KPCB: Big Data, eCommerce, China Top 2018 Report
Respected venture capital firm Kleiner Perkins Caufield & Byers (KPCB) released its annual Internet Trends Report, which Recode magazine calls “the most highly anticipated slide deck in Silicon Valley.” KPCB partner Mary Meeker, who Wired Magazine once crowned the “queen” of the Internet, presented the report at the Code Conference, running through the majority of the report’s 294 slides at her trademark rapid-fire pace which has become a hallmark of KPCB’s presentation since the mid-2000’s.
VIDEO: Mary Meeker’s fast-paced presentation of KPCB’s slideshow. Via YouTube / Code 2018
Presented in hyper-distilled, easily digestible slides prioritizing key summaries supported by basic charts and graphs, the Kleiner-Perkins report provides a high-level overview of emerging Internet trends for 2018 and beyond, rooted in retrospective analysis of 2017 and prior years.
KPCB’s eagerly-anticipated 2018 report sees the company forecasting a globalized tech industry undergoing unprecedented growth and disruption alike, moving into a new era defined by personalized experiences driven by big data, economies increasingly influenced by technological advancement, the rise of China as a web innovator and economic powerhouse and other emerging forces in the fast-changing Internet landscape.
A yearly event in the tech world, the Kleiner-Perkins report is bolstered by KPCB’s sterling reputation among Silicon Valley, hard-won over decades of prescient trend forecasting and one of Silicon Valley’s most impressive venture capital portfolios. KPCB’s investing history has seen the firm back the Internet’s most eminent upstarts, betting with an almost prophetic accuracy upon companies that founded the World Wide Web and others that in turn would fuel the past decade’s highly socialized Web 2.0.
KPCB’s Internet Trends Report 2018 touches on all the predictable buzzwords a tech literate observer would expect from any competent survey of the Internet landscape circa 2018, with coverage on usual topics such as big data, a smartphone-enabled mobile web, data privacy, eCommerce, the rise of the web-enabled sharing/gig economies, AI, rapid Chinese tech growth and even a nod to increasing cryptocurrency adoption.
While the report hardly contains any surprises, the report is more than a sum of its parts and does excel at contextualizing 2017-2018 and the year to come as a time when society is entering a novel era defined, in Meeker’s words, by “unprecedented change, unprecedented opportunity and the need for unprecedented responsibility.”
The read the full Kleiner-Perkins report in all its Power Point glory, flip through the slides below, or read on for some key themes and global trends the report focuses on.
Internet Trends Reports 2018 Highlights:
• Growth in both the number of Internet users worldwide and the proliferation of smartphones is slowing, with no increase in new smartphone adoption this year. Globally, about half of the world’s population was online in 2017, a point that Meeker notes will likely mean slower growth in web technologies in the years to come: “when you get to fifty percent penetration, new growth becomes a lot harder to find, and that’s where the industry is at a really high level.”
• While the number of new users online is likely to slow, the usage of existing web users in increasing, up 4% in the U.S. in the previous year. Content and usage continues to grow, with the average American adult now spending 5.9 hours per day consuming digital media, with the increase driven by mobile access. New forms of digital entertainment are emerging, such as video gaming streaming service Twitch and the increase of short-form video in China.
• Increases in data gathering, sharing, and optimization means that data is being generated at a “torrid pace.” The creation of new data yer to year, including enterprise data, IoT and metadata, is increasing exponentially with the web’s growth.
• The web is becoming more personalized and social. There are 2.2bn Facebook accounts, 200m Pinterests, 170m Spotify users, and 125m Netflix accounts, each delivering every user a unique and personalized experience. Social media networks are experiencing higher engagement and rising monetization, growth, and collection, but coming under increased scrutiny for data privacy. Data usage and collection poses companies with a paradox: less privacy allows for a more personalized web with more satisfied customers, but at the cost of eroded customer trust in the wake of scandals such as Cambridge Analytica.
• Overall, growth in the web space is driving and in turn being driven by innovation, competition, increased access. Online products and services have generally become better, faster and cheaper in the past year. One driving factor is the increased adoption and improvement of online payment systems, especially in mobile-based payments. eCommerce and online payment infrastructures are maturing, with less “friction” in the integration of services such as POS, online stores, fraud protection, purchase financing, customer support, customer finding and shipping.
