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Significant Digits Episode 1 Part 1

Show #1: The Future of the Internet and Everything

Part 1: The Internet is dead, long live the Internet
The data shows the Internet growth will go through an inflection point. Should we panic or celebrate?

 

In this inaugural episode we open with the biggest question facing the biggest technological innovation of our time: the limit to growth of the Internet. The Internet is the backbone of our post-industrial society as much as the railroad was the backbone of the industrial revolution. Even more so, the diffusion of internet consumption is the fundamental engine of growth at a time when industrial economies are all mired in syndromes of underinvestment and misallocation of resources.

And so it matters greatly if and when the Internet will “inflect” in growth, going from acceleration to deceleration. Mobile computing sustained this acceleration, bringing computing and connectivity to the billions for whom the PC would always be beyond reach. But even with the expansion of device-based usage limits are in sight.

The implications could be profound. Frothy valuations and optimism could evaporate. Venture Capital could find few exits and the “second Internet Bubble” could burst. On the other hand, maybe the data shows that opportunity is largely unmet. Quantity of users is but one proxy. How can growth and business model innovation continue?

To help us think this through I have as my guest Marko Anderson, cofounder of Random [1] and a former colleague at Nokia.

Stay tuned for four more parts:

  • Part 2: Browsing vs. Apps The HTML5 vs. Native debate and the jobs the Internet is hired to do.
  • Part 3: Monetize This The problem with business model innovation. When the ad dollars run out, what will take their place?
  • Part 4: Random How discovery is changing and the value of irrationality.
  • Part 5: Glass is half full How can we screw this up? Privacy, Surveillance and The Internet Citizen’s Bill of Rights.

Significant Digits is a talk show where we take time to recognize patterns in the lives of technologies.

Notes:
  1. Run out of Internet to read? Random’s new iOS app is for you []
  • http://nmuppala.wordpress.com Nalini Kumar Muppala

    Interesting that you chose to post this new series on YouTube and not Vimeo. Could you shed some light on the choice?

    • obarthelemy

      Last time I checked, Vimeo where being dicks about mobile, requiring an account and an app ?

      • http://twitter.com/matthewwanderer Matthew

        I’m a fan of Vimeo, but I occasionally wonder if Vimeo could get more in its own way if it actually tried.

    • http://www.asymco.com Horace Dediu

      Did not think about it at all.

      • Moisés Chiullan

        I knew about “SD” in advance, but hadn’t discussed choice of platform when I spoke with Horace about it. I assumed YouTube.

        All of us nerds like various things about Vimeo, but as Matthew says below, I wholeheartedly agree that Vimeo keeps getting in its own way as a YouTube alternative, and for the exact same reasons.

  • obarthelemy

    The list of topics looks promising.

    I really don’t get the “HTML vs App” debate. the one explanation I read about it ( http://mattgemmell.com/apps-vs-the-web/ ) seems mostly about iOS issues (on Android, browsers can be “chromeless”, and the tab switcher mostly looks like a task switcher; performance and ergonomics, even language features, are mostly no longer a factor on any platform. I mostly see it as a false dichotomy: some users prefer apps, others HTML (lighter users, those with space constraints or data constraints or control issues), costs for developing clients whether HTML or App are mostly negligible compared to server-side costs… Monetization is equal…
    The real issue is embedding: how do I get my service into a user’s workflow, ie home screen/widget, Google Now, alerts, … More relevant than the “do I want more stickiness with an app or easier foot-in-the-door via the web”, because you want both, and can get it easily.

    Regarding part 5, my guess is a unique, or maybe a few, centralized and government-regulated (if not -run) ID clearinghouse is the only way to end the current mess of logins, user IDs, SSNs and credit card and personal details,… floating around and leaking everywhere these days. Especially since corps seem to be above the law and not accountable when they mess things up.

    • Glaurung-Quena

      “I really don’t get the “HTML vs App” debate.”

      In some ways it’s a non-issue, since the apps are still using HTML to deliver their content, you’re just changing the container that the web content is delivered through (facebook is a prime example here). If, that is, the different containers that are available for delivering the content are on an equal footing.

