Takeaways from Internet Trends, Part 1
Top 15 Takeaways from the first 150 Pages
Mary Meeker’s iconic Internet Trends Report started as one of the best research reports on information technology in 1995. In 2019, the state of technology has become the state of the culture. As you’ll see in the report (or my notes below), the idea that technology is pervasive is a drastic understatement. Over the next few articles, I’ll share some of the most interesting tidbits from this 300+ page presentation. Here are my top 16 learnings from the first 150 or so pages:
53% of the world is now on the internet. To think this figure has nearly doubled since 2009 is staggering, considering in 2009, nearly 1 in 4 people in the entire world was in the market. That is a massive base… and it doubled in 10 years. Is this rate of adoption unprecedented?
New smartphone unit shipments declined for the first time ever in 2018, meaning that companies like Apple must look for growth channels beyond globalization.
Microsoft is the largest company in the world again, having grown 146% over the past two years, and eighteen of the top 30 tech companies are based in the U.S. Likewise, the US holds 23 of the top 30 companies in the world, and tech represents 9 of the top 30.
Tech growth is slowing, but it’s growing much faster than all other sectors.
E-commerce is still strong, but the overall growth trend is beginning to slow. It is now 15% of all retail.
Average daily time spent on mobile, as a percentage of total media consumption, has gone from 8% to 33% from 2010 to 2019. All other forms of media have declined. It’s also interesting to note that % of advertising spending closely mirrors behavior. For example, consumers spend 34% of media time on TV, and 34% of ad spend is there, 18% and 18% respectively for desktop, and 33% and 33% for mobile.
Online advertising has gotten incredibly sophisticated, from “shopable” catalogs on Pinterest to the controversial targeting on Facebook and Amazon. Ads are often creative, relevant, and tailored.
Additionally, advertising is now driven by “programmatic” buying. 62% of ads are now purchased via real-time bidding and non real-time algorithmic purchasing versus just 10% in 2012. To oversimplify, this means that software is buying the ads real-time as you surf the web. This is infinitely scalable, and players from all sorts of industries are getting in. This also increases demand a lot, and there are only so many impressions (places to put the ads and eyeballs to see them).
The aforementioned factors point to intense competition for ad space online, meaning customer acquisition costs are very high. Anecdotally, at my firm we have observed digitally native (online-based) brands obtain early adopter customers early in their life cycle with customer acquisition costs under control. Early adopters are great. Studies show that they are most likely to tell their friends, evangelize the product, and even adopt your brand as part of their identity. Over time, however, each incremental customer is theoretically less savvy, less trendy, and less of an “early adopter.” As companies attract more and more people, they tap a portion of the customer base that is more mainstream and less enthusiastic. It is more expensive to acquire these customers, and by nature, they generate less value once they are in the fold. These customers leave as soon as the next thing pops up. This is why companies like Blue Apron have struggled to scale. In fact, if anyone can name a single VC-backed digitally native consumer products platform that has raised $1 billion in venture money and proved itself by eventually becoming profitable, I’ll send you a $50 Starbuck’s gift card (not kidding - but you have to prove it).
Amazon, Twitter, Snap, and Pinterest are the highest growth areas for online advertising as Google and Facebook level out.
Freemium is a business model where a company provides a free service with limited value along with a premium service, usually for a subscription, that provides more value. This took off in gaming, but is gaining steam in other areas of media (Spotify) and even enterprise software (Zoom). In fact, Zoom has done something interesting. Just when you thought the world needed another corporate meeting and collaboration tool like it needed a hole in the head, Zoom picked up on something: the category had a low Net Promoter Score, a system for tracking how likely consumers or customers are to promote or recommend a product or service. They discovered that meeting and conference incumbents, such as Skype, GoTo Meeting, and others were generally prescribed to employees by their bosses. If given an easier, more intuitive product, employees would introduce it to their other co-workers. By making it intuitive, valuable, and free, they got users on the platform. They then offer enhanced features to organizations who adopt the premium subscription. In short, while Citrix and Microsoft sell to executives who mandate what the workers use, Zoom empowered the users themselves to advocate for and use the product - a much lower cost of customer acquisition in a rising ad cost environment.
Regulatory is the next frontier in advertising. Companies that are overly reliant on real-time customer data on Facebook and Google could face some significant change in the near future.
Interactive gaming is now a social endeavor. Once upon a time, we logged into our computers to play our favorite strategy, RPG, sports games, etc (well, maybe just those of us who are huge nerds). We played to compete and entertain ourselves. On Twitch, a platform that allows players to stream and watch gaming, there were nearly 4 million active broadcasters in 2018, and nearly 1.2 million viewers. The players play and talk to each other. Fortnite, the most popular game on Twitch today, involves team play where users actively coordinate strategy. Viewers watch the sessions and chat via text with one another about what they are watching. Common Sense Media conducted a survey where 50% of teens claimed that Fortnite helped them learn teamwork skills, 44% made new friends online, 40% have improved their communication skills, and 39% use it to bond with siblings. Clearly, this is a social phenomenon.
Meeker juxtaposes pre-1995 businesses as those who won by collecting insights via human interaction and interpretation of data, which was later applied by more humans in the form of delivery of product or service. Post-1995, she says, companies who win “build data plumbing tools” that extract precise behavioral data and then a combination of humans and software automate and perfect the application of said insights into product and service. The true juxtaposition here is that pre-1995, the insights depended upon the reliability of the humans providing feedback (i.e.: customers actually doing the things they said they did), and on the correct interpretation of said feedback (i.e.: corporate employees avoiding bias and mistakes). Post-1995, software doesn’t have biases and can measure actual behavior. That said, the question becomes one of whether the data-plumbing tools are actually precise. In many cases they are, and in my experience, in many cases they are not. Blind faith in these tools create exercises in false precision, false insights, failed marketing initiatives, and scorched bank accounts.
Innovation on the international front is particularly different in Asia. Regulatory differences, right or wrong, have allowed for acceleration of disruption in financial technology. Alipay, from Alibaba, streamlines online payments, wealth management, and even insurance. Likewise, unique geographic challenges have allowed for breakthroughs in logistics. Tokopedia, an Indonesia based product delivery platform, is improving product delivery across 17,000 islands. Imagine same-day delivery in an environment like that. “When we look at sales data, people from [one island] sometimes don’t want to buy products from sellers on [other islands],” said William Tanuwijaya, CEO of Tokopedia. What an impact. What other industries face geographic constraints that could be solved by same-day delivery?
Global image creation is now double what it was in 2009. The world has gone from nearly 0 smartphones with cameras in 2009 to almost 3 billion in 2019. Smart phone processing power and data storage have both improved nearly 60x since 2010. We’ve gone from 0 to nearly 600 million WiFi networks worldwide since 2000. In 2013, an estimated 700 billion photos were taken globally. In 2017, nearly 1.2 trillion. Instagram started in 2010, and now there are over 1 billion monthly active users. Meeker points out that, originally, transportable human communication was in the form of images. Written language came later. Now that image and video are so transportable, are we returning to our roots? Fascinating question.
