That was the key takeaway from KPCB’s Mary Meeker’s highly anticipated “Internet Trends 2018” report, which she presented Wednesday morning at Recode’s Code Conference in Rancho Palos Verdes, Calif.
The implication for brands? Having a presence on digital channels is no longer a differentiator. Instead, a keen focus on innovation, employee experience, and an understanding of data and internet trends is the key to winning over customers.
This annual report, which Meeker first published in 1995, includes analysis from Adobe Experience Cloud. The Adobe portion of the research is based on the analysis of select, anonymous, and aggregated data from more than 5,000 companies worldwide that use the Adobe Experience Cloud to obtain real-time data and analysis of activity on websites, social media, and advertising.
Below, we dive into some of the most interesting findings and what they mean for marketers and customer experience professionals.
1. Internet Growth: We May Have Reached A Peak
Meeker pointed to solid—but slowing—growth in the number of global internet users, with a whopping 3.6 billion consumers now able to access the web worldwide. That represents 49% market penetration.
“The reality for all of you business people in the room is that when you get to a market where you reach 50% penetration, new growth becomes a lot harder to find, and that’s where a lot of the industry is at a high level,” Meeker told conference attendees.
Growth in the number of smartphone users also continues to slow as it reaches its peak, the report revealed. The good news is engagement with devices is up substantially—even higher than on desktops. Time spent on mobile engaging with digital media has reached 3.3 hours a day, which is more than double from 1.6 hours in 2012. Desktop/laptop digital media engagement came in second place with 2.1 hours daily.
What’s driving the growth in digital media consumption on smartphones? There are a few reasons, according to Meeker. Of course, the fact that more people have smartphone devices drives usage, but so does the simplicity, speed, and ease of use of the new devices coming to market. Additionally, features such as mobile payments, messaging, voice, and video are also playing a role in driving usage.
In addition, Meeker’s report pointed to a gap between time spent and advertising spend. Currently, 29% of time spent in media (print, radio, TV, desktop, and mobile) occurs on mobile devices, yet marketers are allocating just 26% of their advertising budgets to mobile executions. According to Meeker, this three-percentage-point gap equals a $7 billion missed opportunity.
Meanwhile, just 18% of time spent with media is done on the desktop, where marketers are spending 20% of their advertising budget. Overall internet advertising spend is up 22% YoY, totaling $88 billion in 2017.
2. E-Commerce Acceleration Continues
E-commerce sales have grown 16% YoY in 2017, vs. just 14% the year prior. It is important to note, however, that e-commerce is still a very small portion of overall retail sales, with just 13% of retail transactions taking place online.
But here’s what’s interesting: Amazon sales made up 28% of overall e-commerce sales in 2017. Conversely, physical retail sales are continuing to decline.
“The [e-commerce] transformation continues to accelerate,” Meeker said. “E-commerce [is] evolving and scaling. When we think of e-commerce today, it is often mobile, interactive, personalized, in the feed, in the inbox, and also often at the front door.”
Additionally, as more people shop online, prices for what they’re purchasing are dropping—both online and off, according to Adobe’s data.
Specifically, prices for consumer goods have fallen 3% online and 1% offline over the past two-and-a-half years. Taylor Schreiner, principal analyst at ADI, pointed to two driving forces behind those findings: First, the Internet has enabled retailers to move to a more flexible, lower-cost infrastructure to support delivery of online purchases. As a result, they’ve been able to reduce costs. Second, the ability to market online has made it easier and fairly inexpensive for retailers to drive product sales.
“If you are a largely offline company, whoever’s selling to your consumers online is going to be fighting you really hard on prices,” Schreiner said. “So you’re going to need a value proposition that helps you differentiate. The retailers that sell both online and offline are going to have a particularly challenging time because they have really divergent pressures.”
Online efficiencies, ADI found, impact product prices differently. TVs, furniture, computers, and sporting goods are seeing the highest decreases in prices online and at a faster pace. Meanwhile, everyday products, such as groceries and personal care, are seeing similar decreases online and offline.
