Friday, July 3, 2015

Mary Meeker's Latest
































"Delphic Sybil", Michelangelo de Lodovico Buonarotti Simoni, 1509 (source: fineartamerica.com)

"Victory Passes Back and Forth Between Men." - Paris, contemplating the wantonness of winged Victory, in Homer's 'Iliad'

Cassandra, priestess of Apollo and daughter of King Priam of Troy, was blessed with the gift of divination by her patron deity yet simultaneously cursed to never have her prophetic utterances believed for refusing Apollo's advances. She predicted the abduction of Helen of Sparta by the Trojan prince Paris, the resultant war with Mycenaean Greece, the Trojan Horse ruse of Odysseus, the ultimate destruction of Troy, the murder of the Mycenaean leader Agamemnon, the decade-long wanderings of Odysseus (as recounted in Homer's Odyssey), and the escape of prince Aeneas to found a new Troy by the establishment of the settlement of Alba Longa in Italy (which would one day rise to become Rome, The Eternal City.) Yet despite the truth of her visions, the curse held true thru the course of her life and all her auguries were received with scorn and derision. Her visions were so powerful and the public rejection of them so painfully distressing that the royal princess was driven to madness. 

Though Cassandra is a mythological figure, her story, like all mythologies, likely has at least some basis in fact. If Cassandra was indeed a real historical figure in the Trojan court in the days of pre-Iron Age Greece around 1000 BC, then my guess is that she was a hyper-intelligent woman, intensely frustrated and embittered by the inability of others to see what was glaringly obvious to her while at the same time not having the power to do anything about it.

Prophecy is a risky business. After all, nobody has perfect knowledge of the future and educated guesses from even the wisest of us can still be partially or completely wrong. The best and most experienced strategic people in High Tech are all cognizant of the fact that they might be able to make some reasonable estimates of what the future holds for the industry over the next 1-2 years, but anything more than that is mostly speculative.

Nonetheless, prophets and seers are just as valued (and disbelieved, even when they're right) in the modern age as they were 3000 years ago in the southern Balkan peninsula and western Asia Minor. A modern day Sibyl of High Tech is Mary Meeker, the "Queen of the Net" who has long been followed for her insights into all things internet. 

Meeker has traditionally released her prognostications towards the end of May for many years now. Having spent nearly two decades at Morgan Stanley, her last few reports (in my view) while at the piratical Wall Street firm started to lose relevance in her last couple of years there. They improved dramatically once she left in 2010 to join Kleiner, Perkins, Caufield and Byers, with her latest report of 5/27/2015 one of the best I've ever seen from her.

On this blog, I spend a lot of time focused primarily on semiconductors, but also watch the systems markets and the global economy in general to offer the broadest possible perspective. Today, we'll examine Mary Meeker's latest Internet Trends report and examine how she sees things, making contrasts with my own blogging where it's pertinent.

The report is a monster at 196 slides. To follow along with today's commentary, you can find Meeker's report at the link below:

http://www.kpcb.com/blog/2015-internet-trends


The Internet - Economics, Politics and Civilization



Source: helmink.com

"Il mondo รจ un bel libro, ma poco serve a chi non lo sa leggere."
The world is a beautiful book, but of little use to him who cannot read it. - Carlo Goldoni

Meeker quickly gets to the heart of the matter by making connections between worldwide internet penetration and mobile phone usage. Pages 4 and 5 contain the meat while pages 10 and 12-14 provide supporting data.

Page 4 claims there are 2.8B internet users globally (39% penetration.) Considering that it takes highly complex and expensive computing equipment & infrastructure to gain access to the net, such a penetration level is actually quite impressive. This also suggests that there is ample room for growth, perhaps even a doubling of the current level (including everyone on the planet except infants and outliers such as deliberately technophobic populations like the Amish, xenophobic cannibal tribes on certain islands of the Andamans or the hermit kingdom of North Korea.) However, this also presupposes the economic strength to support deployment of the necessary PPE will become a general reality for the entire globe. When we can achieve such a reality is a big 'if.'

