internet publishing and broadcasting in the us industry report
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 1The big bang: Revenue will surge ahead, aidedby strong advertising and demandIBISWorld Industry Report 51913bInternet Publishing andBroadcasting in the USFebruary2011 CaseyThormahlen2 AboutthisIndustry 14 International Trade 28 Technology Systems2 Industry Definition 15 Business Locations 28 Revenue Volatility2 Main Activities 29 Regulation Policy2 Similar Industries 17 CompetitiveLandscape 29 Industry Assistance3 Additional Resources 17 Market Share Concentration 17 Key Success Factors 30 KeyStatistics4 IndustryataGlance 17 Cost Structure Benchmarks 30 Industry Data 18 Basis of Competition 30 Annual Change5 IndustryPerformance 19 Barriers to Entry 30 Key Ratios5 Executive Summary 19 Industry Globalization5 Key External Drivers 31 JargonGlossary6 Current Performance 20 MajorCompanies8 Industry Outlook 20 Google Inc.10 Industry Life Cycle 21 Amazon.com 22 Yahoo! Inc.12 ProductsMarkets 24 Apple Computer Inc.12 Supply Chain 25 Facebook12 Products Services12 Demand Determinants 27 OperatingConditions13 Major Markets 27 Capital Intensitywww.ibisworld.com|1-800-330-3772|info @ibisworld.com
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 2AboutthisIndustryIndustryDefinition This industry consists of organizations websites, internet radio, video sharing and individuals which publish or websites and blogs (among others). This broadcast news, videos, images or written industry does not include search engines, content exclusively over the internet. This internet service providers or publishers industry includes social networking of offline content.MainActivities Theprimaryactivitiesofthisindustryare Online video sharing and broadcasting Internet based radio Online news Social networking Online comics Blogs E-book publishing Internet forums Special interest websites Podcasts Themajorproductsandservicesinthisindustryare Audio streaming services Blogs Forums and discussion boards Image sharing News Other content Social networking Video streaming servicesSimilarIndustries 51212 MovieVideoDistributionintheUS Companies in this industry distribute movies and videos through offline channels. 51311 RadioBroadcastingintheUS This industry broadcasts music and other radio programs over radio waves, rather than over the internet. 51411 NewsSyndicatesintheUS Organizations in this industry distribute news and other information for offline publication. 51419a InternetServiceProvidersintheUS This industry provides internet access to consumers and businesses.
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 3AboutthisIndustrySimilarIndustries 45411a E-CommerceOnlineAuctionsintheUS Companies in this industry sell products and services over the internet.continued 51913a SearchEnginesintheUS Search engines direct a large portion of traffic on the internet.AdditionalResources Foradditionalinformationonthisindustry www.comscoredatamine.com Comscore Datamine www.paidcontent.org PaidContent www.quantcast.com Quantcast I BISWorld writes over 700 US industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 4IndustryataGlanceInternetPublishingandBroadcastingin2011KeyStatistics Revenue AnnualGrowth06-11 AnnualGrowth11-16Snapshot $38.7bn 21.4% 6.8% Profit Wages Businesses $6.6bn $5.6bn 50,558 Revenue vs. employment growth Number of broadband connectionsMarketShareGoogle Inc. 16.7% 30 150 25Amazon.com 12510.0% 20 100 % change 15 MillionYahoo! Inc. 9.3% 75 10Apple Computer 5 50Inc. 9.2% 0 25Facebook 5.9% −5 0 Year 03 05 07 09 11 13 15 17 Year 02 04 06 08 10 12 14 16 Revenue Employment SOURCE: WWW.IBISWORLD.COM p. 20 Products and services segmentation (2011) 3% 2%KeyExternalDrivers Forums and 9.8% Image sharing discussion boards 1.2%Numberofbroadband Audio streaming Video streaming servicesconnections servicesTotalUSadvertisingexpenditure 32.6% Other contentDownstreamdemandfromsearchengines 10.7% BlogsPriceofcomputersandperipheralequipmentCompetitionfromarts,entertainmentandrecreation 13.7% Social networking p. 5 27% News SOURCE: WWW.IBISWORLD.COM SOURCE: WWW.IBISWORLD.COMIndustryStructure Life Cycle Stage Growth Regulation Level Light Revenue Volatility Medium Technology Change High Capital Intensity High Barriers to Entry Low Industry Assistance None Industry Globalization Low Concentration Level Medium Competition Level Medium FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 30
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 5IndustryPerformanceExecutiveSummary | KeyExternalDrivers | CurrentPerformanceIndustryOutlook | LifeCycleStageExecutive The Internet Publishing and the industry’s 50,558 establishmentsSummary Broadcasting industry is a powerfully are non-employers who produce their disruptive force of innovation in the own blogs, news commentary, original distribution of media. The increasing art and videos. penetration of broadband internet During the five years to 2016, the wild connections and the decentralized west environment of the Internet nature of this network have radically Publishing and Broadcasting industry increased competition with traditional will begin to settle, becoming a media. Internet publishing has severely mainstream media outlet nearly as challenged newspapers, periodicals and quickly as it became a disruptive force. print media by radically increasing the Industry revenue growth will slow to number of “soap boxes” for people to 6.8% annually through 2016, to $53.7 billion. While revenue growth is projected to