Google Mobile Day

Google Confidential and Proprietary

Prepared by J'son & Partners Consulting for Google

Mobile Internet

in Russia

Android and Mobile Marketing, Google Russia Android and Mobile Marketing, Google Russia

Table of Contents

1. Mobile Internet users 1.1. Number of active mobile Internet users

1.2. Number of active mobile Internet users by regions of Russia

1.3. User profile

2. Mobile Internet access devices 2.1. Overview of mobile Internet access devices

2.2. Tablet PCs

2.3. Smartphones

3. Mobile Internet usage on smartphones 3.1. Frequency of mobile Internet usage

3.2. Average duration of daily session

3.3. Mobile Internet usage experience

3.4. Places where smartphones are used

3.5. Incentivising smartphone usage

3.6. Mobile Internet advertising

3.7. Using a smartphone to make purchases

3.8. Purchases with a smartphone

3.9. Reasons for using mobile Internet: top 10 actions

3.9.1 Reasons for using mobile Internet: search applications

3.9.2 Reasons for using mobile Internet: video applications

3.9.3 Reasons for using mobile Internet: social networking sites

4. Technical parameters for mobile Internet usage 4.1. 3G network coverage map

4.2. Mobile Internet traffic

4.3. Average traffic for one subscriber

4.4. Cost of mobile Internet

5. Forecasts, trends and barriers for mobile Internet development in Russia 5.1. The dynamic of smartphone prices and forecast

5.2. Dynamic for 3G network coverage

5.3. Growth of sales market for smartphones and other mobile Internet access devices

2

1. Mobile Internet users

Number of subscribers,

million

Average traffic per 1

subscriber, MB

Total traffic per

month, TB

3G tablets 0.3 250 75

USB modems 10.3 1,430 14,729

Smartphones 12.0 121 1,452

Mobile phones 27.2 14 381

1.1. Number of active Internet users from mobile devices as of the first six months of 2011

Data traffic from smartphones accounts for about 75% of all

data traffic from mobile devices*

*In this study, the term „mobile device‟ is understood as smartphones, mobile telephones and tablet PCs.

3G tablets Mobile phones Smartphones

0,3 27,2

12

250

14

121

75

381

1 452

Traffic per month, TB

Number of subscribers,

million

МBOU

3

2009A 2010A 2011E 2012F 2013F

34 39 43 48 53

1. Mobile Internet users 1.2. Number and share of the population of active Internet users from mobile devices by region of Russia

The development of the mobile Internet is rapidly eradicating the “digital divide” in the outlying

regions of Russia. The share of active* data subscribers in Moscow and St Petersburg accounts for

around 40% of the total population

5-20%

20-25%

25-30%

30-35%

more than 35%

Share of data subscribers in the total population by region of Russia,

as of the end of Q2 2011:

28% of the population of Russia

who are active data

users**

**as of Q2 2011

Subscribers for data

from mobile devices, million people

* An active data subscriber is a subscriber who has used a data service at least once in the last month

4

Gender

18 - 24

25 - 34

35 - 44

45 - 54

55 +

Average age: 30.8

Men

Women

Age

Education

Employment status

Primary

Secondary

Higher

Full time

Part-time employment

Student

Unemployed/

Working from home

Monthly household income

High (more than RUB 50,000)

Average (RUB 25,001 – 50,000)

Low (RUB 25,000 and lower)

2%

11%

20%

31%

37%

39%

61%

60%

36%

4%

8%

11%

12%

67%

24%

42%

27%

1. Mobile Internet users 1.3. Smartphone user profile General demographic characteristics

5

Age

1. Mobile Internet users 1.3. Smartphone user profile. Demographic characteristics by operating system

Gender

Men are the principal users of smartphones.

