The tech world has come to expect Mary Meeker‘s annual internet trends report like clockwork. She and other analysts at Kleiner Perkins Caufield & Byers (KPCB) put together their massive presentation every year, examining major trends across the internet. We recommend reviewing the entire report, but we also know not everyone has the time to do so. That’s why we combed through the report to bring you the most relevant trends for your subscription business.
First we’ll discuss some observations about internet and mobile usage as well as some related global economic trends. These help set the stage for trends in digital advertising and media. The most important takeaway is that the days of easy growth are over.
Because the days of easy growth are over, subscription businesses have to deliver excellent customer experiences that forge long-term subscriber relationships. We also take time to cover the trends in data security, which have a direct impact on every subscription business.
Internet Usage and Mobile Trends
The report spends time discussing the state of internet penetration and potential for growth in the years ahead. Their lesson is cautionary, but not without hope. According to KPCB’s research, internet penetration growth rates are plateauing. While this trend is less pronounced in India, the global numbers are clear, as shown in the figure below.
They observed the same trend in the growth of smartphone usage.
These two trends have a serious implication for those who are trying to woo new customers. First, in well developed markets, companies will be facing fierce competition. Simply being present on the internet or having a mobile platform alone is not enough to grow your subscriber base. Customers are saturated and savvy, and they are demanding seamless user experiences and a positive relationship with the brand. Delivering those is how subscription businesses will differentiate themselves in the market.
In less well developed areas the potential for massive growth is there, but obstacles to growth are significant.
While users may be capable, and pricing models are moving to meet groups with lower incomes, there remains a massive deficit for developing economies in the incentives and infrastructure that make participating in online life worth it.
For both well-saturated and underdeveloped markets, the trend from this report is clear: Easy growth is behind us. Success in this era means being innovative and competitive.
Global Economic Trends
The report takes a look at plateauing growth trends in terms of the global economy as well. It examines five major drivers of economic growth over the past two decades that are quickly “losing mojo.” These factors include the the slowing growth of: connectivity, developing economies and global population; as well as the stagnation of interest rates and increasing government debt. While dealing with these factors creates significant risks, it also creates opportunities. Those businesses that can deliver increased efficiency and innovation while lowering prices and creating jobs will be the winners.
In light of these technological and economic trends, the online world is getting more competitive in developed and developing economies. This means subscription businesses must find the most innovative advertising media and distribution channels while also meeting customer needs as they change and grow.
KPCB sees most advertisers overspending in traditional media, or what they call legacy media. So while four percent of consumer time is spent viewing print media, 16 percent of advertising dollars in 2015 went to print media. They see the greatest opportunity for U.S. advertisers in mobile advertising. While U.S. consumers spend about 25 percent of their time on a mobile device, it only accounts for 12 percent of the 2015 advertising spend.
If mobile is the channel for advertising growth, then video is the medium. The report shows a massive growth in not only the use of video, but also an evolution in the way consumers interact with video today. KPCB puts this evolution at the end of a long line of changes for video since its inception.
The evolution in how users interact with video means that brands must deliver more authentic and entertaining video content. And it must appear in a relatable context. Based on the channel, these videos are often brief (think 6 seconds Vines). Snapchat has been the platform with the most success in this area. Branded image filters for brands like Taco Bell or sporting events have been massively popular because they were accessible, allowed users to define the context in which they appeared, and they were wildly entertaining.
When it comes to Snapchat, the report identifies what they call Snapchat’s 3V advertising:
How many frantic articles have been written about the millennial generation? They’re either the end of humanity or the saviors of civilization, but usually nothing in between. The internet trends report does focus on millennials, but without much of the over-the-top language we’ve become accustomed to. They make the very important point that, “Each generation has slightly different core values and expectations, shaped by the events that occur in their lifetimes.” Taken this way, the millennials are exactly like every generation, except for the events that have occurred in their lifetimes.
Recognizing these trends among users is essential for delivering a superior customer experience. Messaging, advertising, customer support, and communicating about important business and technological development are all influenced by your intended audience. Different generations want to connect in distinct ways.
Does Customer Experience Drive Revenue?
The report does not address this question directly. The trends they point out, however, echo trends the subscription market has been tracking for the last couple of years. Namely: customer experience is a key factor in driving business success. While we were reviewing KPCB’s report, we wanted to investigate whether, in fact, customer experience is a revenue driver.
According to Forrester, it depends. They note that, “companies that deliver a better customer experience tend to retain more of their customers, get more incremental purchases from their customers, and attract more new customers through positive word of mouth.” Whether or not this drives revenue as well depends on two factors.
In industries with differentiated customer experiences among competitors, where customers are free to switch brands easily, then customer experience is a significant driver of revenue. So while big-box retailers have a fairly uniform customer experience, digital goods have widely varying customer experiences. Likewise, switching from a health insurance provider may be difficult if it is tied to an employer, changing from Uber to Lyft takes barely any effort at all.
Digital goods vendors, and especially companies that rely on subscribers’ regular renewals, stand to gain the most from providing superior customer experience. They are also the most at risk of alienating customers with poor CX.
Ballooning data usage and plummeting data storage costs represent a double-edged sword. More data has spurred innovations for managing and analyzing it. Businesses are making better use of customer data for greater efficiency, improved customer experience and better decision making than in the past.
On the other hand, holding customer data puts a business at risk, whether from hackers or governments. Customers are more aware than ever that their data is both valuable and at risk. Recent events have only heightened consumers’ concerns and businesses’ efforts to deal with the problem.
In the European Union, the revelations about U.S. government spying brought an end to Safe Harbor, a data protection agreement between the EU and the U.S. The EU is also implementing their General Data Protection Regulation, set to take effect in 2018. In the United States, customers are expecting companies to make data security a priory, with over 95 percent of consumers somewhat or very concerned about their data. That’s literally almost everyone.
Succeeding at subscriptions amidst these trends calls for authentic customer communications and superior customer experiences. Whether delivering a video over mobile applications or image rich emails, investing in the best customer communications will increase recurring revenue for purveyors of digital goods. Keeping ahead of data privacy compliance is key as well, with almost every customer expressing concern over how companies will use their data.