Everyone typically looks forward to hearing the Internet Trends report from Mary Meeker, partner in the venture capital firm of Kleiner Perkins Caufield & Byers, at this time every year, but attendees this year heard a series of largely flat or pessimistic predictions.
The Internet Trends 2016 report was issued during the Code Conference in Rancho Palos Verdes, Calif. To begin with, five of the biggest growth drivers of the past few years are slowing down, Meeker predicts. These include:
- Number of Internet users, which is now at 3 billion, compared with 35 million in 1995, but other than in India, the growth of Internet users has stalled at about 9 percent per year (in fact, if you don’t include India, the growth has slowed)
- Development of emerging nations such as China and the Middle East, is slowing
- Government debt in the world’s 50 largest economies is rising, after spending rose to help support growth
- Internet rates, which helped fuel borrowing, have declined
- Birth rates, which helped drive growth in the labor force, are slowing
The bad news is especially striking for the Apple mobile market. “Meeker notes that over the past six years iOS has seen just a two percentage point increase in market share, while Android has exploded from a 4 percent presence in the industry in 2009 to a massive 81 percent in 2015,” writes Mitchel Broussard in MacRumors. “The pattern is expected to continue, with Meeker projecting iOS will see a year-over-year loss of 11 percent in unit shipments as Android climbs another 7 percent in 2016.”
This is particularly true in the context of flat mobile phone growth overall. Global smartphone unit shipments are slowing dramatically, after years of high growth, to 10 percent vs 28 percent year over year, Meeker writes. “Phones are now good enough and not improving fast enough for everyone to need a new one each year,” explains Josh Constine in TechCrunch.
In addition, the average selling price of smartphones—even for Apple, but particularly for Android—is declining. That’s good news for Android developers, but bad news for phone manufacturers, Constine writes.
Some Positive Signs…Like Video
It wasn’t all bad news. One high point? Video, reports Larry Downes in the Washington Post in his analysis of the presentation. “The combination of ubiquitous devices, high-speed networks, and falling prices for key components including memory, computing power and cloud storage point to the rise of a dramatically different, user-driven media landscape,” he writes. “Viewers will seamlessly combine live video with contextual information, then annotate and socialize it on the dominant platforms. Live events become social experiences, with richer interaction for those not actually in attendance.”
Moreover, the growth of video is also stimulating the growth of social media platforms that support video, such as Facebook, Snapchat, and Instagram, instead of text-based platforms such as LinkedIn and Twitter—particularly in the desirable 18-34 demographic.
In addition, low-end messaging platforms with literally millions of users also offer the possibility of massive industry disruptions, Downes writes. “WhatsApp, acquired by Facebook for $19 billion in 2014, has signed up a billion active users in just five years. Facebook’s native Messenger, along with Tencent’s WeChat (the dominant Chinese platform), are close behind,” he writes. “With that kind of momentum, disruptive new services are easy to launch. Simple text messages become group chats and then multi-user games, and, from there, banking and payment systems. It’s amazing what you can do with a billion users deeply committed to your platform.”
Another potentially disruptive technology? Voice, which Meeker said was a more efficient way of inputting information because people can talk faster than they can type, don’t need to use their hands, and increasingly have devices that don’t even have keyboards. Voice searches on Android are up 35 times since 2008 and 7 times since 2010, and now amount to 20 percent of Android searches, she reports. And by 2020, at least 50 percent of all searches online will be through voice or image search, Meeker quoted Baidu’s chief scientist Andrew Ng as saying.
The result? Massive acquisitions as traditional big companies attempt to stay in the market, the way auto manufacturers are investing in industries such as Uber and self-driving cars. There’s been a 263 percent increase in the last three years of non-technology companies acquiring and investing in tech companies, such as GM buying Cruise Automation, and Fox Sports investing in DraftKings, writes Mike Murphy in Quartz.
“The best hope of reincarnation in industries being transformed by technology (think today of media, health care, automotive, transportation, and finance) is investment if not outright acquisition of the disruptors,” Downes writes. “Even the jaw-dropping sticker prices being paid make sense if the alternative is being pushed out of the emerging market altogether.” Keep in mind that of the top 20 Internet companies, with the exception of one—Apple—none of them even existed in 1995, he adds.
What does this all mean to you?
- If your company doesn’t already know of ways to support image and voice, as well as messaging, with your products or services, you’d better figure out a way.
- Even if you’re a startup, expect big companies to enter your market through acquisitions.
- You can’t count on explosive growth forever.
Meanwhile, the industry is already counting down the days till next year.
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