McKinsey has released a report on the digital consumer, enumerating the six key mega-trends in consumer digital behavior, and the impact that they are having for brands and businesses.
The report, entitled iConsumer: Digital Consumers Altering the Value Chain, authored by Mckinsey’s Ewan Duncan, Eric Hazan, and Kevin Roche can be downloaded here (companion article here)
Six Digital Trends
- Device shift – from PCs to mobile/touch devices. Smart phones are fast becoming ubiquitous, with penetration about 60% in the US. Just over 30% of US Internet equipped households now have a tablet as well, and the rest of the developed world is close behind. Mobile phones and tablets now make up about 44% of all personal computing time, having nearly doubled from 2008. The implications of this shift is already being felt by multiple device manufacturers and their major retail partners.
- Communications shift – from voice to data and video. Email and telephonic voice have fallen from over 80% to about 60% of our “communications portfolio”, while time spent on social networks has doubled to take over a quarter of all our communications time. And when we use our phones, only about 20% of the time is for talking (down from over 60% just 5 years ago), with the majority used for more data-centric activities such as streaming music, browsing websites and playing games. The upshot: mobile carriers in particular face challenges in re-orienting their business models to focus on data rather than voice minutes. The US market has many lessons for the rest of the world in this area.
- Content shift – from bundled to fragmented. In large part thanks to powerful search tools, the ‘long tail’ of media and content (whether that be text, video, classified listings, products for sale, or otherwise) is accessible to anyone. Thus some of the value in traditional “bundles” (whether newspapers, network TV stations, or big-box retailers) has been eroded. The way we use our mobile phones illustrates this well. The number of apps (typically for specific single-purposes) installed has doubled to over 30 from 2008 to 2012. Our spending on these apps is highly fragmented, however, and the growth potential still highly uncertain. Challenges abound for both content owners and marketers to reach and engage audiences that access such eclectic, fragmented media.
- Social shift – from growth to monetization. Social networking represents almost a quarter of all Internet time (up 10 points since 2008) and reaches over 75% of all Internet users. Yet, for the first time we have seen small declines in both total audience and levels of engagement in developed economies. This is a remarkably fast climb to maturity, given that major players like Facebook, LinkedIn, and Twitter have yet to celebrate their 10th birthdays. Facebook and LinkedIn now face the quarterly earning pressures of the public markets as well. At the same time, businesses of all shapes and sizes are now actively trying to use social media as part of their marketing efforts. Achieving real and measurable returns on these efforts will be a continuing challenge for players across the TMT spectrum.
- Video shift – from programmed to user-driven. Traditional live, linear television remains relatively flat on an absolute basis, but has slipped on a relative basis, and now represents just 65% of all video viewing for US consumers on their television screen, and 52% across all screens. Time-shifted DVR content, watching video on PCs and over-the-top internet video services such as Netflix, make up much of the balance. The increase in all varieties of time-, place- and device-shifting video options will continue to pressure traditional advertising-supported business models for distributors, advertisers, and content owners in the value chain.
- Retail shift – from channel to experience. Despite its tremendous growth and transformation of the retail landscape, e-commerce holds only about 5% of all retail sales. As connected mobile devices proliferate, their potential to transform the shopping experience (both in store and online) is the next opportunity. About half of all smart phone owners now use their devices for retail research, and though small today, we will soon see significantly more consumers using smartphones and tablets to complete their transaction as well. The combination of mobile retail and true multi-channel integration will have a transformative effect on the retail experience, and begin the era of Retail 3.0.