Page 5 begins to tie the global mobile phone market to the level of internet reach. With a staggering 5.2B mobile phone users (73% penetration), a 60/40 split between feature/smartphone users suggests that the mobile phone market is more or less saturated and we can expect no further organic growth - just replacements, cannibalization of feature phones by smartphones as handset and service pricing declines, and perhaps a future migration to personal processors that represent a merger of tablets and smartphones. When comparing the latest iPhones and iPads, one gets the impression that this convergence is already close to becoming a reality, so that migration may begin sooner than anyone thinks.

Page 10 offers information that supports both pages 4 and 5. Yet though Meeker shows China driving smartphone growth in 2013 and 2014,the latest data shows that this geography has saturated as well:
http://www.zerohedge.com/news/2015-05-11/chinese-saturation-reached-worlds-largest-smartphone-market-suffers-first-drop-6-yea

Page 12 provides supporting data bolstering the argument that developing countries provide the primary opportunity for further internet and smartphone growth but are hampered by lack of spending power and native infrastructure. Whether or not these countries grow depends, of course, on each of them individually as they manage their affairs. 

This page also makes evident how the entire world is realigning, as economic (and thus political) power shifts from west to east. India continues growing and climbing out of the third world and china nearly stands as a 1st world nation already except for a large rural population (70% of its total citizenry)  that has only partially shared in the economic advance experienced by their urban cousins. The West, in the meantime, saddled with horrific sovereign debt loads and financial sector malfeasance, seems stagnant by comparison and is evidently poised to harvest the bitter fruit of its decades-long shift towards socialism as its individual polities deterioriate into second and, in some cases, even third world status. (We'll come back to this later on, as Mary Meeker herself has quite a lot to say about this as well.)

page 13 outlines the growth of video traffic on the internet and thru mobile platforms. Page 14 reinforces the supposition that it will be mobile platforms which will dominate internet traffic in the future. Consoles, desktops and workstations won't entirely disappear, but will transform into supporting characters for a world dominated by mobile computing. In a sense, 'wired' computing platforms will become peripherals, in the same way that IoT products will be peripheral devices ultimately controlled by mobile systems. One can see the early stages of this already, as apparently the STB market has plateau'd and begun its decline:
http://advanced-television.com/2015/06/29/analyst-stb-market-contracts-for-the-first-time-in-12-years/

Interlude



If the above embedded video doesn't work, please use the following link:
https://www.youtube.com/watch?v=mGQLXRTl3Z0

Overall, I'd say this is mildly positive news for the High Tech industry for both the short and medium term, though the heady days of explosive mobile computing revenue growth are clearly behind us. Mobile technology will continue to evolve, and though unit volumes may increase as the number of smartphone and internet users grows in developing countries, pricing for mobile platforms, infrastructure and services will be very depressed.

The social and political implications, however, are Brobdingnagian. Granted, we can expect only moderate or perhaps even minimal revenue growth from mobile telephony, as cost-based competition will turn the sector into a pond of piranhas over the near & medium term. But consider the broader implications of what has already been achieved. Just about everyone on the planet can now afford a feature phone available for as little as $25 (sometimes even less) which typically includes 1 year of service and a free texting capability such as WhatApp. No matter the level of development or physical isolation of a given country or its people, mobile telephony has reached essentially every corner of the globe. 

The day that these same people can get their hands on internet-capable smartphones for the same cost will be revolutionary in general, and utterly cataclysmic for authoritarian regimes worldwide. Once the developing world is saturated with smartphones sporting service plans they can afford, their ability to stream media will result in upheavals in political, economic and social frameworks. Authoritarian governments will try to block access, but even today are frustrated by their own lack of success. Ask the mullahs of Iran what gives them migraines and they'll tell you it's their own citizens with smartphones sending and receiving internet text, images and videos from both domestic and foreign sources - transmissions which the Iranian security services can never entirely block or control. The key to the popular overthrow of an increasingly tyrannical Mohamed Morsi was the Egyptian public's access to the internet and mobile telephony, allowing demonstrators to globally broadcast events, call for support and coordinate with each other in their efforts to topple the regime.

