The global digital economy is doing reasonably well, but is still suffering from the economic downturn, especially in Europe.
European digital economy think tank IDATE has published the 14th edition of its DigiWorld Yearbook, an international reference for the current state of the digital world. It includes key data and the latest developments in the telecoms, Internet and digital media markets.
DigiWorld markets reported a slight uptick in growth in 2013: going from 2.8% in 2012 to 3.2%, generating close to €3,500 billion in revenue. DigiWorld Yearbook’s editor-in-chief, Didier Pouillot, said: “This modest improvement is a reflection of the ongoing healthy momentum in key sectors, but with a still bleak economic climate, especially in Europe”.
The first trend is driving a continual rise in consumption, traffic, and a steady rate of device (smartphones, tablets, smart TVs) replacement and upgrades, and is forcing hardware suppliers to work hard to keep up with demand.
The second trend is tempering the first, as businesses and consumers are feeling the pinch and being careful with their spending. Suppliers too are being cautious about their investments, especially since, in a number of instances, the current state of the market and competition are cutting into their revenue and more importantly, their margins.
It is the balance between these two opposing forces – inflationist in terms of volume and conservative in terms of value – that creates the biggest challenges for the industry today.
Enjoying the strongest rate of progress, with growth rates of around 20% a year. At this pace (predicted to slow slightly to 16% in the coming years), online services compared to core DigiWorld markets will increase from 5% in 2012 to 10% in 2017.
The markets are also being changed from the inside, from both a sectoral and geographical standpoint. Internet services comprises several sub-groups. Social media sites, mobile apps and OTT video are the most dynamic today: all reporting over 30% growth in 2013 – and more than 40% and even 50% for social networking sites, on average, over the past three years. Together, they account for around 20% of OTT markets.
The cloud is another source of growth, with revenue rising by close to 30% per annum, and singlehandedly accounts for more than a quarter of online revenue, followed by search and e-commerce which are growing by around 20% a year.
Global growth in core DigiWorld markets in 2013 varied from segment to segment: ranging from +6.2% for telecommunications hardware to -5% for consumer electronics. Between the two, computer hardware markets grew by 4.2% last year.
TELECOM AND TV SERVICES
Telecom services’ growth rate has been shrinking for the past five years and dropping to +2.5% in 2013. The other two services segments performed virtually on par: +4.5% for IT and software and +4.4% for TV services.
OTT is in many ways making the rules. Any discussions about the future of the digital economy must focus on business models that are compatible with an all-IP value chain that places most applications and services outside the network. Despite the balance of power being tipped in favour of the top Internet platforms, the report says the future is still relatively open for the taking.
Despite its demise being announced on a near daily basis, linear television will be with us for some time to come – not least because it generates more than 90% of all TV revenue. But profound changes, which are putting tremendous pressure on industry players, are redrawing the global TV landscape. These changes include:
# the swift development of on-demand services, and notably SVOD.
# the gradual disappearance of the technical distinction between distribution on managed networks and online distribution, which will open the way to increased competition for control of retail distribution.
# the IPTV model being called into question, and cord-cutting leading to the emergence of broadcast + OTT solutions.
European Telecoms: the three challenges
A long journey still lies ahead for Europe in its bid to achieve a single telecommunications market. To be successful, the regional consolidation that now appears to be properly underway will need to rise to three main challenges:
price wars that threaten telcos’ ability to invest in new generation infrastructure;
a single European telecoms market, which includes cross-border deals and the creation of truly pan-European players;
achievement of the margins and critical mass needed to reinvent the telco business model, in an environment being dictated by powerful Internet companies.