Mary Meeker’s Internet Trends for 2017

Mary Meeker of Kleiner Perkins Caufield & Byers issued her annual slideshow on tech industry trends. As always she covers an amazing amount of information. The full slideshow can be found here.

Here are a few of the highlights that are of interest to ISPs:

Internet Growth. Worldwide Internet growth is still at about 10% annually with over 350 million new Internet users expected this year. At the end of 2016 there was 3.4 billion Internet subscribers, a global penetration rate of 46%. The worldwide industry has exploded since having 1.6 billion Internet subscribers in 2009.

Internet Usage. In the US the average Internet usage is now 5.6 hours per day per person, up from 5.4 hours in 2015. This includes 3.1 hours of mobile usage, 2.2 hours of desktop usage and 0.4 hours on other devices.

Netflix Growth. Netflix now earns 30% of the home video entertainment dollars in the US. The company had almost 94 million worldwide customers at the end of 2016 and is adding around 6 million new subscribers per quarter.

Interactive Gaming is Huge. There were 2.8 billion worldwide interactive gamers in 2016, up from 100 million in 1995. This is driving a huge amount of Internet bandwidth. The average age of a gamer in the US is 35.

Streaming Music. Streaming music now drives 52% of the revenue in the music industry. Less than a quarter of the industry revenues comes from physical media like CDs.

Smartphone Growth is Slowing. The growth of smartphones sales in 2016 was down sharply and only grew worldwide at 3%, down from 10% in 2015. With that said there were still over 1.4 billion phones sold in 2016 and there are 2.8 billion total smartphone users in the world, up 300 million since 2015. The industry has seen tremendous growth and there were only 300 million smartphone users in 2009. Around 84% of smartphones use Android.

Internet Shopping Continues to Grow. Online shopping is still growing at a torrid pace. Parcel deliveries in the US from Internet shopping were at 10 billion in 2016, up 9% over 2015 and up from 7 billion in 2010. It’s predicted that 7,000 retail outlets will close in 2017.

Online Advertising. In the US the amount of online advertising was $73 billion in 2016, up 22% from 2015. The amount of mobile advertising now equals the amount of desktop advertising. Desktop advertising has dropped by over $2 billion annually since 2015. Google and Facebook dominate US web advertising with the two companies getting 85% of ad revenues in 2016. Google earned over $35 billion in ad revenues for the year.

Voice Used for Queries. Voice is replacing typing and 20% of all queries made through smartphones are now done using voice instead of typing. It’s reported that the accuracy rate of voice recognition is now at 95%, up from 76% in 2013. It’s expected for voice interface to grow rapidly in homes and businesses due to voice recognition devices – Amazon Echo has sold over 10.5 million Echo devices by the end of 1Q 2017.

Social Media Changing Customer Loyalty. Over 82% of customers stopped doing business with a company after a bad experience. This is up from 76% in 2014, with the difference credited to the feedback from social media.

Immigrants and Tech. I’m not sure what this means, but 60% of the most highly valued US tech companies were founded by first or second-generation Americans including Apple, Google, Amazon and Facebook.

2016 Internet Trends

The InternetMary Meeker is an analyst for Kleiner Perkins Caufield & Byers who tracks everything Internet. Each year she compiles the trends in the industry and collectively these trends paint a good picture of where things are headed. Following are just a few of the many things she is tracking in her most recent report, which makes for a great snapshot of the state of the Internet:

  • Global internet customers continue to grow at 9% per year and now total 3 billion users, or 42% of the world’s population
  • The biggest worldwide barriers to internet adoption are lack of local network infrastructure, illiteracy and high prices of connectivity.
  • Sales of smartphones are slowing and are now increasing at a rate of 10% per year, down from a 5-year trend at 28% per year.
  • The average smartphone user only uses 12 apps daily, making it very challenging for new apps to break into the market.
  • Web users clearly are favoring applications that are video-heavy like Facebook, Snapchat and Instagram which are growing much faster than text-heavy platforms like Linked-in and Twitter.
  • Advertising is quickly shifting to follow potential customers. This means advertising with Facebook and Google is growing much faster than anybody else and those two companies garner 76% of online advertising.
  • But total advertising dollars are still weighted towards traditional media like television and radio although the users have shifted online. But it’s obvious that the tide is turning towards online advertising.
  • But ad blocking is up 94% year over year and the online advertising industry needs to find a way to counterbalance the trend.
  • We are starting to see hyper-targeted advertising with ads aimed specifically at potential customers.
  • Messaging is dominated by Facebook Messenger and WeChat (also owned by Facebook) and is growing rapidly.
  • Messaging is supplanting traditional SMS texting due to the ability with messaging to add self-expression to messages.
  • Web customers are showing a strong preference for conversational interfaces on customer service sites, such as being able to read complaints from other customers along with the solution provided. Customers are preferring this over traditional customer service techniques like phone calls, emails or on-site texting with customer service reps.
  • Voice-activated interfaces are growing rapidly. 5% of US homes now have an Amazon Echo. 1 in 5 searches from android phones are activated by voice.
  • From an ecommerce perspective, it’s clear that millennials focus on price and comprehensiveness, while the younger Generation Z cares about the experience, ease, and personalization of the experience and that what they are viewing has aligned values with their own. Generation Z is also more focused on images while Millenials and older generations still think in text.
  • Sellers of new technology are increasingly reliant on success by the adoption of their technology in Japan, China and the Far East. This focus used to be centered on the US and Europe.
  • Non-tech companies are acquiring tech companies to try to fuel growth and take part in the transition to digital.
  • The USA is on a path to become the center of the auto industry again due to innovations from Tesla and Google. But ride-sharing services like Uber and Lyft will shrink car ownership.
  • Sports on the web is trending towards comprehensive apps that combine social chatter and professional analysis along with the game stream.