The majority of smartphone users are aged between 18 and 34.

iOS

Android

Windows Mobile/Phone

Symbian

41%

40%

32%

28%

59%

60%

68%

72%

Женщины Мужчины

iOS

Android

Windows Mobile/Phone

Symbian

49%

42%

42%

27%

30%

28%

28%

31%

14%

20%

17%

29%

8%

8%

12%

8%

2%

1%

5%

18-24 25-34 35-44 45-54 55 и старше

6

Women

55 and older

Men

1. Mobile Internet users 1.3. Smartphone user profile. Experience of smartphone usage by operating system

Of smartphone owners on the Android platform, the greatest share is occupied by new users

(with less than one year‟s experience of smartphone use). For many smartphone users on the Android

platform, this is their first “smart telephone”

How long have you been using smartphones?

Android

iOS

Windows Mobile/Phon

e

Symbian

61%

44%

34%

24%

39%

56%

66%

76%

До года Более года Less than a year More than a year

Symbian

Windowa

Mobile/Phone

iOS

Android

7

2. Mobile Internet access devices 2.1. Overview of mobile Internet access devices: tablet PCs

In 2010, the sales volume for tablet PCs in Russia came to around 400,000 devices – approximately 10 times

less than smartphone sales. In 2011, we expect the size of the tablet PC market to double

8

Sales volume for PC tablets in Russia, million items

2. Mobile Internet access devices

Sales volume for smartphones in Russia, million items

2009A 2010A 2011E 2012F 2013F

1,9 3,9

8,6

11,8

15

The volume of smartphone sales* in Russia will double in 2011 compared with that of 2010

* The smartphone is defined as a multi-functional mobile communication device.

The following main criteria identify a device as a smartphone:

• the operating system that manages the device and enables the installation of additional applications, including those from external developers

(Java2Me applications are not included): Symbian (version 6 and higher), Windows OS for mobile devices, Palm OS, Linux, Android, Maemo; Bada

• advanced communication features – email, HTML page viewing, data synchronisation with PC, etc.;

• support for standard business applications.

Share of smartphones in total sales of mobile

terminals in Russia, %

6%

11%

22%

29%

36%

2009A 2010A 2011E 2012F 2013F

2.2. Overview of mobile Internet access devices: smartphones

9

2. Mobile Internet access devices

2008A 2009A 2010A 2011E

81,2% 66,7% 71,6%

45,1%

0,8% 11,4%

33,9%

3,8% 13,5% 2,8%

6,0%

4,5% 5,0% 15,4%

26,3%

8,3% 2,4%

Other WM Apple Bada Android Symbian

1Q2011A 2Q2011A 3Q2011E 4Q2011F

67% 58% 42%

30%

17% 25% 37%

45%

10% 11% 15% 16%

4% 4% 5% 6%

3% 2% 2% 3%

Other WM Apple Bada Android Symbian

In Q4 2011 in Russia, sales of Android smartphones will for the first time exceed

sales of Symbian smartphones

Smartphone sales

by operating systems: 2008-2011

Smartphone sales by operating

system: 2011

2.2.1 Smartphones by operating system

10

2008A 2009A 2010A 2011E 2012F 2013F

518 452

377 331 305 285

Over the last 3 years, the average price for a smartphone has fallen by 33%.

There has been a significant increase in the share of sales of smartphones costing less than 200 USD

Market structure for smartphone sales

by price segment

The average price of a smartphone

at the end of the first six months of

2011 was 350 USD

2. Mobile Internet access devices 2.2.2 Average price of smartphones

Average price of a smartphone, USD

11

more than 500 USD

less than 200 USD

350-500 USD

200-350 USD

Dynamic of the average smartphone price by operating system, USD

The average price of an Apple smartphone during the last 2 years has increased by 70%,

prices for smartphones on Android, Symbian and WM platforms have fallen

744 637

497 483 462 415 415 393

Android

399 437 488 402 391 352 306 237 300 293

Symbian

414 492 472 472 475 435 434 404 462 351

Windows Mobile

2. Mobile Internet access devices 2.2.3 Average price of smartphones by operating system

12

The average retail price for a smartphone by region of Russia

as at the end of the first six months of 2011:

The highest prices for smartphones – are in the outlying regions of Russia and the Moscow Region.

