Former dotcom star analyst Meeker says India and China are in an ‘enviable position’

yesterday by: Richard Waters in London

A new phase of global competition has broken out between a handful of massively wealthy US and Chinese internet companies — with consumers and businesses that depend on their services the beneficiaries.

That, at least, is the view of Mary Meeker, the former US internet analyst who is still most closely associated with the dotcom boom of the 1990s. Since leaving Wall Street for Silicon Valley seven years ago to join venture capital firm Kleiner Perkins Caufield & Byers, her annual analysis — in more than 200 slides — has become a widely used reference on the state of the global internet landscape.

After what she calls “an epic half-decade” of expansion and stock market appreciation, Apple, Microsoft, Alphabet, Amazon and Facebook have emerged as the world’s five most valuable companies. Two Chinese internet companies — Alibaba and Tencent — have also broken into the top 10.

The rise of this handful of internet giants has stirred worries among competition regulators and scared companies in other industries that haven’t yet felt the touch of digital disruption. But according to Ms Meeker, the concerns fail to take into account the rivalry that has engulfed the internet companies as they move out of their initial markets and on to each other’s turf.

“People don’t spend enough time looking at how intense the competition is,” she says in an interview with the Financial Times. “The bet here is — we can’t stop progress. Are we better off or worse off? So far, the data implies we are better off.”

The picture of growing global dominance emerges from Ms Meeker’s latest annual slideshow, published on Wednesday. Referring to the snapshot of how online activity is reshaping markets from retail to transport, she says: “The pace and breadth of global change is happening at a pace that is faster than I would have anticipated.”

In the US, for instance, growth in online advertising and ecommerce has accelerated again since earlier this decade, with advertising revenues up 22 per cent last year and ecommerce up 15 per cent. Global online ad spending, at nearly $200bn, is forecast to exceed TV advertising for the first time this year.

The disruption is deeper than the numbers alone suggest. Adverts “are basically becoming storefronts”, says Ms Meeker. In ecommerce, the widespread adoption of technologies like geolocation and machine learning are “changing retail at what is probably an accelerating rate”. And the collection of data on a mass scale is about to have a profound impact on markets that haven’t yet been affected by digital transformation.

Ms Meeker’s tip for one industry on the cusp of upheaval is healthcare, where regulatory and other barriers to sharing data have slowed innovation, but which she now says is ripe for change.

Despite Ms Meeker’s optimism about competition, however, the picture that emerges from her global snapshot also shows the effects of increasingly heavy concentrations in some digital markets.

Google and Facebook, for instance, accounted for 85 per cent of online advertising in the US last year, up from 76 per cent a year before. In the media world, Ms Meeker estimates that Spotify has already secured 20 per cent of global music revenues, and Netflix 30 per cent of home entertainment revenue in the US.

These media companies represent a new trend as digital-first companies produced increasingly personalised services, she says: “It speaks to the power of the algorithms and the data. It improves pricing for users and consumer satisfaction.”

Future competition between the digital giants is likely to take place on the global stage. The internet markets in China and India have each reached a scale where they are poised to have a strong beneficial impact on their national economies, Ms Meeker says.

Their mobile payment infrastructures, for instance, put both countries “in an enviable position relative to the rest of the world”. And thanks to its national identity scheme, Aadhaar, and the spread of low-cost bandwidth, India is on the brink of an explosion of digital services — as already evidenced by a boom in mobile learning.

With so much to play for, that has already made India “a global priority” between US and Chinese companies. American companies such as Amazon, which failed to make a dent in China, have learnt their lesson and are approaching new markets like this more aggressively, she says. “These companies are making sure they put more capital to work earlier.”

But even if competition becomes increasingly fierce between the new digital giants, will it create a new global oligopoly? After more than two decades watching the rise of successive generations of internet leaders, Ms Meeker says she is “highly confident” that new categories of online activity will emerge, with new companies to dominate them — much as Uber and Didi Chuxing have come to dominate ride hailing.

But at least one thing has changed. “What is different this time is these global players,” she concedes. “They have CEOs who have the ability to see around corners — and they will continue to make acquisitions.”