When smartphone usage is globally ubiquitous and the information & streaming media of the internet is available to all, it will inspire and energize people worldwide to change their circumstances. Governments used to having their way with impoverished populations will find themselves under irresistible pressure to serve their people much better and more honestly. The long term effects will likely be analogous to those which launched Europe into the Renaissance and Enlightenment. 

Consider how inescapable is the influence of mobile communications, even to such retrograde movements as ISIS. With all their blabber about reducing the entire world to a 7th century 'paradise' that exists only in their fantasies and their criticism of Al Qaeda as being 'too westernized', the ISIS cadres frequently use smartphones to make propaganda movies and post them on youtube, as well as take pictures celebrating their latest genocidal atrocity - whether it be throwing gays off 10 story buildings or executing 74 children for not fasting during Ramadan. Their regressive worldview is already contaminated, and unless they withdraw from the world completely like the Amish, they will find that there is no going back.


The Internet - Bifurcation, Speciation and Natural Selection































Source: zsite59.blogspot.com

Nature, red in tooth and claw - Alfred, Lord Tennyson

The 'middle section' of Meeker's presentation brings the focus back to its primary subject matter: the Internet itself. One can see how the sector continues to evolve in ways that defy the expectations of many pundits and generate a seemingly endless flood of surprises thru widespread experimentation.

Pages 16-25 show how the growth of interest in mobile computing platforms for media and information access is affecting advertisers, e-commerce and media presentation formats. Everyone is trying to adapt themselves to the small rectangular screen format, as they have no choice in the matter. Nevertheless, the iPhone 6 and evolutions of the iPad demonstrate that bigger screen sizes can be accommodated by users. This leaves both hardware providers and media sources to struggle with the problem of how to make content sufficiently attractive to still be effective within a frame that will always be smaller than either a desktop display or a television screen, or how to offer a screen size that leaves content providers at least moderately satisfied which users are still willing to carry around. (We will explore this subject again later in the editorial.)

Pages 29-44 attempt to show how mobile applications startups are no longer all focused on pursuing consumer opportunities but are trying to develop applications and solutions for the enterprise in order to bring big data, ERP, spreadsheets and the like to mobile platforms. This is the first section of Meeker's report which warrants some criticism. 

I am currently involved in cloud-based ERP SW and SaaS with a client. Large data volumes and complex datasets simply cannot be presented in their entirety on a smartphone, nor can sufficiently useful condensations and abstractions of such data. Without a large display, you are assured of losing critical information in both volume and depth and can deal with issues no worse than a 1st order of complexity. 

In my experience, none of the current mobile applications even come close to the necessary level of detail to make them more than minimally useful. Perhaps they will evolve and mature to the point that they become applicable for certain limited functions or abridgements. Even so, they will never provide anything much more than a snapshot at a first or (perhaps) second order of depth and complexity using such a small display. To do real work with analytics and such, you still need to be in front of a workstation in order to have a workable display size. Otherwise, one can do little more than dabble.

One of the things that made the last few of Meeker's reports for Morgan Stanley uninteresting is that they started to look like ads for the broker's Web 2.0 investments and IPO plans. This section in the May 2015 report hearkens back to that. Shame on you, Mary.

Pages 47-56 discuss the growth of messaging apps. Message volume has exploded worldwide, but few have found ways to genuinely make significant revenues, with Line and TenCent's WeChat seeming to be remarkable exceptions. 

Meeker believes these apps may evolve into communications highways that serve as crossroads to e-commerce with the ability to support not just text, but images and perhaps video as well. Once again, Mary Meeker demonstrates keen insight into the latest Web happenings, their evolutionary paths and future potential. Her high reputation as a modern day Seeress for the Internet is well-deserved. The only thing that is likely to thwart the realization of her prophetic vision for messaging apps is.......screen size. As you can see, this is becoming a recurring theme in today's editorial.

Pages 57-65 discuss how most internet content and traffic is generated by users and how it is they, and not corporate or government interests, which are the primary driving force in shaping the internet. One can see how the preponderance of internet activity comes from individuals creating, sharing and receiving text, images and video. 

