We’ve Reached Peak Internet

I have this theory that we’ve reached Peak Internet in the United States. If I’m right, the implications for American society are enormous.

If you read Social Media Is Bullshit, researched from 2009 to 2011, and published in 2012, you’ll know I have an excellent track record when it comes to my theories concerning the Internet. There’s not an honest person out there who has read that book and found me to be wrong about what was said within it.

Then again, there was that one social media marketer who took a picture of himself giving the middle finger and sent it to me after I was on CNBC.

So … I guess consider that as you will.

The Theory

Because this is such a deceptively large topic to cover, I’m going to give you a few of the reasons I believe we’ve reached Peak Internet right up front.

If I decide to make this into a series of articles, or even a book, I’ll expand on those reasons (and the others) at a later time.

One minor point before we get into it: I borrowed the name Peak Internet from noted geologist M. King Hubbert’s Peak Oil. The two theories are vastly different, but the overall point is the same: At some point, we’ll run out of oil, and we’ll need to consider the ramifications of this. In this case for Peak Internet, we’ve reached total market saturation. That means everyone who is ever going to be on the Internet is now on the Internet, and everyone who is going to own a smartphone now does so. Like with Peak Oil, we need to consider the ramifications of this. Especially because what we so often hear about is often created from the vantage point that the Internet is going to continue to expand forever. What if this it?

While the internet still has room to grow abroad, I found it’s disingenuous to include global users in such statements. For one reason, Americans are radically different depending on where you find them within their country. Sometimes within their state. So for us to make bold declarations and assumptions about the larger global population are exceedingly foolish when we can’t even figure each other out. For another, and this one is a bit more important, a lot of our internet companies depend on advertising from American companies to sustain their businesses. Telling an American company that they’re about to part ways with a lot of cash so they can reach a customer in Latvia is a pretty serious non-starter, which is why you’ll notice it’s rare that numbers provided by Internet companies bother to break down International and American users. It’s not in their best interest to reveal the truth. Because the truth is, we’ve reached Peak Internet.

I drew this conclusion based on a bunch of different trends that I’ve seen converge over the past four years since Social Media Is Bullshit came out. Since I’m just providing you with an overview here, I’ll give you the main three.

Briefly, they are:

1. That the mobile market in the United States has now hit a saturation point. 92% of Americans, according to PEW, have a mobile phone. 86% of people aged 18–29, within that sweet spot so desperately coveted by advertisers, own a smartphone. Further, 84% of Americans, again according to PEW, have access to the Internet. And here is one more bit of information on that front, which we will revisit in a moment: 87% of people who earn $75,000 or more have a smartphone as well.

At the time of this writing, Facebook’s head of U.S. E-Commerce, Jeremy Lewis, was in Chicago pushing retailers to put their money into mobile. Because of the numbers I just gave you, Lewis gave his pitch by saying, “mobile isn’t a thing; it’s the thing”. He then mentioned that 92% of sales occur in-store. Ah. And there we have it. Our first clash of realities. What the Internet companies and the media tell us about “The way things are now” and how it really is are two entirely different things.

For over twenty years, for as long as Americans have had easy access to the Internet and World Wide Web, we’ve heard e-commerce is the wave of the future. Now here we are. Packed within the hype and mania surrounding mobile, and that retailers need to focus on mobile because everyone has a phone, this nugget slips out. Over twenty years in, and only 8% of sales are done online according to Facebook. A clash of realities. This division between e-commerce and in-store purchases is one of the major ones I will explore with the Peak Internet if i pursue this project. But for now, I want to keep us on track and repeat this point before moving on: These numbers from PEW tell us that everyone who is going to get online is now online. Everyone who is going to buy a smartphone now owns one. There are no more new customers to be had for companies like Netflix and Facebook, and that spells trouble for them.

2. Services like Netflix will soon reach their peak among Americans regarding new users. There are logistical reasons for this (and it’s one of the counter arguments to the Peak Internet theory), but there are also other reasons at play that I want to highlight here. In the interest of full disclosure, I am pro cord cutting. It saves you money, time, and hassle, and I’ve been a cord-cutter since I moved into my first apartment in 2007. That’s right. I’m one of those pesky millennials who enjoys a gluten-free diet (although in my defense, I really do have a wheat allergy) and has never been a cable subscriber. So I do believe cord cutting is a real phenomenon, but as you’ll see with Internet creatives, there are nowhere near as many cord cutters as you may have been lead to believe. I also can certainly make the argument that there aren’t many of us cord cutters left in the United States to capture. Bad news for Netflix and the “streaming is the future” crowd. That is … Provided there’s some serious course correction on the part of cable providers. You don’t need to take my word for it, an analyst at RBC Capital, Mark Mahaney, pointed out that 53% of Americans already have access to Netflix.

Also, although cord cutting saw an increase of 1.3% from 2014, according to a study from Digitalsmiths, almost half of the people responding to the same study said that instead of ditching cable altogether, they simply slimmed down their cable package. Nielsen, whom I’m always suspect of, and that should be noted, reported that as of 2016, 100 million people still have cable, down from 105 million a few years back. Five million people is still five million people, but that’s also nowhere near as massive a drop as we’ve been told. And there it is. The key point. We are constantly told that Netflix, Hulu, Amazon Prime, Crackle, and YouTube are the wave of the future, but the numbers don’t suggest that. When you hear about the video viewership numbers on Facebook, you can’t accept their numbers at face value, since FB and Snapchat have different ways of grossly inflating those numbers. YouTube views as well. Somewhere we got stuck equating YouTube views with TV ratings and they are not at all the same.

