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Benedict Evans –– January 2020 1
Benedict Evans
January 2020
www.ben-evans.com
Tech in 2020:
Standing on the shoulders
of giants
Benedict Evans –– January 2020 2
We connected (almost) everyone
There are 5.5bn adults on earth, 5bn have a phone and 4bn have a smartphone
0
1
2
3
4
5
6
Global population over 14 Mobile phones Smartphones Fully online
Global population, 2019 (bn)
Source: World Bank, GSMA, Apple, Google, CNNIC, ITU, @BenedictEvans
Benedict Evans –– January 2020 3
New tech generally goes from stupid to exciting to boring
New technologies come in S Curves
Stupid Exciting! Boring
Benedict Evans –– January 2020 4
As the product matures, the easy and obvious things have been done and marginal improvement tends to slow
And smartphones reached ‘boring’ (mostly)
Stupid Exciting! Boring
Smart
Phones
Benedict Evans –– January 2020 5
What becomes possible now that smartphones are mature and widely deployed?
At this stage, we ask how we can use it…
Stupid Exciting! Boring
Smart
Phones
Benedict Evans –– January 2020 6
What is the next generational change?
And we ask what the next S Curve will be
Stupid Exciting! Boring
?
Smart
Phones
Benedict Evans –– January 2020 7
The tech industry has had a new centre roughly every 15 years
Because that’s been the model for 50 years
PCs
Microsoft / Intel
All companies
Mainframes
IBM
Big companies
Web
Google / FB / Amazon
Middle-class families
Smartphones
Apple / Google
Everyone
Benedict Evans –– January 2020 8
What happens
when everyone is
online?
What are the next
S Curves?
Regulation and
policy
What now and what next?
So, two conversations today
Benedict Evans –– January 2020 9
What happens
when everyone is
online?
What are the next
S Curves?
Regulation and
policy
Connecting the world has had consequences far outside tech
So, two three conversations today
Benedict Evans –– January 2020 10
What happens when
everyone is online?
Benedict Evans –– January 2020 11
Density &
penetration
Consumer
expectation
Platforms
New possibilities at new scale
Standing on the shoulders of giants
Benedict Evans –– January 2020 12
“Every failed idea from
the dotcom bubble would
work now”
- Marc Andreessen
Benedict Evans –– January 2020 13
Front of mind:
ecommerce
Benedict Evans –– January 2020 14
Front of mind: ecommerce is big…
US ecommerce is now over $500bn
Source: US Census
0
100
200
300
400
500
600
2000 2005 2010 2015
US ecommerce sales ($bn, 2019 dollars)
Benedict Evans –– January 2020 15
But still ‘only’ 15% of addressable retail
$500bn is a big number, but US addressable retail is $3.6tr
Source: US Census
*Addressable retail = ex. cars, car parts, gasoline, restaurants & bars
0
1
2
3
4
2000 2005 2010 2015
US retail sales ($tr, 2019 dollars)
Addressable retail*
Ecommerce
Benedict Evans –– January 2020 16
Globally, the USA is in the middle of the pack
China leapfrogged physical retail, while the UK and SK are also far ahead of the USA
0%
5%
10%
15%
20%
25%
30%
China UK SK USA France Japan Germany Russia Brazil India
Ecommerce share of retail (2019)
Source: McKinsey, BLS
Benedict Evans –– January 2020 17
Ecommerce has evolved past commodity products in brown cardboard boxes
Expanding what ecommerce means
Books, commodities Anything
One model Many models
Capital Platforms
Benedict Evans –– January 2020 18Source: IAB
Several hundred (at least) new online-only or online-first brands
Powering the ‘D2C’ explosion…
Benedict Evans –– January 2020 19Source: Bloomberg, Companies
Shopify market
cap is $46bn
Stripe valued at
$35bn
Instagram,
YouTube…
Independent ecommerce is now so big that the enabling platforms are worth tens of billions
And huge new ecommerce platforms
Benedict Evans –– January 2020 20
0
25
50
75
2014 2015 2016 2017 2018 2019e
Shopify GMV ($bn)
$60bn of sales on the platform, with over a million merchants, from the long tail to Unilever and Pepsico
Shopify has come from nowhere to $60bn of GMV
Source: Shopify, @BenedictEvans
Benedict Evans –– January 2020 21
Meanwhile: Amazon!
Amazon’s revenue continues to grow at 30% a year
Source: Amazon
0
50
100
150
200
250
1995 2000 2005 2010 2015
Amazon annual revenue ($bn)
Benedict Evans –– January 2020 22
Though only half is direct ecommerce
But it has become about more than just plain ecommerce
Source: Amazon
0
50
100
150
200
250
1995 2000 2005 2010 2015
Amazon annual revenue ($bn)
Revenue
First party ecommerce
Benedict Evans –– January 2020 23
Platforms for others are now a third of Amazon revenue
Amazon is building growth by leveraging its platforms for other companies
Source: Amazon
Marketplace
Subscriptions
AWS
Stores (WFM etc)
Ads & other
0
25
50
75
100
125
First party ecommerce Platform Other
Amazon revenue, 2018 ($bn)
Benedict Evans –– January 2020 24
0
50
100
150
200
250
300
350
2014 2015 2016 2017 2018
Amazon GMV ($bn)
Marketplace
First party ecommerce
60% of sales on Amazon are through the third party marketplace
Amazon is a platform for others
Source: Amazon, @BenedictEvans
Benedict Evans –– January 2020 25
0.0
2.5
5.0
7.5
10.0
12.5
2014 2015 2016 2017 2018
Amazon ‘Advertising & other’ revenue ($bn)
Amazon has built a $10bn ‘search ad’ business – retailers just call this marketing
Amazon is now taxing product search
Source: Amazon
Benedict Evans –– January 2020 26Source: Companies
Amazon sells
placement for
$10bn
Booking &
Expedia pay
Google $10bn
Kylie Jenner's
make-up
business:
$1bn
But Macy's
and Walmart
did all this too
If you’re not paying rent for a store (or in one), how do people hear about you?
New retailing means new taxes
Benedict Evans –– January 2020 27Source: Companies
Amazon sells
placement for
$10bn
Booking &
Expedia pay
Google $10bn
But Macy’s &
Walmart did
this too
But Macy's
and Walmart
did all this too
If you’re not paying rent for a store (or in one), how do people hear about you?
New retailing means new taxes
Benedict Evans –– January 2020 28Source: Companies
Amazon sells
placement for
$10bn
Booking &
Expedia pay
Google $10bn
But Macy’s &
Walmart did
this too
Kylie Jenner’s
make-up
business:
$1.2bn
If you’re not paying rent for a store (or in one), how do people hear about you?
Unless you have a new route to awareness
Benedict Evans –– January 2020 29Source: GoodBed.com
2019: there are
175 online
mattress
companies
A vacuum-packed mattress was a brilliant idea until everyone else did it
Get it wrong? Go to the mattresses
Benedict Evans –– January 2020 30
Is that a ‘tech’ company?
Or is it a mattress company with a website?
Benedict Evans –– January 2020 31
Welcome to retail
The internet is not the first time that retail has a new format
Source: US Census
0
100
200
300
400
500
600
1995 2000 2005 2010 2015
US retail sales, $bn (2019 dollars)
Department stores (ex
discount)
Ecommerce
Warehouse clubs &
superstores
Benedict Evans –– January 2020 32
“Over half of our store sales involve an online
journey, and over a third of our online sales
involve a store experience”
- Erik Nordstrom
Benedict Evans –– January 2020 33
Ecommerce
Addressable
Non-addressable
0%
25%
50%
75%
100%
'Online versus offline' 'Retail'
US retail sales by retailer category, 2018
Online, yes, but also rent, distance to customer, service, selection, staff costs, urgency, margin, inventory, etc, etc
Retail isn’t as binary as ‘online’ and ‘offline’
Source: US Census, @BenedictEvans
*Addressable retail = ex. cars, car parts, gasoline, restaurants & bars.
Benedict Evans –– January 2020 34
Is that a ‘tech’ company?