slow, the volume of contentAdvertisers will devote more of their budgets to produced will continue its dramatic climb over this period. The primary limitingonline outlets, spurring industry growth factor to revenue growth keeping pace is the limited potential to monetizing that broadcast their opinions and creativity. content; advertising is the primary source The result has been spectacular already, of revenue for internet publishers, so with revenue growing 21.4% annually revenue cannot continue dramatic from 2006 to 2011. In 2011 alone, growth without similarly dramatic revenue is expected to grow 18.8% to growth in advertising spending. $38.7 billion. While traditional media Advertising spending in the United States outlets have struggled with large losses, is expected to grow 2.1% annually during this industry achieves an average profit the next five years, to $308.8 billion; margin of 17.1%. Promisingly, this however, the proportion of advertising technology’s benefits are reaching an budgets that is spent online is expected to enormously wide audience through continue growing dramatically, at an entrepreneurship. More than 90% of estimated rate of 12.0% annually.KeyExternalDrivers Number of broadband connections Total US advertising expenditure Consumers who use broadband Advertising is one of the most potent connections to connect to the internet are methods of generating revenue for better equipped to handle the data- internet publishers. When advertisers intensive content (e.g. video streaming, increase their budgets, companies in this large downloads and flash animation) of industry generally benefit. This driver is the modern internet. Consumers who are expected to increase during 2011. limited to dial-up internet access can only access a very limited subset of the Downstream demand content available on the internet. This from search engines driver is expected to increase during Search engines are a major source of 2011, representing a potential traffic for internet publishers and also opportunity for the industry. provide advertising allocation services to
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 6IndustryPerformanceKeyExternalDrivers this industry. This driver is expected to This driver is expected to decreasecontinued increase during 2011. during 2011. Price of computers and Competition from arts, peripheral equipment entertainment and recreation The price of computers and peripheral Internet publishers compete for equipment is negatively related to the consumers’ scarce time, which may availability of such devices to the otherwise be spent enjoying arts, public, particularly people with low recreation or other forms of income. Therefore, when prices go up, entertainment. This driver is expected to fewer people can afford to purchase remain flat during 2011; however, it equipment to access the internet. remains a potential threat for the industry. Number of broadband connections Total US advertising expenditure 150 15 125 10 100 5 % change Million 75 0 50 −5 25 −10 0 −15 Year 02 04 06 08 10 12 14 16 Year 04 06 08 10 12 14 16 SOURCE: WWW.IBISWORLD.COMCurrent The Internet Publishing and Broadcasting industry has produced universal acceptance will only come with the aging of a generation. People over thePerformance meteoric growth during the last five age of 65 are far less likely to consume years. From 2006 to 2011, industry internet-distributed content than revenue is expected to grow 21.4% younger generations are. annually, to $38.7 billion. In 2011 alone, This industry’s rise to power would industry revenue will rise 18.8% from have been far more uncertain without 2010. Revenue figures alone actually widespread adoption of broadband understate the influence of this industry, internet connections. Computer users because it offers so much content for free without broadband internet connections that in prior decades would have (i.e. dial-up subscribers) face severe required subscription fees or newsstand practical limitations to the amount and visits. This revolutionary stance has types of content they can consume caused major disruptions in other online. With dial-up, streaming videos industries, particularly those involved in are impossible and images can take a publishing and print media. Today, long time to load, essentially limiting internet publishing is settling in as a these subscribers to text-based content mainstream form of media, though true and e-mail. Broadband internet
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 7IndustryPerformanceCurrentPerformance connections have increased at a 22.4% annualized rate during the last five years Industry revenuecontinued to 128.1 million today. 30 Even with excellent content and ubiquitous access to it, the industry’s rise 25 depended on answering the question that 20 plagued the 1990’s dot-com bubble: how % change do you make money? For most websites, 15 the answer has been advertising or 10 subscription-based content, directly turning user visits into much-needed 5 revenue. Online advertising is 0 considerably less lucrative on an Year 03 05 07 09 11 13 15 17 advertising-to-content basis than traditional advertising, but the speed, SOURCE: WWW.IBISWORLD.COM efficiency and accountability it offers is extremely attractive for advertisers. With advertiser must display their ad for all innocuous tracking software, advertising readers of the newspaper (or similar networks (like Google’s AdSense system) medium). The industry produces profit can help advertisers