Yahoo warns of industry-wide ‘pause’ in mobile growth for 2016

SAN FRANCISCO — In the midst of turmoil within the Yahoo organization, the company held its third Mobile Developer Conference in San Francisco. While there were several product updates about Flurry, the feeling in the room wasn’t that rosy, at least concerning the future of mobile development in 2016, thanks to predictions Yahoo presented about the mobile space.

Yahoo chief executive Marissa Mayer opened up the conference with a talk about the company’s Flurry acquisition. In her keynote address, she highlighted Yahoo’s efforts within the mobile space, saying that it supports 250,000 developers, reaching 800,000 apps across 2 billion devices. What’s more, 3.2 trillion sessions were logged on tracked apps in 2015 alone.

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Since the company launched its App Publishing suite, Yahoo has generated approximately $200 million in revenue.

With more than 600 million mobile monthly users, Yahoo believes it can offer guidance and support in the industry.

‘A year of pause and reflection’

But while Mayer offered what she hoped would set an optimistic tone for the conference, that was tempered when Simon Khalaf, Yahoo’s senior vice president of publishing products, gave the second keynote and warned developers of the slowdown in the mobile space.

Throughout the opening hours of the event, the number 7 was referenced multiple times in terms of how long it’s been since mobile adoption started taking off. “It’s the seventh year, and there’s something about the number 7. With Web 1.0, it was the crash, so everyone is jittery,” Khalaf warned. “Mobile is growing so fast. There was a phenomenal growth year, but growth rates are declining. Year-over-year smartphone sales decline: 6 percent in 2014 to 2015, but it’s not growing as fast. Wall Street thinks that hardware is on the decline due to saturation, but there’s more opportunity in software. It’s the sign of a maturing industry.”

“Those who sold bricks were punished, those who sold clicks were rewarded,” he summarized.

While he shared numerous Flurry-powered statistics in essentially a State of the Industry address, he cautioned that 2016 will see a pause: “I’m calling it a year of pause and reflection — the end of mobile 1.0. In the next year, we’re going to see mobile 2.0, like the same with how Web 1.0 crashed and the movement of Web 2.0 a few years later. I believe towards the end of 2016, we’re going to see the beginning of mobile 2.0 and will see another 7 years of amazing growth.”

Khalaf believes that starting in 2017, there will be four areas where a “revolution” will occur: hardware, media, messaging, and in local markets.

With hardware, he thinks that the next wave of evolution will be driven by phablets: “I believe phablets will be the majority of devices towards the tail end of this year and in 2017.”

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He believes that media will undergo a transformation in which it will be created entirely on and for mobile devices.

As for messaging, we’re already seeing this now with the rapid rise of services like Slack, which help people do things like connect with one another and be more productive.

The local market will be a space where Khalaf thinks developers will flock to, especially since it’s an $800 billion market. “We got global right, but local wrong,” he said. In the future, he asserted, the industry will move from the Yelp era to something more akin to local contract-work clearinghouse Thumbtack.

While some in the audience may have found his outlook for 2016 depressing, let’s not forget that Khalaf thinks a new era in the mobile space will kick off next year. He also added this optimistic spin: “It is the time to think and reflect, but it’s the best time to build. I’ve seen it all the time, when valuations go down. When egos go down, productivity goes up. You get the real engineers and builders. You get to hire the kick-ass engineers who want to change the world who want to put everything on your credit card to win.”

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[Editor’s note: Read: Yahoo’s ‘mobile pause’ prediction is wrong, damaging, and based on a sample size of one]

Unabashedly mobile addicts

There are 280 million people around the world considered to be “mobile addicts,” said Khalaf, defining this group as individuals who use their device more than 60 times a day. If you think about it as a country, it would rank as the fourth largest nation in the world, just under the United States, China, and India, an increase from eighth in 2014.

While one might think that gaming and mobile go together, data shows that mobile gaming time contracted by 36 percent annually in 2015. Khalaf blames this decrease on the lack of hits in the year and the concept that “mobile has catered a lot to the lazy.” Additionally, the rise of esports has been affecting mobile.

In 2015, people spent more time consuming media on their mobile devices instead of on a traditional television. Flurry research showed that in Q2 2015, 44 minutes was spent watching content on the small screen, up from 13 the year prior, an increase of 240 percent. Khalaf said that it took 37 years to increase the time spent on television by the length of a sitcom, but it only took nine months for mobile. The biggest audience segment making the switch: college students, ages 18 to 24 years.

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Mobile isn’t just taking minutes, but also money. Khalaf said that $31 billion in mobile ad revenue and $33 billion in in-app purchases were made in 2015. By comparison, in 2014, it was $23 billion and $21 billion, respectively.

Selling a new Yahoo to developers

The MDC event took place less than 24 hours after the company began issuing layoffs and shuttering entire departments, including several of its magazines. It also follows a grim analysis by The Information that suggests Yahoo’s efforts to turn itself around will be arduous at best. That piece cites internal records that apparently show three of the company’s most important products — Yahoo Mail, its homepage, and search — losing daily active users.

Yahoo is currently implementing an “aggressive strategic plan” aimed at either salvaging what it can of itself — or perhaps just getting itself tidied up for acquisition. Mayer asserts that doubling down on her Mavens (mobile, video, native, and social) program will help to improve Yahoo’s “competitiveness, and attractiveness to users, advertisers, and partners.” And perhaps she’s right: Mavens brought in $1.6 billion in revenue last year, a 45 percent annual increase.

The Yahoo of yesteryear has been transformed into a leaner company, one that will focus on search, email, Tumblr, Yahoo Gemini, and Brightroll. But if the slower growth for the mobile space Khalaf predicts comes to pass, how will this affect Yahoo’s effort to help developers? Also, can the company even last until 2017 in hopes of experiencing the next revolution?

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