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June 19, 2009

SAI’s chart of the day “Why investing in the internet is like investing in the cement business.”  It argues that the growth of the internet is over and supports it with data that shows slowing growth of broadband subscriptions.

A couple problems with this analysis:

1. # of households on broadband is one thing.  But the real metric is households x throughput.  We still live in a country where median download speed is 2.3 MBPS.  That is getting constrained as the quality and quantity of media delivered online increases.  Meanwhile, other countries like Japan and South Korea have median download speeds that are more than 10x the US.  There is still a lot of growth ahead.

2. The internet is global, and worldwide broadband growth and monetization are still on the rise.  As other nations become more productive, so too will the monetization opportunities presented by the massive traffic coming from countries outside the US and Western Europe.

3. The author ends the article with the words “here’s hoping mobile will save us”. And I think it will.  We are seeing more powerful devices, different monetization models, and faster speeds.  And a lot of these advances have been accellerating in the last few years.

So, all in all, I’m optimistic.  There is still a very long way to go.  True, there is nothing like the invention of a new technology to jumpstart explosive growth and innovation.  But I think there is still a lot of wind in these sails for VC’s and entrepreneurs in this sector.

  • Author robchogo
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