Former partner at Kleiner Perkins, Bond Capital
Mary Meeker's 2017 internet trends report | Code 2017
Kleiner Perkins Caufield & Byers partner Mary Meeker is delivering her annual rapid-fire internet trends report right now at our 2017 Code Conference.
This year’s report includes 355 slides and tons of information, including a new section on healthcare that Meeker didn’t present live.
You can see all of her slides, plus our analysis, here: http://bit.ly/2rkMwlM
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About Mary Meeker
Mary Meeker, a partner at Bond Capital and formerly at Kleiner Perkins, has continued to deliver her annual Internet Trends reports at Recode's Code Conference. In her 2019 presentation, she noted that global internet user growth was slowing, with a 6% increase in 2018 compared to 7% the prior year. She stated that 60% of the most highly valued U.S. tech companies were founded by first- or second-generation Americans, and that U.S. entitlements accounted for 61% of government spending, up from 42% 30 years prior. Meeker also highlighted the rise of data plumbing tools and the digitization of healthcare, quoting Tim Cook's view that Apple's greatest contribution to mankind would be about health. In previous years, Meeker's reports covered a range of trends. In 2018, she said that tech companies accounted for six of the top 15 R&D and capex spenders in the U.S., and that household debt was at its highest level ever. In 2017, she noted that China had become the number one provider of interactive video game content, surpassing the U.S. in 2016. In 2016, she described "easy growth" as being behind the industry, and in 2015 she discussed the reimagining of various industries and the importance of diversity in decision-making. Across her presentations, Meeker has consistently emphasized the growing role of mobile, the challenges of online advertising effectiveness, and the need for lifelong learning in an evolving work environment.
Transcript (34 segments)
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Mary Meeker0:12
Trends presentation. This presentation is meant to be read, it's not meant to be presented, so it is online at KleinerPerkins.com and elsewhere. Please don't take notes, and I apologize for the speed at which I will go through this and the transition from meditation to this. Cara did not make it through three minutes, as you imagine. So this is the outline. We're going to talk about internet trends, online advertising, commerce. Spent a lot of time on interactive games, media, China internet provided by Hillhouse Capital — they did a great job as always — India internet, and talk about some of the public and private companies. If you have a few macro thoughts, and if we have time, want to get to probably the best part of the presentation, which relates to healthcare, put together by Noah at Kleiner Perkins. It's great stuff, a lot of upside.
Many of you in the room have always provided a lot of help, and thanks for keeping us honest. We put this report out there, and our goal is to go back to work, continue investing, and hope people make the report better in the way they look at it. High-level trends: 3.4 billion internet users, flat growth, up 10% year-on-year versus 10% last year, and 8% growth if you didn't include India, so India is really growing quickly. Smartphone units pretty slow at 3%, smartphone installed base 12%. Usage and engagement continues to be pretty strong, up 4%. Online advertising and commerce — we've really linked commerce into our advertising section this year because ads are becoming storefronts.
The slide continues to shift to usage as it should, and mobile continues to gain share. It's a big deal. Internet advertising dollars per Zenith will exceed TV advertising dollars within this year. Google and Facebook account for 85% and rising share of internet ad growth. Ad measurability can be triple-edged. When things are measured, people don't always like what they see, and users don't always like their data collected. Advertisers like measurable engagement metrics, but some find measuring ROI challenging as they do with offline. Ad blocking continues to grow; users increasingly opt out of the stuff they don't want. Leading ad platform offerings are rapidly improving their backend data plus frontend measurement.
Product listing ads from Google driving clicks to product pages, targeted pins from Pinterest driving product discovery and purchase, contextual ads from Facebook driving direct purchases, goal-based bidding ads from Snap driving user action, geo-targeted local ads driving foot traffic to stores, incentive-based and skippable video ads driving positive interactions for consumers, in-app ads plus dynamic creative driving higher in-app install performance, and in-ride in-hand recommendations. Example here is Uber and Foursquare: location plus route plus destination plus time of day plus an offer for Blue Bottle Coffee. Hyper-local targeting, Nextdoor, and Exelate from home.
