Consumer and Shopper Insights October 2011

Minute by minute: How do global digital consumers spend their tech time?

This is the first of five articles derived from McKinseys iConsumer survey, an annual survey that tracks changing consumer behavior for different digital experiences.

Look around you on the subway, in the park, even behind the steering wheeland it might seem that people everywhere, almost all the time, are glued to their technology nose to screen, fingers a blur of tapping. McKinsey decided to test such subjective observations with rigorous empirical analysis. Every year since 2008, we have conducted a wide-ranging survey of at least 5,000 Internet consumers (aged 15-64) in selected countries. This body of research, which is among the most extensive available on the subject, allows us to track changing digital habits and to anticipate future directions. In the following article, we discuss our findings about how people spend their tech time. In subsequent ones, to be posted daily, we will dig a little deeper into the specifics, looking at patterns in phone usage, online shopping, videoand the surprising state of Japan.

when it comes to how they use their personal computers. Not only do they spend by far the most time attached to their PCsmore than five hours a daybut what they do online is also comparable. For example, the Internet users surveyed showed broad similarities in how much time they spend watching TV, watching video, downloading music and online streaming.
How people use their PC
Breakdown of time spent on PC Q: Minutes per day
Watching TV show/movies/sports Watching video clips (e.g., Youtube) Watching movies from DVDs/ CDs Entertainment Watching downloaded videos Listening to downloaded music Online streaming-music/videos Playing games1 Editing documents, photos etc Reading/writing Email Communication Social networking2 Instant Messaging VoIP/voice chat/Video chat Browsing Internet browsing (excluding SNS)3 Search engine
13 9 36 23 12 19 41 37 19 11 52 15 11 7 5 15 14 51 11 11 7 6 16 13 19 23 40 61

There are differences, too, of course. Americans, by far, spend the most time playing games (51 minutes), while the Koreans are second and the Spaniards a distant fourth, behind China (33 minutes). Moreover, while users in the US and Korea spend a similar amount of time on social networks (37 and 27 minutes, respectively), that is far behind the Spaniards (68

Exhibit 1:

7 12 8 6 17 14 20 33 37 42 20 12 53

13 17 16 17 27 27 24 38 29 68 30 19 51

n/a n/a
7 7 5 4 3 2 8 7 5 2 14

n/a n/a
4 6 8 32 33 3 2 16 26 4 24

13 11 9 18 25 15 38 36 25 27 39 9 25 39 30

4 9 2 3 7 3 11 8 13 7 2 3 31 23 10

n/a n/a

n/a n/a

n/a n/a

n/a
1

n/a
1

E-Commerce Online shopping & research

Time matters
What do the US, Spain and Korea have in common? Not much, at first blush. But to a startling degree, they share similar behavior

Total, Minutes/day

308

288

282

375

64

159

359

136

1 Includes offline games, browser games inside and outside of social networking sites 2 Includes Twitter 3 Includes posting comments (e,g., blog etc) SOURCE: McKinsey iConsumer

minutes). And the Koreans are much more avid online shoppers, spending half an hour a day browsing through the Internet malls. Among the other participants in this years survey, the British and the Germans are almost twinsclosely related to each other and distinct from everyone else. Not only do they spend almost the exact same amount of time on their PCs (a little under five hours), but they do the same things for almost the same amount of time. There are only two exceptions. In the 15 different categories surveyed, the British spent much more time on social networks (61 versus 42 minutes for the Germans) and much less time on editing (23 minutes versus 33). As for the rest of the countries surveyed, India is the outlier, with its Internet users spending only an hour or so a day online. Japan and China have many striking similarities and almost as many big differences (ie, Japan likes email, China IM), which is not a bad analogy for the countries as a whole. Interestingly, the same patterns pertain when it comes to how people in different countries use their mobile phones. The US is again most similar to Spain and Koreaand this time the only significant difference in 17 different categories is that the Koreans play many more games than the Spaniards, and the Spaniards spend more time on email than the others.

