Top Takeaways — Mary Meeker Internet Trends Report 2018

Since 2004 Mary Meeker (ranked as a top 10 VC) has been releasing an incredibly in-depth analysis of Internet Trends which has become a must read for insight into the diverse tech ecosystem. The 2018 report has just dropped at the Code Conference in California. This years report is a modest 294 slides long but, as always, we try our best to distill this information down into what we see as the top takeaways and insights for the year.

TECH GROWTH:

As of April this year, technology companies now account for 25 percent of U.S. market capitalization.

This is still quite shy of the original tech boom in the early 00’s, but is a sign of a more mature tech sector than in the past as technology companies are also seeing a growing share of corporate R&D and capital spending to drive both innovation and growth (averaging a very impressive 18% of revenue for this year).

ADOPTION:

The speed of technological disruption is accelerating. It took about 80 years for Americans to adopt the dishwasher. The internet as we know it, saw similar adoption in less than a decade.

INTERNET AND SMARTPHONE SATURATION

Some adoption trends are starting to plateau. Even though, at 3.6B, the number of Internet users has now surpassed half of the world’s population (when Mary first started this report, that number was at 751 Million), we can also see a corollary plateau of reach reflected by 0% new smartphone unit shipment growth in 2017 and an additional big slow down with year on year internet use growth.

The adoption curve momentum slow down (where we’re moving from a J curve to an S) means that future acquisition is going to become significantly harder.

ONLINE TIME INCREASES, ESPECIALLY MOBILE

However, even though Smartphone shipments haven’t grown, the amount of time spent online per device has significantly increased. In the U.S. 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 per day are now spent on mobile, which is responsible for the majority of the growth in digital media consumption habits.

eCOMMERCE:

Sales growth is continuing to accelerate, growing 16 percent in the U.S. in 2017, which is up from 14 percent the year prior and now eCommerce represents 13% of all retail purchases.

Amazon dominates those sales — taking 28 percent last year. From a search perspective more U.S. product searches now start on Amazon than Google.

And although Amazon reigns supreme in the US, Chinese commerce giant Alibaba has much more merchandise (by volume) and is also aggressively expanding into other heavily populated countries like India and Indonesia.

SOCIAL MEDIA and ADVERTISING

Because total time spent on mobile media was up 29% YoY in 2017, there is a corresponding shift to mobile ad spend (which was up 26%). Ad spend on other media — particularly print — remains high. But overall, ad spend is flowing towards mobile at the expense of other formats. This year the opportunity gap is still $7 billion for brands, in 2016, Meeker identified this as a $16 billion opportunity; in 2015, it was $22 billion; and in 2014, $25 billion.

SUBSCRIPTION IS WINNING

Subscription digital services are starting to become a preferred solution for both providers and consumers over one-off transactions. It’s a well know model made popular via SaaS businesses and driven by ease of access to content selection, price, improved user experiences, and personalization (thanks to the data focus).

Across these services, this data-driven personalization improves the user experience and customer satisfaction overall, which in turn improves engagement and loyalty (therefore also subscription growth). Digital subscription YoY growth rates for the primary service providers across all media are:

• Netflix (Video): +25% to 118 million total subs (as of Q4 2017)
• Spotify (Music/Audio): +48% to 71 million subs, with 45% of monthly active users (159 million worldwide) that are now paid subscribers
• The New York Times (News/Media): +43% to 3 million subs
• Amazon (eCommerce/Media): Growth rate is unknown, because Amazon announced it has 100 million Prime subs for the first time on April 18, 2018.

As we previously mentioned the voice-based word accuracy rate from Google reached 95% in 2017, which is a tipping point for accuracy. To continue with this learning, tech companies are now centering on improving their assistants’ contextual understanding. Late last year Google introduced the ability for the Assistant to use the context from a users’ previous question to help it answer following ones. Meanwhile, Amazon is working on improving contextual awareness in follow-up questions for more natural conversations with their new Context Carryover feature.

Voice assistants can now recognize speech as well as humans can, and are becoming more capable of using context. This will trigger even more mass adoption of voice-first devices and we are seeing the start of the adoption J Curve for Voice.

This is evidenced by Amazon Echo’s install base shifting from 10 million to more than 30 million units in 2017, with developers also seizing on incentives to build voice skills to complement Alexa’s capabilities. New ways to shop, listen to music, get news and other as-yet unknown use cases will emerge from this more natural user interface.

PRIVACY IS KEY:

To finish off with the less rosy bits, scrutiny on security and privacy is rising on all sides — users, businesses, and regulators. As mentioned earlier in the article, technology-driven trends are changing so rapidly that it’s rare when security implications are fully understood, or even worse, outcomes from unintended consequences, which I am sure Facebook and Twitter are fully aware of as not all countries & actors look at these issues through the same lens.

Finally , one of the most interesting slides for 2018 shows that 38% of Chinese citizens are willing to provide sensitive private data in exchange for product features (in comparison the US scored at 25%)