Markman Capital Insight

Stunning changes to Internet ahead

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It’s the end of eras. That’s according to work by noted technology analyst Mary Meeker. The Kleiner Perkins analyst’s annual report was released this week and it is as grim as it is voluminous. Swelling from 25 to 213 slides this year, the report is downright depressing.

The frenzied growth of smartphones is over. Meeker expects growth of just 15% in 2015 versus near 80% in 2010. Google’s Android is still the leader, growing to more than 81% of the global market while Apple’s iOS fell to 16% in 2015. Those trends are expected continue in 2016.

And Internet adoption is slowing too. This year almost 3 billion people will have access to the Internet, about 43% of the world population. The year over year gain is 9% which is about the same rate of growth as 2014. There is good reason for this. With so many of the best-heeled customers now online, it is getting harder to find new customers that can afford a data connection. For example, the cost of a smartphone in Vietnam is 15% of average annual income. The notable exception is India when Internet growth is surging.

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This is mirrored in global economic growth. World growth rates have now been below the twenty year average in six of the last eight years. Meeker puts the culprits as slower Internet adoption, rising government debt, aging populations, low interest rates and slowing GDP rates in emerging countries as commodity price weakness persists. It’s hard to see how these trends change in the near term.

The era of textual search is also fading. Internet users are now more inclined to search using images and voice. This is a big change from just five years ago when normal text searches were still dominant. Meeker expects that within five years fully 50% of search will be images and voice which is kind of amazing when you think about it.

Meeker attributes this trend change to millennials and their extensive use of smartphones for storytelling. More than 3 billion images are shared daily using Facebook Messenger, WhatsApp, Instagram, Facebook and Snapchat. Facebook owns all but one of these properties.

The biggest sea change however is the importance of voice as an interface. Meeker notes this trend is a natural progression away from the era of touch screens. Speed is the biggest motivator. Users can talk at a rate of about 150 words per minute as opposed to just 40 words per minute when pecking away at a touch screen.

Advances in natural language processing lend to more personalized experiences. Google has been way ahead of the pack in introducing artificially intelligent software capable of understanding context so that users can carry on normal conversations with the software. You can input data this way without touching the device; no wonder more than 20% of Google searches are now voice

For all these changes, Google and Facebook are the center of attention, and continue to deserve to be bought on pullbacks.


About Jon Markman:  A pioneer in the development of stock-rating systems and screening software, Jon Markman is co-inventor on two Microsoft patents and author of the bestselling books The New Day Trader Advantage, Swing Trading and Online Investing, as well as the annotated edition of Reminiscences of a Stock Operator.  He was portfolio manager and senior investment strategist at a multi-strategy hedge fund from 2002 to 2005; managing editor and columnist at CNBC on MSN Money from 1997 to 2002; and an editor, investments columnist and investigative reporter at the Los Angeles Times from 1984 to 1997.

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