Think about it: user-typed input in words. This is what's happened to Google's market cap as they optimize for user-typed input. We continue to have user-typed input at the margin, but we're moving to user-uploaded input, real-time images. This is an example of Snap ads launched in 2014, and this looks at the market cap of Snap, which has been driven by optimizing for user-uploaded input. According to Ben Silbermann, and we agree, a lot of the future of search is going to be about pictures instead of words. Ads are evolving rapidly, often organic with data at the core. Emerging retailers and crafty big brands are finding ways to make collaborative ad creation social plus UGC work for them.
Brands and crafty big brands are finding ways to make images, video, data, algorithms, and voice work for them. Image-based platform front ends are taking tap and augment, at the margin replacing typing. Image-based platform front ends: taking pictures can replace typing. This is Google Lens, a pretty interesting product just coming to market. Image-based platform backends: algorithms infer user context from the images and can provide contextual relevance for advertisers, which is a huge opportunity. Voice-based mobile platform front ends: voice is increasingly replacing typing. 20% of mobile queries made via voice on Google Assistant a while back. Voice-based in-home platform.
It's at a point where it's almost as good as the human voice. Ads are becoming targeted storefronts. Ads, content, products, transactions — lines are blurring. The content is becoming the store, the ad is becoming the transaction. Product quality plus customer support plus transparency — bars are rising owing to social media. Social media can provide an opportunity to improve customer service; it drives accountability. Real-time online customer conversations are rising very rapidly. This is Intercom's growth of active conversations, and the growth is extraordinary. Customers increasingly expect to understand how things work and more transparency, thanks to the internet and social media. Retailers are emerging with especially content marketing.
Untuckit is using online and offline synergies in both marketing and merchandising. Allbirds shoes are innovative, and the website, offerings, and service offer very simple choice. The chart on the right shows how rapidly they're growing. Trendyol is using private label and local sourcing for local communities in the Middle East in a way we haven't seen before. MM.LaFleur is targeted at women's professional wardrobe and is driving a relationship-driven experience that is both online and offline. I'm going to run through some e-commerce ahas which are not only interesting but sort of amusing. If it seems like package and parcel growth is accelerating, it's because it is, up 9% year-on-year. Apartment building lobbies are becoming.
Pretty impressive. Grocery shopping is getting personal, fast, and easy. Lowe's is doing augmented reality helping consumers find products in stores. Stitch Fix launched another private label clothing brand, and its computer-generated accounts for 1% of their products for now. Retail store closings may break a 20-year record, while Amazon is opening retail stores. Digitally native brands are going offline. The world's largest offline retailer, Walmart, is getting aggressive online and showing good results. Amazon has become a leading private label supplier of baby wipes and batteries. With all this, e-commerce growth is accelerating again in the US, up 15% year-on-year, and now we are.
Changing at a torrid pace. Going to move to interactive games. Interactive games, as we think about it, are really the motherlode of tech product innovation, evolution, and modern learning. Bing Gordon helped us out a lot with this presentation; it's been a pleasure to work with him. Global interactive gaming is mainstream, it's evolving rapidly, and we're still early days. 2.6 billion gamers in the world, up from 100 million in 1995. Gaming has evolved from individual play to global collaboration over the last 50 years. Gen X and Millennials have been gamified since birth. Gaming is a large, broad, and growing business, revenue up 9% year-on-year, $100 billion. Asia Pacific is the largest market. Gamers are of all ages; 35 years old is the average, higher than many people think. Female gamers have been gamers from.
The ultimate trial and error experience: solving puzzles, pattern recognition, critical thinking, planning workflows, managing time and resource efficiency, completing projects, tracking the finish line from the start, leveling up, ongoing progress measurement, competing against self and others to sharpen skills, exploring and discovering open and closed doors, hacking to improvement, following rules in structured play, collaborating for social connection and leadership, learning from working with others, observing by watching others perform. This is Twitch data on the right. Interacting with and analyzing data: many games have strong math underpinnings. The chart on the right looks at fantasy sports player growth in the US, at about 60 million today. Self-optimization.
