BLODGET: The US Smartphone Revolution Is Already Entering The Late Innings

Thursday, September 06, 2012 2:44 PM GMT

To listen to some mobile industry executives and investors tell it, you would think the smartphone revolution was just beginning.

In the United States, however–one of the more mature smartphone markets–we’re actually already entering the later innings.

In a new BI Intelligence report from Henry Blodget, we detail how smartphone penetration in the U.S. has reached the point where market growth will begin to slow rapidly, why the U.S. market will be almost fully penetrated in a few years, and look at the impact this will have on the growth rate of of the U.S. smartphone ecosystem– including gadgets, apps, ads, mobile commerce, and mobile web usage.

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Here’s a brief rundown of why we are already in the late innings:

• Anyway you cut it, the U.S. smartphone market is more than 50% penetrated: According to comScore, 114 million Americans used smartphones as of July. Nielsen reported that two-thirds of of handsets sold in Q2 2012 were smartphones and that the market is now 55% penetrated. The vast majority of the primary smartphone market, U.S. adults between 18-54, already have smartphones.
• The typical “diffusion” curve for new technologies will begin to kick in: As described by sociology professor Everett Rogers in a 1962 book Diffusion of Innovations, new technologies tend to follow a standard adoption curve. he peak of market growth in terms of annual unit gains occurs around the halfway mark. Shortly after the halfway point is reached, the number of incremental new users each year begins to decline. And soon, when the market becomes saturated, unit growth flattens. 2011 and 2012 could very well mark the peak years for smartphone growth in the U.S.
• And, the demographics of new users will be different: Most affluent Americans aged 18-54 already have smartphones. The Americans who don’t have smartphones, meanwhile, tend to be those who make under $100,000 per year and are older than age 55.
• This will have massive implications on the smartphone ecosystem: These new users will likely spend less on smartphones and apps, and be a less-valuable demographic for advertisers and commerce companies. Growth in the smartphone ecosystem will therefore have to increasingly come from selling more to the earlier, existing smartphone users.

In full, the report:

• Details how the U.S. smartphone market is more than halfway penetrated
• Explains the typical “diffusion” curve for new technologies, and explains how this will impact U.S. smartphone growth going forward
• Explores the demographics of current and future smartphone users
• Analyzes the implications of slower user growth and different demographics in the U.S. smartphone market on the the entire smartphone ecosystem, including app sales, advertising sales, game sales, web-usage, and commerce
• Looks at what stage the global smartphone revolution is in and assesses global smartphone growth potential