American venture capitalist and Partner at Kleiner Perkins Caufield & Byers Mary Meeker has been publishing an annual report on the state of the Internet industry since 1995. One of the most eagerly anticipated presentations of any calendar year, Mary’s report has become a top industry source for analysis of the digital world as well as a predictor of future trends. Mary’s latest report, presented yesterday at the Code Conference in Rancho Palos Verdes, California, is no exception. Covering a wide range of topics from internet usage trends to e-commerce and advertising and key Economic Growth Drivers to the rise of China and the US tech sector, the 294-slide presentation delivers a wealth of information about the state of the Internet today. Here are some of the key takeaways:
Two years ago, Mary estimated that about 3 billion people, or roughly 42 percent of the world’s population, was online in some fashion. That number has now ballooned to 3.6 billion people or half the world’s population. Mary also notes that a lot of these people are spending ever increasing amounts of time online. According to the report, US adults spent 5.9 hours per day on digital media in 2017, up from 5.6 hours the year before. Some 3.3 of those hours were spent on mobile devices, which are responsible for overall growth in digital media consumption.
However, despite the growing numbers of people coming online, Mary notes that overall growth in internet adoption has slowed down. Internet user growth rose 7 percent in 2017, down from 12 percent in 2016 – as more and more people come online, there are fewer people left to connect around the world. The report also notes that 2017 was the first year in history when smartphone unit shipments saw no growth at all. But Mary notes that slowing growth may not be as big a problem as it seems, saying, “Internet usage growth is solid while many believe it’s higher than it should be. Reality is the dynamics of global innovation & competition are driving product improvements, which, in turn, are driving usage and monetization. Many usability improvements are based on data – collected during the taps/clicks/movements of mobile device users. This creates a privacy paradox…”
Mary estimates that technology companies made up roughly 25 percent of US market capitalization as of April 2018. In comparison, the dotcom boom at the turn of the millennium saw 33 percent of US market cap made up by tech companies. As tech firms expand into new verticals and business ideas, it is likely that their contribution to the overall US (and global) market cap will only increase with time. Meantime, six technology companies – Amazon, Alphabet, Facebook, Intel, Apple, and Microsoft – were among the top 15 highest spenders for R&D in 2017, reflecting the increasing diversification and competition between tech companies.
A key example Mary notes is Google and Amazon – Google is expanding beyond the ad services vertical into e-commerce through Google Home Ordering, while Amazon is steadily exploring the advertising space.
China has continued its steady growth as an international force to be reckoned with. It leads the rest of the world in mobile payment adoption, with over 500 million active mobile payment users in 2017, as well as steadily building its dominance as a leading global hub for tech companies. According to Mary’s report, nine of the world’s 20 biggest internet companies by market cap are from China, while the remaining 11 are from the US. However, this is a huge jump from five years ago when China had only two firms on the list, while the US had nine.
Mary notes a couple of key areas and business verticals which will see steady growth in the future, including voice-controlled products and devices like Amazon’s Echo series (the Echo’s user base in the US alone grew from 20 million in Q3 of 2017 to more than 30 million in Q4), e-commerce (with e-commerce sales growing 16 percent in the US in 2017 compared to 14 percent in 2016), AI, and healthcare. However, the report also cautions that the pace of disruption caused by technology is accelerating faster than ever before, as global users adopt new technologies and services at unprecedented rates.
Mary takes special note of the impact this disruption could have on the global jobs sector, with on-demand and internet-related jobs expected to dominate in the years to come.
Curiously, despite the in-depth analysis of China’s growing influence in global tech, there is little to no mention of India’s contribution to the same in the report. A KPMG report from March 2018 ranked India third – after the US and China – in tech innovation leadership in the world, noting that “India has prioritised government support for entrepreneurship and a burgeoning culture of innovation. Many start-up business models are leveraging emerging technologies to cater to India’s mobile-first generation.” Given such massive potential for future growth, India’s glaring omission from Mary’s report is more than a little strange.
However, there is little doubt that technology is changing the world faster than ever imagined. As Mary’s report notes, the dishwasher took about 80 years to become commonplace in the US, while the consumer internet has achieved the same in less than a decade. The world is hurtling to a new tech-powered future at an unprecedented rate, and Mary’s report gives us a brief glimpse of what to expect.
You can view the full presentation below: