Every year, venture capitalist Mary Meeker publishes a report (“Report”) on the "Most Important Trends on the Internet.” The Report is something Verizon Ventures looks forward to reading as it provides a statistical snapshot and benchmark of the state of affairs in tech. The Report not only educates CVCs/VCs, entrepreneurs and many others in the technology ecosystem on the current state of tech, but also presents some indication of where it may go.
When Meeker’s 2019 Report was released in June, I took a closer look at the 300+ slide deck to see what trends were relevant to Verizon Ventures and entrepreneurs. I wasn’t surprised to find the Report did not cover a nascent 5G market. However, I expect it will be a significant portion of future Meeker reports as the next generation network scales and respective applications begin to transform the market. That said, there are still several interesting topics the 2019 Report highlights for entrepreneurs to pay attention to that will be influenced by 5G and the next generation network:
Global internet market capitalization has grown significantly over the past 10 years. Additionally, in 2018, global internet users reached 3.8 billion, which is over 50 percent of the population. Thirty years ago, the most valuable U.S. based companies were in capital intensive industries such as oil and gas, automotive, and other industrials. Since then, a confluence of technical innovation in hardware, software, and network connectivity has enabled scalable software solutions to efficiently monetize both enterprise and retail customers. As a result, the top U.S. companies by market cap today are in technology, are capital light, and leverage network effects from internet users to scale. Verizon’s infrastructure and technology are critical to ushering in transformative solutions. The deployment of LTE and mass mobile internet connectivity allowed a generation of enterprises to scale. With the roll out of 5G, Verizon will continue to enable new solutions and Verizon Ventures is poised to capitalize on investments that accelerate the deployment of or are enabled by the next generation network.
Between 2010 and 2019, mobile advertising outpaced desktop advertising with 33 percent vs. 15 percent of all advertising dollars, respectively. This trend can be attributed to the increasing ability of consumers to connect, work, and play through their mobile devices and the resulting time spent using them. In a 5G world, connectivity speed and bandwidth increases and latency decreases. This network evolution may change how we define a mobile device or environment. Consequently, advertising spend may grow and shift to new platforms. Some believe autonomous vehicles could be the next advertising platform to scale. However, as Moore’s law continues to be challenged, there is likely a device or environment not yet created that could supplant mobile advertising as we know it.
There is a recent trend of success in the “freemium” business model. The trend has roots in gaming and has spread to other consumer verticals as well as enterprise products. Examples of noted successes in the Report include:
- Gaming: Epic Games 27M users
- Enterprise: Dropbox 13M users
- Consumer: Spotify 100M users
Freemium business models enable companies to offer a free or significantly discounted version of their product, allowing consumers to test the service prior to purchasing it. This model is bold as the company is betting their solution is a market leader before establishing itself as one. If the model is successful and provides value to the end user, it tends to accelerate conversion rates at a pace competitors struggle to keep up with. The winners tend to get a stickier customer that has benchmarked competition and is fully invested in the respective solution. A commonality in recent winners appear to be their front end user interface (UI) and user experience (UX). The success could be attributable to back end cloud architecture that is constantly evolving, which allow for new solutions to be increasingly simpler and faster to build, test, and deploy. The architecture enables companies to spend more time and resources on designing the best platform, experience, and value for customers. The next generation network will transform existing cloud infrastructure in centralized environments, introduce a new decentralized edge environments, and further progress cloud computing. As such, entrepreneurs should understand current constraints, how new platforms can help overcome them, and start thinking about tomorrow’s UI and UX.
What do the three observations have in common? They demand companies provide fully digitalized customer experiences across mobile and/or desktop. This is not something that will go away, but it will continue to progress in a world with a faster network and a broader reach.
As an entrepreneur or investor, it is critical to keep in mind that companies founded in the 4G and LTE era will likely go down in history as low hanging fruits that were the first companies to fully take advantage of digital tools available to them without a concern for data privacy and security. Recent winners have digitized previously offline businesses and simultaneously leveraged the network effects from the internet. Any new company has a higher mountain to climb and should expect that incumbents may adapt earlier and quicker than ever before.
New, scalable companies disrupting a vertical or solving a problem that couldn’t be solved before are very hard to find. The tech community idealizes the success of unicorns, but tends to forget about past industry failures as well as certain ideas or concepts predating their careers or even lifetimes. For example, autonomous vehicles and virtual reality can trace their roots to concepts that have been around for a century. As such, it is critical to understand if an opportunity is truly different from past attempts and if market conditions could be right for success.
Technology is a flywheel that spins faster with every innovation. The prospect of a transformative next generation network should have entrepreneurs and investors questioning how fast will it make that flywheel spin, and what problems can be addressed. Time will tell, and I look forward to reading about it in a future Mary Meeker report.