Mary Meeker on Global Internet Trends: Prepare for a Lift off!

Former Morgan Stanley's now KPCB's technology analyst Mary Meeker with her fabulous presentation of the current and prospective internet trends.

Notice how the deepening of penetration levels and the widening of connectivity has been changing people's lifestyles globally. Importantly trade and commerce is part of that trend (p.50).

Many analysts tend to underrate this ongoing seismic shift, we shouldn't.
KPCB Internet Trends (2011)

The Power of Slow Change: Older Adults Adapt To Social Media

In the US, older adults (ages 50-64) are now steadily adapting to social changes brought about by technology. (who says they’re luddites?)

Slowly but surely, the penetration of web usage has been diffusing into a larger segment of the US population. I’d say that this represents a worldwide phenomenon, not limited to the US.

Again the implication: changes in the way things are going to get done (commerce, social relationships, lifestyle, regulations, and more).

Read the rest from Pew Research here

Mary Meeker on Web 2.0: Bet On Mobile And Social Networking Trends

GIGAOM.com showcases the projections of “Queen of the Net” or Morgan Stanley's Internet guru Mary Meeker.

All the following quotes from GIGAOM.com

Ms. Meeker first predicts the major dynamic:

"Two overwhelming trends that will affect consumers, the hardware/infrastructure industry and the commercial potential of the web: mobile and social networking."

Next is the evolution of the technology cycle from the Desktop to Mobile.


"The Morgan Stanley analyst says that the world is currently in the midst of the fifth major technology cycle of the past half a century. The previous four were the mainframe era of the 1950s and 60s, the mini-computer era of the 1970s and the desktop Internet era of the 80s. The current cycle is the era of the mobile Internet, she says — predicting that within the next five years “more users will connect to the Internet over mobile devices than desktop PCs.”

In addition, internet take up will increasingly migrate to the mobile spectrum.

"Meeker says that mobile Internet usage is ramping up substantially faster than desktop Internet usage did, a view she and her team arrived at by comparing the adoption rates of iPhone/iPod touch to that of AOL and Netscape in the early 1990s"

And in terms of application, connectivity is now largely driven real time via social networking platforms as email is gradually being dislodged as the main instrument of communication.

"On the social networking side, Meeker’s report notes that social network use is bigger than email in terms of both aggregate numbers of users and time spent, and is still growing rapidly. Social networking passed email in terms of time spent in 2007, hitting about 100 billion"

Another feature of the rapid adaption of technology would be the "creative destruction" as toll carriers lose ground on the increasing use of data.

"But that mobile boom will take its toll on carriers, Meeker says, because mobile Internet use is all about data."

As you can see the next set of "industrial" wreckage (and job losses) is already becoming palpable, as people (consumers) speedily migrate to new technologies to 'enhance' their web 2.0 based lifestyles.

This also means business models will likewise be changing, where those attuned to these changes are likely to benefit, while those who can't cope up with the swiftly altering consumer demand are likely to perish.

This only implies a deepening transition to web based businesses as new industries are likely to be created.

"One of the implications of mobile access is a growth in ecommerce, says Meeker, featuring things such as location-based services, time-based offers, mobile coupons, push notifications, etc. In China, the success of social network Tencent proves that virtual goods can be a big business, she says — virtual goods sales accounted for $2.2 billion worth of the company’s revenue in 2009 and $24 in annual revenue per user. Online commerce and paid services made up 32 percent of mobile revenue in Japan in 2008, up from just 14 percent in 2000. Meeker’s report suggests that the rest of the world — which is still below the 14 percent-mark — could see much the same trajectory over the next 10 years.

Finally Ms. Meeker gives us where the revenue side is likely to emanate;

"Meeker says that users are more willing to pay for content on mobile devices than they are on desktops for a number of reasons, including:

* Easy-to-Use/Secure Payment Systems — embedded systems like carrier billing and iTunes allow real-time payment

* Small Price Tags -– most content and subscriptions carry sub-$5 price tags

* Walled Gardens Reduce Piracy -– content exists in proprietary environments, difficult to get pirated content onto mobile devices

* Established Store Fronts -– carrier decks and iTunes store allow easy discovery and purchase

* Personalization -– more important on mobiles than desktops

Read Ms. Meeker's presentation via GIGAOM.com

Ms. Meeker appears to be validating what we think as a massive shift in the wealth creating process, which had been predicted by Alvin and Heidi Toffler in Revolutionary Wealth,

The Tofflers: "Several forces have been converging to drive the acceleration needle of the gauge. The 1980s and '90s saw a global shift towards liberal economies and hypercompetition. Combine that with the eighteen-month doubling rate of semi-conductor chip power and you get near-instantaneous financial transactions. (Currency traders can find out about a trade within two hundred milliseconds of its completion.) Put differently, behind all these pressures is the historic move to a wealth system whose chief raw material-knowledge-can now move at nearly real-time speed. We live at a pace so hyper that the old law that "time is money" needs revision. Every interval of time is now worth more money than the last one because in principle if not practice, more wealth can be created during it."