Or is it a retailer using a new channel?
Benedict Evans –– January 2020 35
Front of mind:
TV
Benedict Evans –– January 2020 36
-8%
-6%
-4%
-2%
0%
2%
2011 2012 2013 2014 2015 2016 2017 2018 2019
Annual change in US pay TV subscriptions
YouTube launched in 2004 – a decade later, US TV finally unlocked
Front of mind: unbundling TV
Source: JP Morgan
Benedict Evans –– January 2020 37
US pay TV subs down 20% and falling
For generations, most of the US was sold a big and expensive pay TV bundle - this is now breaking apart
Source: JP Morgan, Netflix
0
25
50
75
100
125
2011 2012 2013 2014 2015 2016 2017 2018 2019
US pay TV subscriptions (m)
Incumbents
Netflix
Benedict Evans –– January 2020 38
US cord-cutting percentage has passed ecommerce percentage in just 5 years.
And TV is changing a lot faster than retail
Source: US Census, JP Morgan, @BenedictEvans
0%
5%
10%
15%
20%
2000 2005 2010 2015
Digital change in US retail and TV
Cord cutting as % peak
US pay TV subs
Ecommerce as % US
addressable retail
Benedict Evans –– January 2020 39
0%
10%
20%
30%
40%
50%
Mar 2016 Sep 2016 Mar 2017 Sep 2017 Mar 2018 Sep 2018 Mar 2019 Sep 2019
US teen daily video consumption share
Pay TV
Netflix
Youtube
Pay TV share of US teen viewing hours is down by half in three years
Teen share down by half
Source: Piper Jaffray
Benedict Evans –– January 2020 40
Begun, the content wars have
A third of US 2019 content spending came from streaming companies
0
5
10
15
20
Disney Comcast/NBCU Netflix ViacomCBS Warner Amazon Fox Sony Discovery Apple
US annual content budgets, 2019 ($bn)
Sport
Entertainment
Source: UBS
Benedict Evans –– January 2020 41
Streaming is a third of US TV production
A third of original series in the USA are now from Netflix, Amazon and other new entrants
Source: FX Networks Research
0
100
200
300
400
500
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
US scripted original series
Online
Broadcast
Pay cable
Basic cable
Benedict Evans –– January 2020 42Source: JP Morgan, Nielsen, FX Networks, Zenith
Subs down
20%
Teen viewing
share down
50%
Show count
has doubled,
and costs…
Ad budgets
flat to up?
Old model is gone, but not yet clear what the new equilibrium will look like
Now what?
Benedict Evans –– January 2020 43
New forms of video emerging
Twitch (90% of live games viewing) hit 1bn monthly hours in Q3 2019
Source: Twitchmetrics
0
250
500
750
1,000
1,250
Sep 12 Sep 13 Sep 14 Sep 15 Sep 16 Sep 17 Sep 18 Sep 19
Monthly Twitch viewing hours (m)
Amazon acquisition for $970m
Benedict Evans –– January 2020 44
Twitch is already/only the size of a UK TV channel
Glass half empty, or half full?
Source: Ofcom/ONS, Netflix, Twitchmetrics, @BenedictEvans
0
1
2
3
4
5
6
7
Total UK TV Netflix USA BBC 1 (UK) Global Twitch ITV 1 (UK)
Monthly viewing hours (bn)
Benedict Evans –– January 2020 45
Meanwhile, global effects from the US streaming war
US budgets were always bigger, but they sold the shows abroad: Netflix goes direct
Source: Netflix, UBS, Ofcom/IHS Markit
Netflix
Amazon
UK
Germany
France
Italy
Spain
0
5
10
15
20
25
Streaming Top 5 European markets
2019 content budget, $bn
Benedict Evans –– January 2020 46
Netflix is the UK’s biggest TV channel
Netflix is the UK’s biggest TV channel for 18-34s,, and YouTube is even bigger
Source: Ofcom
0
10
20
30
40
50
60
70
Youtube Netflix ITV BBC Channel 4 Amazon Prime Channel 5
Video minutes per person per day, UK 18-34s, 2018
Benedict Evans –– January 2020 47
More than half of Netflix’s base and most of the user growth is now outside the USA
Unbundling countries, not just cable
Source: Netflix
0
25
50
75
100
125
150
175
Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Mar 19 Jun 19 Sep 19
Netflix subscribers (m)
APAC
LATAM
EMEA
North America
Benedict Evans –– January 2020 48
“In business, there are two ways to make
money. You can bundle, or you can
unbundle.”
- Jim Barksdale
Benedict Evans –– January 2020 49
But!
There can only be so many brand
relationships
Aggregators exist for a reason
Many big brands are actually B2B
businesses anyway
Lots of rebundling coming
New distribution channels break
apart old aggregation models
Everyone wants to unbundle and
go direct
For TV and retail, the old bundles are going, but we will get new ones
Now: the great unbundling. Next: the great rebundling
Benedict Evans –– January 2020 50
Is that a ‘tech’ company?
Or is it a TV company using a new channel?
Benedict Evans –– January 2020 51
OK, ecommerce and TV.
But what else?
Benedict Evans –– January 2020 52Source: Piper Jaffray for US teenagers in 2019
Most people
don’t have
broadband
Most people
don’t have
3G
Most people
don’t have
smartphones
83% of US
teenagers
have an
iPhone
For 25 years, we’ve had to remind ourselves that most people are not early adopters
“Remember, most people don’t have that”
Benedict Evans –– January 2020 53
Today, anyone does anything online
In 2017, 40% of Americans met their partners online
0%
10%
20%
30%
40%
1995 2000 2005 2010 2015
US heterosexual couples who met online, by year of meeting
Source: Stanford/GfK, 1995-2017
Benedict Evans –– January 2020 54
Benedict Evans –– January 2020 55
Penetration and consumer acceptance drives expansion
Models for market expansion
Vertical integration
The full stack’ model: from
booking.com to Airbnb
Horizontal expansion
Taking established online
models to new segments
Benedict Evans –– January 2020 56
A model that only worked for narrow segments a decade ago now expands into the whole economy
Example: expanding the ‘two-sided marketplace’ model
Rigup
Oil field workers
Honor
Home help for the
elderly
Incredible
Health
Nursing
Benedict Evans –– January 2020 57
Is that a ‘tech’ company?
Or is it a travel / insurance / employment / taxi
/ dating /banking / restaurant company using
a new channel?
Benedict Evans –– January 2020 58
Growth and global diffusion
More and more investment in company creation around the world
0
50
100
150
200
250
300
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Venture capital investments ($bn)
RoW
US
Source: NVCA
Benedict Evans –– January 2020 59Benedict Evans –– 12 October 2019 59
Expanding software and tools
from work to everyday life
Software, automation, workflow, and tools…
From work and big business to everyone’s lives
From mainframes, to LinkedIn, to Tinder and Rigup
Benedict Evans –– January 2020 60
The next S Curves
Benedict Evans –– January 2020 61
The tech industry has had a new centre roughly every 15 years
What’s the next generational change in scale?
PCsMainframes Web Smartphones ?
Benedict Evans –– January 2020 62
Can there be another massive increase in scale?
Once you’ve connected everyone, how do you create a bigger market?
0
1
2
3
4
5
6
Mainframes PCs in 1994 Web in 2007 Smartphones in 2019 Global population over 14
Global installed base, 2019 (bn)
Source: UN, GSMA, ITU, Apple, Google, CNNIC, @BenedictEvans
?
Benedict Evans –– January 2020 63
Smartphones began as a PC accessory, but now PCs are a smartphone accessory
And is this the new thing, or part of the old thing?
Stupid Exciting! Boring
?
PC
internet
Mobile?
?
?
Benedict Evans –– January 2020 64
Frontier tech
Quantum, new
battery chemistry,
neural interfaces,
autonomy, AR optics
Important but
narrow
Drones, IoT, voice,
wearables, robotics,
esports, 3D printing,
VR, micro-satellites
Structural layers
Machine learning
Crypto?
