In God we trust; all others bring the Mary Meeker Report
Mary Meeker has released her (now world-famous) 2018 Internet Trends Report. This annual ritual, btw, is a killer marketing move implemented by KPCB for several years now. Nothing goes further than strong, original content, in cementing the brand of a venture firm.
There are several articles already out there that summarize this report (TechCrunch has done a nice, quick-and-dirty capture of key highlights here). However, as I was reading the report, I tried to connect the dots between the data and analysis presented in it, and my own experiences/ world-view. Here are the portions, and consequent implications, that I find interesting enough to highlight here:
1. It’s a two-horse race…and China is here to stay!!
Here’s why I am LONG on China (and large Chinese tech companies). Also, why I choose to live in the US and why I have strong belief in the entrepreneurial fundamentals of this country…
2. ‘Tech’ is in everything!
25% of US public market cap is pure technology. Today, every major company has become a “tech’ company in some sense. Each of us is impacted by tech companies, either as a user, employee or shareholder. There is just no excuse for anyone to not follow tech/ not have a point of view on it, irrespective of whether you directly work in the space or not!
Sidenote: below is the reason why US is still the top destination to build a tech company (in my view, it’s #1 from a holistic perspective). Can’t think of many other markets (barring China) that have both thriving private markets that take on venture risk, and robust public markets that give exits.
3. The era of conventional ‘jobs’ is over — gig economies are taking over!
The Industrial Revolution had created the concept of 9-to-5 jobs, with each worker bringing structured and specialized skill-sets to the table. With tech-led automation, this paradigm will cease to exist soon.
The Internet (followed by the ‘decentralized’ economy in coming years) has turned the world into an interconnected marketplace. In the future, citizens will be expected to contribute their unique value (creative or innovation led in most cases) into this marketplace via flexible ‘gigs’, with majority of tasks automated via tech and lot of human bandwidth freed up.
Sidenote: in the era of these new gig-based paradigms, a key challenge facing Millennial parents today is — how to think about skilling and the concept of a ‘career’ for their kids 20–30 years into the future? Also, what does this mean for school and university education? Topic for another post…
4. Forget your bad cell connection…as long as you have wifi!
During my startup days driving global GTM for a mobile search company, we had gotten a Nielsen study commissioned to understand behavior of Indian mobile users. This is in pre-Reliance Jio days, wherein data speeds were really slow (mostly 2G, 3G was a luxury). An interesting insight from the study was digital consumption in India being driven by wifi, rather than mobile data. In fact, the state-owned telco BSNL had enabled pan-India wifi connectivity, which led to the Internet boom in the country starting 2010. Looks like that trend is still driving global Internet access.
Sidenote: Even in the US market, Laptop/ Desktop usage is by no means, dead (see chart below). Though its share of daily hours spent has reduced from ~58% in 2012 to ~35% in 2017, it’s still a meaningful number in absolute terms and has held steady at ~2 hrs per day over last 5 years.
5. The world needs to discover the magic of QR Codes (ala China)
From my Alibaba/ Ant Financial experience, it wasn’t a surprise to me that 60% of everyday transactions globally are digital. However, only a 4% share for QR Codes was surprising. The world needs to discover their magic…soon. In fact, I have always wondered why this technology is so under-exploited in the US. Alipay has used QR Codes so beautifully to make China virtually cash-less (and Paytm is following a similar strategy in India).
BTW, this is what happens when a market adopts QR Codes…look at this frikkin’ curve!
6. Smartphone OEMs are in a race-to-the-bottom
0% growth in new smartphone shipments + ASPs coming down every year = a shitty industry. OEMs are in for a tough time. Non-Chinese OEMs are pretty much gone anyway. I see lot of startups doing distribution deals with OEMs — beware of hitching your wagon to an “unstable” engine.
Also, as I recently upgraded to the new iPhone X (which, btw, looks and feels eerily similar to my 1st iPhone in 2010; talk about Steve Jobs nostalgia), the first thought that crossed my mind — I can’t believe we are still using these devices. Don’t you feel the same way?
7. eCommerce is yet to inflect…even in the US!
As Prof. Scott Galloway says in this video (which you should definitely watch anyway; it’s about how Grocery is the next vertical likely to be disrupted by eCommerce in the US), 20% online retail penetration is typically the ‘tipping point’ in any vertical. US eCommerce penetration, even with Amazon & Walmart.com & other horizontals & other verticals & other marketplaces, is still only ~13%!! In my view, online can easily become at least 40–50% of the total retail market in major economies. Imagine the headroom for growth that still remains.
8. Amazon needs to have ‘Google Search’, Google needs to have ‘Amazon Prime’
This is probably the most interesting chart from the report. Google has dominated the ‘top-of-funnel’ across pretty much every use case for >15 years. Over last few years, eCommerce has become a dominant use case, resulting in the rise of Amazon. In fact, the company has become so ubiquitous that at least for product searches, it has now displaced Google as the search & discovery starting point (see chart above). With Alexa, this is going to become even more powerful. The same phenomenon has played out in China, wherein consumers prefer Taobao over Baidu as the primary top-of-funnel app, especially due to social commerce features.
Google needs deep commerce integrations to keep its search use case meaningful. At the same time, consumers will have high expectations from Amazon in terms of product search capabilities, especially on Alexa. I see their paths crossing a lot in coming years.
9. Globalization will be the acid-test for Chinese Internet companies
China is a huge market (both scale & monetization) — so immense that some of the most valuable Internet companies in the world today (eg. Alibaba) have been built purely on a domestic user base. The next 10 years will be interesting, as these companies have set out on the path to globalize (as a Founding Team member of Alibaba’s Globalization Team, I have had courtyard seats to this game). If these efforts succeed, China will shape the future of this planet in an unimaginable way (rivaled only by the entrepreneurial, innovation-driven DNA of the US).
10. 294 slides, and not a single one dedicated to India?
Barring a few mentions in some charts and tables, there was pretty much no analysis presented on India in this report. This is even more interesting, given the recent acquisition of Flipkart by Walmart for $16B, making it the world’s largest eCommerce acquisition by deal value ever.
With an economy growing at ~7% annually and a large mobile Internet user base that will soon rival that of China, combined with the likes of Amazon, Walmart, Softbank, Tiger Global and Naspers doubling down on it, India is definitely the 3rd digital consumer horse behind US and China. Though behind by a fair distance, it offers a great 10–20 year bet and an option that global majors definitely need to buy into while it’s relatively cheap. The key is whether these strategics & financial investors have enough patience to last in what is probably the world’s most complex & demanding market.
Note 1: I have consciously not written about other, more mainstream trends covered in the report (rising video consumption, emergence of voice, messaging apps continuing to grow, data as a key lever etc.) as they are more obvious and widely talked about anyway.
Note 2: Interestingly, the report doesn’t talk about Blockchain & Crypto much (barring a slide on Coinbase growth). If interested, check out my previous post on this topic.
Disclaimer: the above views are personal and don’t represent those of any organization I am part of.