Japan’s slow-growth tech market is Asia’s biggest — but not for long. Japan is expected to spend US$248 billion and on tech goods and services in 2017, which is the largest among all Asia Pacific countries. Measured in yen, growth will be low: 1% in 2017 and 0.4% in 2018.
China’s tech market will continue to shift from hardware to software and services. Forrester projects that China’s tech market spending will grow at 7% in yuan renminbi in 2017 (3% in US dollars). Hardware markets will continue to mature; state-owned enterprises will continue to replace foreign products with local alternatives; and cloud adoption will reduce the need for capital expenditures.
India’s tech spending will maintain the highest growth rate in Asia Pacific. India’s total tech purchases will increase by 8% in 2017 and by 10% in 2018 in rupees (5% and 8%, respectively, in US dollars). A robust economy, combined with government-led initiatives like Digital India and Make in India, will spur increased investment in the software, services, and outsourcing segments.
Last week, two news items captured the front-page headlines of the Indian financial newspapers. The first was an announcement by Flipkart on July 29 that it has raised fresh capital of $1 billion in one of the largest funding rounds. The second was an announcement by Amazon on July 30 that it will invest another $2 billion in India. These numbers appeared large to us when seen in the context of overall online retail sales in India. As per the Forrester Asia Pacific online retail forecast published in early October 2013, India’s online retail spending was expected to reach $2 billion by the end of 2013. We believe that the pace of eCommerce in India picked up faster than our expectations during the past 12 months and these companies would have witnessed very strong growth. According to Amazon, at current scale and growth rates, India is on track to become the fastest country ever to reach $1 billion in gross sales. It is important to note that Amazon launched India operations in June 2013 only.
These events raised many interesting research questions for us. We will try to address them as we work toward updating our APAC online retail forecast for the years 2014 to 2019. The two most important questions relate to the number of online buyers in India and the mobile commerce opportunity in India.
The advertising industry mega-trend of the last decade — ad dollars shifting from offline to online media — is continuing in this decade, as well. This is because more and more users are becoming "addicted" to the Internet. According to a recent study by the Pew Research Center, “The Web at 25 in the U.S.,” it has become harder for consumers to give up the Internet than TV. Fifty-three percent of Internet users say the Internet would be very hard to give up, up from 38% in 2006. Only 35% of adults say their television would be very hard to give up, down from 44% in 2006.
The mega-trend of the decade is the shift of ad dollars from desktop/laptop to mobile devices. Based on Forrester estimates, US mobile ad spend was just 6% of total US online ad spending in 2011. The share of US mobile ad spending in the total US online ad spending is expected to reach 44% by 2019. All three components of mobile advertising — display, search, and social — will witness increases in their spend levels.
Mobile display. There is an increasing shift of ad spending from mobile Web to in-app display ads. This is because apps capture most of the smartphone usage. According to a recent study by Flurry, apps capture 86% of usage, whereas only 14% of US mobile consumer’s time is spent on mobile Web. In-app advertisements and mobile video will drive the growth of mobile display ad spending.
This week Forrester published our inaugural online retail forecast for Canada. While still lagging behind the US market, online sales in Canada show encouraging signs of growth over the next 5 years. In fact, online sales in Canada have grown from C$15.3 billion in 2010 to C$20.6 billion in 2013 and are expected to reach C$33.8 billion by 2018. A few highlights of note from the forecast:
Online sales now account for 7% of total retail spend. Forrester forecasts a compound annual growth rate (CAGR) of 10% over the next five years for online sales, however retail total growth (online & offline) in Canada will linger at only 2.8% over the same period. Consequently online sales will account for 10% of total retail spend by 2018, up from 7% today.
Just five categories account for half of the dollars spent online in Canada. Apparel and accessories alone are a C$3.5b plus sector, followed closely by PC;s, consumer electronics, event tickets and groceries. Perhaps this should come as no surprise given these same categories that are also some of the most commonly researched online in Canada.
Average online spend is set to increase 37% by 2018. Today the average Canadian spends C$1,130 a year online which is considerably less than our neighbors in the US (who spend US$1,481), but on the bright side, Forrester forecasts that Canadian online spending will hit $1,552 by 2018. The majority of this growth in online spend will be driven by broader access to products and services that today are only available directly at brick-and-mortar stores or via cross-border delivery from US domiciled retailers.
This week, Google announced that it will shut down Google Reader on July 1, 2013. In its announcement, Google states that it’s doing this because the usage of Google Reader has declined and it wants to concentrate on fewer products. There was a lot of buzz online about this decision, and some fanatical Google Reader fans put together a petition to keep the RSS reader alive. They garnered more than 50,000 signatures in just a few hours.
This whole debate sparked my interest, and I analyzed Forrester’s Technographics® data to get a better understanding of the usage of RSS feeds over time. I found that Google is right about the decline. Our data shows that it was always only a dedicated group who used RSS feeds at least weekly — about 7% of US online adults in 2008; this had declined to just over 4% last year, with about one in 10 US online adults using RSS feeds about monthly.
The European economy is still struggling for growth after the global recession. While overall GDP growth was positive in 2010 and 2011, it again turned negative in 2012. A slow economic recovery is projected through 2017, but growth is not expected to reach 2007 levels during the next five years. Despite this weak macro-economic environment, spending on social media has continued to grow in Europe and will continue to see double-digit growth over the next five years as well. Why?