The high cost for a smartphone in Moscow of around 390 USD is explained by Russia‟s highest share

of sales in this region for Apple and Android smartphones

2. Mobile Internet access devices 2.2.4 Average retail price for smartphones by region

More than 350 USD

330-350 USD

324-330 USD

On average for Russia 350

Moscow 390

St Petersburg 361

Average cost of a smartphone in the

first six months of 2011, USD

13

Over 5%

3 – 5%

2 – 3%

1 – 2%

0 – 1%

Around 50% of all

smartphones are sold in

the Top 10 Russian

regions

Region Share

Moscow region, Moscow 22.4%

Leningrad Region 6.5%

Krasnodar Krai 4.2%

Sverdlovsk Region 3.5%

Rostov Region 2.7%

Tatarstan Republic 2.7%

Chelyabinsk Region 2.5%

Nizhniy Novgorod Region 2.5%

Samara Region 2.5%

Republic of Bashkortostan 2.4%

2. Mobile Internet access devices 2.2.5 Regional structure of smartphone sales

Smartphone sales structure, Top 10 regions,

first six months of 2011

Regional sales structure for smartphones, first six months of 2011:

The Top 10 regions of Russia currently account for around a half of all

smartphone sales

14

2. Mobile Internet access devices 2.2.6 Specific sales of smartphones by region

The highest specific sales of smartphones - at more than 5 devices

per 1000 people per month - are recorded in Moscow and the Moscow Region.

5 – 5.5

4 - 5

3 - 4

0 - 3

Region Share

Moscow region, Moscow 5.50

Khabarovsk Krai 4.61

Kaluga region 4.35

Krasnodar Krai 4.18

Tyumen Region 4.15

Sverdlovsk Region 4.09

Leningrad Region 4.00

Samara Region 3.97

Nizhniy Novgorod Region 3.79

Sakhalin Oblast 3.72

Specific sales of smartphones, Top 10 regions,

first six months of 2011

Specific sales of smartphones: number of devices per 1000 people per month

15

16

303

452 488

547

2008 2009 2010 1H2011

69

122

142

187

2008 2009 2010 1H2011

Processor speed (MHz) RAM (MB)

*Average weighted indicators for 2008 smartphone performance – first six months of 2011

Processor speed and RAM*

In the last 3 years, the smartphone has become twice as fast and three times “smarter”

2. Mobile Internet access devices 2.2.7 Smartphone profile: performance

16

3G module GPS module

In 3 years, there has been a significant increase in the share of touchscreen and GPS smartphones as

well as the average screen size of smartphones

2. Mobile Internet access devices 2.2.8 Smartphone profile: functional

Touch Screen Screen size (inches)*

2008 2009 2010 1H 2011

89% 82% 71% 73%

11% 18% 29% 27%

Нет

Есть

2008 2009 2010 1H 2011

33%71% 72% 80%

67%29% 28% 20%

Нет

Есть

2008 2009 2010 1H 2011

22%62% 79% 85%

78%38% 21% 15%

Нет

Есть2.4

2.9 3.0 3.1

2008 2009 2010 1H 2011

Дюймы

*average weighted indicator for 2008 screen size – first six months of 2011

17

No

Yes

No

Yes

No

Yes In

ches

Number of installed applications

Number of applications used over the last 30 days

Number of charged applications

15 applications

on average

An average of

6 applications

An average of

3 applications

2. Mobile Internet access devices 2.2.9 Smartphone profile: average number of applications installed and used

On average, 15 applications are installed on a smartphone, and over the last 30 days

6 applications were used. Charged applications account for 20% of the total number of installed applications

How many applications are currently installed on your smartphone?

How many applications have you used in the last 30 days?

How many charged applications have you purchased through an app store?

73%

10%

3%

19%

45%

20%

6%

34%

37%

1%

8%

22%

1%

3%

14% 4%

not one 1 - 4 applications

5 - 10 applications

11 - 20 applications

21 - 50 applications

51+ applications

18

One of the fastest growing market segments for mobile content is the sale of applications in app stores.

