Forget about the State of the Union. Especially since a white supremacist has taken the White House. No, the State of the Internet is the one you should pay attention to, especially if you have anything to do with online. And the latest version has just been released. So, time for the highlights!
Mary Meeker is one of the most well-known figures in the online world. Since 1995 she has been publicizing her bible, the annual Internet Report. It has proved to be extremely insightful in long-term developments, not only in digital but in society at large. And she and her colleagues have always had a keen eye on upcoming firms. Not a big surprise, as she is a venture capitalist.
So having a look at her reports is almost mandatory, and gives you a wealth of background information and inspiration. Though, at 334 slides this year, it is almost impossible to read everything. Then again, I at least had a closer look and was struck by the following points:
– smartphone shipments are down. When you search for ‚end of smartphone era‘ (don‘t google it, use DuckDuckGo or others!) you will find plenty of results. Personally I don‘t think we are nearly there. This is a symptom of market saturation and of longer buying cycles (people hold on to their phones much longer than before). Apart from that, I don‘t yet see the next big device coming at the moment
– Customer acquisition costs are rising: this might not interest the ordinary civilian. For marketeers this is bad news though, as the LTV (long-term value) of a customer gets closer to the acquisition costs, so advertising might not be cost-efficient anymore at a certain price point. Luckily enough, Meeker points to successful freemium models where you can use products for free up to a certain limit, and these models are still showing a remarkable effectiveness. Think Spotify, Dropbox and many more. Expect to see freemium to expand more into the enterprise world as well (video conferencing tool Zoom is a good example). Oh, and old-fashioned recommendations are still extremely effective. Stitchfix is one to watch, a kind of an online store that works on recommendations only (not necessarily from friends)
– mobile use is still growing everywhere (hence: not the end of the smartphone era, my friends). For the first time, we spent more time using digital media than watching TV. The desktop use has been steady for years, but mobile use has gone up tremendously to 3,6 hours ON AVERAGE per day. On a side note: online advertising grows accordingly, and of course basically only on mobile (+22%)
– Speaking of media use: as a fourty-something I only started to notice the popularity of WhatsApp status updates when I was in Central America, where everyone seemed to be using them. I only used Instagram Stories until recently, but Meeker shows that WhatsApp Status and Facebook Stories are as popular
– speaking of media use part 2: lots of social media platforms are flatlining. The exceptions are YouTube and Instagram. YouTube is even becoming a primary source for breaking news. I sometimes feel that the influence of this channel is being underestimated by older generations
– Speaking of media use part 3: 26% of respondents say they are continuously online. In the demographic 18-29 years this becomes a whopping 39%… and I am not surprised. To be honest, I don‘t sleep with my smartphone bedside and sometimes take longer walks without smartphone, but apart from that I am always online (if I don‘t reply immediately, it has a reason, ha!)
– Globally, the USA is still leading the technology pack. 18 of the biggest 30 companies are American. China is up next, Europe is non-existent (Spotify just makes it in at number 30). No reason to cheer for America though: the pace of innovation in China is relentless and picking up, and the USA has a fundamental problem. See my last point
– E-commerce is still steadily growing: this isn‘t an exponential curve, but it has reached almost 20% of all retail sales. This is a slow grower, though in around ten years it will be 50/50. Offline retailers are still healthy by the way, growing with 1,6% but not as fast as e-commerce obviously. There will always be a market for both
– Financial services are a big driver of the e-commerce revolution: AliPay has one BILLION users for example, it‘s a Chinese online payment platform in case you missed it. In the banking department, in Germany everyone is talking about N26 with their one million subscribers. But personally I already had a couple of disappointing customer experiences with them, and internationally Revolut is growing much quicker. In Brazil Nubank is an interesting new contender. They all play more or less the same game: effortless online banking for the digital generation, with sleek apps, topped off with extra services such as savings, insurance etc
– interactive gaming is HUGE: this is another development older generations might be missing. 2,4 BILLION people are playing interactive games. 250 million of them are on Fortnite for example. Personally I am thinking about buying an Xbox again. In case you worry about whether these nerdy gamers become socially incompetent aliens: they themselves say gaming helps them to learn team-working skills and to make friends online. The only socially incompetent alien is apparently in the White House (sorry, I cannot say it often enough)
– More of a huge niche thing are podcasts: they are steadily growing to 70 million monthly active listeners in the US alone. Which is huge, but not Fortnite massive, you know…
– Some smaller but interesting things to know: data storage continues to grow into the cloud. 87% of web traffic is encrypted. That again probably has to do with privacy worries by customers, and increasing cyber attacks
– Online education is a fast-growing market. Partially it is a necessity to drive education costs down. Partially it also fits neatly into a societal trend to work more location-independent. With current videoconferencing possibilities and online education, it is becoming easier for education professionals to do that
– the next boom will be the health market: this is a special one, because innovation here is actually customer-driven. The demand here is so massive, and the willingness and ability to innovate by the existing suppliers so low, that people are actually demanding new services and devices. This is again a steady but not exponential growth market, with wearables such as fitness wristbands doubling in the last four years
That fits nicely with my final note. Because Meeker also shows the American income statement. And although the economy is booming, to outsiders it still seems to be built on borrowed money. This, my friends, is no sustainable business. And we aren‘t even talking about climate change.
In the last fifty years, the USA ran a deficit in 45 years of those years. Last year‘s deficit was 23%. There are at least two big drivers. The first being defense expenditure, a whopping 15% of the overall costs (it used to be even worse in the eighties). The other one is healthcare, which is spiralling completely out of control. Digital innovation is a necessity here, as well as probably a complete overhaul of the entire healthcare system. Interesting to see whether the current bipartisan system will be able to clean itself up. My bets are on the NO side.