1. The Future Of “Smobile”
Henry Blodget
CEO, Business Insider
September 27, 2012

2. Social + Mobile =
“Smocial”?
“Smobile”?

3. Henry Blodget
Founder, CEO & Editor-in-Chief,
Business Insider
Marcelo Ballve, Editorial Director
Alex Cocotas, Analyst

4. Something profound
happened last year…

5. Smartphone sales overtook PC sales
Global Internet Device Sales
1,000,000,000
900,000,000
800,000,000
Tablets
700,000,000
600,000,000
Units 500,000,000
Smartphones
400,000,000
300,000,000
200,000,000
100,000,000 Personal Computers
-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Gartner, IDC, Strategy Analy cs, company filings, BI Intelligence es mates

6. And will soon DWARF them…
Global Internet Device Sales
3,000,000,000
2,500,000,000
2,000,000,000 Tablets
Units 1,500,000,000
We are here
1,000,000,000 Smartphones
500,000,000
Personal Computers
-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E
Source: Gartner, IDC, Strategy Analy cs, company filings, BI Intelligence es mates

7. Tablets will also blow past PC sales in a few years
Tablet Sales Forecast
500
450
400
E-Readers
350
300
Units
Sold 250
(millions)
200
We are here
150
100
50
0
2010 2011 2012E 2013E 2014E 2015E 2016E

8. So the future is mobile!
G-20 Internet Access
3,000
2,500
2,000
Consumer
Mobile
Broadband
1,500
Connec ons
(milions)
1,000
Mobile
500
Fixed Fixed
Fixed
0
2005 2010 2015
Source: Boston Consul ng Group, Mary Meeker, Kleiner Perkins, Morgan Stanley Research, Berg Insight

9. 20
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
08
20 - 12
09
20 - 02
09
20 - 04
09
1%
20 - 06
Source: StatCounter
09
20 - 08
09
20 - 10
09
20 - 12
10
20 - 02
10
20 - 04
10
20 - 06
10
20 - 08
10
20 - 10
10
20 - 12
11 4%
20 - 02
11
20 - 04
11
20 - 06
11
20 - 08
11
20 - 10
11
Global Internet Trafic: Mobile vs. Desktop
20 - 12
12
20 - 02
Mobile
12
20 - 04
12
Desktop
20 - 06
12
-0
12%
8
Mobile now accounts for 12% of global internet traffic

10. Time spent on mobile apps is rising fast
Total Mobile App And Web Dura on On Android And iOS
140
120
100
80
Minutes Spent
Per Month
(Biillions )
60 Apps
40
20
Mobile Web
0
Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12
Source: Nielsen Smartphone Analy cs

11. Where are we in the
mobile revolution?

12. Globally, we’re early
Global Smartphone Penetra on Forecast
2,500
We are here
2,000
1,500 Feature Phone Sales
Global Mobile
Phone Sales
(millions)
1,000
500 Smartphone Sales
-
2010 2011 2012 2013 2014 2015 2016

13. The U.S., however, is more than halfway there
Changes In Smartphone Ownership, 2011-2012 (U.S.)
60%
50% 48%
46%
41%
40%
35%
30%
20% 17%
12%
10%
0%
Smartphone Feature Phone No Cell Phone
May-11 Feb-12

14. Smartphone “demo” is young and rich
(but will soon be everyone)
Smartphone Penetra on By Age And Income (U.S.)
90%
80%
80% 77%
74% 75%
69% 70%
70%
65% 65% 65%
63%
60%
60% 58%
56%
53% 52%
50% 51%
50% 48%
43% 44%
41% 42%
40% 38%
31% 32%
30%
30% 27%
23% 24%
21%
20% 18%
16% 17% 16% 15% 16%
10%
0%
Ages 18 - 24 Ages 25 - 34 Ages 35 - 44 Ages 45 - 54 Ages 55 - 64 Ages 65+
<15k 15k - 35k 35k - 50k 50k - 75k 75k - 100k 100k+
Source: Nielsen, January 2012

15. What does this
mean for social?

16. Social is one of the fastest growing
uses of mobile phones
U.S. Mobile Content Usage
80%
Sent Text Message
70%
Share of mobile popula on that has...
60%
Used Downloaded Apps
50%
Used Browser
Accessed Social Network
40%
Or Blog
Played games
30%
Listened to music
20%
10%
0%
Feb Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July
10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12
Source: comScore

