Every year, at the start of summer, Mary Meeker of Kleiner Perkins produces a detailed report on internet trends. She looks at different areas, such as advertising or gaming, and different geographies, such as India or China. There is a lot of detail. And when I say "a lot" I mean that this year's report is 355 slides long. Obviously I can't cover everything in something so voluminous in the roughly 1,000 words of a Breakfast Bytes blog post. I will try and pull out the biggest drivers. China and India are big trends on their own, changing fast and in ways that are not just "the US but a few years later", so they get their own posts tomorrow and the day after. Although in the US, a lot of internet access is through PCs, in the rest of the world it is almost entirely mobile. Since mobile is the biggest segment of the semiconductor industry, everything that happens in the internet has implications for mobile, and thus for semiconductor. Anything that happens in semiconductor affects EDA and IP, and thus Cadence. Only at the highest level does some facet of this report directly affect product strategy, but not much happens in hi-tech that doesn't have an internet aspect behind it. Global Internet Trends Global internet users are 3.4B, up 10% Y/Y (vs 10% from 2014 to 2015) flat (and only 8% if India is excluded) Global smartphone shipments up 3% Y/Y (vs 10% in 2015 and 28% in 2014) slowing Global smartphone installed base up 12% Y/Y (vs 25% in 2015) slowing USA internet usage (engagement) up 4% Y/Y solid, mobile >3 hours/day per user vs <1 in 2012 Online Advertising and Commerce Advertising is increasingly measurable and actionable. The growth is all in mobile advertising. One of the most interesting graphs Mary shows each year compares the amount of time that people spend on a given medium and the amount of the advertising spend it gets. The mismatch is getting less, but there is still a big reduction to happen in print advertising (it's going to get a lot worse for newspapers), and mobile is still underserved with future growth likely to continue to be in that segment. One interesting datapoint is that internet ad spend has now passed TV ad spend. The bulk of the money is going to Google and Facebook. Google is already huge and still growing at 20%. Facebook is much smaller but growing at over 60%. Everyone else, not so much. People are opting out of a lot of advertising they don't want to see using ad blocking software. Only 1% of people in the US use such tools, but it is 13% in China, 28% in India, and for some reason 58% in Indonesia, the ad blocking capital of the world. Increasingly, people are running ad blocking on mobile, too. The leading platforms (Google and Facebook in particular, although Twitter, Snapchat, Linkedin, and more are trying to catch up) are rapidly improving with back-end data, front-end measurement tools, and targeted delivery of ads that users increasingly want (and respond to). This type of targeting increasingly exposes ineffective advertising. Another trend is to mix social networks with user-generated content to create what are pretty much ads, except that they can have 7X the engagement of brand-created ads. The kings of doing this seem to be Qatar, Red Bull, BWM, Wayfair, Sephira, Netflix... The result of all of this is that the lines between ads, content, products, and transactions are blurring fast. The ad is the transaction (tap to book, swipe to buy). How does everyone get their stuff? By UPS, FedEx, and other parcel services. It is a sort of surrogate for e-commerce in general (excluding virtual products in games and e-books, music downloads, and so on). It grew 9% Y/Y. That is having a big effect on bricks-and-mortar stores, with retail closings expected to break a 20-year record, with over 7000 store closings (and meanwhile, Amazon is starting to open retail stores, going in the other directions, plus, of course, it is in the process of acquiring Whole Foods). Interactive Games Global interactive gaming is now mainstream, still evolving rapidly, and it still seems like early days. There are 2.6B interactive gamers worldwide (there were just 100M in 1995). Over the last few decades, gaming has gone from solo play to large multi-player games and even arenas with millions of spectators for eSports. Among the young, eSports are almost as popular as "real" sports. GenX and millennials have been "gamified" since birth. But the average age is now up to 35 (for the US). A lot of things we take for granted in other areas of the internet had their roots in early games: Reputation/ranking (now used in Airbnb, eBay, etc) Recognition (Facebook like) Interactive storytelling (experimental interactive shows on Netflix) Interactive learning (duolingo) Upgrades and downloadable content (Tesla and smartphones) Messaging (WhatsApp, WeChat) Live camera angles (mainstream TV) GPUs for computation (now used for deep learning) But engagement is probably the place where gaming is in a unique place: When I play a video game it is the only time I put away the phone and forget it exists. Video games command your attention in a way nothing else does. (Gary Whitter, screenwriter) eSports are growing fast, although from a comparatively small base. For preference, millennials split equally between preferring eSports and traditional sports. This is driving 40% Y/Y growth rates. Ten years ago, Byron Reeves of Stanford said: if you want to see what business leadership will look like in three to five years, look at what is happening in online games It is borne out by quotes from people like Elon Musk, Mark Zuckerberg, and Reed Hoffman, about how they would never have got into programming if it hadn't been for games. Maybe the current games and their underlying technologies have been helping prepare society for the ongoing rise of human-computer interaction. Media Digital leaders are transforming media with better user-experiences, cheaper prices, data, and scale. Music is increasingly streamed (Spotify is 20% of global music revenue) and video is increasingly streamed rather than watched on traditional cable (top five networks are down in last five years, Netflix is up 700%). There is a generational gap in media usage, too, and the chasm is increasing. Media consumption on mobile is growing fast, having doubled over the last two years. The 18-24s split almost equally between consuming digital media and analog media, whereas older cohorts still watch a lot of TV, and listen to the radio. The situation for TV looks unstable since costs of content are rising for cable companies, and they are providing more channels, but people are watching fewer of them (the people who watch) and people are cutting the cord, so subscribers are falling. But the ARPU is still over $1000/year for cable versus not much more than $100/year for Netflix. But the switch is happening due to a massively improved user experience: On-demand A la carte selection Personalization Mobile 2-way user-generated content Binge watching The Cloud The three big trends are: Cloud adoption reaching new heights and creating new opportunities Customer expectations for enterprise software are mirroring those of consumer apps Security: more applications means more vulnerabilities Security, in particular, continues to be a major story. The chart below shows the growth in "major" breaches, defined as those where over 10M identities were stolen: Healthcare There are all sorts of trends in healthcare and there seems to be a feeling that it is on the cusp of truly "going digital". Increasingly, people expect digital provision of healthcare, especially millennials. Pundits have regularly predicted major transformation in healthcare, and the big question is whether it will follow the current adoption rates. It took 35 years for the telephone, 13 for the cellphone and just 5 for social media. Will medicine change at the "speed of Facebook"? This is just looking at normal healthcare. Genomics is also accelerating (faster than Moore's Law) and has potentials to transform some aspects of healthcare, especially personalized medicine, completely. Closing Thoughts Before 18th century, we were in the agricultural and extraction era. The 19th and 20th were manufacturing and industry. The 21st is compute power and human potential. And, despite the bad things you hear on the news where "if it bleeds, it leads", things have never been better if you look at the big picture. Tomorrow You may have noticed a couple of big omissions, omissions that include over 2B people: China and India. Mary did talk about them. But you will have to wait until tomorrow for Asia. If you want all the details now, then you can read the entire report . Sign up for Sunday Brunch, the weekly Breakfast Bytes email.![]()
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