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The 15 most important slides in Mary Meeker’s Internet trends report

Mary Meeker’s annual Internet trend report has become something of a rite of summer.  Every year, Meeker, a leading venture capital analyst, comes up with an extraordinary collection of data on a wide range of topics in the innovation economy, revealing in broad and specific terms where the Internet and related technologies are and where they are going.  

The full 200+ page slide deck and our quick take on the biggest trends can be found here.  But for those who just want the highlights, these are my picks for the top 15 most important charts.  

Taken together, they tell a remarkable story about how better and cheaper information technology disruption is transforming market economies, giving consumers powerful new leverage in the process.

Like it or not, the Internet economy is fueled by advertising, which has gone from $0 to $60 billion in just 20 years.  That uptake dwarfs the development of advertising in earlier media including radio and television, whose rapid expansion seemed equally shocking in their day.

Still, the full potential for online advertising is far from realized.  Advertisers and ad agencies are sticking with traditional media even as consumers have shifted their attention to the Internet and mobile devices in particular. Meeker estimates that advertiser inertia translates to under-spending on mobile to the tune of $22 billion. That’s a profound opportunity for players in the mobile ecosystem. It’s also a profound risk for traditional media. Not to mention newspapers, which, in fact, Meeker doesn’t mention.

So far, Internet advertising revenue is profoundly dominated by Google and, to a lesser extent, Facebook.  Google alone controls nearly half of the market, which it and others guard jealously from potential new entrants, including ISPs, who are now being threatened with new FCC rules that will make it impossible for them to compete.

Privacy and security issues are ticking time bombs in this otherwise uninterrupted success story.  Internet users are highly conflicted about the implicit exchange of free or subsidized content and services for personalized advertising. Use of ad blockers is rising fast, and 50 percent of all consumers report being “very concerned” about how contextual information is used by Internet companies, even as they continue to provide more and more personal information to service providers. Without more aggressive self-policing by participants in the Internet ecosystem and consolidation of splintered and inconsistent privacy regulations both within the United States (the FCC vs. the FTC, for example) and abroad (the U.S. vs. the EU, for example), the innovation engine may seize.

Billions of photos are shared every day.  Facebook and Snapchat dominate the market, but what is the “market” and why does it matter?

The answer, it turns out, is marketing itself, with 55 percent of Pinterest users, as an example, reporting they use the platform to find and shop for products.  Product endorsement by other consumers are becoming the dominant method by which consumers decide what to buy, and consumers speak to each other through the volume of images they post. This gives tremendous new power to consumers to determine winning and losing products—and quickly. It also gives profound leverage to the platforms that host their images.

The rise of consumer-driven marketing translates to what economists call a frictionless market, where buyers have near-perfect information about sellers based not on what companies say about themselves but what other consumers report—a far more reliable source.  The result, increasingly, is the very rapid rise (and sometimes fall) of new brands and new products.  For the winners, the market can be very generous.  For everyone else, it can be brutally efficient.

Even more than photos, user-generated video content is redefining marketing.  As Meeker notes, Candace Payne’s viral video in a Chewbacca mask, viewed over 150 million in just one day, twice mentioned Kohl’s department store. The result? The company’s app leapt to the top in the iOS app store.  No planned (and expensive) campaign could have hoped for such an outcome.

As that example suggests, cord-cutting from traditional media providers is just the tip of the iceberg in the rapid transformation of the video marketplace. Facebook and Snapchat alone now account for 18 billion video views daily, much of it user-generated content.  That shift is putting extreme pressure not just on cable and satellite providers but the entire video ecosystem—content producers, networks, advertisers, agencies and the regulators who still think they call the shots.

What does the future of video really look like?  The combination of ubiquitous devices, high-speed networks, and falling prices for key components including memory, computing power and cloud storage point to the rise of a dramatically different, user-driven media landscape.  Viewers will seamlessly combine live video with contextual information, then annotate and socialize it on the dominant platforms.  Live events become social experiences, with richer interaction for those not actually in attendance.  Media theorist Marshall McLuhan’s “global village” is now a reality.

Even low-level text-based messaging platforms become key components in the new consumer-driven marketplace, if only through the sheer scale of their users and interactions.  WhatsApp, acquired by Facebook for $19 billion in 2014, has signed up a billion active users in just five years.  Facebook’s native Messenger, along with Tencent’s WeChat (the dominant Chinese platform), are close behind.   

With that kind of momentum, disruptive new services are easy to launch. First give the users what they want, it turns out, and the revenue follows soon after.  Simple text messages become group chats and then multi-user games, and, from there, banking and payment systems. It’s amazing what you can do with a billion users deeply committed to your platform.

Easy enough, in any case, for nimble start-ups.  But for incumbent businesses caught off-guard by what Paul Nunes and I call the “Big Bang Disruptions,” the best hope of reincarnation in industries being transformed by technology (think today of media, health care, automotive, transportation, and finance) is investment if not outright acquisition of the disruptors.  Even the jaw-dropping sticker prices being paid make sense if the alternative is being pushed out of the emerging market altogether.

And now voice-activated interaction has arrived, thanks to Moore’s Law and componentization of basic technology parts.

Put it all together, and it becomes clear why investors are betting so heavily on a few Internet companies with the potential both to take market share from incumbents and dominate new sources of revenue from such emerging technologies as the Internet of Things and autonomous vehicles.

The top 20 Internet companies, Meeker reports, now have a market value of nearly $3 trillion.  Thanks to a long-standing U.S. policy of “permissionless innovation,” over half are American companies, and seven are Chinese — the result of an admittedly very different industrial policy.  Remarkably, as with last year’s list, not a single one comes from the highly-regulated but badly fragmented European Union.  

As Meeker noted in last year’s presentation, none of these companies, with the exception of Apple, even existed in 1995, at the dawn of the Internet age.  Every country had a chance—and still does—to incubate its own disruptors.