Deep roots in gaming started with Space Invaders; now it's Airbnb, Uber, Lyft all over the place. Digital recognition: deep roots in gaming, what started with badges in Activision 2600 games in 1980, now all over the internet. Interactive storytelling started with Atari in 1980, now starting with Netflix, Twitch, and Amazon. Interactive learning started with Lemonade Stand in 1979, now all over most of the successful education apps that are out there. Upgrades and downloadable content: the first downloadable content was Sega in 1993, now it's in many places, including in cars. Secondary markets.
As a gaming company, Tiny Speck, Discord 9 million DAUs, started as Hammer & Chisel. Live camera angles: deep roots in gaming, started with Madden Football in 1996 when Troy Aikman was on the field, and now he is in the box, and now it's mainstream in media with different camera angles. Graphics computation: deep roots in gaming, Nvidia started as a GPU in 1999, and now those products have expanded dramatically and are used for artificial intelligence with the major players. In an era of perceived disengagement, perhaps engagement is actually rising. Video gaming is the most engaging form of social media. This looks at.
What else can or will? The question we asked as we went through all this is: perhaps interactive gaming evolution, growth, and usage has been helping prepare society for the ongoing rise of human-computer interaction. Gaming tools are pretty active in improving human performance, especially in sports: virtual plus augmented reality simulation and real-time analytics improving athlete performance, video plus virtual reality mental reps can improve performance, video and machine learning visuals and deep analytics can improve performance, audio plus guided meditation mental focus can improve performance — in spite of the fact that Cara Swisher can't meditate for more than three minutes. Physically interactive media, real-time activity analytics can boost intensity and focus for athletes. The stats behind Peloton are striking.
Video game stats can be very predictive. Immersive gaming tools are improving performance across disciplines, whether it's education, personal finance, exercise, and influencing multiple businesses, whether it's military training, pilot training, or surgery. This whole world is getting way more dynamic with some of the things with real-world simulations. This is an example of some of the things Improbable is doing. As rapid data growth continues, gaming tools, interfaces, and processors will continue to organize and drive usefulness. This looks at IDC data: the percentage of data created worldwide, and about 10% of that data and rising dramatically is tagged so it will be analyzable. This looks at.
Evolving at high speeds. This looks at the products that are out there around the virtual world environment, and these are the stats and growth stats behind developers for Unity, monthly active users for Roblox, and peak concurrent users for Steam. We're going to shift to esports. It's expanding the gaming ecosystem, fans and spectators. It's been 45 years in development. People watch what they play. League of Legends World Finals 2016: 20,000 people at the Staples Center, 43 million online. A survey done by League Sports Worldwide asked the question: what sports do you prefer? 27% of Millennials have a significant preference for esports versus another 27% that have a significant preference for.
Years old, 29% are female. Money is following these users aggressively. This looks at the prize pool for The International, and partnerships and investments are bringing esports into the mainstream. It's a very rapid area of development. I'm going to close on this section with: is gaming experience correlated to technology leadership and innovation? We think so. Ten years ago, Byron Reeves at Stanford made the point: if you want to see what business leadership may look like in three to five years, look at what's happening in online games. Fast forward to today, Elon, Reed, Mark Zuckerberg, and many others say that games have been foundational to their success in building their companies. Perhaps interactive gaming evolution, growth, and usage with related data collection, analytics, real-time simulations, and.
Personalization, mobile, fewer ads. Why did they cut cords? Lower price and convenience — all the things that people like to build businesses on. Digital evolution in music and video is ramping rapidly. Recorded music revenue was up 11% in 2016 after 16 years of negative 4% annual average growth. The reason for that is subscription and streaming is now 52% of revenue versus 0% 13 years ago. It was hard for many to accept, but it's now finally been really super helpful. Spotify has been the catalyst for that internet-driven evolution in the music industry, from 0 to 50 million subscribers in less than nine years, now accounts for 20% of global music industry revenue versus 0% in 2008. Spotify is using its recommendation engine, data, and.