How people use their mobile phones

Breakdown of time spent on mobile phone Q: Minutes per day
Watching video1 Listening to downloaded music Online streaming-music/videos Entertainment Playing games2 Reviewing/editing documents Taking photos Downloading apps/video/music etc. Talking Communication Reading/writing Email, MMS Social network websites Instant Messaging Video chat Browsing Internet browsing (excluding SNS)3 Search engine
5 2 6 4 3 7 4 5 12 4 3 33 10 3 8 3 22 8 12 3 5 5 5 4 10 3 5 3 7 3 14 10 16 5 1 7 7 4 9 3 5 7 6 7 4 4 4 8 4 31 4 12 0 0 5 3 2 2 1 6 6 4 11 3 26 3 5 2 7 8 12 5 13 1 2 1 7 7 11 2 3 1 7

Exhibit 2:

n/a

n/a
5

n/a
5

n/a
5

n/a n/a n/a n/a

n/a n/a n/a n/a

n/a n/a n/a n/a

E-Commerce Online shopping & research LBS Location-based services4 Others

1 Includes video recorded yourself with your mobile phone 3 Includes posting comments (e,g, blog etc) 2 Includes preinstalled/downloaded games, browser games inside and outside of social networking sites 4 Local search; sharing GPS location; navigation SOURCE: McKinsey iConsumer

What people do while watching TV

Percentage of respondents who always or very frequently multitask activity

Exhibit 3:

Browsing the internet

25

33

29

31

12

17

Working on the PC Text messaging on mobile phone (e.g., SMS) Emailing

26

19

18

20

17

20

16

17

13

15

17

8 5 3 2

15

6 8
21

8 8
18

10

8 6
28 11

Listening to music/radio

9
10

11

Instant messaging

V6b Thinking of the time that you are watching TV. What percent of that time are you doing the following things at the same time (i.e., multitasking)? SOURCE: McKinsey iConsumer

The uses of diversity

Across the whole spectrum, the most striking characteristic the survey reveals is the lack of commonality across all eight countries. The Internet is universal and the PC is ubiquitous; still, nations remain different. No two countries have the same top three PC uses, for example, and none have the same two in order. Even when it comes to

the simplest of behaviors what you do after logging on there is no universality: While most people check email, the Koreans go to a portal. Ditto when it comes to media multitasking. The countries surveyed are essentially split down the middle on what their residents do while watching TV, with half reporting their most common activity was browsing the Internet and

half working on their PCs. The British, Spaniards and Germans are also apt to take the opportunity for some quick instant messaging, while Koreans and Americans prefer texting while watching. The lesson? Think global and act local.

http://csi.mckinsey.com

Consumer and Shopper Insights October 2011

How the world watches

This is the second of five articles derived from McKinseys iConsumer survey, an annual survey that tracks changing consumer behavior for different digital experiences.

Convergence is the fission of the tech worldthe day, always a little in the future, when all kinds of media and content will converge on a single, ubiquitous platform. But reality has proved stubborn. Consider television. This is an old-school device, to be sure, but the last few years have seen the biggest change in TV since the advent of cablethe ability to watch TV programming without a TV. But as McKinseys recent survey of 5,000 people in the US, Britain, Germany, Spain, Korean and Japan indicates, there is no convergence about how people are watching and on what. Spaniards, for example, spend 13 minutes a day watching over-the-top (OTT) video, more than six times as much as the Japanese (2 minutes). More than half of Koreans prefer to watch OTT content on TV-connected PCs, compared to only 13% of Americans, the lions share of whom watch their OTT content on gaming consoles, the choice of only 12% of Japanese. On the larger issue, only 15% of Germans and 19% of British watch TV over the Internet at all, compared to 45% of Koreans.