Lessons From China-Google Schism

The China Google rift has given us some interesting insights.


This from the New York Times, (all bold highlights)

``The story behind the success of these companies is a simple one, some analysts say. The young people who dominate Web use in China are not just searching for information; they’re searching for a lifestyle. They are passionate about downloading music, playing online games and engaging in social networking.

``“Sixty percent of the Internet users here are under the age of 30,” said Richard Ji, an Internet analyst at Morgan Stanley. “In the U.S., it’s the other way around. And in the U.S. it’s about information. But in China, the No. 1 priority is entertainment.”

``Experts say American companies have largely failed here because they don’t have local expertise, are too slow to adapt and don’t know how to deal with the Chinese government.

``“Internet companies in China have to work so closely with the government,” said Xiao Qiang, of the China Internet project at the University of California, Berkeley. “And that means the government’s political agenda can become the company’s business agenda.”

``The need to censor Web sites, for example, can overwhelm smaller companies, Mr. Xiao said. “This becomes a growing business cost. So often, small companies don’t develop.”

``At this stage, analysts say the Web in China is less about innovation than about quickly delivering on the latest online trend.

``“People here are quick to see trends, and to clone and innovate,” said William Bao Bean, a former Internet analyst who is now a partner at Softbank China & India Holdings. “If one company is doing well, other companies will quickly clone it and roll it out.”...

My observations:

1. cultural difference in the use of the web: "And in the U.S. it’s about information. But in China, the No. 1 priority is entertainment.”

2. American companies outside the China's intrusion has failed to grab a substantial share because of the lack of local knowledge or expertise.

This is very Hayekian. From the Use of Knowledge in Society, ``But a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place. It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active cooperation."

How does this relate to macroeconomics-alot!

Google's failure involves one of risk money plus a real attempt to establish or gain a foothold in China's market. Whereas people or even officials condemning China, have not been there nor have they a real or working knowledge of how things operate in China. All they base their polemics is on aggregate assumptions. If Google can be wrong how much more with personalities suffering from "fatal conceit".

3. Government intervention have limited competition to the locals and may have even politicized the distribution.

More insights from the New York Times, (bold highlights mine)

``One advantage local companies have is government protectionism. Because the Communist Party wants to maintain tight control over communication and the media, foreign Internet companies come under suspicion.

``For instance, YouTube has been blocked inside the country for over a year, ever since a user uploaded a video that was said to show human rights violations in Tibet.

``YouTube, which is owned by Google, had a large following here. But now online video in China is being championed by companies like Youku.com and Tudou.com. They may have dominated anyway, analysts say, but it certainly helps to have few big competitors.

``And without competition here from Facebook, which has not yet tried to develop a site for the Chinese market, a social networking site called Kaixin001.com has managed to register over 70 million users.

``But some experts say Google’s departure will leave Internet users here with fewer options, making the country’s Internet market less competitive and less open.

“The biggest loser is Netizens,” says Fang Xingdong, chief executive of Chinalabs.com, a research firm. “Google is a multilinguistic search engine, but Baidu is a Chinese-language one. Chinese information only occupies a small fraction of the Internet.”

Additional observations:

4. It's odd that the New York Times can be promoting competition (selectively though), apparently this depends on which interest groups benefits.

5. As the article suggests, government protectionism is considerably hindering the development of social networking sites. This translates to endemic disadvantages or obstacles from developing the local market (even if the Yuan appreciates!) and from attaining productivity enhancing facilities that would enable them to even be more competitive in terms of value-added products.

Put differently, in a world being revolutionized by Web 2.0, China will unlikely match the level of capital structure of economies that fosters open competition in the cyberspace that would lead to more innovation.

So unless China opens up, the pace of growth will be constrained by the current industrial framework. But she will lag in the advances of technology, which I think will be a significant growth driver for the world over the coming years.

The Web 2.0 Evolution: McKinsey Quarterly Interviews MIT’s Andrew McAfee

It's been a frequent theme on this blog space that conventionalism doesn't take into account how the world has been transitioning from the post-industrial age to the information age.

This video interview of MIT's Andrew McAfee by McKinsey Quarterly "How Web 2.0 is changing the way we work"deals with such transformation.

According to McKinsey Quarterly,

``In recent years, using technology to change the way people work has often meant painful disruption, as CIOs rolled enterprise software programs through the ranks of reluctant staffers. Today, employees are more likely to bring in new technologies on their own—and to do so enthusiastically—through their Web browser, whether it’s starting a blog, setting up a wiki to share knowledge, or collaborating on documents hosted online. Andrew McAfee, principal research scientist at the Center for Digital Business at the MIT Sloan School of Management, has been watching this shift closely. His new book, Enterprise 2.0: New Collaborative Tools for your Organization’s Toughest Challenges, explores the ways that leading organizations are bringing Web 2.0 tools inside. McAfee calls these tools “emergent social software platforms”—highly visible environments with tools that evolve as people use them—and he is optimistic about their potential to improve the way we work.