(3G/4G/5G)
(Cloud, still)
The next
platform?
AR glasses?
Many new things happening, but what’s their scope?
Lots of new things going on, but which is THE thing?
Benedict Evans –– January 2020 65
A lot of innovation is happening inside tech, but that’s no longer the only focus
Tech for the 2020s
Machine
learning is the
new database
Crypto is the
new open
source (?)
AR is the next
smartphone
(?)
Regulation
Benedict Evans –– January 2020 66
The Next Big Thing?
Regulation and policy
Benedict Evans –– January 2020 67
Governments of the Industrial World, you
weary giants of flesh and steel, I come from
Cyberspace, the new home of Mind. On behalf
of the future, I ask you of the past to leave us
alone. You are not welcome among us. You
have no sovereignty where we gather.
- John Perry Barlow, 1996
Benedict Evans –– January 2020 68
Then we connected everyone, including the bad people
There are 5.5bn adults on earth, 5bn have a phone and 4bn have a smartphone
Source: UN, GSMA, ITU, Apple, Google, CNNIC, @BenedictEvans
0
1
2
3
4
5
6
Global population over 14 Mobile phones Smartphones Fully online
Global population, 2019 (bn)
Benedict Evans –– January 2020 69
Which also meant creating huge, scary companies
7 of the 10 largest global companies by market cap are tech
Source: Bloomberg
0
250
500
750
1,000
1,250
Apple Microsoft Google Amazon Facebook Berkshire
Hathaway
Alibaba Tencent Johnson &
Johnson
Exxon Mobile
Ten largest global companies by market cap, December 2019 ($bn)
Benedict Evans –– January 2020 70
Encryption
Fake NewsAI
Bias
CSAM
Ride
share
Elections
Every month there’s something else to worry about
Now we have issues. So many issues
Privacy
Hate speech
Face
recognition
Radicalisation
Abuse of
market
power
Filter bubbles Political
advertising
Benedict Evans –– January 2020 71Source: ThisPersonDoesNotExist.com
None of these people exist: these faces are algorithmically generated by a machine learning system
And this won’t get simpler
Benedict Evans –– January 2020 72
Every complex question has a simple answer
Naturally, there must be a simple answer
Break them up BREXIT
Benedict Evans –– January 2020 73
Every complex question has a simple answer
‘Break them up’ – the Brexit of tech
Break them up
Into what?
And which
problems would
that solve?
Brexit
Benedict Evans –– January 2020 74
Coverage of real issues is accompanied by a steady flow of stories that don’t stand up to scrutiny
Also included: a classic moral panic
‘Google makes $4.7bn
from Google News!’
Extrapolated from a
2008 guess of ‘$100m?’
‘The NHS gave Amazon
our health data!’
Alexa can read bits of the
public website to you
‘Amazon has private label!’
Like all retailers for a
century
Benedict Evans –– January 2020 75
Moral panic: Amazon does private label
'Well done – you just discovered retail’
0%
10%
20%
30%
40%
Amazon Walmart US groceries Macy's US general retail UK packaged food
Private Label as % revenue, 2018
Source: Morgan Stanley, Euromonitor
Benedict Evans –– January 2020 76Benedict Evans –– 12 October 2019 76
But panics have causes, and
consequences
“Industrial food is a good thing, but what’s in the
sausages?” - The Jungle, 1906
Maybe we should break up ‘the beef trust’…
But we also need an FDA, ingredient lists, veterinary
inspections, hygiene rules…
Benedict Evans –– January 2020 77
Tech companies
being bad to
other companies
Search, app stores,
ad pricing
Tech companies
being bad to us
Privacy, security
(but not pricing)
Bad people
using tech
Abuse, fake news,
elections…
Different types of problem have fundamentally different solutions
So, which problem are you trying to fix?
Benedict Evans –– January 2020 78
Anti-trust:
Mostly beside the point
Benedict Evans –– January 2020 79
Google
Google
Google
Facebook
Facebook
Facebook
0%
25%
50%
75%
100%
Search Social (DAUs) Online advertising All advertising
Market share, global ex-China, 2019
Google and Facebook clearly have dominance in major markets: the question is what (if anything) to do
Google and Facebook clearly have market dominance
Source: Companies, Zenith, @BenedictEvans
Benedict Evans –– January 2020 80
Amazon has a third of ecommerce, but is that really the competition?
What’s Amazon’s market share: 35% or 5%?
Source: @BenedictEvans, Amazon, Walmart, US Census
Addressable retail = ex. cars, car parts, gasoline, bars & restaurants
0%
10%
20%
30%
40%
First party share of ecommerce GMV share of ecommerce GMV + Stores share of total
retail
GMV + Stores share of
addressable retail
Walmart share of addressable
retail
Amazon US market shares, 2018
Benedict Evans –– January 2020 81
What’s Apple share? Depends which regulator you ask
Apple is the minority player globally, but has 100% of the market for ‘iOS app stores’
0%
25%
50%
75%
100%
Global unit sales Global installed base US installed base US app store sales US teenager installed
base
iOS app stores
Apple market shares, 2019
Source: Apple, Gartner, Operators, @BenedictEvans, Piper Jaffray
Benedict Evans –– January 2020 82Benedict Evans –– 12 October 2019 82
Market definition is everything
Regulators make their own decision on what the
‘relevant market’ is for anti-trust purposes
IBM had 100% of the IBM mainframe market
Apple has 100% of the iPhone app store market
But they don’t have
market dominance!
Regulators define
the relevant market
however they like!
Benedict Evans –– January 2020 83
Google
YouTube
Android? Gmail?
Display ads?
Facebook
Instagram &
WhatsApp
Oculus?
Amazon
AWS (cash cow,
but not the only
one)
Apple
Content stores?
Music?
Coherent case that YouTube, Instagram & WhatsApp, and AWS are viable stand-alone businesses
What could feasibly be split apart?
Benedict Evans –– January 2020 84
More competition
in the ad market
Split apart
Instagram or
YouTube
Little impact on
network effects
or product
competition
Breakups would affect ad competition, but not product competition – unlikely to create a flood of YouTube alternatives
But what kinds of competition would breakups affect?
Benedict Evans –– January 2020 85
And…
Do people worry about ‘big tech’ because
Google & Facebook might be overcharging
WPP, and Apple is mean to Spotify?
Or are the real concerns elsewhere?
Benedict Evans –– January 2020 86
Tech companies
being bad to
other companies
Tech companies
being bad to us
Bad people
using tech
Few of the issues that make people worry about ‘big tech’ relate to anti-trust
Which problem are you trying to fix?
Solved by anti-trust:
either breakups or
conduct regulation
Limited anti-trust
relevance
No anti-trust relevance
Benedict Evans –– January 2020 87
Regulation:
Boring, complex,
somewhat effective
Benedict Evans –– January 2020 88
‘Tech’ becomes a regulated industry
Lots of industries are subject to specific, technical regulation, and tech will become one of them
0
5
10
15
20
25
30
Cargo shipping Pharma Oil and Gas
Extraction
Fishing Airlines Banks Finance Cars Electrical
utiltiies
Refining
US Federal industry-specific regulation index, 2014
Source: Al-Ubaydli and McLaughlin
Benedict Evans –– January 2020 89
We won’t regulate ‘tech’ – we’ll have lots of different regulation for different issues and companies
We don’t actually regulate ‘banks’
Retail
deposits
Public
securities
markets
Insider
trading
Credit cards Pensions
Capital
adequacy
Mortgages
Futures &
options
And so much
more…
‘Regulate the
banks’
Benedict Evans –– January 2020 90
Old issues,
old solutions
Online-only
banks
Old issues,
new questions
Uber
New issues,
new solutions
Airbnb, Facebook
Is this a new problem, or an old problem expressed in a new way?
Is this a ‘tech’ problem?
Benedict Evans –– January 2020 91
Is that a ‘tech’ company?
Or is it a bank, but with a website?
Benedict Evans –– January 2020 92
In a massively disaggregated industry, there are many parties that might touch a problem at some point
Where is the liability?