For businesses in the industry, then, this is a good moment to pause and reflecton what trends the leaders are establishing; on how to react to the inevitable disruptions; and on how to coax profits from the vortex. The reasons people give for watching OTT are broadly similar, chiefly the ability to view when they want to and the ability to see Internet content on a bigger screen. So
Why people like to watch the Internet on their TV
Exhibit 1:

it is the not-as-important reasons that may be more revealing in terms of revealing market-specific important wants and needs. Americans and Koreans value controlling ads; and Japanese and Germans place watching YouTube high on their priorities. Such information is of more than academic interest; it can suggest avenues for business to explore. For example, Americans and

Percentage of respondents who chose top 2 boxes between 1 (= not at all important) and 6 (= very important)

View when you want it (access to TV shows you missed) View when you want it (not having to wait for TV program Watch internet content on large display View photos/videos from PC Watch youtube Control over ads Access to large library of content Download directly to TV Get additional info Customize viewing Access other content Chatting while watching Comments on content SOURCE: McKinsey iConsumer 21 13 16 16 13 11 19 17

34 32 32 17 14 16 28 30 16 11 19 18 14 17 27

35

19 18 17 15 16 10 14 11

19 25 24 20 19 21 24 18 18 13 18 20 15 12 N/A 22 16 27

36 35 32 25 25

37

29 21 21 20 19 14 12 12 11

4
11 15

11 18

9 6

7 6

9
11

9 6

Spaniards are the most likely to name the ability to access a large library of material as an OTT advantage. The US and Spain also have the two highest rates (25% and 16%) of consumers who subscribe. The two data points suggest a virtuous dynamic the more material there is, the more likely people are to be willing to pay for it on a regular basis. What kind of material? Current TV, reruns and movies dominate everywhere; in other words, conventional material dominates. Except in Japan, where 32% of Internet-based videos on PCs are user-generatedat least double the rate anywhere else. For all the possibilities of OTT and the numbers suggest this is a market very much in the makingthere are also limitations that content providers can do little about. With consumers preferring smaller laptops and handhelds, the size of screens can make watching a movie something less than an epic experience. Indeed, in every country, the size and comfort of watching on a PC is the main reason given for not watching video online.

As for making televisions themselves sexier, there is certainly room to grow because the base is so small at the moment. Only small minorities of respondents16% or lessare even aware that 3D televisions exist and less than half of those have ever seen one; fewer than 1% say they are likely to buy one. The OTT opportunity is going to be big, but it is also going to be complicated. When consumers use OTT, it also changes the way they watch things in general, with fewer watching current TV shows, premium channels or DVDs (although there is some compensating effect in some watching more, presumably as they get more plugged into watching). The priorities in every country are apparent content, price and simplicity. The devil is in the tiny details.

http://csi.mckinsey.com

Consumer and Shopper Insights October 2011

Wheres Japan?

This is the third of five articles derived from McKinseys iConsumer survey, an annual survey that tracks changing consumer behavior for different digital experiences.

Japan has a well-deserved reputation for loving technologythis is, after all, the land of the computer-enabled loo and sushi restaurants that look like robotics laboratories. But one of the most surprising findings of our research is that Japanese consumers are not nearly as much in love with their gadgets as those in many other countries. Indeed, compared to neighboring Korea, Japan looks distinctly unenthusiastic. In specific ways, it is almost always far outpaced by other developed countries. That is one of the conclusions of McKinseys most recent survey of more than 5,000 Internet users (aged 15 to 64) in eight countries. Consider the personal computer. The biggest difference is simple: Japanese users spend about 136 minutes a day on their PCs, ahead only of much-poorer India (64 minutes) and far behind Spain (375 minutes), Korea (359) and the US (308). Since Japanese are spending so much less time on their computers, it is unsurprising that in almost every activity, they follow the leaders, at a considerable distance.

For example, Koreans spend 39 minutes a day instant messaging and 36 editing; the figures for Japan are 2 and 8 minutes respectively. Americans spend 51 minutes a day playing games, Japanese 11. Germans spend 37 minutes a day on email, the Japanese, 13. The affable Spaniards spend 68 minutes a day on social networks, compared to just 7 minutes for the Japanese.
Exhibit 1:

These anomalies are less pronounced, but still apparent, when it comes to mobile phone usage. Except, that is, when it comes to talking, the core use of a mobile phone. In that regard, Japan trails every other country by a margin of at least half, spending just 7 minutes a day speaking, compared to 14 for Germany, the next least talkative, and 33 minutes for Americans, who are the chattiest.