17. People spend more time on apps than
they do browsing web
U.S. Mobile Apps vs. Web Consump on, Minutes Per Day
94
81
74 72
70
64 66
43
June 2010 Dec 2010 June 2011 Dec 2011
Web browsing Mobile apps
Source: Flurry Analy cs, Alexa, comScore

18. And social and games are the big apps
Daily Smartphone App Consump on, Minutes Per Category
7
7 10
10 12
11
24
15
25 24
Q1 2011 Q1 2012
Games Social Networking News Entertainment Other
Source: Flurry Analy cs

19. 37% of U.S. smartphone owners check social
networks daily; 64% monthly
U.S. Frequency Of Social Networking Use On Mobile Phones (May 2012)
% of Smartphone Users
% of Total Mobile Audience
Ever in month
Once to three mes per month
At least once each week
Almost every day
0 10 20 30 40 50 60 70 80 90 100
% who accessed a social network or blog (3 month average)

20. Facebook ~500 million mobile users
Facebook Mobile Users
600
500
400
Monthly
Ac ve
300
Users
(millions)
200
100
0
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q09 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12

21. More than half of Twitter usage is mobile
75%
70%
55%
% of Traffic from Mobile
Pandora
50%
Twi er
33%
Facebook
25%
5%
1%
0%
2008 2009 2010 2011
Source: Mary Meeker, Kleiner Perkins, companies

22. Instagram hit 100 million users in 2 years

23. What are mobile
users doing on
social networks?

24. They are (surprise!) mostly using them to communicate
U.S. Social Networking Ac vity On Mobile Phones
% of Total Mobile Audience, Aug. 2011
Clicked on an adver sement. % of Total Mobile Audience, May 2012
Received a coupon or offer.
Posted a link to a web site
Read a post from a public figure.
Followed a posted link to a web site.
Read a post from an organiza on, event, or brand.
Posted a status update.
Read a post from someone they know personally.
0 10 20 30 40 50 60 70 80 90 100
Source: ComScore % who did ac vity at least once per month (3 month average)

25. Sharing, reading, and liking posts and links…

26. Taking and sharing lots of photos…
U.S. Mobile Phone Usage By Ac vity, May 2012
Accssed news
Listened to music
Accessed maps
Accessed search
Played games
Accessed social networking site or blog
Accessed weather info
% of Smartphone Users
Used email
% of Mobile Audience
Used browser
Used an app
Accessed news and informa on
Took a photo
Sent text message
0 10 20 30 40 50 60 70 80 90 100

27. Unfortunately, there
are some things users
are NOT doing

28. Clicking on ads (only 32%)
U.S. Social Networking Ac vity On Mobile Phones
% of Total Mobile Audience, Aug. 2011
Clicked on an adver sement. % of Total Mobile Audience, May 2012
Received a coupon or offer.
Posted a link to a web site
Read a post from a public figure.
Followed a posted link to a web site.
Read a post from an organiza on, event, or brand.
Posted a status update.
Read a post from someone they know personally.
0 10 20 30 40 50 60 70 80 90 100
% who did ac vity at least once per month (3 month average)

29. And mobile monetization still lags desktop
ARPU, Desktop vs. Mobile
$58.95
$25.00
$17.61
$6.62 $5.00
$3.87
Pandora Zynga Tencent
Mobile Desktop
Source: Pandora, Zynga, Tencent

30. Why?

31. Mobile CPMs are lower
Effec ve CPM, Desktop vs. Mobile
$3.50
$0.75
Desktop Internet Mobile Internet
Source: comScore, Vivaki, Mobclix Exchange

32. Including for companies like Google and
Facebook
Google CPC Growth
15%
10%
5%
0%
-5%
-10%
-15%
4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Source: Company data, Evercore Group LLC Research

33. Smartphone users really don’t like
intrusive ads
Smartphone Owners' Recep vity To Mobile Adver sing
40%
33%
30% 30%
27%
26%
19%
16%
Don't mind adver sing as long as does not disrupt ac vi es Adver sing is acceptable
UK Italy Germany US
Source: Nielsen Mobile Connected Device Report

34. And ads on smartphones may not be
particularly effective…
Smartphone Adver sing Effec veness
34%
28%
27% 27%
24%
22%
20%
19%
17%
14%
12% 12%
11%
8%
7%
4%
Made a purchase on internet Clicked on ad to view full ad or Searched for more info about Made a purchase directly
via PC product offering business I saw adver sed through device based on ad
Italy Germany UK US
Source: Nielsen Mobile Connected Device Report

