Emerging markets are driving the web, no bubble in sight: The Meeker files

Emerging market countries are driving internet growth. Thing is, it’s not the only the usual BRIC suspects that are steering the ship.

In fact the countries that are really surging ahead include likes of The Philippines, India, and Indonesia. That’s according to the 2012 Internet Trends report from renowned web analyst Mary Meeker, sometimes referred to as the “Queen of the Net”.

Meeker, a partner at VC company Kleiner Perkins Caufield Byers (KPCB), unveiled her annual trends report at All Things Digital’s D10 conference.

According to Meeker, there are now 2.3-billion web users around the world. Despite continued growth however, global internet penetration only stands at around 32%.

The mobile web is also growing at a phenomenal rate. In fact KPCB estimates that mobile now accounts for 10% of all web traffic.

The company says there are now 1.1-billion people with 3G subscriptions. That seems like a lot, but it actually only represents around 18% of the world’s total mobile subscriptions.

While traditional emerging market powers might not be leading the way in web growth, they are leading the way when it comes to 3G growth.

In the past year, 3G subscriptions in India grew by a massive 841%. Subscriptions in Brazil and China meanwhile grew by 99% and 115% in the same period. In fact, that kind of growth has seen mobile internet usage in India surpass desktop usage.

Outside of the BRIC powers, Vietnam experienced the biggest 3G expansion, growing by 358% in the last year. Despite pioneering a number of mobile technologies like MPesa, no African country cracks the top 15 in the list of countries with most 3G subscribers

Given that the vast majority of mobile devices with 3G capability are smartphones, it’s hardly surprising that they have a long way to catch up before they become the norm. Right now, there are around 935-million smartphone subscribers: a fraction of the 6.34-billion global mobile subscribers.

As those smartphone subscriptions grow, it looks like Android will become the dominant mobile OS. At present Android lays claim to around 56% of the mobile OS market. Add in the fact that Android adoption is happen four times faster than that of iPhones and you get an idea of just how dominant it could come to be.

All that growth is great news for all the mobile evangelists out there, but not so great news for anyone whose livelihood depends on the more highly monetised desktop web.

The effective cost per mile, or the amount you can charge for every click on an advert, is five times lower mobile than it is on desktop. The average revenue per user (AARPU) on three of the web’s biggest social properties — Zynga, Pandora, and Tencent — is between 1.7 and five times lower on mobile than it is on desktop.

While mobile does mean more people are clicking on more ads more often, those clicks cost less, meaning that they’re actually slowing growth in ad revenue.

That said, Japanese game makers like GREE and CyberAgent are showing that it is possible to increase your revenue from mobile users, and even get more out of them than your desktop users.

If mobile follows the “ad money follows eyeballs” dictum, then the platform should be making a lot more money in the next few years. In fact, Meeker reckons there’s a US$20-billion opportunity in mobile ad spend in the US alone.

Beating the Bubble

Meeker points out that a string of tech IPOs, while compelling in market value, have been somewhat less compelling in performance. She puts this down to public market investors being a lot more sceptical than private investors. In fact, out of the biggest tech names to have gone public in the last year, only LinkedIn has shown positive growth.

Meeker points out however, that your IPO is more likely to be successful if everyone is pulling in the same direction. Moreover she reckons we’re actually in a cycle of tech growth. In other words, things aren’t about to come crashing down any time soon.

Re-imagine everything

Meeker also points out that we’re living an age where things we’ve come to take for granted are constantly being re-imagined. In 1990, Encylopaedia Britannica hit peak with 120 000 editions sold. This year it closed down for good, its demise precipitated first by Microsoft Encarta and then Wikipedia.

Products like Square, Pinterest, and Uber are forcing us to re-imagine everything from cash registers to scrapbooking and calling a cab.

KPCB Internet Trends 2012