US consumers watch TV the most, Koreans use VOD significantly, and Japanese depend on regular TV the most
Time spent watching TV on average day by major access method Minutes per day 264 17 18 4
OTT

36

220 12 15

VOD

27

21 188 163

190 15 17

181 23

202 14 7

205 18 0

4 4

Pay per view DVD/blue-ray, Video tape Regular TV1

26

0
8

63

137

125

118

170

1 Includes regular TV recorded and watched through DVR SOURCE: McKinsey iConsumer

Exhibit 2:

Finally, when it comes to television, a similar pattern emerges. Japanese spend about 205 minutes a day watching the tube, slightly more than the last-place Koreans (202 minutes). The difference is that Koreans spend 40% of their TV time on new (or new-ish) kinds of viewing, such as DVDs, video on demand, and pay-perview. The Japanese, on the other hand, spend almost all their tube time170 minuteson conventional TV, by far the highest ratio. The Japanese seem to the rest of us to live several measurable clicks down the time line, science-fiction writer William Gibson wrote in 2001. The Japanese are the ultimate Early Adaptors. The results of our research suggest that this is no longer the case. Not only are the Japanese no longer the earliest adaptors, they are downright slow. Fewer than one in eight, for example, has a smartphone, compared to four in ten Americans, and about a third of British, Spanish and Koreans. The Japanese have also been slow to the social networking party, with the lowest percentage, by far, visiting such. Then theres the tabletthe newest toy for the tech-savvy. While more than 9% of Koreans surveyed already had a tablet at home, only half as many Japanese did. Asked how likely they were to buy one, none of the Japanese surveyed said they would definitely buy one and only 3% said they probably wouldthe smallest percentage of any country surveyed. Three-quarters of Japanese said they probably or definitely would not buy a tablet. Meanwhile, 18% of Koreans were planning to buy one, as are 9% of Americans. Among those Japanese who do own a tablet, the way they use it is, frankly, boringbasically emailing and browsing the Internet. Compared to Korean and American users, Japanese ones are

Less than half of respondents visited social network sites in Japan and Germany
Visited a social networking website in the past 6 months Percent

No

33

40 60

40

30

70

Yes

67

60 40

60

70

30

SOURCE: McKinsey iConsumer

Exhibit 3:

Consumers in Korea and the US show highest intent to purchase a tablet in the next 12 months while Japan and Germany are lowest
How likely are you to purchase a tablet1 during the next 12 months Percent Definitely would Probably would Might or might not 6 3 1 1 1 0

24

19 27

11 25

8 26

15

22

35

Probably not

29

x
49 61

29 29 36 17

48

Definitely not

38

27

1 For Europe, question asked purchase intent for only iPad SOURCE: McKinsey iConsumer

much less likely to tap into the tablets more interesting capabilities, such as reading books, playing games, or reading newspapers and magazines. Why is this? Well, Korean networks are much faster and more open; there is also more free contentsomething that Japanese media companies are much more protective about. Moreover, the ability to

stream media and download music is still limited. With less entertainment available, perhaps it is not surprising that Japanese consumers are less apt to bother with devices one of whose main purposes is to deliver such content.

http://csi.mckinsey.com

Consumer and Shopper Insights October 2011

How the world shops online

This is the fourth of five articles derived from McKinseys iConsumer survey, an annual survey that tracks changing consumer behavior for different digital experiences.

Will clicks replace sore feet as the preferred means to indulge in a little retail therapy? Not likelyor certainly not yetis the conclusion of McKinseys most recent survey of Internet users in countries in the US, Asia and Europe. Yes, consumers do use the Internet extensively when it comes to buying but predominantly for price comparison, research, and reviews. When it comes to parting with their yen, dollars and euros, though, they greatly prefer to do so in person. That is particularly true for Americans; only 9% bother to go to price comparison sites to check out computer prices and 12% for electronicsa far lower percentage than any other country. In this area, the Japanese are the leaders more than half check out prices online for these products, well ahead of the pack. Curiously, though, Japanese (and Germans) are less likely to do such research on their mobile phones than others, while Americans are more likely to do so.

In another sign that technology is not replacing humanity just yet, most consumers continue to rely heavily on their friends for recommendations. Of course friends is an expansive idea these days. User-generated reviews and the opinions of others are also greatly valued; Americans also generally trust YouTube.