What this trend shows us is that people are cutting back, not cutting the cord. Another clash of realities. The trend of cord cutters seems to have been blown way out of proportion by the media, tech companies, and television executives. Why?

I’ve always been of the belief that people are abandoning cable, not because of their ability to stream, but because the prices are too high, and the customer service tends to suck. It’s hard to find something every American will agree on, but the shared hatred people possess for Comcast is one of those things. The data supports this, with Ars Technica reporting in December of 2015 that the FCC received more complaints about Comcast than it’s competitors (AT&T, Verizon, Time Warner Cable / Charter) combined. It’s easy to see why people would bother cutting the cord in the first place when one of the major Internet and Cable providers in America is on the receiving end of universal scorn. Would we be saying the same if people loved Comcast in the way they love Apple? I don’t think so.

If the customer service is improved, the rates for cable packages are dropped, and their offerings don’t attract the attention of states attorney generals for being terrible, people will come back to cable. Yes, I know that’s a tall order, but as we’ve seen play out in the tech world on a nearly infinite loop: The person whose product is better than their competitor by a wide margin always wins. Remember that MySpace was the dominant social network until Facebook came along with its cleaner and easier to use interface. To say nothing of the fact that, unlike MySpace, Facebook’s entire system didn’t crash because someone wanted to add glitter to their profile page. (One of the counter arguments to Peak Internet is that broadband access is not everywhere in America, and in the places that do have it, the service and speed is substandard. You can’t cut the cord and move to Netflix if you can’t stream anything successfully.)

As far as ratings down going, allegedly, there’re many reasons for that. Again because I’m just providing an overview, I will make just one point for now: Never forget that the Nielsen system is fundamentally broken. That is why I mentioned I tend not to trust their data. Ever since the incorporation of Live+3 and Live+5 ratings, the ratings we see today are on par with the ratings we saw in the ’90s. The Walking Dead’s ratings success is proof of this, as was the ratings for the first season of Empire on FOX. Further, the Super Bowl and the NCAA Men’s basketball finals in recent years have been scoring all-time highs for ratings. It is also worth noting that, so far anyway, there’s no accurate measure to tell us what all 324 million Americans are watching. The ratings for some of your favorite, and least favorite, shows could be way better than you think.

One other point: It seems after The Great Recession that there are now two Americas. One that recovered, and the other that did not. That’s why I mentioned smartphone ownership among the $75,000+ crowd being as high as it is. There is one America that recovered, people being on the wealthier side, that may have fueled the cord cutting “trend” such as it is today. But the people who were cutting back on cable to begin with were arguably doing so because they simply couldn’t pay for it. Not because they wanted Netflix and nothing else. For people in cities like Memphis, if their fortunes change financially, as well as those of the millions of Americans left behind by our nation’s current “recovery”, you could see cable subscriptions grow again. This is not at all the future we’re constantly being told is coming.

3. There has been no conclusive proof in the in the history of the World Wide Web, despite the best efforts of the tech companies, to show that rabid online fan demand transfers into a big success when it comes to most things.

I’ll stop here and let that sink in.

And in the few instances where it can be implied, it’s hard to separate whether or not it’s offline word of mouth that’s fueling all the online buzz to begin with, or if it’s genuine Internet-born hype that is fueling what’s going on offline.

I got into this more in my last book and fall firmly into the camp that the Internet has always been a mirror reflecting what people are excited about offline, and not a breeding ground for smash hits and critical successes that then leap offline. Of course, there are exceptions; there’s always exceptions, but they’re less common than you’d think based on our obsession with the Internet. In other cases, where we hear of an “Internet success story” a quick behind the scenes look will reveal a large, multimillion dollar company like Google being responsible for placing that story to begin with. Somehow that’s not quite the same thing.

(A quick point about punctuation and the Internet: The AP did something stupid in the Spring of 2016. They decided that there’s no difference between Internet and internet, except that there is. A major one. Internet (Capital I) refers to the Internet’s culture, voice, and various communities. The internet (lowercase i) refers to the infrastructure that provides the service we use. When I use Internet (Capital I) I’m not referring to the infrastructure.)

So if we accept all these points as true, then we have to ask ourselves what that means. The way we think and write about the Internet, and trends that it fuels, often overlooks external factors like the Recession. For people who place their advertising and marketing budgets increasingly on Internet outlets over traditional media outlets, they have to ask themselves: Why? If this is all that there is, then why are they abandoning a media outlet that works and provides them with results for those who don’t? Because it’s “cool”? Really? Yes. “Because it’s cool” is an actual thing a major television broadcast company told me about why they were putting money into Snapchat. I’ve also been told companies like Ford are forcing their dealers to spend a majority of their budget on digital, even though there’s no proof that doing so will increase sales for that dealership.

For those of us who have tried to make a living on the Internet. For those of us who have a message to share with the world or a company they want to grow, Peak Internet has taught us something else: You can only go so far before you bump into a modern day glass ceiling. And I’m not talking about marketing and advertising here. I’m talking everything. The entire concept, which you can create something on the Internet and grow it into a household name, is entirely fabricated. Without the media, without a company backing you, to say nothing of luck, you can only get so far. Then what?

What this really comes down to is that we have to rethink our relationship with the Internet. How we view it. How we write about it. What potential we think it can offer us. If this is all that there is in terms of users in America, than the reality is not at all what we’ve been told it would be.

B.J. Mendelson is the author of “Social Media Is Bullshit” from St. Martin’s Press.

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