by Larry Magid
This article appeared in the Monday, June 4, 2012 San Jose Mercury News
Mary Meeker, a former Wall Street analyst who is now a partner with venture capital firm Kleiner Perkins Caufield & Byers, took the stage at the Wall Street Journal’s D: All Things Digital conference in Rancho Palos Verdes last week to deliver her annual Internet trends report (scroll down to view her slides).
Although it may seem as if “everyone” is online, there is still plenty of room for growth. Global Internet penetration is now at 32 percent with an 8 percent annual growth rate. Leading the growth are emerging markets, including China, India, Indonesia, the Philippines, Nigeria, Mexico and Russia, followed by the United States, Iran and Turkey.
There is also enormous growth potential in mobile, especially with smartphones and mobile broadband. There are currently 1.8 billion mobile broadband (3G) users with an annual growth rate of 37 percent. That represents only 18 percent of mobile subscribers, so Meeker sees “still a lot of upside with rapid growth.”
There are 6.1 billion mobile phone subscriptions in the world, which includes 953 million smartphones, but Meeker predicts that within five years more than half of mobile phone users will be using smartphones. Meeker also said that 29 percent of American adults own a tablet or e-reader, up from only 2 percent less than three years ago, and she noted that the iPad is growing three times faster than the iPhone.
She also said that Android phone sales are growing faster than iPhone sales.
To illustrate the meteoric growth in mobile data usage, she pointed out that in 2009, mobile accounted for about 1 percent of Internet traffic. By 2010 it grew to 4 percent and is now 10 percent. From a financial standpoint, mobile represents 8 percent of e-commerce and is growing quickly.
Unlike the fixed Internet, where advertising is the cash cow, 71 percent of mobile monetization comes from apps and 29 percent from ads. Although 44 percent of apps are free and paid apps on average cost only $3.77, some developers are nonetheless making a lot of money because of the volume of apps they sell as well as in-app purchases. As for ad spending, it’s now about $30 billion for the fixed Internet compared to only $1.6 billion on mobile.
Meeker also talked about how the world is being “re-imagined” by technology. After 125 years, the number of land lines was surpassed by mobile subscriptions in 2002. After 305 years, newspaper advertising revenue was surpassed by Internet ad revenue in 2010.
What Meeker had to say validated comments by Apple CEO Tim Cook in his first public interview since taking over as CEO from the late Steve Jobs. During his on-stage interview by co-hosts Walt Mossberg and Kara Swisher, Cook discussed Apple’s impact on American jobs.
While conceding that most iPhone and iPad manufacturing jobs are in China, he pointed out that some components are made in the United States and that the number of jobs created by apps is “big enough to be in the Bureau of Labor Statistics.” We can add to this the jobs that will emerge with the growth in cloud computing, which enables mobile devices to remotely run complex software and access massive amounts of data.
Cook said he hopes that Apple might someday assemble devices in the United States. But he complained that, wage issues aside, there are other challenges because of the dramatic shrinking of the American tool-and-die industry, which is essential for manufacturing.
What all of this suggests is that we’re going through yet another revolution when it comes to devices. I started my tech career during the early days of the PC industry and was amazed at the rapid evolution of the technology. Storage and processing speeds improved every year.
PCs continue to get better, but the improvements are mostly incremental. As for the changes in mobile, “evolution” seems too tame a term. We’re seeing explosive growth in uptake, especially with smartphones and an even more impressive growth in the range of things consumers can do with their devices — from photography to navigation to measuring and reporting vital health statistics.
Smartphones have already disrupted the point-and-shoot digital camera market and — along with tablets — are starting to take a bite out of PC sales. In the developing world, smartphones are being used by millions who have never owned a PC or a land line.
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