P. 18

  Ben Rogoff
Fund Manager
Polar Capital Technology Trust
Eighteen years after the bubble of 2000, technology as an investment sector is in a good place as the industry delivers on much of what was promised nearly two decades ago.
At that time, the world was fascinated by the long-term promise of the internet, a PC-based network with 361 million users (5.8% of the world’s population) connected via dial-up modems, mostly in the developed world. There was no broadband, no smartphones, no WiFi, no connected games consoles. Instead of Candy Crush or Fortnite, Snake (embedded in most Nokia handsets) was one of the most widely played mobile games.
There were no apps, just browser-based searching, banner ads and rudimentary B2C eCommerce. When reality caught up with inflated early expectations and the inevitable bust happened, Amazon and eBay survived but most of the first-generation internet leaders did not. Today, the internet is more than ten times larger than it was in 2000, sporting four billion users and accounting for 53% of the world’s population.
Much of the growth has been driven by smartphones (more than 3.4 billion users worldwide), particularly
in the developing world that lacked legacy, fixed-line telecom infrastructure. As such today’s internet is very much a smartphone-driven network powered by the cloud and the app economy, an ecosystem of millions of apps that act as the interface for connected devices. This ecosystem – worth nearly $1trn today – is the engine room for the smartphone-fuelled disruption that is reordering much of the world right now.
This dynamic is most apparent in consumer-facing domains such as advertising where online already accounts for 19% of worldwide spending , dominated by Google and Facebook who have been capturing 90% of incremental growth .
In the US, advertising delivered on mobile devices accounted for 57% of online advertising revenues in 2017.
Likewise, eCommerce – fuelled by the growth of mobile commerce and payments – grew 20% y/y in 2017 . While the stunning success of both Alibaba and Amazon is well known, global eCommerce penetration remains relatively low at 13% which should prove supportive for future growth.
While online spending has been growing steadily (taking 1% share from the offline world per annum ), today’s winners are not sitting on their laurels.
Amazon’s surprise purchase of upscale grocer Whole Foods in August 2017 epitomised how today’s online winners are instead looking to press home their scale and data advantage at a time when traditional retailers are struggling.
The remarkable growth of Amazon Prime (more than 100 million members worldwide) is in stark contrast to record levels of US retail store closures. Together with its Go checkout-less concept store, Amazon has continued to push the boundary of what is possible today, and
how the combination of smartphone and the cloud can be harnessed to forever change user experience and expectations resulting in widespread disruption and reinvention.
Once contained to a few industries, disruption is both broadening and deepening at an accelerating pace. Today’s disruptors know more about their customers
        DIY Investor Magazine | Dec 2018 18

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