      It becomes very much an issue when the different containers are not on an equal footing. If you have a company that is making an app version of their website instead of making their website accessible to mobile users, and the app version is inferior to the website proper, then mobile users are screwed because the company has made the small screen version of their service a second class citizen (as XKCD says, a partial version of the web site where you can’t zoom). And the full, grown-up version of their site is unusable on small screens. The example of what not to do here that I’ve had experience with is Ebay.

      When ebay launched the app version of their service a few years back, I was irked to discover that it did not provide me with the same ability to filter searches that I could have on the web site. Nor did it provide all the seller tools that their website provided. Since I used those search filters all the time when shopping on ebay, and since I used those seller tools whenever I was selling something on ebay, the ebay app, when it came out, was fundamentally useless to me. Since then I’ve been suffering through using their web site on my ipad (seriously suboptimal, tiny text, tiny links crammed close together). Eventually I will have to try out their app again and see if it’s become full featured enough to use.

      Ebay doesn’t really have credible competitors for what it does, but if we were talking about another company that did have alternative competitors, and one of those competitors had made their mobile offering a first class citizen next to their desktop offering, I would gladly switch services in order to have the ability to use the service on whatever device without feeling that I am being penalized for doing so.

    • monetisation

      “Monetization is equal…”

      In what sense?

      • obarthelemy

        Users are counted the same (that’s for selling the company), ads are worth the same whether displayed in a browser or in an app, payment options are the same…
        In what sense wouldn’t it be ?

      • charly

        I expect the click rate in a browser to be much higher but the fact that your more likely to open another browser tab is for most apps/sites a negative.

      • monetisation

        Upfront price, in-app purchase, to start with.

      • obarthelemy

        pay wall. and sub-paywall or microtransactions.

      • monetisation

        Oh did you mean equally possible in theory rather than equally likely for users to do in practice, or something?

      • obarthelemy

        what do you mean “in theory” “or something” ?

      • monetisation

        I mean that if I put a paywall up in front of a web app I’m not going to get anywhere near the same revenue, or conversion rate, as an upfront app store purchase. So I’m wondering if you meant monetisation was theoretically the same, because it isn’t practically.

      • obarthelemy

        Any data to back that up ? I’m personally paying several times more for content and apps I can access from any client over the web than for device- or ecosystem-specific apps. Having to install a bespoke app to access content/services has gotten to be a strong negative, in fact, unless the app does something that couldn’t be done using standard clients, which is very rare.

      • monetisation

        Conversely, nobody I know has ever paid a single dollar for access to a website. There’s also no sign that they see installing an app as a burden, as you appear to. Since the internet has no integrated payment mechanism, and therefore makes paying for things complex, I feel that the burden is on the person making the claim that they are more likely to do the more complex thing. I know of no sales data from identical content or services available solely behind a web paywall or paid app so none of this will change your mind. Perhaps you could consider why there is such an explosion of paid apps doing things that could eaily be paywalled web services, though.

  • Fran_Kostella

    It is interesting to pair the usage and population data from this video with the data in Hans Rosling’s “Don’t Panic” video on http://www.gapminder.org to see how the trends are playing out. There are suggestions that newly developing economies will rapidly build up as they adopt step-by-step improvements that improve lives and economic wellbeing. A few decades of the “non-consumers” becoming consumers might include many opportunities for the old guard to provide technologies that accelerate the process of improvements.

  • Christian Huund

    The presentation implies that the number of people with access to the internet is a good measure for its size. But there could be growth from the internet of things and people owning more devices without the number of people with access actually rising. The question is what are we really measuring here and what defines growth? Number of machines connected, volume of data transmitted, value of equipment? I don’t think that 90% penetration as measured here rules out further growth in an economic sense.

