Mary Meeker’s 2019 internet trends report | Code 2019

I'm gonna run through these slides. Many of you have seen this before, and this is a presentation that's meant to be read, not presented, so the critiques about the presentation style are justified. Here is what we're going to go through. I'm going to talk about trends with users, what's going on with e-commerce and advertising, focus on usage trends, freemium business models, what's going on with data growth, work, education, and touch on some things that we're... I won't go through all of them, but there will be more content in the deck that is posted at bondcap.com and a tree code as well. But some things on immigration and an update to our report USA Inc, and look at healthcare. And then the folks at Hill House Capital created them. You'll get a sense of scale and scope, but before I begin, I want to thank the folks at Bond, especially Michael Brogan and Ansel Parikh, who really put a lot of sweat equity into this report and have taken it across the goal line, in addition to Kara and all the folks that helped us with this report every year. You know who you are, and we're very appreciative. So I'm not going to read through the slide, but this is basically the context setting for all that we go through in the report. So internet users at 50% of global penetration, new growth remains harder to find, growth is slowing, up 6% in 2018 versus 7% in the prior year. New smartphone unit shipments actually declined in 2018. You can see from the red line what the growth rate trending looks like. 3.8... India has a lot of upside, the US does not. If we look at the global internet market cap leaders, the US is stable at 18 of the top 30, and China is stable at 7 of the top 30, and those are the two leading countries where internet innovation is at an especially high level. If we look at global market cap leaders, the United States is stable at 23 of 30, and tech is stable at 9 of 30 of that group. If we look at revenue growth for the internet market cap leaders, it continues to slow, as evidenced by the red line, up 11% year-on-year in Q1 versus 13% in Q4. If we look at the market cap leaders, similar trending with 2% growth in Q1 versus 7% year-to-year growth in Q4. Moving on to e-commerce and online advertising, it's solid but slowing. We look specifically at... continue at 15% of retail versus 14% a year earlier. In online advertising, this is a chart we created a really long time ago. We thought it would be interesting to look at the amount of media time spent versus the amount of advertising dollars spent. Mobile hit equilibrium in 2018, while desktop hit that equilibrium point in 2015. If we look at internet ad spending on an annual basis, that accelerated a little bit in 2018, up 22%. But if we look at it according to the leading companies and their results, internet average revenue has been decelerating on a quarterly basis, up 20% in Q1. If we look at the platforms that are the majority of ad spending at this point, it's been negatively impacting pricing. If we look at some of the ad share gain drivers, and there are many, but at the top of the list are better targeting, new creative, integrated commerce, and high relevance. And these are examples from Facebook, YouTube, Pinterest, and Instagram. Customer acquisition costs are rising in many highly competitive and highly capitalized sectors. This looks at cost per activation in mobile finance apps globally, and the reality is customer acquisition costs can't exceed lifetime value for very long. And for those of you that are in this business, you know it, and you often see it. The most efficient and effective marketing... more recently, a great example of this is Zoom: free user conversion to paid subscribers. Another very effective and efficient marketing mechanism can be recommendations, and Stitch Fix is one of the best examples of recommendations, both human-driven and AI-driven, that are driving their customer base and their revenue. There are a couple things in advertising that we don't quite know about yet. We'll call them the TBDs. We don't quite know what the impact of privacy changes will be on ad targeting, and an emerging area that will be important to watch is digital-based TV ads aided by mobile, and how that impacts the market for ad targeting. Moving on to internet usage, solid growth driven again by investment in innovation. If we look specifically at... and private investment into tech companies has been very high for two decades or more. And if we look at innovation for US companies, and then switch to non-US companies, that remains robust. If we look at device time, mobile surpassed TV time in 2018. If we look at online platforms, YouTube and Instagram are gaining the most. If we look at video time, digital is up to 28% of total versus TV. If we look at short-form video specifically on the Facebook platform, 1.5 billion daily active users, up to 2x in one year. If we look at voice, 67 million podcast listeners monthly active users, up to 2x in four years. And also voice, 47 million Amazon Echo devices. Global neighborhoods up to 2x in two years. And then the underserved population: we looked at Square seller base, it's growing 28% faster in the lowest versus highest income MSAs in the US. If we look outside the US, there's especially high innovation in data-driven and direct fulfillment that's growing very rapidly in China. Pinduoduo connecting consumer preferences and manufacturers, 443 million buyers up to 2x in five quarters. China Meituan connecting consumers and local businesses, 6 million merchants up to 2x in two years. Latin American rapid digitizing delivery, 8 million orders up to 2x in four months. Indonesia Tokopedia improving product delivery across 17,000 islands, 6 million merchants up to 2x in one year. And data usage is up to 2x in one year as they are offering a broad base of geo services for their consumers who are picking them up and using it very quickly. Also, innovation outside the US is especially strong in financial services. And that is an Alibaba slide on the website with their billion users. It's not on here, but you'll see it if you go to bondcap.com. Thank you very much. South Korea Toss, 12 million users up to 2x in one year. Europe Revolut, 4 million users up to 2x in 10 months. Brazil Nubank, 9 million unique customers up to 2x in one year. Latin America Mercado Libre, 389 million... communicate images are the oldest form of transportable communication. 