Bernie Madoff
Landlord
IRS
Market counterparties
Auditor
Microsoft Excel
SEC
Phone company
Suspicious peers
Benedict Evans –– January 2020 93Source: Moody's Analytics Global Banking Regulatory Radar
The reality of regulation is complex and multimodal
Presume complexity, across domain and country
Benedict Evans –– January 2020 94
Do we know what we
want?
Benedict Evans –– January 2020 95
Where to start? We have a wish list…
Secure, private,
minimal data
collection
Police
access
Empower
competitors
Catch state
‘bad actors’
Trustworthy
information
Moderate
‘bad’
content
Open
platforms
Benedict Evans –– January 2020 96
Do we want platforms to know and control what happens on their networks, or not? Or both?
All of these are trade-offs
Secure, private,
minimal data
collection
Police
access
Empower
competitors
Catch state
‘bad actors’
Trustworthy
information
Moderate
‘bad’
content
Open
platforms
Benedict Evans –– January 2020 97
Easy to say, but do we know what we want?
Case study: content moderation
There’s bad stuff on your platform – take it down
Benedict Evans –– January 2020 98Source: Alex Stamos
‘Social networks’ are a mix of many publishing forms with different speech and distribution models
What does ‘take down’ mean?
Advertising
Recommendation engines
Public feeds
Groups
Private feeds
Group
messages
1:1
Benedict Evans –– January 2020 99
0%
10%
20%
30%
40%
50%
60%
70%
80%
Brazil Canada France Germany India Italy Japan Spain UK USA
Percentage believing that people should be free to:
Offend minorities
Offend religion
Be sexually explicit
It’s not just ‘China’ - liberal democracies have widely varying attitudes to free speech
What does ‘bad’ mean?
Source: Pew Global Attitudes Survey, 2015
Benedict Evans –– January 2020 100
We lack consensus on what’s bad enough to ‘take down’, and on what ‘take down’ even means
Do we know what we want?
Innocuous IllegalOffensive?Rude?
Totally public
Totally private
???
???
Benedict Evans –– January 2020 101
We lack consensus on what’s bad enough to ‘take down’, and on what ‘take down’ even means
Do we know what we want?
Innocuous IllegalOffensive?Rude?
Totally public
Totally private
???
???
Benedict Evans –– January 2020 102
China, digital sovereignty
and digital extra-
territoriality
Benedict Evans –– January 2020 103
“War is God's way of teaching
Americans geography.”
Benedict Evans –– January 2020 104
The end of the American internet
China and India have 5x more smartphones than the USA
China
India
North American
Westen Europe
Other
0
1
2
3
China & India RoW
Smartphone users, June 2019 (bn)
Source: Apple, Google, CNNIC, @BenedictEvans
Benedict Evans –– January 2020 105
The end of the American internet
China and India use more mobile data than the rest of the world combined
China
India
North American
Westen Europe
Other
0
5
10
15
20
China & India RoW
Mobile data, June 2019 (EB)
Source: Ericsson
Benedict Evans –– January 2020 106
China
North America
Western Europe
All otherIndia
0.0
0.5
1.0
1.5
2.0
2.5
China & India Other
Ecommerce ($tr, 2019e)
40% of global ecommerce value is in China
The end of the American internet
Source: McKinsey, eMarketer
Benedict Evans –– January 2020 107
0%
25%
50%
75%
100%
Google Apple Facebook Netflix
Global user base, Q3 2019
RoW
USA
“But the US constitution says!” is no longer an adequate answer
American companies, global reach
Source: Companies, @BenedictEvans
Benedict Evans –– January 2020 108
USA EU China
California,
Singapore,
UK, etc
At least three jurisdictions competing, with different politics but also different regulatory cultures
Regulatory competition?
Benedict Evans –– January 2020 109
Austria
EU court holds that
an Austrian libel
take-down order
applies globally
Singapore
State’s right-of-
reply must be
applied to posts
seen in Australia
GDPR & CCPA
Laws apply to
EU/CA citizens
wherever they are
How do you apply domestic laws to a global medium, and to citizens who may be abroad?
Digital extraterritoriality
Benedict Evans –– January 2020 110
Extra-territorial regulation means companies start complying with the harshest rule that applies, wherever it is
Global reach means a lowest common denominator
Benedict Evans –– January 2020 111Benedict Evans –– 12 October 2019 111
Tiktok: not just your standards?
When the community standards being
enforced may not be your community’s
standards
Benedict Evans –– January 2020 112
There will be many more TikToks
The US can no longer assume that every hot new thing will be made in the US
0
50
100
150
200
250
300
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Venture capital investments ($bn)
RoW
US
Source: NVCA
Benedict Evans –– January 2020 113
China and the NBA…
Benedict Evans –– January 2020 114
‘Don’t forget Taiwan is part of China’
And every other brand
Benedict Evans –– January 2020 115
Old
Store your data in
our country
New
Follow our rules in
our country
Future
Use our country’s
rules outside our
country
Again, how do local rules apply to global systems?
From sovereignty (or protectionism) to extraterritoriality
Benedict Evans –– January 2020 116
GCP/AWS/Azure all now rolling this out – will Facebook join them?
The future – compliance and moderation as a service?
Benedict Evans –– January 2020 117
When local regulators assert global coverage and make incompatible demands, who yields first?
But what will happen when regulators conflict?
Secure, private,
minimal data
collection
Police
access
Empower
competitors
Catch state
‘bad actors’
Trustworthy
information
Moderate
‘bad’
content
Open
platforms
Benedict Evans –– January 2020 118
Old
Mark Zuckerberg
won’t come to
Parliament
New
Will the CEO of
Tiktok come to
Congress?
Next
A distributed
Blockchain system
that has no CEO?
Part of the point of crypto is to remove central control – and hence sovereignty
And this may get even more complicated
Benedict Evans –– January 2020 119
The only certainty: regulation as a regressive tax
Much of regulation is a fixed cost that affects new entrants disproportionately
Source: Dahl, Meyer and Neely 2016
0.0%
2.5%
5.0%
7.5%
10.0%
<$100m $100-250m $250-500m $500m-1bn $1bn-10bn
Mean compliance costs at US financial institutions by size
Benedict Evans –– January 2020 120
Conclusion:
welcome to the world
Benedict Evans –– January 2020 121
Software ate the world, so all the world’s
problems get expressed in software
(We connected everyone, including the bad
people)
Benedict Evans –– January 2020 122
Tech has become part of the world, so it gets regulated as part of the world
What’s the next cycle?
PCs
All companies
Mainframes
Big companies
Web
Middle-classes
Smartphones
Everyone
Systemically
important part of
society
Benedict Evans –– January 2020 123
The late 70s and early 80s saw another wave of concern around computing and automation
Worrying about tech isn’t new
Benedict Evans –– January 2020 124
Railways
Industrial
food
Ships,
aircraft, cars,
databases…
Internet
Every important tech gets industry-specific regulation
Every wave of tech changes the world, and gets regulated
Benedict Evans –– January 2020 125
The ideology of tech has changed, and AI has changed what’s possible, but some things remain impossible
Tech has changed its attitude…
“Censorship is bad”
Yes to moderation…
But whose decision is it?