The power of the individual has been greatly magnified by mobile platforms with internet access. People upload tremendous quantities of content on trivial subjects - dining at a favorite restaurant, visiting family and friends, vacationing, capturing a video game stream and offering a running commentary and review, etc....

Yet there is hidden value in this blizzard of user-generated content. Reviews on restaurants, products and services are almost all generated by individual users. News media organizations are even monitoring the multitude of messaging apps and social media sites to get quick notification and content on breaking stories from eyewitnesses.

Mobile computing and the internet have also released the ability to create & distribute media products and transact business to the general public. Video documentaries and audio tracks are available now from independent creators, developers and publishers. Even purely written content is flooding the internet in the form of books, articles and blogs, with text supplemented by multimedia content that traditional graphic novelists could only dream of just twenty years ago. The Vigil Futuri blog is an example of that.

Interlude #2


https://www.youtube.com/watch?v=sE1WoMocTlw
Note: Renee Fleming does a rather different bu nevertheless very good version of this as well:
https://www.youtube.com/watch?v=hsBt9yZDslA

As discussed above, Meeker's enthusiasm for the potential of further internet developments in multimedia, advertising, e-commmerce, enterprise software, messaging and social media are all constrained by the limitations of mobile hardware - today's smartphones and tablets. The screen is just too damn small. It would be a bit much to expect consumers to start carrying a Samsung HDTV under their arm. Does this mean that further advancements and improvements in the mobile internet experience are virtually impossible?

Perhaps the solution lies in one particular interpretation of the word 'virtual.' There are already a variety of VR headsets under development by industry heavyweights - FB's Oculus Rift, MSFT's Hololens and the Sony Morpheus, to name a few of the most public efforts. It is likely that such devices will be the only way for mobile users to overcome the screen size limits of their hardware platforms.

Content providers have barely begun exploring the possibilities offered by such a spectacularly large and deep multimedia canvas. The implications to how we engage with ads, user videos and entertainment are almost overwhelming. Though significantly more limited in their operational parameters, the head-mounted wearables such as Sony's SmartEyeGlass, Epson's Moverio, the Toshiba Glass and perhaps even Google Glass should be able to make their mark here as well, at least in a more restricted set of applications.

We've already become accustomed (well, some of us have) to seeing people walking around in public apparently talking to the air while actually carrying on a phone conversation thru an out-of-sight Bluetooth earplug. Over the next 5-10 years, it might become commonplace to observe people wearing headsets in espresso cafes who are typing on invisible keyboards or moving windows & pressing icons on a desktop display only they can see.


















Sources: youtube.com,  huffingtonpost.com, mobiusengine.co.uk

The ramifications of such a wondrous peripheral for mobile computing are incredibly wide-ranging. When somebody streams a live video of some ongoing event, you can be there to experience it - virtually.

Making this feasible will take quite a lot of engineering work. The software will be incredibly demanding in all multimedia spheres, including 3D effects. The mathematical aspects of interacting with a virtual environment are being worked out in a desktop environment (see my previous 2-part post on machine vision, in particular the Fraunhofer discussion towards the bottom: http://vigilfuturi.blogspot.com/2015/01/machine-vision-part-2-argus.html ), but that computing capability will need to be extant in a mobile form factor (either the headset, handset or both.) Some of the VR headset developers are already far down this road, but there is still a huge amount of hardware and software engineering work to do.

There are further technology implications which ripple across the High Tech industry. Power management for such a wearable peripheral will require innovation in chip design & technology as well as batteries, charging methods and electrical power delivery in general. Handsets, the VR peripheral and the mobile communications infrastructure will need to be capable of handling VR bandwidth demands and data volumes. Qualcomm, Mediatek, Nvidia, Broadcom/Avago and Intel/Altera better be paying very close attention to this sector....

Pause

"Aliquod crastinus dies ad cogitandum dabit."
Tomorrow will give some food for thought. - Cicero

I actually had ambitions to finish this discussion in one blog post, but between my own bandwidth considerations and the size of the topic, I find myself having to plan the rest of this out for at least one more editorial and possibly two. There is still a great deal to discuss concerning Mary Meeker's report beyond page 65, and we'll take up the discussion again in the next installment.