In 2010, the share of this segment increased by a factor of 2.5.

2. Mobile Internet access devices 2.3. Mobile content market

applications (including games) - content for smartphones with OS

RBT (Ringback Tone) - melody instead of ringtone

graphic content - pictures and screensavers for mobiles

video (incl. TV content) - pay-per-view and/or downloading video to a mobile phone

games - Java games for phones with no OS

information content – subscription (news, events guide, weather, currency exchange rates)

19

1133

1431

1798

2582

mobile phone content market

2009 2010 2011 2012

40 43 44 45

584 701 766 89879

8688

88

55143

255

497

360286

292

296

70172

355

760

Information content audio and RBT graphic content video and TV games applications

Mobile content market

by content type, USD million

Android

Palm

Apple

BlackBerry

Windows

Nokia

64%

32%

28%

24%

22%

15%

36%

68%

72%

76%

78%

85%

Ratio of paid to free applications, available to download

from app stores* Average cost* of apps by type, USD:

Average app

cost in store:

3.62 USD

Среднее 31% 69%

Бесплатные Платные

Average

Free Charged

2. Mobile Internet access devices 2.3.1 Mobile content market: app stores

A large proportion of the applications currently available in stores

are paid apps. Average cost of an application is USD 3.62

*data as at the end of second quarter of 2011

Games

News

Photography

Social

Music

Entertainment

Weather

Productivity

Sport

Finances

Health/Fitness

Lifestyle

Travel

Education

Books

Navigation

Business

1.97

2.05

2.11

2.28

2.45

2.5

2.53

2.74

2.85

2.93

2.97

3

3.66

3.71

4.44

4.99

5.7

20

Игры Развлечения Инструменты Социальные сети

Продуктивити Стиль жизни Фотография Музыка Путешествия Здоровье и фитнес

24%

20%

12%

7% 7% 7% 5% 4%

2% 2%

23%

11%

6%

2% 2%

6%

1% 3%

3% 2%

Games Games Entertainment Tools Social networking sites

Productivity Lifestyle Photography Music Travel Health and fitness

Dynamic of the total number of user app downloads in app stores,

million units, 2009-2011.

2009 2010 2011

26

76

256

1 Q 2011 2 Q 2011

Growth dynamic of the total number of apps available in app stores

for the first six months of 2011, thousand units.

Share of apps by type: in the structure of applications, available in app stores

and in the structure of user downloads, first half of 2011

2. Mobile Internet access devices 2.3.2 Mobile content market: app stores

For the period from 2009 to the present, the number of app downloads from app stores has

increased almost 10-fold. The most popular apps are games and entertainment applications

Share of apps downloaded Share of available apps

21

3.1. Frequency of mobile Internet use (days a week)

Smartphone

PC

3. Mobile Internet usage on smartphones

32% of smartphone owners use mobile Internet daily; around a half of users use it 4 to 7 days a week.

A PC is used far more often for daily Internet access

How often in the last week have you been on the Internet (using a PC or smartphone)?

22

7 of 7 6 of 7 5 of 7 4 of 7 3 of 7 2 of 7 1 of 7 0

5%

5%

29%

1%

17%

70%

30%

5%

15%

17%

4%

2%

One long One short Several longSeveral short Short and long n/a

Smartphone

PC

3.2. Average duration of daily session


A PC is used more often than smartphones for several long online sessions a day. Smartphones are

used more often for one short online session.

How much time did you spend on the Internet yesterday (using a PC or a smartphone)?

23

Experience of smartphone usage

53% 47%

Да Нет

For 53% of users, this is their first smartphone. 39% of smartphone users have less than one year‟s

experience

3.3. Mobile Internet usage experience


10%

9%

9%

15%

18%

17%

13%

9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Is this your first smartphone?

How long have you used your smartphone?