“It has a lot to do with people’s expectations about where prices should be for everyday products,” Schreiner said. “It’s important to remember that you have different price pressures depending on who you are in this market.”
3. Social Media Is A Growing Referral Source
Today, social media penetration is at an all-time high, reaching a third of consumers in the United States. In addition, users spend a full 135 minutes on social networks every day, according to the “Internet Trends” report.
“Social media is enabling more efficient product discovery in commerce,” Meeker said. “A material portion of people that have used social media have found products on social media, and a material portion have purchased those products after finding them on social media.”
Indeed, social media referrals to e-commerce sites have grown from 2% in 2015 to 6% today, according to Adobe data that appears in Meeker’s report. This increase in referrals is most likely due to personalized discovery mechanisms available on platforms such as Facebook and Instagram. According to Meeker’s analysis, 55% of consumers ages 18 to 65 have bought a product online after social media discovery.
However, it is important to remember that more traditional digital channels, such as email and search, still drive the bulk of referrals and will continue to do so for the next few years, even as social accelerates and takes share from them, ADI’s Schreiner said.
When it comes to finding products online, most people go to Amazon. In fact, that’s where 49% of product searches on the web begin. Thirty-six percent begin with a search engine, and 15% from other referral sources.
4. Innovative Companies Invest In Innovation
Now that a digital strategy has become table stakes, it’s going to take innovation to really stand out from the competition.
According to Meeker, U.S. technology companies have been the most “aggressive” and “forward-thinking” investors in innovation for a number of years. For example, the “Internet Trends” report points to tech giants including Amazon, Intel, and Microsoft as top spenders on research and development programs, indicating their commitment to growing innovation at their companies.
That could be one of the reasons why tech companies now make up 25% (and rising) of the market capitalization in the United States, according to Meeker’s report.
Generally speaking, technology disruption is not new, Meeker said, and it is spreading across all industries and product categories. The biggest ripples have come due to the proliferation of mobile devices and the internet. Technology disruption drivers include rising and cheaper computing power and storage capacity. It is also changing the way we work.
“Job expectations are evolving,” Meeker said. “The most desired non-monetary benefit for workers is flexibility. Technology is helping make freelance work easier to find.”
In fact, studies have found that freelancers are finding it easier to discover new jobs, thanks to connected technology, Meeker said, with 77% in 2017 saying so vs. 69% just three years ago.
When it comes to which technologies will see the greatest prioritization in enterprises in 2018, networking equipment, artificial intelligence, and hyper-converged infrastructure top the list for CIOs.
5. Lifelong Learning Is Crucial In The Internet Age
Today’s workforce clearly understands the importance of lifelong learning, with 33 million learners on Coursera.com, Meeker said. That’s up 30%, which means more people globally are interesting in upskilling and furthering their education.
“Lifelong learning is crucial in evolving the work environment, and the tools are getting better and more accessible,” Meeker said.
The most popular courses people are taking? Machine learning, neural networks, deeper learning, and an introduction to mathematical thinking top the list, according to the report. North America has the highest amount of learners, followed by Asia, Europe, South America, and Africa, respectively.
Educational content usage is ramping up fast online, namely on YouTube, Meeker’s report shows. In fact, YouTube sees 1 billion daily learning video views, and 70% of viewers use the platform to help solve work, school, or hobby problems—pointing to the need for “how to” content.
Enterprises also understand the benefit of upskilling their workforces, Meeker said. She cited AT&T as a best-in-class example, with 77% of the company’s workforce actively engaged in retraining today. What’s more, 61% of promotions are received by retrained employees. AT&T has allocated $1 billion for web-based employee training, working with partners such as Coursera, Udacity, and universities.
In addition, freelancers understand the importance of upskilling, according to Meeker, with 55% stating they have participated in skill-related training in the past six months.
“We are living in a period of unprecedented change, unprecedented opportunity, and an unprecedented need for responsibility,” Meeker said.
Click here to watch the video of Meeker’s CodeCon presentation.