40,000 years ago, the first image, oldest-known image, is a painting in Indonesia. For centuries, people have learned to write and share words offline, and one-to-one and one-to-some communication via text and numbers is foundational. But for two decades, people have been ramping image and video sharing and video creation and sharing offline, and often one-to-many, going back to what we did 40,000 years ago. Image creation foundations continue to ramp. If we look at smartphone camera base, smartphone power, cellular data use, and Wi-Fi reach. If we look at image sharing, the foundations continue to ramp. Image creation and also image sharing, image creation sharing engagement continues to ramp. When Twitter launched, this is Jack's first... has absolutely been a leader there, as has Pinterest. And Google is leading with computer vision and artificial intelligence. People are increasingly telling stories, we edit images and videos. Let's look at the growth in the Snap community, lens views, and image-based design fluency and storytelling is increasingly self-taught and collaborative, and we're still in the early innings. This is an example of what Canva does with simple, collaborative, and feedback-driven design on its service. This is a great quote from Kevin Systrom with Sentwits which summarizes it all: people have always been visual, our brains are wired for images. Writing was a hack, a detour. Pictorial languages are how we all started to communicate. We are coming full circle. Instagram's inherent feedback systems... usage. I'm not going fast enough, clearly. Interactive gaming is an increasingly relevant way to communicate. Interactive gaming accelerated to 2.4 billion users, up 6% year-on-year in 2018. Interactive gaming innovation is rising across platforms. It's real-time play, talk, text, and watch. It's social in nearly always. If we look at Fortnite, 250 million users up to 2x year-on-year across 7 platforms. One of the things that drove this business and this product to great success: talking text. Discord has 250 million users up to 2x year-on-year. Watch in interactive gaining: Twitch time and viewers up to 2x in two years. If we look specifically at Fortnite battle... with collective purpose and goals. Are these the new social and friend networks, recreating reality around play and problem solving? Switching to freemium business models: they're growing and scaling, we're still in the early days in enterprise and consumer. Freemium businesses: free user experience enables more usage, engagement, social sharing, and network effects. Premium user experience drives monetization, product, and innovation. Started in gaming, moved to enterprise and consumer. Specifically in gaming: RuneScape 2001, more recently Epic Fortnite 2017. Freemium gaming is often social, often mobile, and it can be transient. If we move to the enterprise, it really started in many ways with Google G Suite in 2006, most recently Zoom. Freemium enterprise collaborative... gaming evolving, emerging, and consumer and enterprise all in. We're just getting started. This looks at the pure-play companies with freemium business models that have more than 10 million paid subscribers. Gaming: Epic Games. Enterprise: Dropbox, Spotify. And in consumer, we think there's a lot more to come. One of the key enablers of this has been cloud deployment, revenue growth up 58% year-on-year, workloads at 22% of total up to 2x in five years, and interest continues to rise. Another enabler of freemium subscription business models is efficient digital payments, accounting for more than 50% of day-to-day transactions around the world, according to an annually updated survey from Visa. Data growth is changing the way things work rapidly and globally. Data collection, analysis, and... street customer input drove that to great success. Nike did that with employees who happen to be runners who helped them design great products to great success. Chrysler did it with focus groups and discovered that the minivan could be a very exciting product and turned the company around. Intuit did this with all-in, top to bottom, with the organization from founder to CEO to president to engineer focused on customer testing in the 1990s and 2000s. The internet, mobile devices, and cloud emerged. Post-1995, winning businesses used digital data and insights to improve customer experiences. Capital One did this to great effect, using customer data to optimize its marketing. And Amazon.com did this better than almost anyone else, using customer data to... use data plumbing tools to use digital data and insights to improve customer experiences. Hang on, and went backwards. Sorry, sorry, sorry. And this is what these data plumbing tools are helping businesses: real-time collect data, manage connections, and optimize data. Qualtrics is helping FabFitFun collect data to understand customer wants and improve business processes. Salesforce