• eCommerce is also increasingly using personalized, data driven approach, notably through the use of personalized, custom curated advertisements on social media. Meeker notes that, following this trend, Google is moving from an ad platform to a commerce platform, while Amazon doing the inverse.
• eCommerce is putting even more pressure on brick-and-mortar retail by offering cheaper prices for the same products and by acquiring or competing against some players in offline shopping, such as in Amazon’s acquisition of Whole Foods or its own ventures into physical retail and grocery outlets. Similarly, distinctions between online and offline retail is beginning to blur, with China leading the world in new smart stores integrating sensors, personalization and improved selection.
• Advertising on social media is increasing advertisers’ reach, but costs are rising at a quicker rate than engagement.
• Online services, especially media, are moving more towards subscription models rather than purchases.
• Tech companies are 25% of the MSCI market cap, the highest since early ’00s tech boom. Six of the top 15 R&D+CapEx spenders are tech companies, including Amazon (1), Alphabet / Google (2), Intel (3), Apple (4), Microsoft (5), and Facebook (11). The largest and fastest growing industry in this metric is the tech industry. R&D and CapEx are growing expenses at top companies, comprising 18% of revenue in 2017 vs 13% in 2007.
• The broader economic state of the U.S., while growing, has also presented new challenges to average Americans. The country’s debt-to-income ratio is rising sharply while savings continue to decrease along with buying power for many important products and services such as housing and insurance, meaning that many Americans are increasingly finding it difficult to “make ends meet.” Consumers are now prioritizing value and low costs.
• The hampered spending power of most of America combined with a decrease in traditional stable jobs and the positive benefits of tech industry innovation have led to growth in web-driven gigs, sharing and freelance economies. Despite the lack of monetary benefits, the rise of such on-demand work is also due in part to the attractiveness of non-monetary advantages such as increased flexibility and the ability to work from home. The rise of online learning platforms such as Udemy, Udacity and YouTube, among others, are also being used by traditional workers and freelancers alike to learn new professional skills.
• The web has brought improved quality, access, and personalization as well as lower costs to many industries, but one major exception is healthcare. KPCB predicts that the space is ripe for transformation and that technological innovation and economies of scale might see the healthcare industry experience the same tech-driven advances and decreased costs as the web has brought to other industries.
• Malware volume is increasing dramatically, empowered by the same technologies that have fueled legitimate web uses such as cloud computing, big data and AI.
• Industry-wide, AI is still a small portion of enterprise tech spending but is notably the fastest growing. The largest tech companies are offering increased AI capabilities in concert with cloud services.
• The pace of technological innovation and adoption is increasing. While previous revolutionary technologies such as electricity, the telephone, refrigeration, etc., took decades to reach universal adoption, similar breakthroughs this century such as the Internet, social media, and smartphones are developing at a faster rate and gaining widespread adoption within the span of years. KPCB is not worried that the disruptive technologies of the web and AI will contribute significantly to unemployment, saying that mass unemployment may “perhaps” happen but is “inconsistent with history.” The report cites precedents such as the shift from agrarian to service economies or the almost 1:1 transition from railroad jobs to aircraft jobs in the previous century.
• China is rising as a tech and AI superpower. China, India and the U.S. are the only nations with rising relative GDPs, driven in large part by technology. In 2013, nine of the world’s top 20 Internet companies were based in the U.S. while only two were Chinese; five years later, 11 are U.S.-based (Apple, Amazon, Microsoft, Alphabet/Google, Facebbook, Netflix, Ebay/Paypal, Booking Holdings, Salesforce.com, Uber, Airbnb) while nine are based in China (Alibaba, Tencent, Ant Financial, Baidu, Xiaomi, Didi Chuxing, JD.com, Meituan-Dianping, Toutiao). Chinese web services and social networks don’t compete globally with American companies yet, but are almost uncontested within China and are growing among the Asian market.
• The Chinese are making headway on computational markers of AI success, and Chinese degree holders and doctorates in STEM far outnumber those in the U.S. and are increasing rapidly.
• China will likely match and perhaps even surpass the U.S. in AI leadership in five years.
• Immigration is becoming an important factor for tech development; 56% of the U.S.’s most highly valued tech companies were founded by first or second generation Americans.