“We can’t moderate 100bn
messages a day”
AI changes this…
If we also hire 30k human
moderators
“You can’t build a secure
platform with a back door”
You can’t build a secure
platform with a back door
Benedict Evans –– January 2020 126
Some regulation
is binary
Ban tobacco ads
Open banking APIs
Most is ‘best
reasonable effort’
Try to prevent fraud
Try to block CSAM
Some things are
just not possible
Ban inflation
Block all bad content
instantly
Regulating tech is complex and full of tradeoffs. But, this is true of all regulation – law and policy are the art of the possible
And this also needs new understanding in policy…
Benedict Evans –– January 2020 127
0
5,000
10,000
15,000
20,000
25,000
Year 1 Year 2 Year 3 Year 4 Year 5
Pages of rules related to Dodd-Frank banking regulation
Welcome to a regulated industry
The growth chart for the 2020s
Source: Davis Polk & Wardell LLP
Benedict Evans –– January 2020 128
Benedict Evans
January 2020
www.ben-evans.com
Thank you

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Tech in 2020 Benedict Evans

  • 1. Benedict Evans –– January 2020 1 Benedict Evans January 2020 www.ben-evans.com Tech in 2020: Standing on the shoulders of giants
  • 2. Benedict Evans –– January 2020 2 We connected (almost) everyone There are 5.5bn adults on earth, 5bn have a phone and 4bn have a smartphone 0 1 2 3 4 5 6 Global population over 14 Mobile phones Smartphones Fully online Global population, 2019 (bn) Source: World Bank, GSMA, Apple, Google, CNNIC, ITU, @BenedictEvans
  • 3. Benedict Evans –– January 2020 3 New tech generally goes from stupid to exciting to boring New technologies come in S Curves Stupid Exciting! Boring
  • 4. Benedict Evans –– January 2020 4 As the product matures, the easy and obvious things have been done and marginal improvement tends to slow And smartphones reached ‘boring’ (mostly) Stupid Exciting! Boring Smart Phones
  • 5. Benedict Evans –– January 2020 5 What becomes possible now that smartphones are mature and widely deployed? At this stage, we ask how we can use it… Stupid Exciting! Boring Smart Phones
  • 6. Benedict Evans –– January 2020 6 What is the next generational change? And we ask what the next S Curve will be Stupid Exciting! Boring ? Smart Phones
  • 7. Benedict Evans –– January 2020 7 The tech industry has had a new centre roughly every 15 years Because that’s been the model for 50 years PCs Microsoft / Intel All companies Mainframes IBM Big companies Web Google / FB / Amazon Middle-class families Smartphones Apple / Google Everyone
  • 8. Benedict Evans –– January 2020 8 What happens when everyone is online? What are the next S Curves? Regulation and policy What now and what next? So, two conversations today
  • 9. Benedict Evans –– January 2020 9 What happens when everyone is online? What are the next S Curves? Regulation and policy Connecting the world has had consequences far outside tech So, two three conversations today
  • 10. Benedict Evans –– January 2020 10 What happens when everyone is online?
  • 11. Benedict Evans –– January 2020 11 Density & penetration Consumer expectation Platforms New possibilities at new scale Standing on the shoulders of giants
  • 12. Benedict Evans –– January 2020 12 “Every failed idea from the dotcom bubble would work now” - Marc Andreessen
  • 13. Benedict Evans –– January 2020 13 Front of mind: ecommerce
  • 14. Benedict Evans –– January 2020 14 Front of mind: ecommerce is big… US ecommerce is now over $500bn Source: US Census 0 100 200 300 400 500 600 2000 2005 2010 2015 US ecommerce sales ($bn, 2019 dollars)
  • 15. Benedict Evans –– January 2020 15 But still ‘only’ 15% of addressable retail $500bn is a big number, but US addressable retail is $3.6tr Source: US Census *Addressable retail = ex. cars, car parts, gasoline, restaurants & bars 0 1 2 3 4 2000 2005 2010 2015 US retail sales ($tr, 2019 dollars) Addressable retail* Ecommerce
  • 16. Benedict Evans –– January 2020 16 Globally, the USA is in the middle of the pack China leapfrogged physical retail, while the UK and SK are also far ahead of the USA 0% 5% 10% 15% 20% 25% 30% China UK SK USA France Japan Germany Russia Brazil India Ecommerce share of retail (2019) Source: McKinsey, BLS
  • 17. Benedict Evans –– January 2020 17 Ecommerce has evolved past commodity products in brown cardboard boxes Expanding what ecommerce means Books, commodities Anything One model Many models Capital Platforms
  • 18. Benedict Evans –– January 2020 18Source: IAB Several hundred (at least) new online-only or online-first brands Powering the ‘D2C’ explosion…
  • 19. Benedict Evans –– January 2020 19Source: Bloomberg, Companies Shopify market cap is $46bn Stripe valued at $35bn Instagram, YouTube… Independent ecommerce is now so big that the enabling platforms are worth tens of billions And huge new ecommerce platforms
  • 20. Benedict Evans –– January 2020 20 0 25 50 75 2014 2015 2016 2017 2018 2019e Shopify GMV ($bn) $60bn of sales on the platform, with over a million merchants, from the long tail to Unilever and Pepsico Shopify has come from nowhere to $60bn of GMV Source: Shopify, @BenedictEvans
  • 21. Benedict Evans –– January 2020 21 Meanwhile: Amazon! Amazon’s revenue continues to grow at 30% a year Source: Amazon 0 50 100 150 200 250 1995 2000 2005 2010 2015 Amazon annual revenue ($bn)
  • 22. Benedict Evans –– January 2020 22 Though only half is direct ecommerce But it has become about more than just plain ecommerce Source: Amazon 0 50 100 150 200 250 1995 2000 2005 2010 2015 Amazon annual revenue ($bn) Revenue First party ecommerce
  • 23. Benedict Evans –– January 2020 23 Platforms for others are now a third of Amazon revenue Amazon is building growth by leveraging its platforms for other companies Source: Amazon Marketplace Subscriptions AWS Stores (WFM etc) Ads & other 0 25 50 75 100 125 First party ecommerce Platform Other Amazon revenue, 2018 ($bn)
  • 24. Benedict Evans –– January 2020 24 0 50 100 150 200 250 300 350 2014 2015 2016 2017 2018 Amazon GMV ($bn) Marketplace First party ecommerce 60% of sales on Amazon are through the third party marketplace Amazon is a platform for others Source: Amazon, @BenedictEvans
  • 25. Benedict Evans –– January 2020 25 0.0 2.5 5.0 7.5 10.0 12.5 2014 2015 2016 2017 2018 Amazon ‘Advertising & other’ revenue ($bn) Amazon has built a $10bn ‘search ad’ business – retailers just call this marketing Amazon is now taxing product search Source: Amazon
  • 26. Benedict Evans –– January 2020 26Source: Companies Amazon sells placement for $10bn Booking & Expedia pay Google $10bn Kylie Jenner's make-up business: $1bn But Macy's and Walmart did all this too If you’re not paying rent for a store (or in one), how do people hear about you? New retailing means new taxes
  • 27. Benedict Evans –– January 2020 27Source: Companies Amazon sells placement for $10bn Booking & Expedia pay Google $10bn But Macy’s & Walmart did this too But Macy's and Walmart did all this too If you’re not paying rent for a store (or in one), how do people hear about you? New retailing means new taxes
  • 28. Benedict Evans –– January 2020 28Source: Companies Amazon sells placement for $10bn Booking & Expedia pay Google $10bn But Macy’s & Walmart did this too Kylie Jenner’s make-up business: $1.2bn If you’re not paying rent for a store (or in one), how do people hear about you? Unless you have a new route to awareness
  • 29. Benedict Evans –– January 2020 29Source: GoodBed.com 2019: there are 175 online mattress companies A vacuum-packed mattress was a brilliant idea until everyone else did it Get it wrong? Go to the mattresses
  • 30. Benedict Evans –– January 2020 30 Is that a ‘tech’ company? Or is it a mattress company with a website?
  • 31. Benedict Evans –– January 2020 31 Welcome to retail The internet is not the first time that retail has a new format Source: US Census 0 100 200 300 400 500 600 1995 2000 2005 2010 2015 US retail sales, $bn (2019 dollars) Department stores (ex discount) Ecommerce Warehouse clubs & superstores
  • 32. Benedict Evans –– January 2020 32 “Over half of our store sales involve an online journey, and over a third of our online sales involve a store experience” - Erik Nordstrom
  • 33. Benedict Evans –– January 2020 33 Ecommerce Addressable Non-addressable 0% 25% 50% 75% 100% 'Online versus offline' 'Retail' US retail sales by retailer category, 2018 Online, yes, but also rent, distance to customer, service, selection, staff costs, urgency, margin, inventory, etc, etc Retail isn’t as binary as ‘online’ and ‘offline’ Source: US Census, @BenedictEvans *Addressable retail = ex. cars, car parts, gasoline, restaurants & bars.
