Mobile commerce is finally poised to achieve the promise so many have imagined for so long. 

Mary Meeker’s most recent presentation on mobile drew an analogy between the US nascent mobile e-commerce market (m-commerce) and Japan’s m-commerce market ten years ago. Over the course of 10 years, mobile revenues increased by more than 700%, with dramatic growth in paid goods and services. 

M-Commerce Distribution

Curious about the composition of these $15B in annual revenue, I found Infinia’s presentation on m-Commerce published last year. In Japan, m-commerce spending is broadly distributed. From my reading, this survey data below is a response to the question, “What do you purchase using your mobile phone?”

Respondents submitted multiple answers and these figures indicate penetration of users: 39.5% purchased fashion(able) things using their phones.

Assuming these figures are directionally correct, they differ vastly from US current e-commerce metrics. Taking another page from Meeker’s “book”…

…there are some large differences in e-commerce behavior in the US and m-commerce in Japan. These figures are the e-commerce penetration in various categories. For example, apparel has 40% of Japanese, but only 8% of US e-commerce dollars indicating significant differences. There are some categories with similar patterns as well – music and computers.

NB: these figures aren’t apples to apples since we’re comparing a survey to census data, self-reported purchasing habits to e-commerce penetration as a percentage of total sales and so on.Some of these directional differences are functions of market differences. 

Comparing m-commerce per capita spending

In Japan, there are roughly 100M mobile subs generating $15B in annual sales, according to Infinia. In the US there are 300M mobile subs generating $2.4B in annual mobile commerce sales. Additionally, smart phone penetration in the US is 17%. Crunch the numbers and you’ll see the differences in per capita m-commerce spending: $150 in JPN and $8 in US.

Key differences in Japan and US mobile markets

Of course, no back of the envelope analysis would be complete without contrasting the differences between the two markets:

  • Revenue share for content providers is 90% in Japan (70% in the US)
  • Homogeneous handset ecosystem (US is wildly fragmented)
  • Same day delivery to convenience stores and COD there is ubiquitous (no notion of this in the US)

How big is big?

Assuming the US m-commerce market behaves identically to the Japanese market, an upper bound might be about $45B. However, it’s too early to tell how reasonable such an estimate is.


5 thoughts on “How large is the US mobile commerce opportunity?

  1. Tom, If the US e/m-commerce numbers encompass things like lotteries starting to sell online, then the $45B estimates will look paltry. @AAinslie

  2. You’re absolutely right. Cannibalization of e-commerce to m-commerce and new product categories will likely dwarf this estimate and this potential is what makes the opportunity so massive.

  3. Yep. Cannibalization AND Auto-Cannibalization (the latter strategy deployed by the few co’s in dominant positions who have taken the wake up call!).In Japan, the e/m-com numbers could have been much higher if the govt. legislated certain industries, particularly Pachinko, and allowed them to take their model online and mobile. As you may know, Pachinko (see: http://en.wikipedia.org/wiki/Pachinko ), while being gaming/gambling, is essentially a commerce model where your winnings are “paid” in the form of say a stuffed teddy bear which you then exchange for cash at an adjoining establishment unrelated to the gaming parlor. This is an accepted regulatory end-run. Pachinko is also a $400B (yes, that’s $Billion’s) industry that few have heard of outside Japan. Officially the industry is stated to be in the $2-250B range. Take it from me, as an informed source, that it is in truth over $400B. My point is that industries like this would have changed e/m-com #’s by an order of magnitude. Disclosure: Got involved in this industry in 2005-6, but that’s a story to be shared over a couple of beers ;)In contrast to Japan, the US will allow intrastate sales of things like lottery tickets both online and via mobile. Its only a matter of time given the poor financial health of many States. The other pink elephant in the m-commerce room is Skype. With 560M unique users, identified billing relationships (huge advantage), trusted brand and smart operators like Anderseen in their camp, they are in a catbird seat to harness mCommerce volumes. Think Skype-as-a-Platform. Another major play IMO is the Apple + Siri announcement today. Siri’s IP is broad and deep and beyond exceptional in its scope and quality. I’ve been tracking them for a few years. This is a #VRM play.BTW, I am finding a lot of value in your curated “The week’s tech news” posts. Super quality. Many thanks for the effort. Please keep them coming! @AAinslie

  4. I'm thrilled you like the news. It's fun pulling it together. I didn't realize Pachinko was so large. I've played it in Tokyo when I was there and it's addictive – but $400B! Amazing

  5. +$400B it is and here’s the kicker: Even the Japanese can’t break into it for the most part as it is controlled by the ethnic Koreans! (another reason why there are few Pachinko co’s that have IPO’d – impossible to pass due diligence)

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