Every year, Mary Meeker’s highly anticipated Internet Trends report helps set the agenda for the global conversation about the technology industry. The 2018 version, which dropped this week, is no exception.
A partner at the influential venture capital firm of Kleiner Perkins Caufield & Byers, Meeker covers virtually all the tech bases, from the growing technology competition between the United States and China to the increasing role of on-demand work (the so-called “gig economy”) to where your tax dollars really go.
We urge you to check out all the nearly 300 slides in the report (embedded below), but here at New Relic we were especially interested in her observations around four key topics:
- Internet growth
- Changes in cloud computing costs
- Why enterprise applications must satisfy sky-high digital customer experience expectations
- The increasing importance of online subscriptions
Internet growth continues, but more slowly
Meeker’s report cites figures showing that while the number of internet users around the word continues to grow, the pace of that growth is slowing a bit. She says the total number of global internet users hit 3.6 billion in 2017, for a 49% market penetration. The internet user growth rate, however, slipped to 7% year over year, down from 12% last year. And she warns that as market penetration tops 50%, additional internet growth will be increasingly hard to come by.
That’s important for many internet-dependent companies (which is just about every company these days). Firms accustomed to ongoing fast growth in the number of potential customers, especially in developing nations that don’t yet have wide internet usage across their populations, may have to work harder to find and convert new customers.
On the other hand, internet usage growth remains solid, rising more than 4% to a whopping 5.9 hours a day per adult user! The biggest, fastest growing slice of the pie? Mobile, of course, especially mobile video. (Is almost 6 hours a day too much?, Meeker asks. Her answer is that it depends on how the time is spent.)
According to Meeker, a powerful combination of innovation and competition is driving internet product improvements, usefulness, and usage. To take advantage of that growth, then, enterprises have to make sure they stay ahead of the competition through constant software innovation.
Cloud computing gets even cheaper
Fortunately, the rise of cloud computing is making it easier for enterprises to focus on technology innovation instead of merely keeping the lights on. Meeker cites the rise of cloud computing as a “Big Bang” effect, and notes that cloud computing costs declined 11% year over year in 2017, versus a 10% yearly decline before that. Despite the cost decline, cloud service revenue growth continues to skyrocket, hitting 58% quarter over quarter in the first quarter of 2018, up from 54%. The demand is just that strong.
As noted above, those price declines are critical, because along with the cloud helping to relieve software shops of the burden of operating infrastructure that may not provide competitive advantage, they leave those companies more resources to spend on software innovation instead of operations.
Sky-high digital customer experience expectations for enterprise software
Enterprise software shops will need all of those extra resources. That’s because customer expectations for enterprise software also continue to soar. Fortunately, usability and usage of enterprise software is improving, Meeker’s report says, as companies like Dropbox pioneer consumer-grade products designed to appeal to enterprises, and upstarts like Slack deliver enterprise-grade products with a consumer look and feel.
The modern enterprise success formula? Meeker quotes Kleiner Perkin’s Ilya Fushman, who says it starts with building an “amazing consumer-grade product.”
What does consumer-grade mean in this context? Impressive functionality and simple ease of use, to be sure. But don’t forget the importance of meeting customers’ performance expectations. And that requirement extends from e-commerce to streaming media to online advertising to search—and even to healthcare apps and software, Meeker says, as that industry is also undergoing a consumerization process.
With the rise of consumerization, enterprise customers increasingly have a choice of solutions, and you can’t afford to let slow performance send them to your competition. As Meeker quotes Slack founder Stewart Butterfield: “Every petty irritation will stop them and give them the impression that it is not worth it.” The top U.S. internet companies know this, and have worked hard to attain high levels of customer satisfaction. Everyone else is tasked with doing whatever it takes to keep up.
The rise of online subscriptions
Another new development cited by Meeker makes the competition to deliver a great digital customer experience even more important. The 2018 Internet Trends report highlights the evolution of internet sales from “buying to subscribing.” Online subscription services have grown dramatically, Meeker says, driven by a variety of factors, including the quality of the digital customer experience.
In a subscription model (which obviously includes Software-as-a-Service, or SaaS), the customer acquisition process becomes even more critical as the lifetime value of a customer goes up. Given the amount of money companies spend to acquire subscription customers, losing them due to poor performance, for example, becomes prohibitively costly. Companies simply can’t afford to deliver a substandard digital customer experience, and those who can deliver a superior experience are positioned to overtake their competitors.
Put it all together, and Mary Meeker’s Internet Trends 2018 report makes two things pretty clear for enterprise software teams: First, while individuals increasingly rely on the internet for just about everything, you can’t expect the population of internet users to increase forever. Second, leveraging the power and efficiency of the cloud is increasingly essential to meeting the ever-rising expectations of consumers and enterprise software customers. If we didn’t know that already, Meeker’s 294 slides make it pretty hard to ignore.