The continuous shift of ad spending from traditional media to online media. The megatrend of the past decade — advertising dollars shifting from offline to online media — is expected to continue in this decade as well. Internet advertising’s share of overall advertising spend grew from 1% in 2001 to 22% in 2012 for Western Europe. There still exists a significant gap between the time spent online by consumers and the share of online spend in overall advertising spend, but this gap will decrease over the next few years with the continued shift in spending.
Social media’s increasing share of online ad spend. Currently, display ad spending is nearly four times higher than social ad spending in Western Europe, and search advertising is eight times larger. However, social will experience faster growth than display or search in the coming years. Social’s share of overall online spending will increase as companies spend more to engage with consumers on social media platforms for marketing and sales initiatives.
With just over a billion people around the world having a smartphone in 2012, and the next billion smartphone adopters joining in within the next five years, smartphones have reached a tipping point. Malcolm Gladwell defines the tipping point as “the moment of critical mass, the threshold, the boiling point” within a sociological ecosystem. A technology hits critical mass when one-fifth of the population adopts it. For smartphones, developed economies witnessed this phenomenon in 2011.
North America and Europe top the global smartphone penetration rates, at 47% and 35%, respectively. However, they are outpaced in terms of the sheer number of users by the Asia Pacific region. In fact, China alone already has more smartphone users than any other country in the world. And our forecast shows that Asia Pacific is also the fastest-growing region for smartphone adoption, projected to increase by approximately 20% per year.
In the Forrester Research World Smartphone Forecast 2012 To 2017 (Global), we investigate the size, speed, operating system (OS) dominance, and user demographics of the competitors in the world’s smartphone showdown. Younger and wealthier adults are the early adopters of smartphones, but there will be a gradual progression toward adoption by lower-income and older adults as smartphones become cheaper and the offerings of basic phones become more limited.
Tablet ownership in Western Europe is set to quadruple in the next five years: The percentage of European online consumers who own a tablet will increase from 14% in 2012 to 55% in 2017, according to the Forrester Research World Tablet Adoption Forecast, 2012 To 2017 (Global). This dramatic growth follows what was a pivotal year for tablets: Ownership doubled in 2012, and one in seven online Europeans now owns a tablet. The recently published Forrester report “The European Tablet Landscape” draws on our Technographics® data and looks at the profile of European tablet owners and their usage patterns. We found that:
Unsurprisingly, tablet owners are tech-savvy. Today, tablets are most popular with 18- to 24-year-olds, with one in four online consumers in this age group now owning a tablet. Of all tablet owners, a high 45% state that they “like technology” and 36% agree that “technology is important for me.”
Income is a driver . . . for now. About 24% of high-income European online consumers have a tablet, compared with 15% of online low-income consumers. But the growing variety of tablets and form factors as well as more competitive pricing will make tablets affordable for a wider range of consumers.
The Asia Pacific (AP) growth engine did not fire on all cylinders in 2012, leading Forrester to revise its IT purchases growth forecasts for the year. While Australia, South Korea, and several ASEAN tech markets are showing continued solid growth, in other markets like China, India, Japan, Malaysia, and Vietnam, political leaders are struggling in the face of growing economic problems. My colleague Andy Bartels and I, with the help of Forrester’s AP analyst team, have recently published our revised IT purchase growth forecasts for 2013. Here are our key expectations by country:
2012’s slowdown in China will be short-lived. Despite a slowdown in 2012, China continues to attract intense vendor interest because of its size and potential for further growth. The expected government stimulus efforts in the country will offset factors such as weak demand from businesses and governments. The slowdown in 2012 (+9%) is therefore likely to be short-lived, with stronger growth resuming in 2013 (+10%).
India’s IT growth will remain slower than expected through 2014. 2012 (+7%) was a relatively lackluster year for the tech market in India. Worse than expected economic growth, combined with political gridlock on economic reforms, kept the tech market from reaching its full potential in 2012. While we expect the public sector to drive India’s IT spending growth, the impact will be limited through 2014 due to the parliamentary elections scheduled for that year.
Ten years ago, the most common way to connect to the Internet at home was via a PC or a laptop. Now, connectivity at home is increasingly being supplemented by tablets, smartphones, and other media devices, although PCs/laptops still dominate. Consumer electronics device manufacturers cashing in on this shift are offering Internet-ready capabilities in many of their devices. Although the notion of “connected devices” can be quite broad, we focused specifically on game consoles, Blu-ray players, and high-definition (HD) TVs in our recently published Forrester Research Connected Devices Forecast, 2012 To 2017 (US). Here is a brief commentary on each of these device segments:
Game consoles: In 2012, the game console manufacturers experienced declining sales. Unlike in the past, when the introduction of a new console generally saw significant uptake in sales, Nintendo’s Wii U (launched in Q4 2012) is not expected to hit the peak sales of the original Wii. We believe that this trend will be seen more broadly in the game console industry. This is largely (though not exclusively) driven by the availability of low-cost/"freemium" titles on smartphones and tablets, which fulfill the gaming needs of the casual gamer — and have a negative impact on the console market. However, we still expect the console market to see moderate growth. By 2017, the majority of consoles will be “connected” to an IP connection because consoles are multi-purpose and allow users to do many activities online such as rent/buy movies and TV shows, purchase games, watch streaming videos, and listen to streaming music.