Five networks have seen a 10% average decline, while Netflix was up about 700% over that five-year period. Netflix has been a catalyst for internet-driven evolution of the video industry: 95 million streaming subs in 10 years, and now approximately 30% or more of home entertainment revenue in the US. As Google pioneered search, find, and obtain for content and products, Netflix and Spotify pioneered search, find, and serve up for media. It's from give to get with data and algorithms. There are 98 million different Netflixes and 126 million different Spotifys, and that data is old, so the numbers are even higher now. Switching from that to.
Enterprises are increasingly driving wealth creation and economic growth in jobs. They account for 48% of the market cap of the MSCI China index versus 5% in 2005. What a change. In that category, the companies driving that growth are primarily the tech sector. China mobile internet users: 700 million, accelerating up 12%. Mobile usage outpacing user growth, up 30% for usage versus 12% for users. China entertainment is driving a lot of usage and monetization growth. 55% of media spend in China is on the internet.
Content in China surpassed the US in 2016. Tencent and NetEase are leading the way there. Something that's super effective and successful in China and somewhat unique is live streaming: high consumer engagement and willingness to pay for this live streaming. On-demand transportation: some stunning stats. China is the number one global market for cars and bikes, 67% global share of on-demand transportation trip volume, up 2x year-on-year, and it's almost equally divided between bikes and cars. On-demand bike sharing: mobile innovation is driving significant usage ramp, 20 million MAUs of on-demand bike sharing, 100% accelerating.
In a Didi vehicle. China mobile payment infrastructure is enabling all this rapid growth and monetization of internet usage. China mobile payment volume up 2x year-on-year, led by Alipay and WeChat Pay. Alipay and WeChat Pay on mobiles are digitizing micropayments, so for live streaming you can do author tipping, a penny an article, 15 cents for a bike, etc. One of the reasons we're able to do this is regulated low relative interchange rates. This slide is really hard to read, but it shows just how much Ant Financial, Tencent, and JD.com are doing to become diversified financial services platforms off the base of strong users that they have. They have e-commerce.
On multiple fronts. JD.com is world-class on delivery and fulfillment: 91% of orders delivered within two days, 58% delivered within one day. Online advertising up 30% year-on-year, and algorithmic mobile news feeds are accounting for a very large amount of advertising revenue in China. Moving from China to India. How are we doing? Competition continues to intensify. This is one of the most fascinating markets for the internet on the planet. Consumers are winning. India is the fastest largest growing economy based on GDP growth and scale. India internet users slowing but still up 28% in June of 2016; we'll have new data soon. India is the.
India smartphone and data costs are declining a lot, which I want to spend a little time on, but they're still high for the majority of India's 1.3 billion citizens. This green line looks at the ASP as a percent of GDP per capita for the average smartphone selling price; it's 8%, but it's down from something materially higher not too long ago. Wireless data costs are finally declining to more affordable levels, 1.3% of annual average GDP per capita. India internet is a fierce global battleground for all players: hardware providers, carriers, software and commerce providers. You can look at the slide on this, but the chart at the right looks at the market share changes for the India.
Pan-India network called Jio with a dollar monthly ARPU for a period of time before the ARPU went up. I'm just going to show you what's happened because of this. India wireless consumer data prices are down nearly 50% in the last year as the incumbent established carriers had to respond to Jio's low pricing. India broadband subscribers are up 85% year-on-year and accelerating. Reliance Jio market share rose from 0% in Q3 of 2016 to 39% owing to these low prices. If we look at software, Alibaba has number one browser share in China at 50%, and Google Chrome is at.
E-commerce: many players are fighting for share. It's a super competitive marketplace, and Amazon is pretty relentless in wanting to win in this marketplace. This looks at SKUs, sellers, and fulfillment centers, and they're aggressive and investing heavily. So in India internet usage, I'm going to look at some stats on how much it's growing since the Jio launch. This looks at data usage rising dramatically as access costs have fallen, as you can see from the slide. This is a couple of bandwidth-intensive apps that show their growth since June of 2016. India leadership is unlike any.
