/Understanding Mary Meeker’s Report on the Internet in 5 minutes!

Understanding Mary Meeker’s Report on the Internet in 5 minutes!

Mary Meeker, venture capitalist and Partner at Kleiner Perkins Caufield & Byers, publishes a report every year – since 1995 – on the state of the Internet.
Her 2018 report was presented at the Code Conference in Rancho Palos Verdes, California, on 30 May. In a 294-slide presentation, her report covers a wide array of topics, including internet usage trends, advertising and e-commerce, as well as the role of migrants in the tech industry. Here are some interesting takeaways from her report:

The Rise of Online Life

In 2016, Mary had estimated that about 3 billion people (about 42 percent of the world’s population) was online on one device or another. That number has now become 3.6 billion people, roughly half the world’s population!

As a result of the global increase of internet users, internet user growth advanced only 7 percent in 2017, whereas the number was 12 percent in 2016. Moreover, this resulted in a sharp increase in the number of smartphone users, as a result of which, smartphone shipments didn’t see any growth at all in 2017. This was the first year in recorded history in which there was no growth in smartphone sales.


Mary also made note of the fact that despite these unimpressive numbers, the time an average internet user spends online in the US grew from 5.6 hours in 2016 to 5.9 hours in 2017. Of these, 3.3 hours were spent on mobile, and this was responsible for the overall growth in digital media consumption.
She also highlighted the accelerating speed of technological disruption, noting that the internet became ubiquitous within a decade, whereas it took Americans close to 80 years to adopt the dishwasher.


Tech is the Way Forward


In Mary’s estimation, tech companies constituted about 25 percent of US market capitalization as of April 2018, in comparison to the boom at the turn of the millennium, which saw 33 percent of the market cap made up by tech companies. A part of this reason is that tech firms are expanding into different verticals from the ones in which they had started out, including Google – which is now becoming a commerce platform via Google Home – and Amazon, which is slowly moving into advertising now. Moreover, voice-controlled products like Google Home and Amazon Echo are taking up a significant part of the market share, the latter growing 50 percent from third to the fourth quarter of 2017.

As this trend continues, Google and Amazon are estimated to offer more artificial intelligence services or platforms as AI becomes a bigger part of their enterprise expenditure. In doing so, however, they will face a “privacy paradox”, as we have already seen happening to Facebook – they will be caught between using data to provide more holistic consumer experiences while the same can become the reason for breaching consumer privacy.

Mary shortlisted six technology companies, among the highest spenders for R&D in 2017, which are likely to continue to grow at a steady rate due to their investments. These companies are Facebook, Amazon, Intel, Apple, Microsoft and Alphabet.


China’s increasing role in the tech space


Mary notes China’s accelerating influence in the tech space with the increase in mobile payment adoption, in which it leads the world, having more than 500 million active mobile payment users in 2017. China is quickly marking its path to competing with the world’s biggest internet companies, most of which are in the US. As of now, China houses nine of the world’s 20 biggest internet companies in terms of market capitalization, while the U.S. has 11 companies. Just half a decade ago, China had only two companies, while the U.S. had nine.


Immigration and the Future of Jobs


Mary’s report also emphasized the importance of immigration for the tech industry. In her reasoning, over half of the most highly valued tech companies in the U.S. have been founded by first- or second-generation immigrants, some examples of this being WeWork, Uber, Wish, and Tesla, all of whose founders are first-generation immigrants.
Amid all this, Mary’s vision of the future is one of uncertainty. This is partly due to the fact that E-commerce sales have been continuing to grow as well as accelerate. In 2016 it was 14 percent in the U.S., and it grew to 16 percent in 2017. And while Amazon has been partaking in the market share, grabbing close to 28 percent of overalls sales last year, physical retail sales have been continuously declining.

In this connection, Mary tells us to expect that technology may also disrupt the way we work. Just as America had made a collective shift from agriculture to services in the early twentieth century, the different kinds of employment generated in the age of immense tech consumption will be significantly different from what we are so far familiar with. Mary says that we should expect more internet-related and on-demand jobs to predominate, moving away from primarily physical or manual labour.

To Conclude: Mary has given us a glimpse of what the future for the tech industry looks like, with the rise of AI, the increasing requirement of immigrants, and the growing influence of China, among other factors. However, despite the complexity of her analysis of China’s unwavering presence in global tech, she does not mention India’s contribution to the tech industry in the report.

A March 2018 report by KPMG ranked India third, after the US and China, in tech innovation leadership in the world, noting that it prioritized government support for entrepreneurship, and helped build a culture of innovation. It also added that many startups are attempting to leverage imminent technologies so as to service India’s mobile-first generation. Given that this is the potential for future growth – and it is massive – one might raise significant questions about India’s obvious and somewhat conspicuous omission from the report.
But otherwise, Mary’s report can lay the groundwork for how to approach the foreseeable future in tech. You can view the full presentation here.

If you have any doubts or questions, feel free to reach out to me via LinkedIn or contact us at sshroff@mystartupcfo.com. I run myStartUpCFO, a finance and accounting services company that provides on-demand CFO services.