If you don’t know who Mary Meeker is, you are on the wrong site. For the rest of us, it’s time to dust off our PowerPoints, because the Kleiner Perkins Internet tsar is back with her famous State of the Internet Address — and this time it has blown out to 355 pages.
We have selected our ten favourite slides, but if you have an hour to spare, grab a coffee, click the link and dive deeply into one of the most interesting presentations about the Internet you will see this year.
We have focussed on her insights into global advertising trends, online advertising and commerce, and media. But there are also new chapters this year on India, healthcare and the cloud. And, of course, a big section of China.
Soon, half of humanity will be online
While the growth of new users has remained steady and is in a slight decline over the last eight years, the number of people on the Internet has reached 3.4 billion. That represents almost half of the human race.
Increasingly, people are connected to the Internet via smart mobility — a trend that thas been evident for several years and is more pronounced in the emerging economies of Asia and Africa. Smartphone unit shipment growth has slowed to a crawl (three per cent), but the total number of units shipped is still impressively close to 1.5 billion.
And Android — or at least the many flavours of Android — is utterly dominant. Thank you, China.
Have phone, will linger
The amount of time an adult in the US spends online has doubled since 2012, and that growth is almost entirely due to expanding engagement on mobile phones. Desktop hours have fallen, although they have been remarkably stable since 2013.
The emergence of new device types has made almost no impact.
Seriously, when will online advertising take a breather? More than two decades after the emergence of the medium, online advertising growth in the US is still accelerating — up 22 per cent this year.
Once again confirming the oldest triumism in the book, advertisers follow the eyeballs. As a result, money is moving to mobile. Importantly desktop’s share of spend is shrinking for the first time.
And yes, there is still bad news for print publishers. Their share of ad spend relative to the amount of time users spend with the medium is still highly over-indexed. More falls to come!
The Internet has achieved equilibrium between minutes and money. However, even within that data point there is an interesting trend: mobile is still significantly under-indexed. So, more ads are coming to a phone near you. Meeker says the underspending on mobile is a $US16 billion opportunity.
Television, which still takes the lion’s share of the bucks, is about right. But — and it’s a magnificent but for those of us who have been in the Internet sector since Netscape — global advertising online will overtake global TV advertising in the next six months.
Viva la Revolución!
Two Rings to Rule Them All
Google and Facebook are pwning everyone.
Facebook’s ad revenue in the US is up 62 per cent in a year. Google’s — which is off a much larger base — is still up an impressive 20 per cent. (Look for Google to break into a new category like Outdoor to maintain that growth — just sayin’.)
The two Internet Leviathans now take 85 per cent of new online advertising dollars in the US market, and their share of new money is growing!
Measurement Can Make You Sad
Meeker says measurement is a triple-edged sword. People don’t always like what they see, and they don’t always like the data they have collected.
And, while marketers like measurable engagement metrics, they still struggle with ROI (as they always have in the offline world).
Block Me a River
You know all those stories marketers tell themselves about how much consumers love their engaging content and experiences? It turns out consumers hate their engaging content and experiences — but maybe not for the reasons they imagine.
Ad blocking is surging.
Almost one in five desktops in the US has ad blockers. The number is one in four in Canada and Germany. On mobile, the line is almost vertical. The only good news is not really good news at all: most ad blocker growth is coming from the developing world, and in those markets the driver is scarce bandwidth. However, a whole generation of Internet users in the fastest-growing markets in the world are growing up in an online world without ads.
Still irrationally optimistic? It gets worse. Users are increasingly opting out of stuff they don’t want, says Meeker.
There is a whole cluster of slides devoted to successful advertising types (slides 20 to 30) which we won’t even try to describe here. There is one simple characteristic that is common to them all: transparency of results.
The days when media companies could obfuscate campaign results are (sadly for publishers) a thing of the past.
The Algorithms are Winning
Companies who can put the right ad in the right place at the right time are winning, and it’s reflected in their market capitalisations.
The chart above demonstrates the power of search, but there is also an interesting side note about the category that Google has made its own.
Meeker quotes Ben Silbermann, the Pinterest founder, as saying “A lot of the future of search is going to be about pictures instead of words”, and smarter brands have already figured this out. For instance, Qatar Airways sees almost 80 per cent of the images it shares on Instagram ‘regrammed’. Wayfair, BMW and Red Bull all score over 50 per cent.
Expect big improvements in voice search as well. Machine learning is leading to big improvements in the quality of voice recognition, says Meeker.
Content is Ka-ching!
Here’s another really interesting insight, especially for retailers and ecommerce platforms: their content is becoming the store, as the lines between ads, content, products and transactions begin to blur.
In keeping with our long-held view that consumers now hunt in packs (thanks for that idea, Paul Greenberg), social media is raising the bar on product quality, customer support and transparency. The good news is that business is getting the message. Easier access to online support channels and faster agent response times are rated as the top things companies would most like to change about their customer service.
Auld Lang Syne
To end on a cheery note, US retail store closings will break a twenty-year record this year, and will be significantly worse than even at the height of the GFC. This is in a recovering economy, and at the very time that Amazon is opening its own retail stores.
However, Meeker makes a very important point: “I don’t think retail is dead — mediocre retail experiences are dead”. ’Struth, there will be no department stores left in Australia if she’s right!
That’s our initial run through the Mary Meeker omnibus. But here’s the thing: we have barely scratched the surface. There are another 280 slides that we need to work our way through.
For those of you with time on your hands — like, everyone, right — here is the full presentation.