24

Yes No

Smartphones are used most often at home, “on the go” and at work

Any time

In the last 7 days

At home

On the go

At work

On public transport

In a cafe

In shops

In public places

In a restaurant

At school

At the airport

At the doctor‟s

Somewhere else

3.4. Places where smartphones are used


Where do you use your smartphone?

Where have you used your smartphone in the last 7 days?

25

The most common reasons for using smartphones: “to save time”, “Internet

access when other means are not available” and “when I need specific information urgently”

To save time

To access the Internet when other means are not available

To obtain information that I need urgently

A fear of missing something important (for example, messages, letters or news from friends and acquaintances)

Mobile Internet is an essential feature of modern life

The smartphone as a discrete device for Internet access at work, at school and so on

Mobile Internet as the cheapest way of accessing the Web

Using mobile Internet on a smartphone because there is no other means of accessing the Web at home

3.5. Incentivising smartphone usage


To what extent do you agree with the following statements.

26

10%

20%

23%

21%

25%Constantly

Frequently

Occasionally

Rarely

Never

In search engines

On video sites

On retailers' websites

In apps

Video advertising

Other sources

No response

3.6. Mobile Internet advertising


90% of users notice mobile advertising when using mobile Internet from smartphones

How often do you come across advertising on the Internet or in apps on your smartphone?

Where do you encounter advertising?

27

21%

20%

18%

One fifth of all smartphone users have used their smartphone to obtain information about products when

making purchases

Have you used your smartphone to compare

prices and search for product information

Have you changed your opinion about

a product or service in a shop based on

the information that you received

Have you changed your opinion about

a product or service online based on

the information that you received

3.7. Using a smartphone to make purchases


Specifically:

Share of smartphone

users

Question: Do you agree with the following statements?

28

23% have already made purchases* using their smartphone. Around a half of them made a purchase

with their smartphone in the last month

Yes No

Yes No

3.8. Purchases with a smartphone


*The definition of a purchase includes the purchase of paid content

• Have you ever bought anything online using a smartphone?

• Have you bought anything online with your smartphone in the last month?

• How often do you make purchases online using a smartphone?

29

Daily Weekly

Monthly Less than once a month

74%

73%

72%

70%

68%

64%

60%

60%

52%

50%

46%

45%

42%

42%

40%

39%

25%

30%

25%

25%

0% 20% 40% 60% 80% 100%

Top-10 reasons for using mobile Internet

Email

Listening to music

Viewing websites

Using search engines

Photos and videos

Social networking sites

Maps and navigation

Games

Visiting blogs and forums

Reading news on press and media sites

Any time

In the last 7 days

The most popular reasons for using mobile Internet on smartphones: reading emails, listening to music

and viewing websites

3.9. Reasons for using mobile Internet


Mark all the actions that you have ever performed on your smartphone.

Mark all the actions that you have performed on your smartphone during the last 7 days.

30

While using their smartphones, owners often listen to music, watch videos and TV programmes or

browse the Internet using other devices

62%

42%

41%

38%

24%

18%

10%

17%

2%

Listening to music

Watching videos (online and offline)

Watching TV programmes (online and offline)

Browsing the Internet on any other device (such as a PC)

Reading books

Video games

Reading newspapers and magazines

Only the above actions when using my smartphone online

None of the above

3.9.1 Simultaneous usage


31

Which of the actions listed do you perform (using other devices)

while you are browsing the Internet on your smartphone?

Smartphone

PC

3.9.2 Reasons for using mobile Internet: search applications


40% of users use their smartphones for searching the Internet on a daily basis.

A PC is used more often for daily access to search engines

How often do you use search engines (Google, Yahoo!, Bing etc.) on your PC/Smartphone?

32

Daily Weekly Monthly Less than once a month

Smartphone

PC

3.9.3 Reasons for using mobile Internet: video applications (watching videos)


28% of users use video applications on smartphones at least once a week. For PC users the figure

is 85%

How often do you watch videos online on your smartphone (via a browser or app)?

