Tuesday, July 19, 2016

Tech Trends

Over the years there have been many enormous advances in technology that have changed the world and the way we live.

The printing press, railroads, the internal combustion engine, automobiles, electricity and the telephone are just a few examples.

We are still in the midst of the technological revolution that defines us today---the internet.

Mary Meeker and Liang Wu of Kleiner, Perkins, Caufield and Byers recently released their 2016 report on Internet Trends.  This has become an annual must-read for me over the last few years. The current report contains 213 PowerPoint slides that provides an overview of what the internet is today and where it is going tomorrow. I suggest viewing the entire slide pack if you have the time.

A few of the more interesting slides in the report with a few comments from yours truly.

52% of smartphone users in the world are in the Asia-Pacific market. North America and Europe (combined) only make up about 20% of the global market.

Google has a 50% share of all internet advertising ($30 billion of a $60 billion market.) Google plus Facebook have a combined 76% share of the internet advertising market.

There still is a major disconnect where consumers are spending their time in media and where advertisers are spending their dollars. Print is still taking a disproportionate share of ad dollars (only 4% of time is now spent by consumers with print media but 16% of ad dollars are still going to this media. There is enormous upside potential for mobile ads which Meeker indicates is a $22 billion opportunity in the U.S. alone.

E-Commerce has grown rapidly but is still only represents 10% of all retail sales. However, that equals over $340 billion in spending over the internet.

Internet retailers are able to grow much faster than has been historically feasible for other brands. Successful internet retailers are achieving $100 million in sales in less than 5 years. By comparsion, it took Nike 14 years, Lululemon 9 years and Under Armour 8 years to reach this level in the pre-internet world.

Facebook is still the digital pathway if you want to reach Millennials. Almost 100% reach with an average monthly usage of over 1,000 minutes! That is over 30 minutes per day on average. No one else is even close.

Photos, visuals and videos are the source of most social platform growth. For example, there are 2 billion photos shared per day just on Facebook properties (Facebook, WhatsApp, Instagram, Facebook Messenger). Snapchat by itself sees about 1.25 billion photos shared per day.

Meeker also looks at what technology is going to do to the auto industry. As GM CEO Mary Barra stated recently,

"We believe the traditional ownership model is being disrupted...we are going to see more change in the next five to ten years than we have seen in the last 50."

To put that statement in perspective consider what has transpired in the global auto industry over the last 50 years or so.

The United States has gone from a 76% global production market share in 1950 to 13% today. The big story for me in this slide is China auto production. China is producing about 3x the number of cars that the United States is today.

However, Meeker sees an opening for the United States to again become the global hub of the auto industry in the future due to its leadership in autonomous driving systems as well as the innovations in ride sharing services such as Uber and Lyft.

Car ownership costs are very high relative to the amount of time they are actually used. Cars are only used about 4% of the average day for most households but the average cost of ownership is $8,500 per year per auto and there are 2.2 cars per household in the U.S.

At the same time, drivers license usage has been declining over time. In 1982, 92% of all those aged 16-44 had a drivers license. Today only 77% of that age group has a license.

Automobiles also require a massive amount of real estate just for parking them when they are not in use. Consider these amazing numbers on parking spaces in Los Angeles County, Californian.

  • 19 million parking spaces in LA County in 2010 (that is an increase of $12MM since 1950).
  • 14% of incorporated land in LA County is dedicated to parking 
  • LA County has about 2 parking spaces for every resident. However, this is actually lower than the total U.S. average where it is estimated there are 4 parking spaces for every person!

If you want to get an idea of where this is going read my blog post from March, 2015, "Fasten Your Seat Belt" where I wrote about where technology (with special emphasis on autos) is taking us.

If you doubt the popularity of ride sharing services like Uber, look at the chart below. There is a reason that Uber has attained the market value it has. The reality is that Uber, or something like it, may end up owning most of the autos in the world. The rest of us will just order one to our door when we need one. That also means a lot of parking lots and garages can be put to other uses.

One last slide shows the dislocations in wealth that the internet has created.

 Look at Netflix compared to Viacom.

You might also have believed that Wal-Mart was a great stock to own as its market cap has tripled in the last 19 years. However, what about Amazon? And remember that online retail is still only 10% of all sales.

Truly incredible.

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