, surged in usage during 2020 over 2019.
In the chart above, we illustrate the year-over-year increase in mobile app sessions in Health & Fitness and Education, two of those app categories that have adapted to the post-COVID-19 world. We have set 2019 sessions for both categories to a baseline of ‘1’ to easily show the year-over-year growth. Sessions in the Health & Fitness category increased 37% in 2020 and increased 15% in the Education category. Expect these growth trends to continue and extend into other app categories in 2021.
3. Consumer Privacy Changes Will Take Center Stage
At WWDC in June, Apple announced it would soon require app developers to secure permission from end users of their apps in order to track and share their data with third parties. While the timeline has been pushed once already, industry insiders predict the rollout to happen in March. This shift away from an opt-out data sharing model to an opt-in data sharing model is expected to drastically decrease targeting capabilities, which means advertisers will pay less per impression, resulting in less revenue for app developers that rely on advertising. Dozens of companies Flurry has spoken with expect eCPMs to drop by at least half. Further, attribution of ad effectiveness will be handled by Apple itself as all conversion data will flow through them so that they can help ensure end user identification is obfuscated. Up until now, these conversations have mostly taken place among app developers and app marketers, but once the tracking prompts begin to roll out, expect a new level of focus on consumer privacy as well as the tension it creates for app developer revenue potential on Apple’s platform.
4. Lower-priced iPhone Devices Will Fuel Apple’s Growth
When it first launched the iPhone in 2007, Apple notably pursued and dominated the premium end of the mobile market. Just ask Nokia which commanded over 50% of the worldwide mobile phone market at the very moment the iPhone was first released. By 2011, Nokia CEO Stephen Elop was penning his famous “burning platform” memo to the Nokia rank-and-file. Mr Elop wrote, "The first iPhone shipped in 2007, and we still don't have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable." By 2012, Nokia’s market share had shockingly fallen below 5%.
While Apple took an early market share lead in the next chapter of Mobile, Samsung (leveraging Android operating system) ultimately surpassed Apple with a greater number of lower priced devices across a much broader set of international markets. But now, after firmly securing the high-end of the market in the U.S. and other top markets, Apple is on the offensive with multiple lower-priced iPhone models (e.g., iPhone SE, iPhone 12 mini, and heavily discounted iPhone 11 models) to appeal to more price-sensitive consumers in the U.S. and to penetrate international markets. The result is that Apple is chipping away at Samsung’s global market share lead. To see this more clearly, let’s take a look at Apple’s market share among upper, middle and low income segments in the U.S.
In the chart above, we plot Apple’s share of the market by upper, middle and lower income levels in the United States during the first half of 2020. Notice how Apple consistently commands upper and middle income segments represented in orange and gray. And now turn your attention to the blue line, which shows Apple’s share of the low income segment surge by 4% percentage points when it launched the second generation iPhone SE in May 2020 for just $399. That level of share has held steadily ever since. And what’s remarkable is that Apple continues to hold its position with the high and middle income earners, demonstrating that they can simultaneously expand their down-market install base while maintaining the loyalty of the highest income segment. We’ve seen similar success for Apple in key Android-dominated international markets such as Brazil and India, where new iPhone activations increased by double digits in 2019. While Apple’s total market share in these markets remains low, expect the company to continue to make international gains against Samsung’s in 2021.
5. Mobile Advertising Will Transform
As both Internet and Mobile platforms remove third-party cookies, IDFAs and other identifiers, digital marketing is bracing itself for a tectonic shift. Ultimately, this knocks out the ability for marketers to finely target consumer segments with their advertising campaigns. The less efficient the ad campaign, the less the advertiser will pay. The less money spent on advertising, the less that publishers with ad revenue business models will earn from ads.
In mobile, Apple is making the first move by all but deprecating the Identifier for Advertising, IDFA. It is speculated that Google will ultimately follow Apple’s lead, especially since making Chrome a cookieless browser is already in the works. On the targeting side, mobile ecosystem players have been probing Apple for hints and guidance, which now includes required end user permission to track, a need to use the Apple SKAdNetwork for much more limited attribution and a prohibition against fingerprinting or other means to aggregate signals to rebuild user-level identity.
This is kicking off a ‘war for supply’ as walled-gardens with larger first-party audiences will be the only ones left with fine-grained user-targeting capabilities. We expect some increased M&A and partnership activity in the ecosystem to build scale. Additionally, most third-party ad networks are falling back to contextual ad targeting, which uses non-user-based information to deliver relevant ads to consumers.
Despite these new constraints, we believe that the need to promote to consumers is immutable, and that consumers will, as always, respond to various forms of subtle and disruptive advertising. This will kick off a new wave of approaches, including what appears to be a long-term play to build rich user-based identity from start-ups like Marissa Mayer’s Sunshine. After rebuilding consumers' contact lists and the corresponding relationships among them, they’ll then have an option to seek consumer opt-in to turn on ad revenue. Since “necessity is the mother of invention” -- and to the extent Apple and Google ecosystems allow it -- mobile identity, attribution and advertising will be re-imagined in 2021.
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The Flurry blog (https://www.flurry.com/blog/) is an independent blog and has not been authorized, sponsored, or otherwise approved by Apple Inc. or Samsung.