33

Daily Weekly Monthly Less than once a month Never

Smartphone

PC

3.9.4 Reasons for using mobile Internet: Social networking sites


52% of users use their smartphone to visit social networking sites at least once a week.

How often do you visit social networking sites on your smartphone (via a browser or app)?

34

Daily Weekly Monthly Less than once a month Never

4. Technical parameters for mobile Internet usage 4.1. 3G coverage map as of 2010-2011

The share of the population living in areas covered by 3G networks of mobile operators

70 – 97%

60 – 70%

50 – 60%

40 – 50%

0 – 40%

2010

1 half 2011

At the end of the first half of 2011, the share of the population living in regions covered by 3G

networks was more than 50% in the majority of Russian regions

35

According to the forecasts of J‟son & Partners Consulting, Internet access traffic from mobile devices

will „double‟ every year over the next few years against a continually falling cost

Drivers:

• An increase in the total number of smartphone users

• Development of coverage and quality of service of 3G network operators

4. Technical parameters for mobile Internet usage 4.2. Mobile Internet access traffic, PB

5 10

25

48

104 7,1

4,2

2,8

1,9

1,3

0

1

2

3

4

5

6

7

8

0

20

40

60

80

100

120

2009A 2010A 2011E 2012F 2013F

Трафик, ПБ

Средняя стоимость 1МБ, руб.

36

Traffic, PB

Average cost of 1MB, RUB

As of the end of the first half of 2011, average traffic per smartphone user

was 121 MB a month

4. Technical parameters for mobile Internet usage 4.3. Average traffic for one subscriber, MB

2010

1st half of 2011

2010 1st half

of 2011

On average for Russia 85 121

Moscow 89 166

St Petersburg 100 143

Average traffic per 1 subscriber per

month, MB

over 150

100-150

50-100

25-50

0-25

37

2010

1st half of 2011

4. Technical parameters for mobile Internet usage 4.4. Cost of mobile Internet

2010 1st half

of 2011

On average for Russia 4 3

Moscow 6 3

St Petersburg 2 2

Average cost per 1 MB of traffic from

a smartphone, roubles

As of the end of the first half of 2011, the average cost per 1 MB of traffic for mobile Internet

smartphone users was 3 roubles

More than 5

3 - 5

Less than 3

38

5. Forecasts, trends and barriers for mobile Internet development in Russia

5.1. Growth of sales market for smartphones and other mobile Internet access devices

2009A 2010A 2011E 2012F 2013F

1,9 3,9

8,6 11,8

15

Sales volume for PC tablets in Russia, million items Sales volume for smartphones in Russia, million items

Sales drivers:

• The current level of technology development facilitates

the production of inexpensive smartphones and PC tablets

• Development of coverage and quality of service of 3G network operators

• Mobile operators subsidise the purchase of smartphones and

PC tablets

• Development and rise in popularity of mobile applications that require

a “functional” telephone and Internet access

• Development of consumer credit programmes

According to forecasts made by J‟son & Partners Consulting, the volume of smartphone sales

in Russia will be 15 million devices per year by 2013.

39

0.4 0.74

1.02 1.23

.

40

5. Forecasts, trends and barriers for mobile Internet development in Russia

5.2. Growth in data traffic and the mobile content market

Mobile content market, USD billion Mobile data traffic, PB

Drivers of growth in data traffic and the mobile content market:

• reduction in the cost per 1 MB of traffic, including on account of a rise in sales

of unlimited data tariffs

• development of coverage and quality of 3G operator networks and

increase in mobile Internet speeds

• increase in the total number of users and a drop in the cost of smartphones

• increase in the sales of content in app stores of mobile eco-systems

• convergence of mobile and Internet spaces

According to forecasts made J‟son & Partners Consulting, mobile data traffic will amount to 104 PB by

2013, while the mobile content market will grow to USD 3.1 billion

2009A 2010A 2011E 2012F 2013F

5 10

25

48

104

2009A 2010A 2011E 2012F 2013F

1,1 1,4

1,8

2,6

3,1

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