Due to broader availability of low-cost data access. India internet user base at 355 million is large. Ongoing smartphone and access prices are crucial to onboarding the next 200 million. For the businesses, driving free cash flow for many of the internet businesses in India is challenging owing to fierce competition, and consumers are benefiting mightily from this competition and from government policies. India is leapfrogging in some areas and reimagining some areas that are pretty striking. A leader in mobile in the world versus desktop, a leader like no other in digital IDs: Aadhaar and eKYC have offered digital authentication for a billion people, and the uses of these products is.
What they could before: paper has been removed and phones have been engaged. This looks at the growth in Reliance Jio's signups and subscribers: 108 million signups in seven months, 72 million of them converted to paying subscribers, and that's March data; suspect it's higher now. This looks at the stack for digital payment and data infrastructure in India, started with Aadhaar and eKYC for identity, then moved into banking for all, banking accounts easily accessible for citizens, and then UPI, which is a universal payments interface and Bharat Interface for Money, which allow at very low cost transactions to take place in India. This looks at Paytm's registered user growth, and this looks at.
Of mobile time is focused on entertainment. TV shows are being reimagined for mobile first. India education: the largest K-12 school system in the world, 250,000 students. The quality of education is not what a lot of citizens would want it to be, and it's one of the largest markets in the world for coaching and tutoring. This looks at how things are changing because of accessibility via mobile, self-based and personalized learning. India healthcare: fewer than 20% of citizens have insurance, and things are being optimized to take advantage of that, thanks to the internet. In India, marketplaces organizing the unorganized: middlemen are being replaced with.
Startup valuations up and spending and competition. And then there are multiple languages in India, so it's hard; you can't go into India with one language. There are a bunch more macro challenges: the demographics are good and bad, job creation, business basics, education, logistics, gender disparity. You can find those slides online. Global public and private internet companies: it's been a good time to be a leader and an innovator. This is the 2017 leaderboard. Most are extending their leads: Apple, Google/Alphabet, Amazon, Facebook, Tencent, Alibaba. The green color shading on the market cap indicates the valuation went up since we were last here. If we.
In the world, 100% of the top five. If we compare where we are now with where we were in 2012, tech was 20% of the top 12 and 40% of the top five. The bigs are going after the bigs. They're often founder-driven, innovative, and have the ability to see around corners. This is a simple chart that looks at Apple, Google, Amazon, Facebook, Tencent, and Alibaba: what their original business was, what their business is now, and those businesses are increasingly overlapping. Global tech financings: strong relative to history but slowing at the margin. M&A robust relative to history, in part as these big companies work to get more companies so they compete. We're asked this question all the time, I repeat it all the time: the value of a business is the.
United States income statement. We've had a negative 19% average net margin over 25 years. That's even hard for venture funding. US income statement: this is what net losses in 45 of 50 years look like. When spending exceeds income, debt rises. The net debt to GDP at 75% for the US is higher than 97% of our country's history, and at current course and speed, if government projections are correct, the US net debt to GDP ratio will break World War II records by 2035. US entitlements are 63% of spending, up from 45% 25 years ago. The yellow line on this chart indicates what's happened to interest rates since.
Where debt has gone up versus the third quarter of 2008. Mortgage debt: good news is down 7%. Student loans up 120%. Auto loans up 44%, bringing that back to peak levels. In our view, debt commitments are a non-trivial challenge that need to be addressed. Moving from that to some good stuff: immigration. It's important, very important for US job creation. This is data compiled by others: 60% of the most highly valued tech companies in America were founded by first or second generation Americans. This is new and an update: 50% of the most highly valued private tech companies were founded by first generation immigrants. A really big deal for our country. High level, for all the angst, consider this: the world is getting better in many ways. Poverty and child.
And extraction in the 19th and 20th century. Manufacturing and industry in the 21st century. We believe we're in the period of compute power plus human potential, and it's really exciting, and a lot of people in this room are making a lot of that happen. And here is the healthcare section that's awesome that I can't go through, and I'm really sorry for that. So with that, please read it. That's it. I'm done. Thank you.