  • 34. Benedict Evans –– January 2020 34 Is that a ‘tech’ company? Or is it a retailer using a new channel?
  • 35. Benedict Evans –– January 2020 35 Front of mind: TV
  • 36. Benedict Evans –– January 2020 36 -8% -6% -4% -2% 0% 2% 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annual change in US pay TV subscriptions YouTube launched in 2004 – a decade later, US TV finally unlocked Front of mind: unbundling TV Source: JP Morgan
  • 37. Benedict Evans –– January 2020 37 US pay TV subs down 20% and falling For generations, most of the US was sold a big and expensive pay TV bundle - this is now breaking apart Source: JP Morgan, Netflix 0 25 50 75 100 125 2011 2012 2013 2014 2015 2016 2017 2018 2019 US pay TV subscriptions (m) Incumbents Netflix
  • 38. Benedict Evans –– January 2020 38 US cord-cutting percentage has passed ecommerce percentage in just 5 years. And TV is changing a lot faster than retail Source: US Census, JP Morgan, @BenedictEvans 0% 5% 10% 15% 20% 2000 2005 2010 2015 Digital change in US retail and TV Cord cutting as % peak US pay TV subs Ecommerce as % US addressable retail
  • 39. Benedict Evans –– January 2020 39 0% 10% 20% 30% 40% 50% Mar 2016 Sep 2016 Mar 2017 Sep 2017 Mar 2018 Sep 2018 Mar 2019 Sep 2019 US teen daily video consumption share Pay TV Netflix Youtube Pay TV share of US teen viewing hours is down by half in three years Teen share down by half Source: Piper Jaffray
  • 40. Benedict Evans –– January 2020 40 Begun, the content wars have A third of US 2019 content spending came from streaming companies 0 5 10 15 20 Disney Comcast/NBCU Netflix ViacomCBS Warner Amazon Fox Sony Discovery Apple US annual content budgets, 2019 ($bn) Sport Entertainment Source: UBS
  • 41. Benedict Evans –– January 2020 41 Streaming is a third of US TV production A third of original series in the USA are now from Netflix, Amazon and other new entrants Source: FX Networks Research 0 100 200 300 400 500 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 US scripted original series Online Broadcast Pay cable Basic cable
  • 42. Benedict Evans –– January 2020 42Source: JP Morgan, Nielsen, FX Networks, Zenith Subs down 20% Teen viewing share down 50% Show count has doubled, and costs… Ad budgets flat to up? Old model is gone, but not yet clear what the new equilibrium will look like Now what?
  • 43. Benedict Evans –– January 2020 43 New forms of video emerging Twitch (90% of live games viewing) hit 1bn monthly hours in Q3 2019 Source: Twitchmetrics 0 250 500 750 1,000 1,250 Sep 12 Sep 13 Sep 14 Sep 15 Sep 16 Sep 17 Sep 18 Sep 19 Monthly Twitch viewing hours (m) Amazon acquisition for $970m
  • 44. Benedict Evans –– January 2020 44 Twitch is already/only the size of a UK TV channel Glass half empty, or half full? Source: Ofcom/ONS, Netflix, Twitchmetrics, @BenedictEvans 0 1 2 3 4 5 6 7 Total UK TV Netflix USA BBC 1 (UK) Global Twitch ITV 1 (UK) Monthly viewing hours (bn)
  • 45. Benedict Evans –– January 2020 45 Meanwhile, global effects from the US streaming war US budgets were always bigger, but they sold the shows abroad: Netflix goes direct Source: Netflix, UBS, Ofcom/IHS Markit Netflix Amazon UK Germany France Italy Spain 0 5 10 15 20 25 Streaming Top 5 European markets 2019 content budget, $bn
  • 46. Benedict Evans –– January 2020 46 Netflix is the UK’s biggest TV channel Netflix is the UK’s biggest TV channel for 18-34s,, and YouTube is even bigger Source: Ofcom 0 10 20 30 40 50 60 70 Youtube Netflix ITV BBC Channel 4 Amazon Prime Channel 5 Video minutes per person per day, UK 18-34s, 2018
  • 47. Benedict Evans –– January 2020 47 More than half of Netflix’s base and most of the user growth is now outside the USA Unbundling countries, not just cable Source: Netflix 0 25 50 75 100 125 150 175 Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Mar 19 Jun 19 Sep 19 Netflix subscribers (m) APAC LATAM EMEA North America
  • 48. Benedict Evans –– January 2020 48 “In business, there are two ways to make money. You can bundle, or you can unbundle.” - Jim Barksdale
  • 49. Benedict Evans –– January 2020 49 But! There can only be so many brand relationships Aggregators exist for a reason Many big brands are actually B2B businesses anyway Lots of rebundling coming New distribution channels break apart old aggregation models Everyone wants to unbundle and go direct For TV and retail, the old bundles are going, but we will get new ones Now: the great unbundling. Next: the great rebundling
  • 50. Benedict Evans –– January 2020 50 Is that a ‘tech’ company? Or is it a TV company using a new channel?
  • 51. Benedict Evans –– January 2020 51 OK, ecommerce and TV. But what else?
  • 52. Benedict Evans –– January 2020 52Source: Piper Jaffray for US teenagers in 2019 Most people don’t have broadband Most people don’t have 3G Most people don’t have smartphones 83% of US teenagers have an iPhone For 25 years, we’ve had to remind ourselves that most people are not early adopters “Remember, most people don’t have that”
  • 53. Benedict Evans –– January 2020 53 Today, anyone does anything online In 2017, 40% of Americans met their partners online 0% 10% 20% 30% 40% 1995 2000 2005 2010 2015 US heterosexual couples who met online, by year of meeting Source: Stanford/GfK, 1995-2017
  • 54. Benedict Evans –– January 2020 54
  • 55. Benedict Evans –– January 2020 55 Penetration and consumer acceptance drives expansion Models for market expansion Vertical integration The full stack’ model: from booking.com to Airbnb Horizontal expansion Taking established online models to new segments
  • 56. Benedict Evans –– January 2020 56 A model that only worked for narrow segments a decade ago now expands into the whole economy Example: expanding the ‘two-sided marketplace’ model Rigup Oil field workers Honor Home help for the elderly Incredible Health Nursing
  • 57. Benedict Evans –– January 2020 57 Is that a ‘tech’ company? Or is it a travel / insurance / employment / taxi / dating /banking / restaurant company using a new channel?
  • 58. Benedict Evans –– January 2020 58 Growth and global diffusion More and more investment in company creation around the world 0 50 100 150 200 250 300 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Venture capital investments ($bn) RoW US Source: NVCA
  • 59. Benedict Evans –– January 2020 59Benedict Evans –– 12 October 2019 59 Expanding software and tools from work to everyday life Software, automation, workflow, and tools… From work and big business to everyone’s lives From mainframes, to LinkedIn, to Tinder and Rigup
  • 60. Benedict Evans –– January 2020 60 The next S Curves
  • 61. Benedict Evans –– January 2020 61 The tech industry has had a new centre roughly every 15 years What’s the next generational change in scale? PCsMainframes Web Smartphones ?
  • 62. Benedict Evans –– January 2020 62 Can there be another massive increase in scale? Once you’ve connected everyone, how do you create a bigger market? 0 1 2 3 4 5 6 Mainframes PCs in 1994 Web in 2007 Smartphones in 2019 Global population over 14 Global installed base, 2019 (bn) Source: UN, GSMA, ITU, Apple, Google, CNNIC, @BenedictEvans ?
  • 63. Benedict Evans –– January 2020 63 Smartphones began as a PC accessory, but now PCs are a smartphone accessory And is this the new thing, or part of the old thing? Stupid Exciting! Boring ? PC internet Mobile? ? ?
