How to explain the internet's slow growth

The internet spins into adulthood

Despite the growth of video and developing markets, the internet's once frenetic expansion is finally slowing.

The internet is spinning into adulthood, with user growth rates slowing from the frenetic whirl of its adolescent years.

How much information will the internet carry in 2016? About a zettabyte, according to networking company Cisco. That’s about one trillion terabytes, or 1,000,000,000,000,000,000,000 bytes – equivalent to the data in about 300 billion DVD movies.

Yet even with the growth in developing economies, growth in internet traffic is slowing. Traffic is still expanding but not at the staggering growth rates of the 1990s and early 2000s. In this sense, the internet has left its teenage years behind.

Two things are driving the internet’s current traffic growth: rising global incomes and video.

The video comes mostly from services like Netflix and YouTube; Cisco calculates that video of all sorts will soon make up half of all internet traffic. On some other estimates, video has already passed that mark. (These days, traditional web pages and emails make up less than 10 per cent of all internet traffic.)

"Technology is advancing faster than demand." Andrew Odlyzko

Meanwhile, the internet is no longer dominated by users from the traditional “advanced” economies of North America, Europe, Australasia and Japan. Rising incomes have made China and India the world’s two largest internet markets, measured simply by numbers of customers; India passed the US last year to have the world’s second-largest user population.

Mary Meeker, a renowned analyst who publishes a yearly compendium of internet trends, estimated in June that the global number of internet users has now passed three billion.

Why the traffic growth slowdown?

First, internet user growth rates are slowing. 

Internet traffic: past and future.On Meeker’s figures, the number of internet users around the world went up just 9 per cent between 2014 and 2015. Global smartphone user growth is slowing year-on-year, too: in 2015 it was up 21 per cent, compared with 31 per cent the previous year. New users are harder to win in developing nations, largely because a smartphone takes a larger chunk of people’s incomes.

Second, and perhaps more surprisingly, per-user growth rates are continuing to slow as well – despite all that extra video. Cisco’s most recent forecast is that internet traffic will grow threefold from 2015 to 2020, a compound annual growth rate of 25 per cent. That may sound high, but it’s down on the growth rates of the 2000s, which appear to have been above 40 per cent.

Indeed, Andrew Odlyzko, the US mathematician who debunked many of the late-1990s internet boom’s wilder traffic claims, points out that traffic growth has been slowing down for many years – and not just wired internet traffic, but wireless traffic as well. 

In a paper published this year (“The growth rate and the nature of Internet traffic”, in Transactions on Internet Research), Odlyzko suggests that the slowdown is not due to poor internet infrastructure or slow economic growth. 

He notes that Japan, with some of the world’s best fibre-to-the-home connectivity, has had relatively low traffic growth rates (20 to 25 per cent) and has far lower internet traffic per person than countries such as the US.

One important implication of the global slowdown in demand is that few countries are likely to run into widespread unexpected shortages of internet connectivity. 

“At the 20 to 30 per cent per year growth rates that are observed today in industrialised countries,” writes Odlyzko, “technology is advancing faster than demand.”

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Impact of video

Why hasn’t video caused a bigger surge in internet traffic yet? It could be that the mass of users are still not adopting the internet for most of their video usage, and will shortly do so.

Odlyzko’s paper, however, notes another possible factor: much recent innovation in internet services has concentrated on mobile devices, which still need expensive mobile data and which have small screens and small batteries. Many of the most innovative new ideas don’t need enormous bandwidth. 

On these figures, there may be less need for concern about an imminent shortage of connectivity in countries such as Australia that do not yet have fibre connecting the homes of every citizen – the original aim of Australia’s National Broadband Network. 

The internet will keep growing, but it is no longer exploding.

Five directions for the internet

Mary Meeker, a partner at venture capital firm Kleiner Perkins Caufield & Byers, is renowned for her annual Internet Trends survey. Here are five predictions from her 2016 report:

Chinese innovation:

China boasts global innovation leaders in e-commerce, messaging, financial services and on-demand transport. Its three internet giants – Tencent, Alibaba and Baidu – command 71 per cent of the total time spent on mobile devices in China. 

Voice control:

For small screens, cars and even sometimes homes and offices, speaking your commands is easier than typing them. Meeker argues that speech recognition can reach 99 per cent accuracy, at which point the vast majority of people who now use it rarely will start using it to tell their devices to do all sorts of internet-connected tasks. (Note that voice recognition has its sceptics who say it often falls short of usability.)

Messaging:

Meeker ranks WhatsApp, Facebook Messenger and WeChat as the current messaging leaders, and she argues they will become even more important in years to come.

Commerce:

Internet sales have increased from less than 2 per cent of all retail sales in the US in 2000 to about 10 per cent in 2015, and they will keep growing. Millennials, born between the early 1980s and the early 2000s, are more comfortable with e-commerce, and they’re moving into their prime spending years.

Android:

Smartphones running Google’s free Android operating system grew from 4 per cent market share in 2009 to 81 per cent in 2015, and dominate particularly in developing markets. In the same period, iOS, which runs on pricier Apple devices, grew from 14 per cent to just 16 per cent.

Read next: Coming soon: a massive upgrade to the global brain


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