Social networks are also beginning to become importantparticularly for bargain hunters. In every country surveyed, the top reason for going to a retailers Facebook site is to check out promotions and coupons; the top reason to sign up for Twitter is to get up-to-date information about events and products.

Exhibit 1:

Finding the right price

Percentage of respondents who used price comparison sites to research product, by category Percent of respondents
Top 2

Computer hardware/ software Electronics Books DVD/Videos Video games Grocery (e.g., food) Clothing (not including footwear) Health and beauty products Household products Office supplies Home improvement tools and products Furniture SOURCE: McKinsey iConsumer

9 12 3 3 5 1 2 2 2 3 5 4 7

28 35 21 23 27 3 15 12 8 16 18 25 13 8 5 19 15 21

38 31 26 21 25 5 7 6 5

20 20 12 13 19 25 21

38 66 8 12 49 3 5 14 3 3 6 17 25

56 54

31

37 40 31

12 7 13

35 40 36

Yet again, though, Americans show they are missing some bargain chances. Sixty percent have never even heard of mobile couponing, and of those who have, 28% have never seen or used one or even known someone who did. Only 3% have actually used one of the things compared to 45% of Koreans.

Exhibit 2:

Coupon clippings
What best describes your experience with mobile couponing? Percent

Never heard of mobile couponing

60

14

16

Have heard of mobile couponing, but have never seen anyone who has received one or used one Have seen someone who has received a mobile coupon, but have not received one myself

28

15

23

http://csi.mckinsey.com

14

21

Have received a mobile coupon, but have never used it

12

11

Have used a mobile coupon to buy something

45

29

SOURCE: iConsumer 2010 US, Korea/Japan; RT13

Consumer and Shopper Insights October 2011

Its good to talk: How global consumers use their mobile phones

This is the fifth of five articles derived from McKinseys iConsumer survey, an annual survey that tracks changing consumer behavior for different digital experiences.

Death and taxes are but two of lifes certainties: The need to communicate is a third. That has not changed, but the means of doing so certainly have. Consider: In Korea in 2007, there were only 500,000 smartphones (and 21 million basic ones). By early 2011, the ratio had totally flippedand then some. There are now 77 million smartphones and just 2.3 million basic ones. And of those Koreans who dont have a smartphone, twothirds said they intend to buy one shortly (including more than half of low-income people). Whats the lure? Koreans are overwhelmingly tech-friendly, and they appreciate that mobile devices enable them to take tech everywhere. Asked why they wanted a smartphone, sizable percentages named playing video games (40%), streaming (45%), accessing the Internet (46%), paying for transactions (53%), finding local businesses (56%) and social networking (58%) as ways they planned to use their new toy. For Koreans, then, the smartphone is becoming the go-to device for many activities, displacing the PC and landlines.

Not just in Korea, but in every country McKinsey surveyed, smartphones are finding, and expanding, their place. While the details differ, the broad outlines are similar. For example, the landline is losing its clout everywhere. Some 44% of Americans, for example, say they are willing to cancel their landlines, as well as a quarter of British, Germans and Spaniards (but only 19% of Japanese). Another common effect is the cannibalization of the PC. As people get more comfortable with their smartphones, they use their PCs less not for extensive searches but increasingly for short and simple ones. And the same thing is happening with game consoles. Almost a third of Americans and Koreans, and a quarter of Spaniards, say they are playing less on their consoles because it is easier to learn on their phones; half of Spaniards (but only 6% of Japanese and a quarter of Americans and Germans) say it is more fun. Games account for a significant percentage of active apps in every country; the implication, then, is that mobile

phones could well be poised for growth as gaming platforms. Finally, there is one greatand entirely unsurprisinguniversal truth on display: Everyone likes a freebie. More than twothirds of downloaded apps are free, and when it comes to payment, respondents everywhere strongly prefer onetime fees over subscriptions. Koreans are the only people to people popularity and reviews ahead of price when it comes to deciding what to download. One interesting difference: European consumers are apt to rely on their friends to find apps to download; Americans and Asians are more likely to go to app stores.

http://csi.mckinsey.com