helping Adidas collect data to increase customer input and improve products. Stripe and Slack collect direct customer subscriber relationships. Plaid and Betterment collect data to improve customer consumer decision-making. Slack and HelloFresh manage connections to organize internal and external communication. Twilio helping Shopify manage connections to communicate with customers and consumers via multiple channels. Segment helping... or helping Farfetch optimize data, discover business insights, and optimize fulfillment. UiPath helping Sumitomo Mitsui optimize data to manage data growth and eliminate inefficiencies. A lot of data plumbers helping a lot of companies collect data, manage connections, and optimize data. This is a quote from Frank Bien at Looker: data is now fundamental to how people work, and the most successful companies have intelligently integrated it into everyone's daily workflow. Data is the new application. Data and artificial intelligence, used properly, can improve customer satisfaction. Retail customers like sharing data if it gives them a better experience. 91% prefer brands that provide personalized offers and recommendations. 83% are willing to passively share data in exchange for... provide services. Data volume and utilization is evolving rapidly and broadly. This is data from IDC that looks at the volume of data. The data volume: 13% is structured and tagged, and is rising rapidly. Data propagation is expanding from endpoints to edge to core and back and around. Data stewardship is evolving. Enterprise surpassed consumer in 2018, and cloud is overtaking both. If we look at data volume share, AMEA leads, followed by faster-rising China, and the US is falling. It's a great quote from IDC that summarizes that. And this is from Astro Teller at Google X. Basically, he created a chart that indicates technology changes are evolving faster than human adaptability. If we... constantly online versus 21% three years ago. Social media has lots of positive attributes but lots of negative attributes. In digital media, users are taking action to reduce their usage, and businesses are also taking actions to help users monitor their usage. What's happened: social media usage has decelerated, up 1% in 2018 versus 6% in 2017. Another concern is privacy. Privacy concerns are high, but they're moderating. Regulators and businesses are improving consumer privacy control in digital media. Encrypted messaging and traffic are rising rapidly. Another usage concern is problematic content and activity. More than half of humanity and rising is online. The reality is people prefer negative news... concluding that society is on the verge of deplorable anarchy. 1909 James E. Rogers. Problematic content on the internet can be less filtered and more amplified. Images and streaming can be more powerful than text. Algorithms can amplify user patterns. Social media can amplify trending topics. Traditional media platforms can amplify social media trending topics. Social media can amplify bad behavior. Motivated bad actors can amplify ideologies. Unintended bad actors can amplify misinformation. Extreme views can amplify polarization. With all that, the internet platforms are indeed driving efforts to reduce problematic content. Consumers and businesses are driving efforts to moderate problematic content. This is a quote from Susan, CEO of... perception of the internet in the US: 88% of people believe the internet has been mostly good for them, and 70% believe the internet has been mostly good for society. We're dealing with the age-old challenge of amplifying good and minimizing bad, and it's taking rapid twists and turns. Global relationships related to information and data are evolving differently and rapidly. It's a quote from Mark Scott at Politico and Brad Smith at Microsoft: in a sense, the world wide web as we know it is over. In its place is something altogether different, a Balkanized splinternet where your experience online is determined by local regulation. We need a new generation of laws to govern a new generation of tech. This is great data from Freedom House... the world wide web as a web of worlds, driven by local regulation. And we look at markets and the attributes of markets with low internet regulation like the US and the largest EU economies moving to more regulation, India and China. There's a great piece in Foreign Affairs in September-October 2018 that looks at all these markets around the world. This is a summary of some of those highlights. An open internet can benefit all constituents. Consumers want to get what they want efficiently and inexpensively. Businesses want to sell products and services profitably. And regulators want to protect consumers, businesses, and social institutions. In an open internet, online reviews can boost multi-sided accountability. It's a great quote from Brian Chesky at Airbnb: safety is our number one principle at Airbnb. The whole... trust. The chart on the right looks at the growth in host and guest reviews on Airbnb. Reviews, actions, and reactions are amplified on the internet, can drive transparency and rapid change for consumers, businesses, and regulators. This looks at Twitter as a communication tool for citizens, Twitter as a communication tool for consumers and businesses, and social media as a communication tool for citizens and regulators. The open internet can be messy but effective. Consumers, businesses, and regulators need to work together to amplify good and minimize bad. There's a quote on that. And are we at the first step in a long journey? Recently, as published in Vox, there was a crowdsourced algorithmic Bill of Rights that was put together. And these things always