The Internet subsector in Q4 2015 reported a strong quarter with 20% of year-over-year revenue growth, led by Yelp (+40%), Linkedin (+34%), Netflix (+23%) and Amazon (+22%). Yahoo reported a slight revenue increase, posting a 1.6% gain.
On a quarter-over-quarter basis, the Internet subsector reported 13% revenue growth. Amazon led with 41% growth, Google followed with 14% and eBay and LinkedIn with 10% each. As usual for the Internet subsector the growth in revenue was not positively reflected by net income as Google was the only company which reported a positive growth in net income both sequentially (+24%) and year-over-year (+4%).
An estimated 3.2 billion people, or 44% of the world's population, will have access to the Internet by 2016. Of this, more than 2 billion will be using mobile devices to do so and this number is predicted to grow by more than 25% per year. More than a billion people use the Internet to bank online, to stream music, and to find a job. More people are making purchases online. As a result, mobile commerce and mobile advertising is experiencing explosive growth.1
The growth in Internet access is taking place across the world, but some countries are seeing particularly rapid growth. China with 688 million internet users, India with 402 million, and Indonesia with 93.4 million lead the way and will account for almost half of the gains in access globally over the course of the next five years. The combination of lower-cost devices and inexpensive wireless networks are making accessibility easier in countries with populations that could not previously afford them.
Considering that around 4 billion people in the world still do not have access to the Internet, several technology companies are rolling out efforts to connect them via high altitude planes, balloons, and satellites. Google along with Fidelity recently made a US$1 billion investment in SpaceX to achieve bringing satellite Internet to remote corners of the world.1 Satellite Internet has been around for years, but did not become mainstream due to its extreme latency—the gap in time between the satellite receiving a request and responding. However, companies such as SpaceX and OneWeb are trying to eliminate that latency by placing their satellites in what’s called low Earth orbit, which ranges from roughly 100 to 1,250 miles above Earth. By bringing their satellites closer to home, latency could be cut from 500 milliseconds to 20 milliseconds, which is about the same speed as a fiber optic home internet connection in the US. However, the signal from these satellites won’t be able to cover as much of the planet as satellites in geosynchronous orbit, some 22,000 miles up. So companies will have to launch more satellites to make up for the difference.2
An estimated 1.6 billion connected things are expected to be used by smart cities in 2016, an increase of 39% from 2015. Smart commercial buildings will be a major user of Internet of Things (IoT) followed by smart residential homes. Intel, Samsung and Google have invested in smart city projects. Intel generated US$2.3 billion from IoT in 2015. Samsung has set a target to make 90% of its future devices IoT ready by 2017 and 100% by 2020. Google plans on creating a unified, one language network of interoperable IoT devices. IBM is building a IoT portfolio through its big data analytics and cognitive computing (Watson) technologies and IBM Bluemix platform/services. Amazon has developed the ‘Echo’, a connected-home personal assistant.3
Amazon has now posted profit for three consecutive quarters. Amazon’s net sales increased 22% to US$35.7 billion in the fourth quarter, compared with US$29.3 billion in the fourth quarter 2014. Excluding the US$1.2 billion unfavorable impact from year-over-year changes in foreign exchange rates, net sales increased 26% compared in the fourth quarter 2014. Operating income increased 88% to US$1.1 billion in the fourth quarter, compared to US$591 million in Q4 2014. The increase was driven by a sharp increase in Services sales which rose to US$9.1 billion in Q4 2015 from US$6.2 billion in Q4 2014. Net income was US$482 million in Q4 2015 compared to net income of US$214 million in the fourth quarter of 2014.
LinkedIn announced that it has acquired Connectifier, which provides search technology that draws on artificial intelligence to help recruiters find talent. Connectifier’s search index contains profiles for more than 400 million job candidates. The acquisition of Connectifier, is expected to strengthen LinkedIn’s core products and accelerate its product roadmap. Terms of the deal weren’t disclosed. In 2015 Connectifier raised US$6 million in funding.
1IDC.com, December 2015
2Wired.com, December 2015
3wtvox.com, December 2015