Updated: Feb 10, 2019
Slowing Growth in Internet Access
The Internet Society estimates that in the year 2000, approximately 400m people in the world had access to the internet. As the table below from Internet World Statistics shows, that number has passed 4b by the end of 2017.
This dramatic growth was fueled largely by the rise of cheap Android smartphones and the proliferation of Wi-Fi networks around the world. The average selling price (ASP) of Android phones globally is now under $200. Lower prices allowed smartphone sales to surpass feature phone sales for the first time in 2017. This has been amplified by the incredible growth in public Wi-Fi hotspots around the world. The World Wi-Fi Alliance predicts that there will be more than 400m public hotspots by 2020.
The result is that for the first time, more than 50% of the world’s population has access to the internet.
While it is easy to look at this chart and think “wow, there are still billions of people that don’t have access,” the rate of growth is slowing. In 2010, the rate of growth was greater than 12% Year on Year. In 2017, the rate of growth had fallen to less than 7% Year on Year. It is expected that this number will be lower still in 2018.
Growth in new smartphone shipments has slowed as well. According to Statista, the total number of smartphone shipments fell for the first time in 2017. While sales are expected to rebound this year, sales are expected to be relatively flat over the next 4-5 year.
Media is Eating the Internet
While growth in number of users has started to slow, there is strong continued growth in the amount of time the average user spends each day on the internet. There has also been a dramatic shift in the type of usage. Most of the growth has been in digital media engagement. According to eMarketer research, the average user spent 5.6 hours a day engaged with Digital media alone. This is up from 3.2 hours in 2010, and almost all that growth has been on mobile devices. In 2010, the average user spent about 20 minutes a day engaged with mobile media. In 2015, it was 3 hours and 20 minutes. That is a staggering growth curve.
During the same period, text-based usages has remained essentially flat. Cisco estimates that in 2016 video made up 51% of all internet traffic (with 18% being web/data) and that by 2021 video will be at 67% f all traffic (with just 11% being web/data).
There are several factors driving this trend. The most significant is the accessibility of higher speeds. Media engagement requires more bandwidth. According to OpenSignal’s research, the wide-scale deployment of 3G and 4G networks has means that there is enough mobile bandwidth available almost everywhere in the world to perform any basic internet task on a mobile device. Even in Afghanistan, there is an average of more than 2Mbps of bandwidth.
When you combine this with the dramatic rise in access via Wi-Fi, bandwidth is no longer an inhibitor. The other major contributing factor is growth in the size of smartphone screens and the resolution. The final factor has been the rise of new types of media. An interesting example is the rise of e-sports and Twitch. In 2012, Twitch streamed approximately 3 million hours of video a day. In 2018 it will likely pass 18m hours a day.
The Impact on the Tech Industry, Especially Startups
For the past 5-10 years, app developers have been able to ride the growth curve of internet users to capture an ever-growing number of users for their apps. It is easy to grow quickly when the user base is expanding. But the days of riding the wave are over. It is much harder to grow after you reach 50% market penetration.
App developers will need to shift their focus from capturing more users to capturing a greater percentage of the time users spend on the internet.
This will require developers to pay great attention to UX/UI with a focus on ease of use. And it will require them to provider better content and “usefulness” in the apps they develop and deliver to consumers.