Digital Economy : 30 years of the world wide web
What long-term trend are we observing?
12 March 2019 marks 30 years since Tim Berners-Lee first proposed a new way of connecting and sharing information over the internet, effectively creating the world wide web*. This landmark shift in the way that people connect over the internet has since changed almost every facet of how we live and work, making it easier to find information, products, and – potentially – even love (read more on how the internet is disrupting romance).
This 30 year anniversary really cements the fact that there is an entire generation of people – millennials – who have grown up with the internet always being there. This digital-native generation have been good teachers to their parents and grandparents, so millennials and baby boomers now tend to make roughly the same amount of transactions online each year – both buy around 15 items annually online (KPMG, Global Online Consumer Report 2017).
However, this younger generation is now approaching their peak spending years, and the amount of their discretionary spending that takes place via digital channels will only increase as their disposable income grows:
Source: Haver Analytics, Bureau of Labor Statistics, Morgan Stanley Wealth Management GIC. Data are average expenditures for US consumers in nominal dollars from 1984-2014. Latest long-term data available as at March 2019.
What does this mean for investors?
This significant demographic and technological shift is likely to have significant implications for how companies interact with their increasingly connected consumers. We see investment opportunities in companies operating across the full online customer journey, from customers' initial discovery of products and services, to the buying decision, and then final payment and delivery.
We also invest in ‘data enablers’, companies which provide technology and/or services to help other businesses manage their digital transformation. We call these four investible stages of the consumer journey the 4 Ds – Discovery, Decision-Making, Delivery, and Data & Enablers.
Read more about the ‘4 Ds of the digital economy’
Given the rapid and widespread adoption of the internet in the 30 years since the world wide web was conceived (nearly one billion new Internet users came online from 2013-2017 according to Bain), and the proliferation of smartphone access in more recent years, it is easy to assume that everyone has access to the internet. However, we are likely to continue seeing a significant amount of individuals in developing markets become connected.
Bain also forecasts that of the main countries that are likely to account for the next billion new internet users, these countries will have growing populations, high GDP growth, a growing middle class, improving 4G network coverage, and falling data and smartphone prices, all of which could be supportive for companies that are willing and prepared to evolve their business models in line with changing consumer preferences.
So in addition to consumers in developed markets hitting their peak spending years, a broader potential consumer base is likely to become connected in the coming years, enabling even more people to make informed purchase decisions 24/7.
Find out our views on why the consumer is king for thematic investors
*What’s the difference between the internet and the world wide web?
The internet is the massive global system of interconnected computer networks that lets computers talk to each other wherever they are in the world, and which dates back to the 1960s. The world wide web is the model created in 1989 which lets computers share information and documents over the internet.
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