Within just a few years, the world will have 4 billion people connected to the internet. But it may surprise readers to learn that also within a few years, there will be 75 billion devices connected to the internet and that number will continue to grow into the hundreds of billions by 2030. The obvious question many will ask is: what are these devices?
Whereas in the past most internet connected devices were objects we would all recognize from the office or home; laptops, desktop computers and mobile telephones, a dramatic decline in the cost of connecting electronic devices means that today almost anything can be connected to the internet. Cars, components inside factory machines, heavy infrastructure, household appliances, even individual lampposts in a city, all are now increasingly being connected to the web, creating a worldwide network of smart devices and smart systems. This is something otherwise known as the ‘Internet of Things’.
Today, for example, a series of connected components in a jet turbine can record in real-time the condition of the engine and components, send this data over the internet to the manufacturer, warn the engine user of any potential repair issues ahead of time and can even order spare parts automatically from the manufacturer to arrive before repairs are required. Connected sensors in modern buildings can monitor the number of people inside a building and the weather outside, and automatically adjust the ventilation and cooling systems to minimize energy use while maintaining a comfortable internal environment. These examples, and many more across every sector in the economy, are conducted today by devices connected to the internet and often without any human involvement. This investment theme, the Age of Connectivity, is only just getting started and offers investors great future opportunity from investment exposure to this trend.
This dramatic change in connectivity gives humanity previously unimagined levels of data and control over the lived environment. This new Age of Connectivity will change the world dramatically in coming years.
With billions of new devices and humans joining the internet economy over the next few years, the volume of traffic and commerce happening online will grow dramatically too.
Already, the total value of online commerce (Ecommerce) is $15 trillion per year and is expected to continue growing, driven by this rapid increase in the volume of internet traffic, the number of people and number of devices connected to the web. And the internet economy is about much more than just buying or selling products online. Digital payments, advertising, logistics, cloud computing, computer gaming, these are huge markets and critical to the functioning of the connected world. The global opportunity offered to investors from this already huge market and the growth we will see in coming years is huge. It is truly an investment trend that investors cannot afford to miss out on.
Ecommerce is the transfer of value across electronic networks and we see networks and the economics of networks as being key to understanding where the value lies for investors in the wider trend of The Age of Connectivity.
Large, successful and scalable networks provide barriers to entry and propel growth. The more users that any online network has, the stronger the network becomes and the harder it is for others to compete. This generates significant amounts of value for investors with exposure to these networks over the long-term. Whether it is in operating systems, apps, cloud-data, search engines, digital payments, or logistics, scaled networks are the business models that win over the long-term and this is where, we believe, the optimal investment returns lie for investors in the Age of Connectivity.