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Analysis of Mary Meeker’s Internet Trends

Each year, Mary Meeker and team put together the Internet Trends report that draws together an ever growing collection of charts and analysis about the state of our Internet-driven world, from the latest companies to industry and economic impact. Over the years, the report has gone on to include analysis of markets like China and India. Being a production of the Kleiner Perkins Caufield & Byers venture capital firm, the focus is typically on new technologies and the corresponding business opportunities: you know, the stuff like "millennials like using their smartphones" and the proliferation of smartphones and Internet globally.

These reports are good for more than just numbers-gawking, but can also give some quantitative analysis of new, technology innovations in various industries. The consumer and advertising space consumes much of this business analysis, but for example, in this year's report, there's an interesting analysis of health-care and transportation (bike sharing in China!). For enterprises out there, it may seem to over-index on startups and small companies, but that doesn't detract from the value of the ideas when it comes to any organization looking to do some good, old-fashioned "digital transformation."

As I'm wont to do with this kind of thing, here's my notes and analysis of this year's report:

 

Finding new markets, and harvesting existing ones

  • A major premise last year (and this year) was that smartphone sales were leveling off in Western markets, suggesting saturation in those markets.

  • Internet and mobile driven businesses – while this means little growth in the US (and presumably, in Europe) , it does mean ubiquitous Internet access. This ubiquity enables and drives pretty much everything in these Internet Trends reports (well, it’s right in the name there, you know). The premise is the old "if you have an Internet-connected supercomputer in your pocket, what sci-fi stuff is now evenly distributed?”

  • Geographically, there's more than just the US and European markets, of course. There's much more attention paid to operating in China and India, which I'll summarize below.

 

Consumer markets

  • In all these Internet and mobile driven markets, you use smartphones as the straw to drink customer's milk-shakes. Here are the “milk-shakes”:

  • The methods of hustling up eyeballs and moving people along the sales funnel are the usual, but “digitized”: celebrity/friend endorsements/WoM, education/challenge sales, and just targeting productivity for commodity purchases.

  • Go-to-market still uses delivery as a massive fulfillment channel.

  • This year, the report puts a lot of emphasis on visual/image-driven hustling. Ben Thompson has a good, ongoing theory here that things like Snap are the new TV. Humans are visual, visual is easy and compelling. As computing capabilities (storage, networking to send that stuff, and then image recognition) zooms up, all this makes sense.

  • It’s also exciting for Silicon Valley, VC people, and nerd-fandom (each the primary audience of Meeker’s work) because it opens up new channels of engagement: the existing entertainment industry knows not to trust nerds to help their business (see Napster, etc.). For example, cable companies have done a good job fending off their businesses. That fight will be never-ending , but incumbents have deep pockets, high barriers to entry (if Google can’t figure out disrupting fiber, who can?), and are cottonin’ onto The Struggle.

  • That said, there’s a crazy slide of Netflix taking 30% of the total US home entertainment spend:

  • And then the report gets to games, which are, you know, just straight up a product/service that you pay for. WHAT A BUSINESS MODEL!

  • There’s much attention spent on looking at China and India as growing markets that Internet-driven business models can be applied to. That is, as more of the buyers in China and India come online, have disposable income, and otherwise want to do business through their mobile devices, new “blue oceans” are opened which startups and existing businesses can fish for growth.

  • For an investor or entrepreneur, the task then becomes one of picking the best opportunity to maximize the possible pay-off. While Western markets may be larger, their growth can be smaller and competition can be fiercer. In new markets, there's a different set of risks, but a more attractive growth curve to suck cash from. In either case, you need to have good products.

  • If you're targeting new geographies, you have to figure out how doing business in the new country. But, you know, that’s (supposedly) why investors and entrepreneur get paid the big bucks. For example, India rates poorly here:

 

Cloud – Enterprise IT

 

Health IT

  • There’s an interesting section on IT in healthcare. As with everything, the Internet is coming. I have no idea what the numbers are, but there’s likely a huge amount of waste in healthcare and opportunity left out, relative to the utopia of injecting more computers.

  • You can see an inkling of this in the conclusion that clinical trials are much more efficient with all this computer stuff.

  • On that note, the digitization of healthcare data and, more importantly, access to it is growing rapidly:

  • Without that raw data and access to it, you can’t do much. So, that’s the first step. Of course, there are still annoying competitive things, like Fitbit not linking up with Apple’s HealthKit, which kills the possible platform dynamics there. That move, in particular, is a logical defensive, strategic move by Fitbit (see the entertainment industry being rightfully leery of nerds, above). As with many defensive, strategic moves, from a consumer’s perspective, you’re just like “wut?”

  • In addition to clinics and hospitals, companies that create the fabric of healthcare (from prescriptions and insurance to medical supplies and testing) have the bulk of the work to do here.

  • These companies have justified, competitive concerns with nerds as well: whoever owns the dashboards has an easier time owning the customer, and shoving down all others in the supply chain to commodity status, with similar downward jogging profit margins.

  • Of course, there are advances in pure capabilities in healthcare, like genetically tailored drug cocktails and genetic analysis.

  • In both cases, the idea is that if you can identify genetic “disorders” and dispositions in individuals, you can more perfectly dictate healthy behavior and start treating for future problems. And, of course, address existing problems and sicknesses. Getting the costs of the tests down to $50-200 is probably the key here. If you could go to the little clinic at the front of the grocery store and get your genetics run with that $50 Groupon, all sorts of things would be different, hopefully for the better:

 

How’s the exit business?

  • Like most analysis nowadays, despite all this breathless awesome-sauce, there’s an open question of why there aren’t more tech company IPOs and acquisitions in this space. The amount of funding and IPO’s in the tech sector has dropped over the past 3.5 years:

  • As a side note, as ever you should read the footnotes for hidden fun: Facebook accounted for 75% of the 2012 IPO market, Alibaba for 69% in 2017, and Snap for 74% 2017 YTD. It's always good sniff out find the large outliers in charts like these.

  • The analysis of the business of "USA, Inc." is always interesting, but not without critics, even among the nerd-set.

  • Of course, humanities “exit,” which is to say, the value of all this computer stuff – and, you know, more humane thinking and approaches to life – looks pretty good:

 

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