  • 64. Benedict Evans –– January 2020 64 Frontier tech Quantum, new battery chemistry, neural interfaces, autonomy, AR optics Important but narrow Drones, IoT, voice, wearables, robotics, esports, 3D printing, VR, micro-satellites Structural layers Machine learning Crypto? (3G/4G/5G) (Cloud, still) The next platform? AR glasses? Many new things happening, but what’s their scope? Lots of new things going on, but which is THE thing?
  • 65. Benedict Evans –– January 2020 65 A lot of innovation is happening inside tech, but that’s no longer the only focus Tech for the 2020s Machine learning is the new database Crypto is the new open source (?) AR is the next smartphone (?) Regulation
  • 66. Benedict Evans –– January 2020 66 The Next Big Thing? Regulation and policy
  • 67. Benedict Evans –– January 2020 67 Governments of the Industrial World, you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather. - John Perry Barlow, 1996
  • 68. Benedict Evans –– January 2020 68 Then we connected everyone, including the bad people There are 5.5bn adults on earth, 5bn have a phone and 4bn have a smartphone Source: UN, GSMA, ITU, Apple, Google, CNNIC, @BenedictEvans 0 1 2 3 4 5 6 Global population over 14 Mobile phones Smartphones Fully online Global population, 2019 (bn)
  • 69. Benedict Evans –– January 2020 69 Which also meant creating huge, scary companies 7 of the 10 largest global companies by market cap are tech Source: Bloomberg 0 250 500 750 1,000 1,250 Apple Microsoft Google Amazon Facebook Berkshire Hathaway Alibaba Tencent Johnson & Johnson Exxon Mobile Ten largest global companies by market cap, December 2019 ($bn)
  • 70. Benedict Evans –– January 2020 70 Encryption Fake NewsAI Bias CSAM Ride share Elections Every month there’s something else to worry about Now we have issues. So many issues Privacy Hate speech Face recognition Radicalisation Abuse of market power Filter bubbles Political advertising
  • 71. Benedict Evans –– January 2020 71Source: ThisPersonDoesNotExist.com None of these people exist: these faces are algorithmically generated by a machine learning system And this won’t get simpler
  • 72. Benedict Evans –– January 2020 72 Every complex question has a simple answer Naturally, there must be a simple answer Break them up BREXIT
  • 73. Benedict Evans –– January 2020 73 Every complex question has a simple answer ‘Break them up’ – the Brexit of tech Break them up Into what? And which problems would that solve? Brexit
  • 74. Benedict Evans –– January 2020 74 Coverage of real issues is accompanied by a steady flow of stories that don’t stand up to scrutiny Also included: a classic moral panic ‘Google makes $4.7bn from Google News!’ Extrapolated from a 2008 guess of ‘$100m?’ ‘The NHS gave Amazon our health data!’ Alexa can read bits of the public website to you ‘Amazon has private label!’ Like all retailers for a century
  • 75. Benedict Evans –– January 2020 75 Moral panic: Amazon does private label 'Well done – you just discovered retail’ 0% 10% 20% 30% 40% Amazon Walmart US groceries Macy's US general retail UK packaged food Private Label as % revenue, 2018 Source: Morgan Stanley, Euromonitor
  • 76. Benedict Evans –– January 2020 76Benedict Evans –– 12 October 2019 76 But panics have causes, and consequences “Industrial food is a good thing, but what’s in the sausages?” - The Jungle, 1906 Maybe we should break up ‘the beef trust’… But we also need an FDA, ingredient lists, veterinary inspections, hygiene rules…
  • 77. Benedict Evans –– January 2020 77 Tech companies being bad to other companies Search, app stores, ad pricing Tech companies being bad to us Privacy, security (but not pricing) Bad people using tech Abuse, fake news, elections… Different types of problem have fundamentally different solutions So, which problem are you trying to fix?
  • 78. Benedict Evans –– January 2020 78 Anti-trust: Mostly beside the point
  • 79. Benedict Evans –– January 2020 79 Google Google Google Facebook Facebook Facebook 0% 25% 50% 75% 100% Search Social (DAUs) Online advertising All advertising Market share, global ex-China, 2019 Google and Facebook clearly have dominance in major markets: the question is what (if anything) to do Google and Facebook clearly have market dominance Source: Companies, Zenith, @BenedictEvans
  • 80. Benedict Evans –– January 2020 80 Amazon has a third of ecommerce, but is that really the competition? What’s Amazon’s market share: 35% or 5%? Source: @BenedictEvans, Amazon, Walmart, US Census Addressable retail = ex. cars, car parts, gasoline, bars & restaurants 0% 10% 20% 30% 40% First party share of ecommerce GMV share of ecommerce GMV + Stores share of total retail GMV + Stores share of addressable retail Walmart share of addressable retail Amazon US market shares, 2018
  • 81. Benedict Evans –– January 2020 81 What’s Apple share? Depends which regulator you ask Apple is the minority player globally, but has 100% of the market for ‘iOS app stores’ 0% 25% 50% 75% 100% Global unit sales Global installed base US installed base US app store sales US teenager installed base iOS app stores Apple market shares, 2019 Source: Apple, Gartner, Operators, @BenedictEvans, Piper Jaffray
  • 82. Benedict Evans –– January 2020 82Benedict Evans –– 12 October 2019 82 Market definition is everything Regulators make their own decision on what the ‘relevant market’ is for anti-trust purposes IBM had 100% of the IBM mainframe market Apple has 100% of the iPhone app store market But they don’t have market dominance! Regulators define the relevant market however they like!
  • 83. Benedict Evans –– January 2020 83 Google YouTube Android? Gmail? Display ads? Facebook Instagram & WhatsApp Oculus? Amazon AWS (cash cow, but not the only one) Apple Content stores? Music? Coherent case that YouTube, Instagram & WhatsApp, and AWS are viable stand-alone businesses What could feasibly be split apart?
  • 84. Benedict Evans –– January 2020 84 More competition in the ad market Split apart Instagram or YouTube Little impact on network effects or product competition Breakups would affect ad competition, but not product competition – unlikely to create a flood of YouTube alternatives But what kinds of competition would breakups affect?
  • 85. Benedict Evans –– January 2020 85 And… Do people worry about ‘big tech’ because Google & Facebook might be overcharging WPP, and Apple is mean to Spotify? Or are the real concerns elsewhere?
  • 86. Benedict Evans –– January 2020 86 Tech companies being bad to other companies Tech companies being bad to us Bad people using tech Few of the issues that make people worry about ‘big tech’ relate to anti-trust Which problem are you trying to fix? Solved by anti-trust: either breakups or conduct regulation Limited anti-trust relevance No anti-trust relevance
  • 87. Benedict Evans –– January 2020 87 Regulation: Boring, complex, somewhat effective
  • 88. Benedict Evans –– January 2020 88 ‘Tech’ becomes a regulated industry Lots of industries are subject to specific, technical regulation, and tech will become one of them 0 5 10 15 20 25 30 Cargo shipping Pharma Oil and Gas Extraction Fishing Airlines Banks Finance Cars Electrical utiltiies Refining US Federal industry-specific regulation index, 2014 Source: Al-Ubaydli and McLaughlin
  • 89. Benedict Evans –– January 2020 89 We won’t regulate ‘tech’ – we’ll have lots of different regulation for different issues and companies We don’t actually regulate ‘banks’ Retail deposits Public securities markets Insider trading Credit cards Pensions Capital adequacy Mortgages Futures & options And so much more… ‘Regulate the banks’
  • 90. Benedict Evans –– January 2020 90 Old issues, old solutions Online-only banks Old issues, new questions Uber New issues, new solutions Airbnb, Facebook Is this a new problem, or an old problem expressed in a new way? Is this a ‘tech’ problem?
  • 91. Benedict Evans –– January 2020 91 Is that a ‘tech’ company? Or is it a bank, but with a website?