``McAfee spoke with McKinsey’s Roger Roberts, a principal in the Silicon Valley office, in Palo Alto, California, in October 2009.

Andrew McAfee: ``One of my initial assumptions was after looking at the Web, you see the phenomenal growth of things like Facebook and Wikipedia and Flickr and YouTube and all that. I thought these technologies were essentially so cool that when you dropped them in an organization, people flocked to them. That was the assumption I carried around in my research.

``I very quickly had that overturned. And in fact what you see is—particularly for longer tenured workers, particularly for older workers—this is a big shift for them, changing their current work practices and moving over to Enterprise 2.0. This is not an overnight phenomenon at all. And while there are pockets of energy, getting mass adoption remains a pretty serious challenge for a lot of organizations." (Things do change at the margins-Benson)

If video doesn't appear pls proceed to McKinsey's website here.

The Transcript of the interview here

Wikinomics: The Exploding Growth In Social Networking Media

We are witnessing a growth juggernaut in social networking.

In the US social networking among broadband users have soared by 93% according to a new report from Netpop Research, LLC that delves into social networking trends and habits (Marketing Charts).

And talking, sharing, and providing opinions and perspectives have been taking up the "new" form of entertainment displacing the traditional forms as shown below. (All charts from Marketingcharts.com)

Of the 105 million US users, a big majority or 76% are counted as active participants to social media.

This implies of the sundry roles of contribution: upload audio/video, post to wiki, publish a blog, upload photos or podcasts, publish websites, tag articles or vidoes, post to microblog, send/forward email, live in a virtual world, post to blog or forum, rate or review products, P2P file sharing, publish personal pages...see below

Meanwhile, WEB 2.0 is being shaped at the margins.

Web 2.0 is defined by wikipedia.org as the ``perceived second generation of web development and design, that facilitates communication, secure information sharing, interoperability, and collaboration on the World Wide Web. Web 2.0 concepts have led to the development and evolution of web-based communities, hosted services, and applications; such as social-networking sites, video-sharing sites, wikis, blogs, and folksonomies.”

This means less than 10% of US broadband users are “heavy” social media contributors, concentrating their activities to at least 6 applications- such as blogging, microblogging, social networking and photo/video sharing - and connect with 248 people on a one-to-many basis in a typical week (marketing charts.com).

And which is the most used social networking media?

According to Marketingcharts.com which quotes Hitwise it is still MySpace, ``MySpace accounted for 52.21% of those visits, the highest in the category, despite a decrease in visits of 28% compared with February 2008.” Albeit MySpace appears to be losing out to competitors.

Nonetheless, while MySpace is where Americans spent more time among the most visited media: “with 29 minutes and 38 seconds - though this represents a decrease of 2% compared with February 2008”, the fastest growth was seen in Facebook and Tagged.

Again from Marketing Charts, `` In contrast to MySpace’s negative growth, US visits to Facebook increased 149% in February 2009 compared with February 2008. The site received the second-highest market share of US. visits for the month, with 36.03%. Tagged received 2.47% of visits in February 2009, the third-largest number, and had the largest percentage gain in market share of visits among the top five visited websites increasing 280% compared with February 2008.”

Yet based on demographics, Facebook appeals more to older users…

``Looking at the demographic breakdown of visitors to MySpace and Facebook, users between the ages 18-34 still dominate, as 58.81% and 53.91% of US visits, respectively, came from those combined age groups in February 2009. This represents a 2% growth for MySpace and a 14% decline for Facebook in terms of year-over-year percentages. Visitors to the sites who are age 35+ have increased 23% to Facebook in February 2009 compared with February 2008, while visitors from that age group to MySpace have declined 2%.” reports the Marketingcharts.com

All of these underscores of the exploding social networking business model of Wikinomics (openness, peering, sharing and acting globally). This means that from an investment point of view companies actively exploiting these opportunities could be tomorrow’s bonanza.

Importantly we can take note of additional social networking data from Marketingcharts.com:

Additional findings about Chinese users:

-China has a sizable proportion of social media contributors who participate in many Web 2.0 activities, including blogs, micro-blogs, social media, video and photo sharing

-43% of Chinese broadband users (105 million) contribute to forums and discussion boards.

-Young professionals ages 25-29 are the most active users of social media in China. They use more online modes of communication more often than any other age group.

-37 percent of bloggers, or 29 million bloggers, post to blogs on a daily basis.

-41 million Chinese are heavy social media contributors (6+ activities) who connect with 84 people on a ‘one-to-many’ basis in a typical week.

For Chinese Netizens, Netpop said, social media add exponentially to the sources and perspectives available online and represent a new experience for a country accustomed to a single source for media and information.

A global growth juggernaut indeed.