35. Overall, mobile is still a tiny fraction of
digital ad spending
U.S. Digital Adver sing Revenues
$35
Mobile
$30
$25
(billions)
$20
$15
$10
$5
$0
2007 2008 2009 2010 2011
Source: IAB, BIA-Kelsey, BII es mates

36. What about
mobile/social
commerce?

37. One “mobile commerce” theory is this:
 Take advantage of a phone’s GPS
to offer something desktop can’t
 Mobile users share their location
by checking-in, or allowing app to
track them
 Users then receive coupons from
nearby businesses

38. But, local couponing experiments are
not working well
 Only 36% of smartphone users
are using coupons or offers
 “Groupon Now” numbers have
been unimpressive
 LivingSocial abandoned “Instant”

39. Why not?

40. That’s not how people
shop!

41. Proximity and discounts are not enough
 Few customers are drawn into a
store simply because of a sale
 They need to be interested in the
products being sold first
 They also need to be actively
looking to buy that product at
that time

42. Another idea, “Check-ins,” not going
mainstream
U.S. Geoloca on Service Usage By Demographic
25
20
15
Percentage
10
5
0
18-29 30-49 50+
Age Group
May-11 Feb-12

43. And social referrals to commerce sites are still tiny
Drivers of E-Commerce Traffic
90.0%
80.0%
70.0%
60.0%
Facebook referrals up 92% year-over-
50.0%
year…
Percentage
Of Traffic
40.0% 80.6%
30.0%
20.0%
10.0%
9.7% 7.5% 1.7% 0.5% 0.02%
0.0%
Google Yahoo Bing AOL Facebook Twi er
Source: RIchRelevance

44. So, what can
make “smocial”
huge?

45. “Native” mobile ads…
 Facebook just released
“Sponsored Stories” for mobile
 Brands can turn an action by a
user into an ad
 Highly shareable
 ~500 million mobile users, ~$500
million revenue

46. Twitter has them, too
 Mobile promoted tweets
 Mobile revenue surpasses web
revenue many days
 ~$125 mm mobile revenue in
2012
 Also highly shareable, can link to
additional richer info

47. And there may be big
opportunities in social
discovery

48. Contextual relevance
 Goes beyond
location
 Must understand
user’s buying
habits, preferences,
tastes, etc.
 Social networks
have this kind of
information

49. Push, not pull
 This is Groupon’s secret
 Sent to users when they are
receptive to it
 Messages must be infrequent
and relevant

50. Services and experiences – not goods
 Works best for service-based
businesses
 These kinds of businesses lead
to spontaneous purchases
 And these are types of
purchases most likely to be
made on mobile phones

51. Brand advertising
 Opportunity for brands to
connect themselves to social
experiences

52. Affiliate payouts
 Users could recommend
purchases to friends
 Users could then be paid out
when friends buy something
 Could be used for big-ticket
items that users consider over
time

53. So, who is poised to win?

54. Three obvious leaders

55. Facebook
 500+ million mobile users
 Superb mobile engagement
 Lack useful location data, as
check-ins did not catch on
 Acquisitions like Instagram and
Glancee may help

56. Twitter
 More than 60% of traffic is
mobile
 Product and ad-platform
inherently suited for mobile
 Lots of information about user
interests based on tweets and
who they follow

57. Google
 Great combination of assets
 World-leader when it comes to
determining relevance
 Most popular set of mobile
properties and services
 Biggest weakness is relative lack
of social data

58. Other players may come
up with a winning formula

59. Foursquare
 Fourth most popular mobile
social service in U.S.
 Pivoting into local search and
discovery
 ~20m users; enough to collect
useful relationship data
 Needs more users and business
data

60. Pinterest
 Very popular on mobile
 Lots of commercial potential
 Interesting local possibilities

61. Groupon or LivingSocial
 Both have experimented with
mobile location-based deals
 Results have not been impressive
 Both lack any real social data
 But… email still mobile, social
and big.

62. Apple
 No social DNA, Ping shut down
 Massive resources and iPhone
sales could allow them to enter
market as they please
 Likely to do it only to sell more
iPhones or differentiate iOS
from other platforms

63. Microsoft
 Lots of local business data and
advertising relationships
 Partnership with Facebook
provides access to social graph
data (already used in Bing)
 Eager to differentiate WP8
 Company focus is more likely
on other, more core products

64. Or… new startups!
 Facebook only 7 years old;
Twitter 5.
 Many ways to combine social+
mobile phones in new, intriguing
ways
 Successful entrants will make for
great acquisition targets

65. Thank you!