    • Juan Ageitos

      I totally agree with you. I am not sure where this misconception of growth comes from which will also applies to the hardware that connects people to the net.
      Obviously early growth is always faster but:
      1 – the Internet of the next decade could be much wider eg: will drive our car, online education, online meetings, all TV content, etc… so there will be a lot of opportunities there – Think of the Internet as electricity – so then there was a video recorder, a washing machine….
      2 – Smartphones could also become our main CPUs which need regular update… I dont think Apple or Samsung are actually shaking because of market saturation…in the contrary, day by day they are eating other people’s lunch… eg: Navigation devices, MP3 players, digital cameras, watches (and more to come!)

      • charly

        There is not that much more for smartphone/tablet to eat into except the settop box, game console and TV remote.

        ps. You forget dect phones. Every cable/fiber/ADSL provider that uses VOIP to provide phone service is starting to offer an app to use your smartphone as home phone. I expect dect phones to be death in a year.

      • Kizedek

        “There is not that much more for smartphone/tablet to eat into except the settop box, game console and TV remote.”

        Except… more of the paper-based publishing industry, the health industry, those devices my DHL delivery man makes me sign on, menus at restaurants, brochures, interaction at museums and public spaces, voice recorders, mics for PA systems, car keys… Just a million jobs to be done.

      • charly

        You are right about the paper based publishing industry but it is not electronics.

        DHL, restaurant menu’s, POS etc. are not consumer products and most will be replaced by dedicated smartphones/tablets so the total number of devices wont go down. A POS tablet wll replace a POS pc but neither will be used to surf the web.

        But you are right about car keys (and house keys). I think they are another thing that will disappear

    • obarthelemy

      Probably the best measure is “business transacted”, whether for client (PC, phone) equipment, servers/infrastructure, data/service, or most important, stuff bought over the internet. Oh, and ads.

  • Juan Ageitos

    Once the Internet reaches certain level of penetration we should start looking at something like the number of hours and Gigabytes (even connected devices) per person – this would provide a better picture of growth and size of the Internet in developed countries

  • smiling_fortune

    I will certainly watch the remaining parts of Significant Digits.

    Did you think of trying more of a lecture/presentation/monologue format? With perhaps a more distinct, dedicated section for interviewing Marko. He obviously has some interesting points to make.

  • Ian Ollmann

    Excellent synthesis of your airshow and asymco businesses!
    This shows how it is done.

  • conner

    how often do you plan to release these? great stuff!

    • http://www.asymco.com Horace Dediu

      A new Part every few days. New episodes will depend on how to obtain funding for production.

      • fl1nty

        kickstarter/youtube video purchase?

  • teapartydoc

    As I age I become aware of costs in life that are duplicated, and where savings might be achieved when I retire. I currently get internet via the cable company as well as the phone company, and in fact this is duplicated in a couple of residences. In watching this, I became aware that in the near future a decision must be made and I will probably go with the phone as my only source. If phone companies decide that they want to capture more of the market, they might begin to offer their own sources of internet usage, making the traditional forms either give them more of the action, or by offering their own product, thus we would enter a fresh phase of competition. Anticipation of this will cause capital expenditure on the part of internet providers in order to enter this market. Cable companies will suffer greatly (whoopee), and there will be a new phase of job growth as well. Creative destruction will once again prove to be the way to growth.
    A now dead sociologist, Carrol Quigley, had a theory of the advance and decline of civilizations in which expansion was achieved by an “instrument of growth” which would undergo a sort of sclerosis, becoming an “institution”. Once the instrument of growth became institutionalized, it was not long before decline would commence. I look at business models the same way, and in a Machiavellian sense, a business is like a city, in that if it is not growing, it is dying. To be a business success in the long term means being able to adapt and anticipate changes without the sclerosis of institutionalization. I think one big sign of this sclerosis is when businesses begin to cooperate with government in their own regulation. Regulatory capture, or the attempt to do so, indicates lack of creativity and adaptability, betraying the onset of sclerosis. When CEOs go running to the government and begin to hire lobbyists, you know they are running out of ideas, and are simply looking to hold onto market share and keep others out of the market. General Patton implied as much when he told his troops never to be in the position where they were holding ground. When you begin to hold ground, it’s all over.