For the past 23 years, revered internet stock analyst turned investor, Mary Meeker, has been releasing a yearly presentation on the state of the web. This year, the tech state of the union, which focused heavily on personalization and data, was released Vox Media's Code Conference, and was published in full by Business Insider. At 294 slides, the full report can be time consuming to get through, which is why we are doing the hard work for you! Here is a roundup of the important aspects from Ms. Meeker's report:
Users & Usage
As we draw closer to hitting 50% market penetration on global internet users (49% in 2017), finding new users has been harder and harder to come by. While overall global internet users saw a small growth in 2017, the growth percentage YOY is down to 7% in 2017 from 12% in 2016. We expect the growth of users to keep slowing down in 2018.
Similarly, internet usage saw a small increase in 2017, but the growth has been slower. In 2017, US users spent an average of 5.9 hours a day consuming digital media, up from 5.6% in 2016 and 5.4% in 2015. However, media consumption by device continues to be dominated by mobile, which continues eating away at users from desktop and other connected devices. It should come as no surprise that the prediction for 2018 is a continued increase in users consuming on mobile.
Innovation + Competition + Scrutiny
Rapid innovation and fierce competition between tech companies is becoming a real benefit for consumers. Tech devices are increasingly improving overall quality of online experiences while enabling selling for a cheaper price, and companies are steadily releasing products and features that focus on ease-of-use for consumers (think Spotify, Square Cash, Venmo, face tracking etc.).
Other digital spaces that are rapidly expanding include messaging (WhatsApp, Facebook Messenger etc.), video content (thanks to new content types such as Twitch), and voice (Google machine learning word accuracy hit 95% in 2017).
The last innovative component Meeker heavily focused on was personalization. Her key takeaway? Data improves engagement and user experiences! Not only is data important to improving experience, she mentions that personal (aka first-party) data is key to providing these better experiences. As part of this section, she also dives into the GPDR and the consumer's desire for their data to be secure and used properly, and in return, users are spending more time on internet services based on the perceived value they are providing as well as perceived value of security.
It shouldn't come as a surprise to anyone that statistics show e-commerce and online sales are growing - YOY growth was up 2% in 2017. Additionally, 2017 saw the highest percentage of e-commerce share gains into retail at 13% of shares. Key innovations and improvements center around store locators, in-feed offers, and personalized and interactive customer experiences.
Meeker also discussed the integration of customer support, including chat bots, real-time interactions, and customized experiences based on user data. With the improvement in customer service, we saw an huge spike in overall customer conversations in the past few years.
In addition, digital marketing played a big part in e-commerce with personalized Facebook and Instagram ads converting users at an increasingly higher rate. Studies showed 55% of users bought a product online after a social media discovery! Facebook ad CTRs are increasing, meaning site referrals from social are also on the rise. However, with the growing competition, fighting for a top placement in social has lead to a reduced ROI for many e-commerce advertisers. Last but not least, studies found that brands are putting lifetime value as the top measuring metric for advertising.
For print, radio, TV and desktop, the percent of time vs the percent of advertising spend are either equal or advertising spend is higher than time spent. However, time spent on mobile devices in 2017 was 29%, while ad spend was only 26%. This gap presents a $7B opportunity for advertisers to capitalize on. Additionally, digital ad spend was at an all-time high at $88B, up from $73B in 2016.
In 2017, household debt was at its highest level ever with no signs of slowing down. To make matters worse, personal savings rate is continuing to decrease (down to 3% vs. 12% fifty years ago) alongside a debt-to-annual-income ratio that is increasing. With costs for necessities such as shelter, pensions, insurance and healthcare getting more expensive, the trend of consumer spending less and less on things like food, entertainment, and apparel continues.
With consumers able to spend less money, retailers have to work harder to be competitive, which has lead to a decrease in the cost of goods being sold online. The price of goods online has fallen -3% in 2017 while prices of goods in store are only down -1%. Customer prefer to do their shopping online thanks to the efficiency, lower prices, higher selection and convenience, and Meeker points out that offline shopping has a huge opportunity to do the same things and increase store traffic.
The shocker of all shockers (sarcasm) is that the internet is changing the workforce and the way we work. Computing power, storage capacity, and data sharing are increasing while becoming cheaper and cheaper. Additionally, as our technology becomes more innovative, jobs in the new sectors start to replace jobs within the older technology (think airline jobs increasing as railroad jobs decreasing). As we become more innovative, we will see job opportunities in services in these new areas increasing and helping to displace the unemployment from outdated sectors. Other things to note are a decrease in unemployment, a steadily rising consumer confidence index (CCI), and job openings at an all time high over the past 17 years.
As for employees, expectations are beginning to shift, again thanks to technology. Besides monetary benefits like salary and paid vacation, the most sought after benefit is a flexible schedule. We have seen a huge spike in the availability of freelance, remote employees. Plus, the need for on-demand employment has skyrocketed. Services like Uber, Lyft, Etsy, and Airbnb have seen a new realm of employment that isn't limited by schedules or location, with workers earning only when they choose to.
Data Gathering + Optimization
With the rise of cloud computing in 2006 and the band of mobile phones in 2007, data gathering has reached whole new levels. These two things were a catalyst for everything we know regarding data collection improvements, including social media and sensor pervasiveness (Google Maps, Nest, fitness trackers etc.). The amount of information created worldwide, and the rate at which it is being created, is astounding.
The ability to gather, store, and analyze data has led to an overall increase in consumer satisfaction. As offerings become more personalized and relevant, consumers are engaging more and spending more. Additionally, data collection ultimately improves predictability modeling for many companies. AI and machine learning are becoming more prolific due to their ability to digest vast amounts of customer data and produce predictive modeling and highly targeted segments and recommendations.
AI is one of the most important things humanity is working on. It is more profound than electricity and fire... We have learned to harness fire for the benefits of humanity but we had to overcome tis downside to.... AI is really important, but we have to be concerned about it. - Sundar Pichai, CEO of Google, 2/18.
This pervasiveness of data gathering has lead to a love-hate relationship with consumers. While 79% of consumers are willing to share their personal information for a clear benefit, consumer's are also more aware of how their data is being used, and want to ensure companies are not abusing or sharing their information.
Consumer-like apps are changing the game for enterprise computing software. Key players like Drop Box and Slack have set the precedence for computing software usability and consumer simplicity. They have also transformed collaboration and productivity.
USA Inc. + Immigration
The USA income statement is showing a loss in 45 of the past 50 years, and a -19% average net margin over the past 30 years. The rising USA net debt to GDP ratio is at the highest level it has been since WWII, and is the 7th highest compared to other major economies. The biggest driver of US debt revolves around healthcare entitlements. Looking at average entitlement payout per household income, we are at 34% of the household income in 2016 compared to 19% in 1986.
Studies also show that immigration is a key player in technology advancement with 56% of the highest valued tech companies in the US being founded by 1st or 2nd generation immigrants, with many high value private tech companies being founded by 1st generation immigrants - Uber, SpaceX, Stripe, and WeWork to name a few.
And that does it for our roundup! To summarize, technology is growing (duh), online usage is increasing, innovation is driving competition and lowering consumer pricing, e-commerce is continuing to steal market share from brick and mortar and data gathering is playing a key role in personalization and consumer satisfaction and spending. If you want the full slides from Meeker's presentation, you can find them here.