Common cases: Sizing

- All right, here's your next case. Very simple. What is the market size for smartphones globally? - Okay. Well, a couple questions to determine the size. Are there any exceptions or limitations to that global number, or are we truly speaking everyone on Earth? - You're correct. We're talking about every person on Earth. - Okay. And what do we consider a smartphone? - Sure, any phone that has multiple uses besides just talking on the phone. - Perfect, so we're going to assume that any phone that you can text and talk on, at least, is a smartphone. - Yes. - Okay, and what's the timeframe? It's a year? - Over the current time period. - In that case, we'll consider it on a yearly basis. Great. And other question, are we determining the market size based on phones or on revenue? - Great question. Annual revenue of new sales. - Okay, great. Okay, so to determine this, we have to figure out the amount of smartphones being sold. And if we take into account an average cost of $500 per phone, then we'd multiply the amount of smartphones by $500. - Great, walk me through. - Okay. We would then want to segment into first-time buyers versus repeat buyers. Let's say there's seven billion people in the world. Seven billion people who has an average life expectancy of about 70-years-old. Seven billion by 70, that comes out to 100 million. So at any given point in time, there are 100 million people of any age. That's 100 million five-year-olds, 100 million 65-year-olds. - Sounds good. - Okay, but then there's the other side of the problem, which is going to be existing users. Let's say that's, it's not everybody in the world has the means to own a smartphone, right? So that's going to be about 40%, or 40 million people becoming new users. - [Female] Okay, sounds good. - So follow this line of thinking. That comes out to 40% of people using smartphones. 40% of seven billion comes out to three billion. Most phones have an average life expectancy of about five years, so that would be three billion divided by five. That comes out to 600 million. Then we add in that 40 million existing customers. And that brings us to 640 million. 640 million, multiply that by $500 per phone. And that gives us $300 billion. - So, what's your answer? - So, my answer is the global market size for smartphones is $300 billion. - Great work. Let's move on to the next one.