Mary Meeker is the head of Morgan Stanley’s global technology research team. In 1998 she was dubbed, ‘Queen of the Net’ by Barron’s magazine (FORTUNE), she was one of the first Wall Street analysts to cover Microsoft, Dell, Intuit, AOL, Netscape, Yahoo!, Amazon.com, VeriSign, eBay and Google (nba.com Tech Summit).

Courtesy of DePauw University

First published in 1995 by Mary Meeker and Chris Depuy, the Internet Report has become known as the ‘bible’ for the dot-com boom (FORTUNE), internet enthusiasts and investors as well as web businesses. The report examines the current state of the Internet and the major trends as well as forecasts on what effect these trends will have on the Internet in the near future.
The 2010 Internet Trends report by Mary Meeker, Scott Devitt and Liang Wu of Morgan Stanley focuses primarily on the exponential growth of mobile internet and how this affects other areas of the internet.

Below we’ve outlined the key findings that impact web businesses from Mary Meeker’s report and explained how you can factor this information into your planning to ensure your web business has the best chance to grow and thrive in the future.

All statistics stated below are based upon data obtained by Morgan Stanley Research, unless otherwise indicated.

Stock Market Update
Increases in the stock market are often a leading indicator of economic growth. The countries that experienced the greatest increase in rates are Russia (+225%); India (+120%); China (+85%) and the USA (+76%).

State of the Internet…Mobile Will Be Bigger Than Desktop Internet in 5 Years

In 2009, 5 countries accounted for 48% of the world’s 1.8B Internet users: China 384mm; USA 238mm; India130mm; Brazil 67mm; Russia 39mm.
With the exception of Brazil, the other four countries have also experienced the greatest increases in their domestic stock market.

Currently, mobile internet is experiencing a faster adoption rate than desktop internet did. The leader of the pack is Apple with the iPhone and iTouch. NTT docomo i-mode acquired 31mm users from 1999 until its 11th quarter. Since 2007 or 11 quarters, they have acquired 85mm users. From its launch in 1994 until its 11th quarter, AOL desktop internet acquired a mere 8mm users and Netscape desktop internet which also launched in 1994, acquired 31mm.
Morgan Stanley predict that within 5 years mobile users will exceed desktop internet users.
This is an important trend for web businesses, as website content will need to be adapted for mobile internet but still available for desktop internet users.

E-Commerce
Online penetration of US Retail Market

20% = Computer products (45%); Other event tickets (27%); Books (24%); Music/video (24%); Gift cards/certificates (21%) = Already thriving
10-20% = Toys/video games (19%); Baby products (19%); Consumer electronics (18%); Office supplies (13%); Flowers/cards (12%); Jewellery (11%); Apparel/footwear (10%); Movie tickets (10%) = Area for growth
<10 % = Home furnishings (9%); Cosmetics/fragrances (9%); Sporting goods/apparel (8%); OTC meds/personal care (6%); Appliances/tools (5%); Pet supplies (4%); Auto/auto parts (2%); Food/beverage/grocery (1%) = Just beginning
Source: The State of Retailing Online 2008 (Forrester Research)
The above statistics indicate which markets have the most room to grow and which have already experienced success online. Although these figures are based on the American market, it can deduced that the Australian market is quite similar perhaps not as mature and emerging web businesses can formulate their market entry strategy and positioning strategy based on whether their product is already thriving online or just beginning.

Cloud computing: Virtual servers available over the internet. Infrastructure-as-a-Service; Software-as-a-Service; Platform-as-a-Service
– Music: last.fm; Rhapsody; iTunes; Facebook; MySpace; Pandora; Amazon mp3
– Video: Netflix; hulu; Youtube; iTunes; Amazon video; Facebook
– Photos: photobucket; shutterfly; Picasa; flickr; Facebook
– Apps/Documents: Scribd; salesforce.com; Facebook; Google; iTunes
– Shopping/Stuff: yelp; Fandango; eBay; zipcar; Gilt; Google; Amazon
Facebook is the leading repository for user-generated photos/videos/comments/links to music and social games
Web businesses can use cloud computing for viral marketing campaigns by uploading content for consumers. By using a direct communication channel such as this consumers feel closer to a business and relationships can be built and maintained.

Mobile Internet Deep Dive
1. Wealth Creation/Destruction is Material in New Computing Cycles – Now in Early Innings of Mobile Internet Cycle, the 5th Cycle of the Last Half Century
This tech cycle is characterised by the reduce in usage friction via better processing power, improved user interface, smaller form factor, lower prices and expanded services. This equates to more mobile devices, such as the iPad, Smartphone, Kindle, Tablet, MP3, cell phone/PDA, car electronics/GPS/ABS/AV, Mobile video, home entertainment, games and wireless home appliances.
The current user interface is touch; the input devices are the user’s fingers and the device usage is content consumption. Web businesses must keep this in mind when creating web content and how touch can be utilised.
Each tech cycle tends to last approximately ten years; the current cycle (Mobile Internet) began 2 years ago. This is just the beginning for mobile internet and web businesses who take advantage of the opportunities mobile internet and its predicted exponential growth have to offer.

2. Mobile Ramping Faster than Desktop Internet Did and Will be Bigger Than Most Think – 5 trends converging (3G + Social Networking + Video + VoIP + Impressive Mobile Devices)
Globally, 2010 is the year 3G is predicted to reach its inflection point, that is where penetration is >20% or 1, 054, 810 3G connections. However, the Asia/Pacific region (excluding Japan) is predicted to reach its inflection point somewhere between 2011 (19%; 482, 981 3G connections) and 2012 (25%; 693, 995 3G connections). Australia’s 3G penetration rate is currently at 56%, we are the 9th in the world in terms of users and innovation.
3G is the key to the success of mobile internet but all wireless options are growing rapidly (GPS, WiFi, and Bluetooth). The inflection point is where mobile internet will start to gain momentum and web businesses need to factor this into their strategies and act accordingly.

