12 things Mary Meeker wants you to know about the Internet, 2016 edition (part 2)

In a post published earlier this week, I distilled six important insights from Mary Meeker's “Internet Trends” slide deck. Today’s post offers six more nuggets of wisdom, this time focusing on trends in advertising, social networks, and new fault lines that are emerging on the Internet as a whole. 7. Advertising isn’t the only way to make money on the Internet — sales of goods and services offer an alternate source of revenue, and the Internet continues to grow as a retail channel. While the Internet garnered 2 percent of retail sales in the US in 2000, it’s now up to 10 percent, with a year-over-year growth rate of more than 20 percent. Unlike advertising, which is intensely concentrated in Google and a few young sisters, retail offers a healthy mix of traditional stores and startups. The most interesting developments are in customized goods and ad hoc services that couldn’t be monetized before the Internet. We can buy personally fitted clothing without ever seeing a tailor, hail rides from cars that don’t have taxi medallions, and spend the night in rooms that aren’t parts of hotels. And, by the way, the leading US retailer in sales per square foot — apart from gas stations — is Apple, at an impressive $5,546. The Internet is great for retailers whose products can be upgraded and enhanced, and Internet retailing is made to work with personalized ads tailored to known or expected buying preferences. When merchants can virtualize the most concrete part of the shopping experience — the examination of physical goods — the rationale for brick and mortar stores to serve as anything but warehouses is sharply reduced. 8. Social network engagement by millennials continues to be a one-sided game between Facebook and the also-rans. Facebook is the lopsided winner in both participation and engagement, with the best numbers for millennial users and millennial user time. Facebook is also growing its ad business faster and more effectively than anybody else, presumably because it has so much information about its users — as well as an outstanding ability to place its ads for maximum impact and minimal annoyance. 9. Speaking of virtualizing tangible goods, Meeker brings out the example of Houzz, a home-decorating site that allows users to visualize the way purchases will look in the buyer’s home. This feature — known as “View in My Room” — appears to be a clever response to a sales trick you will run into if you shop for high-end home decorating goods: These stores often offer to let you take a rug home, for example, to see how it looks. The act of taking home the rug and installing it can only increase your attachment. But creating a visualization of a decorating project without paying a decorator is a plus (except for the decorator). 10. Returning to the big picture, the Internet is dividing into an English-language space, dominated by American firms, and a Mandarin-language space dominated by China. The top 20 Internet firms by market cap include 12 US firms, 7 Chinese firms, and 1 firm from Japan. Not too surprisingly, market cap is at odd multiples of revenue and earnings. Apple is number one in market cap, cash, and revenue, and nobody else is close across all three categories. But if we only look at share value, Apple and Google/Alphabet are neck-and-neck, with Apple falling and Google-bet rising. Five of the top 20 firms are privately held, and recently spun-off PayPal is ahead of stalwarts Yahoo! and eBay. 11. Voice is beating keyboards as a mode of interaction with small digital devices, and it’s doing so very quickly. Amazon’s Alexa voice platform — found in Echo, Echo Dot, and Echo Tap — is finding its way into cars, homes, offices, and mobile phones. This is a device that constantly listens to everything we hear and say, as well as to ambient sounds. Not only is it the ultimate surveillance device, it’s also the ultimate digital assistant: it has context. The Alexa ecosystem is growing at an astonishing rate, increasing from a dozen apps (known as “Skills”) a year ago to 1,000 today. Meeker sees us communicating with each other in pictures and with our digital devices through speech. 12. The big-picture trend is a mashup of advertising, retailing, and entertainment targeted at the millennial and post-millennial (Generation Z) generations. With Facebook Live and Periscope, social networks are now video entertainment channels, so it wasn’t totally odd that Twitter licensed Thursday Night Football from the NFL for distribution over its platform. Meeker sees this as an opportunity for multi-screen simultaneous engagement that combines the game with social interaction, advertising, supplemental commentary and, of course, advertising. This is not far from the way some fan groups on Facebook follow teams with tech-oriented fan bases such as the Oakland A’s, Golden State Warriors, and San Jose Sharks. While a game is underway on TV, fans chat and share memes and links to other reactions to the game. This is done at home or at work and requires a lot of multitasking, something Meeker believes to be common to the Generation Z kids coming along behind the millennials.

Conclusion

As I mentioned at the end of my last post, the trends Meeker highlighted in this year’s slide deck are a bit dizzying. US firms still unquestionably dominate most Internet markets, but international competitors are increasingly encroaching on their territory. New generations of Internet users are interacting with their devices in new and different ways, rapidly changing the methods platforms and online retail outlets use to market themselves. And while these changes have made the Internet’s growth and impact harder to measure, new changes on the horizon promise to complicate things even more. If we can count on anything, though, it’s that I’ll be back here in 2017, distilling the insights from Meeker’s next slide deck.

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