start in one way, shape, or form. It was good that it was endorsed by Jack Dorsey at... long-standing thing of a lot of importance to all of us. Have a quote from 1927 and most recently 2017. Brandeis in 1927: if there be time to expose through discussion the falsehood and fallacies, to avert the evil by the processes of education, the remedy to be applied is more speech, not enforced silence. Similar things said by Anthony Kennedy, a Supreme Court justice in 2017. And this contrasts with the opinion about free speech and openness around the world. Cyberattacks sophistication and scope continue to rise. State-sponsored cyberattacks are rising. Large-scale data provider attacks are rising. Monetary extortion cases... data and cyberattacks effects are amplified by state sponsorship. With all that, I'm going to move to some good stuff: work. Strong economic indicators, internet-enabled services and jobs are helping. If we look at global GDP, China, US, and India are rising. Europe is falling. Cross-border trade is at 29% of global GDP. It's foundational to the global economy and has been growing for many years. If we look at global relative unemployment concerns, very high outside the US and low in the US and trending lower. If we look at the view of unemployment concerns around the world, the US ranks much lower in concern than many other countries. And this is an example of how it's been... opportunities and efficiencies. This looks at small business enablement payment processors, specifically Square and Stripe, and their growth. This is a quote from Tony at DoorDash: 5% of America's restaurants, a business of $800 billion in annual sales, is delivered. We're still in the very early innings in the development of on-demand delivery and services, with a lot of opportunity to help local merchants. I showed this slide earlier: 56 million on-demand consumers, 7 million on-demand workers, up 22% year-on-year. Checkers platform for job applicants: more than 20 million people have been on the platform since 2015 and growing rapidly. On-demand work is creating internet-enabled benefits. People that are getting on-demand work were previously unemployed. They want to learn new skills... in 2000, as a PR is one of the greatest examples of this. And they say that the co-founder CEO Wade says with well-connected tools and processes, any remote employee can feel more focused, productive, and in control of their time. And we believe that to be true. Benefits of remote work: number one, flexible work hours, ability to travel, and more time with family, and more time at home. With a little bit of a smile, ask the question: are we moving to a new world, Zoom by day and Fortnite by night? Online education, a market many of us have been hoping for and looking at for a long time, is really beginning to have some big numbers and big growth. Education costs are rising in the US, as is student debt. Post-secondary education... we look at online education courses. Top offline institutions are ramping their online offerings at a very rapid rate. 2,000 most recently: University of Pennsylvania, University of London, University of Michigan, and UC Boulder. Online education and learning platforms, excuse me, the University of Colorado Boulder. I've spent too much time in California. Online education learning platforms scaling in different shapes and sizes. I'm just going to click through a bunch of companies that are growing their user bases very rapidly and talk about what the categories are. Online education program managers: this looks at the growth for B2B online education marketplaces. Coursera, online education marketplaces. Udemy, online education paying for a post... Byju's is one of the global leaders here with a very impressive growth trajectory. Byju's virtual classrooms in India. Online learning broadcast, broad-based video. YouTube educational content growing very rapidly. Online education job-relevant skills: Google's growth in creating certificates for in-demand jobs growing rapidly, doing that in collaboration with Coursera. 80% of Coursera's revenue comes from business, tech, and data science people taking courses for job-relevant skills. And the number of companies that are paying for those classes for their employees continues to grow at a rapid pace. So online education: high interest, retention and completion rates vary. The paid learners complete at a high rate, the tourists do not. Create, do not... it's supposed to be viewed. And I can have some water. Immigration is important to us and technology leadership. And this is just an update of a slide we've updated before. In the US, 60% of the most highly valued tech companies are founded by first- or second-generation Americans. 1.9 million employees. This is an update to USA Inc, just one slide from that. 61%: USA entitlements account for 61% of government spending versus 42% 30 years ago, and shows no sign of stopping that rise. No, enough. Pulled some great stuff together on healthcare. And again, like education, there are a lot of trends that are really moving in the right direction. Digital impact expanding across the ecosystem. Healthcare: we just pulled two slides from that. If you zoom out into the future and you look back and ask the question, what was Apple's greatest contribution to mankind? It will be about health. And those are big words. And with that, I'm going to the China section very quickly from Hill House Capital. We look at WeChat. This is great stuff. WeChat innovation evolution from chat to mini programs and payments. Alipay from payments to a super app. 200,000 mini programs, a billion users, 70% use three financial services. And that's our disclaimer. Thank you very much.