Five Important Takeaways From The Latest Kleiner Perkins Internet Trends Report

Each year, venture capital firm Kleiner Perkins releases its Internet Trends Report curated by partner Mary Meeker. At 294 pages, it’s a bit of a heavy lift, so I’ve saved many of you the effort by organizing what I believe to be the most noteworthy findings into five subject areas.

They are: The global data/privacy conundrum; Google vs. Amazon; social media’s role in product discovery; from buyers to subscribers; and how immigration fuels innovation.

Released in May, the Kleiner Perkins report came at an interesting time regarding the subject of data privacy. The European Union’s Genera Data Protection Regulation (GDPR) would take effect that month, even as Facebook was being grilled by various and sundry critics over its myriad data lapses. 

Meeker succinctly sums up the data issue by noting a prevailing “privacy paradox.” To wit, the more feedback consumers yield regarding products and services via their personal data, the faster companies can respond with better products and services. But in between are global regulators, whose views on privacy are all over the map, as are their inclinations to impose financial penalties.

As I write this, Facebook’s stock price was tumbling mightily after the release of its second-quarter earnings. Among other bad news, the company attributed the loss of 1 million users in Europe to the GDPR. That’s not a whole lot compared to some 2 billion-plus overall, but Facebook also has hit a wall with new user growth in both Canada and the United States, its two top markets. Question: will U.S. regulators toughen up on Facebook and, if so, to what financial impact?

One of the values of a report like Meeker’s is its ability to crystalize long-term trends. Such is the case with her take on Google—which started as an ad platform and shifted to commerce—and Amazon, whose evolutionary path is the exact opposite. Along the way, peoples’ search habits have changed to the extent that, according to Kleiner Perkins, 49% of product searches in this country now start on Amazon versus 36% on search engines. 

A big edge for Amazon is that people order stuff directly from its website, unlike Google, where most fulfillment goes elsewhere. This helps to explain why Amazon’s advertising business is on fire, and it’s only going to get hotter given ongoing investments in programmatic, self-serve solutions. How hot? eMarketer had forecast Amazon would generate $3.7 billion in worldwide ad revenue in 2018, but the company's first quarter earnings report suggested that its ad business exceeded $2 billion in that quarter, as Advertising Age reports. Google and Facebook are certainly paying attention.

Amid all the dialogue about the potential negative impact of social media on peoples’ lives, one thing is clear from Meeker’s report. Social media platforms continue to be a powerful way for brands to put themselves in front of consumers. She presents a survey by Curalate showing the extent to which people in the United States ages 18-34 had discovered retail products on Facebook (78%), Instagram (59%), Pinterest (59%), Twitter (34%) and Snap (22%). Moreover, among survey respondents ages 18-65, 55% bought a product online after discovering it via a brand’s social media post. On the flip side, while e-commerce click-through rates on Facebook have risen from about 1% in early 2016 to 3%, competition for top placements have caused effective cost-per-thousand metrics to rise almost twice as fast as the click-through rate in the space of a year. 

Have you pedaled a Peloton yet? The exercise-bike/streaming classes pioneer is among the latest to leverage the benefits of subscriptions, in Peloton’s case $39 monthly for access to more than 8,000 on-demand classes (in addition to the $1,995 machine plus $250 for delivery). 

Peloton is among a growing roster of companies that have harnessed the elements of online subscription success: Access, Selection, Price, Experience and Personalization. With year-over-year subscription growth of 173%, Peloton joins double-digit leaders like Amazon, Netflix, Spotify, Dropbox, Stitch Fix and LegalZoom. In Spotify’s case, it had zero paid subscribers when it launched in 2008, but now 45% of its monthly active users have converted to that category. And it’s not just the newcomers who are racking up the gains. Sony PlayStation Plus enjoyed a 30% increase in 2017, to 34 million subscribers. 

As a supporter of legacy journalism, it’s nice to see that The New York Times racked up year-over-year subscription growth of 43%, although some people within the Beltway might disagree.

Finally, immigration has always been a complicated subject, owing to its human, economic and political ramifications. What’s far simpler to see is its impact on the continuing rise of technology. According to Meeker, 56% of the most highly valued tech companies in the United States were founded or co-founded by first- or second-generation Americans. Among private tech companies, there are at least 45 with a market value of between $1 billion and $72 billion founded or co-founded by first-generation immigrants. 

Ever hear of Tanium? Me neither, but its Iraqi founder has helped to create a security systems entity in California with a value of some $5 billion.