As always we have had a number of very interesting tech trends that emerge from both. First, we will look at some quick flashes and then we will deep dive in some key trends (Voice, VR, China/India). Let’s start with the quick flashes:
- Internet & Smartphone penetration is finally nearing saturation globally, at the same time use continues to grow substantially in those users. So new penetration will come increasingly from more use rather than more users.
- Mobile ads are already bigger than desktop ads in the US. It has taken 10-15 years from youth to maturity and decline of desktop internet ads. Google and Facebook have successfully transitioned from desktop to mobile and now have a virtual duopoly in mobile (>85% share).
- Ad-blocking continues to grow and has substantial penetration in some markets (18% USA desktop, 28% Germany desktop, 28% India mobile, 58% Indonesia mobile)
- eCommerce continues to grow worldwide and it is starting to transition in some key ways: visual commerce, with Pinterest which is considered as a shopping channel by 24% of its users and white label with Amazon white label goods starting to lead some categories.
- In media, Spotify has 20% of worldwide recorded music revenues and Netflix 30% of entertainment revenues in the US. Netflix has moved from nothing to the top 4 network in viewership in the US in 7 years. Should we consider watching Netflix in
- Tech represents 7 out of the top 10 public companies in the world with 5 US and 2 Chinese tech companies. The only three non-tech companies left are Buffet’s Berkshire Hathaway, J&J and Exxon. How long will they be able to maintain their position?
Voice interfaces continue to be the rage. Google made some impressive announcements in Google I/O like user differentiation based on voice, integration with other services (e.g. Hulu, HBO), visual responses on the phone or TV, availability in other languages and proactive notifications. Google also converted Google Home into a fixed phone operable by voice threatening telcos. It also passed 95% voice recognition accuracy, equivalent to human accuracy. Amazon has >10 million devices sold in the US and more than 10k skills. Microsoft and Apple have announced the launch of their devices. We will see the voice wars over the next 2-4 years, and the big players are expecting a winner take all redux of the mobile OS wars and none of them wants to miss the boat.
VR/AR and Gaming
Google has announced Google Lens which applies machine learning to images from the phone camera allowing for augmented reality in the phone, including accessing reviews and information about physical objects and locations. Google also announced a new Tango phone for 3D imaging and a dedicated VR headset design for partners. Google is looking to integrate the digital and physical world even more.
On the Gaming side, Mary Meeker stresses the fact that the there are already 2,6 billion gamers in the world. The opportunity for gaming is how it can optimize learning and engagement especially in the context of VR and AR. There are interesting applications of integration of physically interactive media like the Peloton bike. Also, eSports appear as very interesting, with as many millennials preferring eSports as regular sports (27%).
The combination of AR/VR and gaming will create a new paradigm, integrated and gamified reality which will totally transform how we live and work.
China/India, the new pole emerging
China continues to be an extremely interesting and unique market. It has an extremely large scale and is leapfrogging in many aspects like Finance, eCommerce and Media. After years of copying China is blazing new trails. In Finance it is the global center of Mobile Finance which is overtaking traditional ways of banking and even cash. Street carts now routinely take mobile payments, leapfrogging credit cards and substituting cash. The three giants, Ant Financial (Alibaba), Tencent and JD, are launching new services in Payments, Wealth, Funding, Insurance and Credit History. They don’t even compete with banks, they have created a new category. In eCommerce, it is the number two market in penetration already just behind Korea. Daily delivery is already >50% for JD, competing effectively with physical retail. In Media, China is the #1 market for gaming globally and it is creating new paid forms of media like livestreaming. Maybe the gaming Hollywood will be in China
India is getting its act together and has moved already to the #7 spot in terms of global size, with the top 5 in reach in the short term. India’s middle class will move from 14 million to 66 million households, a top global consumer market. While internet users are growing and only second to China, they still have a long runway which might take a decade to capture. Some movements in the market will accelerate growth: a drop of more than 50% in the annual cost of data in only to years (from $51 to $23 for 1GB), smartphone penetration over 50%, the entrance of Reliance Jio in the market (108 million of free customers in 6 months with 67% converting to paid).
The Indian government is creating a unique ecosystem that might allow leapfrogging even China. Banking for all allows all Indians to have access to low cost banking, with more than 280 million new accounts in 3 years. Power for all is ensuring electricity arrives in rural India. Demonetization and the Universal Payment Interface is trying to eliminate cash and with the National Tax Reform to improve the tax base. Finally, Aadhaar, the national identity scheme has more than 80% of the population enrolled and allows to radically reduce identity and KYC costs with 16 million API calls per day. Maybe we are seeing the blueprint of the future digital government infrastructure.
Google announced Android GO, an OS version which is optimized for low-cost devices. This is the solution to connect to the internet the hundreds of millions of still unconnected individuals in China and India. It also highlights a new ecosystem emerging separately from developed country domination. In India, for example, the top browser is not Chrome, rather it is the UC browser by Alibaba with more than 50% market share.
Google continues committed to its AI-first strategy. Google has created the TPU chip, optimized for machine learning, with the aim of leading the AI cloud against AWS and Microsoft is embedding AI in all its products, voice, Google photos with automated editing and sharing, youtube, search. They are sure that AI can transform each product category completely. The obsession for AI is shared by most technology companies. At the same time, Mary Meeker is surprisingly silent about AI, do they think it is not as relevant or do they look at it from another angle?