McKinsey & Company released a new report on February 28 which evaluates the explosive growth of the “consumer surplus” associated with the mobile internet.
“When consumers tweet, exchange photos, or search for information on the web, they’ve come to expect that it will be free. In economic terms, this panoply of services by web providers amounts to a vast consumer surplus.”
In three years, from 2010 to 2013, they estimate that the “value” (what they think consumers would be willing to pay for these now “free” services) has doubled from €130 billion to €250 billion. That is $179 billion and $245 billion, respectively.
McKinsey attributes this growth in the value and the use of these services to the growth of mobile devices.
“Three-fourths of the incremental surplus results from the explosion in consumer use of the wireless web through smartphones and tablets—propelled by the migration of web services, communications channels, social media, and entertainment to these wireless devices.”
(image credit: McKinsey & Company)
What is striking about their findings, as visualized in the graph above, is that while the surplus attributable to mobile devices ( a proxy for “use”) grew seven-fold in three years, “all other surplus” (a proxy for desktops, laptops and other devices that are tethered to some physical location) grew by only 26% in the same three year period.
As an extension of McKinsey’s core surplus analysis, they estimated the value of the trust users have in the web brands they use to interact with others, seek information, and consume entertainment.
“Leading web-service providers such as Google (including YouTube), Facebook, Microsoft, Yahoo!, and Twitter capture nearly half of the trust surplus.”
So, what does this mean?
“Companies with strategies that meet or exceed them while increasing the range and reliability of their web offerings—particularly mobile services—should be well positioned to enjoy a virtuous cycle in which the creation of a consumer surplus expands the scope of opportunities to generate revenue and value.”
The current environment favors the big dogs….as long as they continue to provide reliable and useful applications, targeted at mobile platforms…and do not do anything to violate the trust that users have placed in them.