  • 92. Benedict Evans –– January 2020 92 In a massively disaggregated industry, there are many parties that might touch a problem at some point Where is the liability? Bernie Madoff Landlord IRS Market counterparties Auditor Microsoft Excel SEC Phone company Suspicious peers
  • 93. Benedict Evans –– January 2020 93Source: Moody's Analytics Global Banking Regulatory Radar The reality of regulation is complex and multimodal Presume complexity, across domain and country
  • 94. Benedict Evans –– January 2020 94 Do we know what we want?
  • 95. Benedict Evans –– January 2020 95 Where to start? We have a wish list… Secure, private, minimal data collection Police access Empower competitors Catch state ‘bad actors’ Trustworthy information Moderate ‘bad’ content Open platforms
  • 96. Benedict Evans –– January 2020 96 Do we want platforms to know and control what happens on their networks, or not? Or both? All of these are trade-offs Secure, private, minimal data collection Police access Empower competitors Catch state ‘bad actors’ Trustworthy information Moderate ‘bad’ content Open platforms
  • 97. Benedict Evans –– January 2020 97 Easy to say, but do we know what we want? Case study: content moderation There’s bad stuff on your platform – take it down
  • 98. Benedict Evans –– January 2020 98Source: Alex Stamos ‘Social networks’ are a mix of many publishing forms with different speech and distribution models What does ‘take down’ mean? Advertising Recommendation engines Public feeds Groups Private feeds Group messages 1:1
  • 99. Benedict Evans –– January 2020 99 0% 10% 20% 30% 40% 50% 60% 70% 80% Brazil Canada France Germany India Italy Japan Spain UK USA Percentage believing that people should be free to: Offend minorities Offend religion Be sexually explicit It’s not just ‘China’ - liberal democracies have widely varying attitudes to free speech What does ‘bad’ mean? Source: Pew Global Attitudes Survey, 2015
  • 100. Benedict Evans –– January 2020 100 We lack consensus on what’s bad enough to ‘take down’, and on what ‘take down’ even means Do we know what we want? Innocuous IllegalOffensive?Rude? Totally public Totally private ??? ???
  • 101. Benedict Evans –– January 2020 101 We lack consensus on what’s bad enough to ‘take down’, and on what ‘take down’ even means Do we know what we want? Innocuous IllegalOffensive?Rude? Totally public Totally private ??? ???
  • 102. Benedict Evans –– January 2020 102 China, digital sovereignty and digital extra- territoriality
  • 103. Benedict Evans –– January 2020 103 “War is God's way of teaching Americans geography.”
  • 104. Benedict Evans –– January 2020 104 The end of the American internet China and India have 5x more smartphones than the USA China India North American Westen Europe Other 0 1 2 3 China & India RoW Smartphone users, June 2019 (bn) Source: Apple, Google, CNNIC, @BenedictEvans
  • 105. Benedict Evans –– January 2020 105 The end of the American internet China and India use more mobile data than the rest of the world combined China India North American Westen Europe Other 0 5 10 15 20 China & India RoW Mobile data, June 2019 (EB) Source: Ericsson
  • 106. Benedict Evans –– January 2020 106 China North America Western Europe All otherIndia 0.0 0.5 1.0 1.5 2.0 2.5 China & India Other Ecommerce ($tr, 2019e) 40% of global ecommerce value is in China The end of the American internet Source: McKinsey, eMarketer
  • 107. Benedict Evans –– January 2020 107 0% 25% 50% 75% 100% Google Apple Facebook Netflix Global user base, Q3 2019 RoW USA “But the US constitution says!” is no longer an adequate answer American companies, global reach Source: Companies, @BenedictEvans
  • 108. Benedict Evans –– January 2020 108 USA EU China California, Singapore, UK, etc At least three jurisdictions competing, with different politics but also different regulatory cultures Regulatory competition?
  • 109. Benedict Evans –– January 2020 109 Austria EU court holds that an Austrian libel take-down order applies globally Singapore State’s right-of- reply must be applied to posts seen in Australia GDPR & CCPA Laws apply to EU/CA citizens wherever they are How do you apply domestic laws to a global medium, and to citizens who may be abroad? Digital extraterritoriality
  • 110. Benedict Evans –– January 2020 110 Extra-territorial regulation means companies start complying with the harshest rule that applies, wherever it is Global reach means a lowest common denominator
  • 111. Benedict Evans –– January 2020 111Benedict Evans –– 12 October 2019 111 Tiktok: not just your standards? When the community standards being enforced may not be your community’s standards
  • 112. Benedict Evans –– January 2020 112 There will be many more TikToks The US can no longer assume that every hot new thing will be made in the US 0 50 100 150 200 250 300 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Venture capital investments ($bn) RoW US Source: NVCA
  • 113. Benedict Evans –– January 2020 113 China and the NBA…
  • 114. Benedict Evans –– January 2020 114 ‘Don’t forget Taiwan is part of China’ And every other brand
  • 115. Benedict Evans –– January 2020 115 Old Store your data in our country New Follow our rules in our country Future Use our country’s rules outside our country Again, how do local rules apply to global systems? From sovereignty (or protectionism) to extraterritoriality
  • 116. Benedict Evans –– January 2020 116 GCP/AWS/Azure all now rolling this out – will Facebook join them? The future – compliance and moderation as a service?
  • 117. Benedict Evans –– January 2020 117 When local regulators assert global coverage and make incompatible demands, who yields first? But what will happen when regulators conflict? Secure, private, minimal data collection Police access Empower competitors Catch state ‘bad actors’ Trustworthy information Moderate ‘bad’ content Open platforms
  • 118. Benedict Evans –– January 2020 118 Old Mark Zuckerberg won’t come to Parliament New Will the CEO of Tiktok come to Congress? Next A distributed Blockchain system that has no CEO? Part of the point of crypto is to remove central control – and hence sovereignty And this may get even more complicated
  • 119. Benedict Evans –– January 2020 119 The only certainty: regulation as a regressive tax Much of regulation is a fixed cost that affects new entrants disproportionately Source: Dahl, Meyer and Neely 2016 0.0% 2.5% 5.0% 7.5% 10.0% <$100m $100-250m $250-500m $500m-1bn $1bn-10bn Mean compliance costs at US financial institutions by size
  • 120. Benedict Evans –– January 2020 120 Conclusion: welcome to the world
  • 121. Benedict Evans –– January 2020 121 Software ate the world, so all the world’s problems get expressed in software (We connected everyone, including the bad people)
  • 122. Benedict Evans –– January 2020 122 Tech has become part of the world, so it gets regulated as part of the world What’s the next cycle? PCs All companies Mainframes Big companies Web Middle-classes Smartphones Everyone Systemically important part of society
  • 123. Benedict Evans –– January 2020 123 The late 70s and early 80s saw another wave of concern around computing and automation Worrying about tech isn’t new
  • 124. Benedict Evans –– January 2020 124 Railways Industrial food Ships, aircraft, cars, databases… Internet Every important tech gets industry-specific regulation Every wave of tech changes the world, and gets regulated
  • 125. Benedict Evans –– January 2020 125 The ideology of tech has changed, and AI has changed what’s possible, but some things remain impossible Tech has changed its attitude… “Censorship is bad” Yes to moderation… But whose decision is it? “We can’t moderate 100bn messages a day” AI changes this… If we also hire 30k human moderators “You can’t build a secure platform with a back door” You can’t build a secure platform with a back door
  • 126. Benedict Evans –– January 2020 126 Some regulation is binary Ban tobacco ads Open banking APIs Most is ‘best reasonable effort’ Try to prevent fraud Try to block CSAM Some things are just not possible Ban inflation Block all bad content instantly Regulating tech is complex and full of tradeoffs. But, this is true of all regulation – law and policy are the art of the possible And this also needs new understanding in policy…
  • 127. Benedict Evans –– January 2020 127 0 5,000 10,000 15,000 20,000 25,000 Year 1 Year 2 Year 3 Year 4 Year 5 Pages of rules related to Dodd-Frank banking regulation Welcome to a regulated industry The growth chart for the 2020s Source: Davis Polk & Wardell LLP
  • 128. Benedict Evans –– January 2020 128 Benedict Evans January 2020 www.ben-evans.com Thank you