At present there are approximately 859mm unique users of global social networking web sites and those users have spent a total of 234B minutes on such sites. Facebook is the leading social networking web site with 471mm users; MySpace has 120mm users and; Twitter has 74mm users.
Facebook provides unified communication and acts as a multimedia creation tool and repository that is available in your pocket via your mobile phone –> Messages, VoIP calls, Chat, Wall Posts, Status Updates, Share Videos/Music/Photos/Stories, Play Games.
Examples of companies/brands using Facebook to leverage social influence marketing include Texas Hold’em Poker (Zynga) 16.5 mm fans; Mafia Wars (Zynga) 11.4 mm fans; Facebook 8.0mm fans; Starbucks 6.5mm fans; Coca-Cola 5.1mm fans.
Facebook and other social networking websites can be used by web businesses to connect with consumers and nurture relationships with the utilisation of Facebook groups, fan pages and events.

For the past three years, Youtube has achieved one of the largest shares of global online usage. The rapid growth of video is driving mobile internet traffic and mobile data traffic is expected to multiply 39 times the size by 2014 or 108%. Videos are a great way of visually conveying messages from a web business.
Source: Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update 2009-2014.
If VoIP (Voice over Internet Protocol) leader Skype was a carrier, it would be the world’s largest carrier with 521mm users and retains 12% of cross-border calling minutes (34% video-enabled). VoIP is an inexpensive, effective and efficient way to contact employees, outsourced labour and clients. Another useful feature is the business listings homepage and business recommendations. The directory contains contact information and recommendations on 887,684 businesses in 20,315 countries.

3. Apple Leading in Mobile Innovation + Impact, for now – Depth of App Ecosystems + User Experience + Pricing Will Determine Long-Term Winners

Worldwide, there are 85mm iPhone users, 35mm iTouch users and 185, 000 applications which can be added to either device.
Many businesses have created their own application for iPhone and iTouch users, so they can use it on the go and receive instant connectivity with the business. This is another way to utilised mobile internet, instead of adapting the content.

4. Game-Changing Communications/Commerce Platforms (Social Networking + Mobile) Emerging Very Rapidly

Facebook has over 500, 000 application downloads available, which have resulted in over 500mm downloads by the 471mm users. The Apple iPhone/iTouch has over 185, 000 applications, which have resulted in over 4B downloads by 85mm users. Interestingly, there is a Facebook application available for download to your iPhone/iTouch.
The following applications are revolutionising commerce with constant product improvements:
– Location-based services enable real-time physical retail and service opportunities e.g. Google Maps
– Transparent pricing is instant local plus online price comparison could disrupt retailers e.g. ShopSavvy
– Deep discounts are invitation-only time-based selective sales gaining traction e.g. Gilt
– Immediate gratification through OTA (over-the-air) instant digital products and content delivery e.g. eBook on iPhone/Kindle wireless delivery in 60 seconds
Other opportunities exist with:
– Mobile coupons have the potential to generate retail store traffic and sales
– Branded mobile applications could drive incremental store traffic and purchases e.g. Starbucks card on iPhone
– Mobile push notification enables effortless monitoring of real-time transaction process e.g. eBay
– Lockerz is an invitation-only social rewards program, where members earn rewards points which they can redeem for free products and events by logging in and watching promotional videos, playing games, completing surveys and inviting friends.
Depending on your web business the above applications could be used to generate interest in your product/service as well as increase traffic and sales.

5. Massive Data Growth Driving Carrier/Equipment transitions

Increasing, mobile phone usage is about data usage and not voice. Voice accounts for 70% for the average mobile phone and 45% for the average iPhone.
In developed markets data traffic is increasingly dominating total network traffic. NTT docomo data traffic equates to approximately 90% of total network traffic. Vodafone data traffic equates to approximately 70% of total network traffic. Consumers are relying more and more on their mobile devices for the internet and content such as music, games, social networking, web search, instant messaging, news, video, personal banking, restaurant guides and online shopping. Whatever is available on desktop internet is now available through mobile internet.

6. Growth/Monetisation Roadmaps Provided by Japan Mobile + Desktop Internet

Users are willing to pay for content on mobile internet owing to…
– Easy-to-use/secure payment systems – ‘Embedded’ systems (like carrier billing + iTunes) allow real-time payments
– Small price tags – Most content subscriptions carry sub-$5 price tags
– Walled gardens reduce piracy – Content exists in proprietary environments, difficult to get pirated content onto mobile devices
– Established store fronts – Carrier decks/iTunes store allow easy discovery/purchase
– Personalisation – More important on mobiles than desktops

Users are less willing to pay for content on desktop internet owing to…
– Difficult-to-use/fragmented payment mechanisms that are more susceptible to security issues – Too many payment options for vendors/consumers and widespread fraud
– Often expensive and cumbersome to purchase legal content – $15+ per movie/DRM protection limits usage
– Open internet and piracy – Most content in digital formats is available for free (newspaper/pictures) or for illegal download (music/video/applications)
– Lack of centralised/large-scale marketplace for legal content discovery/purchase – few players beyond iTunes and Amazon.com

If you’d like to read the full report, click here