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IT IS DIFFICULT to predict the size of a market that does not yet exist, as Andreessen Horowitz analyst Benedict Evans explained in a blog post about the problem with accurately forecasting sales of the Apple Watch earlier this week.

When trying to work out the market potential for something new you have to solve two linked problems, he writes:

• You have to look past a product’s current iteration and see how much better and cheaper it might become.
• You need to think about who would buy it now and who would buy it once it is better and cheaper.

Evans said the problem also applied to mobile phones in the 1990s:

You could do a bottom-up analysis that counted business travellers, taxi-drivers, fleet dispatch and so on, and get to maybe 10-15% of the population. Lots of people did that in the 1990s. They were all wrong. For phones, as for PCs, you had to make an imaginative leap into the unknown. You had to say ‘I believe’ that this experience will be transformative, and everyone on earth who has the money will get one. Moore’s Law takes care of ‘having the money’ meaning 4-5 billion people, but it’s the imagination that gets you to teenage girls living in text messages. You could predict that phones might get really cheap, but not what that might mean.

These two lines of thinking were demonstrated by two ads in the early years for the mobile phone industry in the UK.

Here’s an ad for BT Cellnet, which Evans says took on that rational 10% to 15% market-share argument, that the mobile phone would be a niche product for travelling sales people and the like but not for everyone. It seemed logical at the time but turned out to be completely wrong.

Orange, two years earlier, took the other route, that the mobile phone was universal. Everyone would have one.

Evans points out that Orange’s CEO at the time, Hans Snook, went around saying the UK would get to 150% mobile-phone penetration — “and most people thought he was mad.”

Charlie Ivans, a former Orange employee, told Business Insider that new employees at the company were even made to watch the Orange ad as part of their employee orientation well into the 2000s, as it looked to embed the idea.

Snook’s vision turned out to be spot on. In the UK, 93% of the population owns a mobile phone, according to the Mobile Operators Association, and many of those own more than one device. That number is only likely to grow further as the older population gives way to a more tech-savvy generation.

Another interesting nugget: BT spun off its debt-laden mobile business in 2002. BT is now looking to buy EE (owned by Orange and Deutsche Telekom) for £12.5 billion. It is, perhaps, paying the price for not being ambitious enough about the potential for mobile in those early days.

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