precisely target their equal to about 17.1% of revenue, or $6.6 customers based on income, sex, location billion in 2011; profit has been rising and even interests. This extent of during the last five years as online targeting represents a quantum leap over advertising has gained more acceptance traditional advertising, in which an among advertisers.Employmentand In addition to revolutionizing the way growth in entrepreneurs. These owner-establishments companies advertise, internet publishing operators include self-employed bloggers, has created an enormous number of online cartoonists, filmmakers and employment and entrepreneurship opinion writers. The average employee in opportunities. The number of jobs in this this industry earns an enviable wage of industry has risen 12.6% annually to more than $47,000. Even sweeter, this 119,461 in 2011. Similarly, the number of explosion in opportunity has establishments has risen 13.3% annually, exponentially increased the number of to about 50,558. However, more than voices that can be heard in the media, 90% of these establishments are non- giving the public a much greater diversity employers, reflecting an enormous of opinions and creativity.Interneteverywhere The reach of the Internet Publishing and made broadband internet access Broadcasting industry grew dramatically commonly available on the go. In 2011, during the last five years, driven by consumer electronics manufacturers are technological advancements and new offering a diverse array of products that electronic platforms. Faster wireless provide internet connectivity where it did internet connections, including those not exist five years ago, within TVs, provided by cell phone carriers, have Blu-ray players and video game consoles.
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 8IndustryPerformanceIndustry The Internet Publishing and Broadcasting industry will rapidly Advertisers will spend Outlook mature during the five years to 2016, larger portions of their almost as quickly as it leapt into the media as a disruptive force a decade ago. budgets online, resulting in Industry revenue is forecast to grow at an solid revenue growth average annualized rate of 6.8% through 2016 to $53.7 billion. Despite slowing revenue growth, the depth and quantity relation to revenue. Wages are expected of content produced by this industry will to rise 3.0% annually over the five years hardly slow; revenue growth will lag, not to 2016, consuming 12.1% of revenue, because of less content production, but down from 14.5% in 2011. The diminishing returns to the monetization entrepreneurial spirit that drove growth of that content. Advertising networks like early on will continue to drive the way Google’s AdSense already distribute the industry uses resources. While the advertisements alongside website number of industry jobs is expected to content efficiently and effectively, so grow 3.8% annually, the growth in the adding more content without a drastic number of establishments will outpace it increase in advertising budgets will cause at 5.0% annually to 64,674 in 2016. growth to slow. Fortunately for this Experienced workers in the Internet industry, advertisers are spending larger Publishing and Broadcasting industry portions of their budget online. In 2012 will branch out on their own to start alone, revenue is expected to rise 16.1% their own blogs, news websites and to $44.9 billion. online communities. They will certainly Profitability in the internet publishing not lack an audience: the number of business will weaken only marginally broadband connections in the United during the next five years, primarily due States is expected to rise 2.5% annually to moderate increases in wages in to 145.1 million in 2016.Unrealized The full potential of the Internet intellectual property agreements andopportunity Publishing and Broadcasting industry the reluctance of old media content will not be realized during the next five producers to make their content fully years, despite its maturation. Internet available online. These content owners publishing revolutionized the are uncomfortable releasing their distribution of print media and news products into internet distribution for unequivocally, but it has had more fear of reducing their own profitability, difficulty extending that success to though they could certainly expect television and movie distribution. The revenue and viewership gains if it was wall holding the industry back from done in a controlled manner (i.e. this second wave of success is avoiding piracy).Expandinguniverse The reach of the internet universe will market products in 2011. As prices on continue its rapid expansion during the these products come down and five years to 2016. Internet-connected technology platforms mature, more home electronics are becoming mass people will have access to internet-based
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 9IndustryPerformanceExpandinguniverse content in a greater variety of places. operating system is encouraging cellcontinued Internet-connected televisions, phone manufacturers to move away including those built on the GoogleTV from simpler phones, because platform, will be particularly important production of smartphones does not in making the internet a truly universal require much more in manufacturing medium in the United States. costs. Wide availability of broadband Smartphone ownership will also drive internet on cell phones will unlock the growth in this industry, driven potential for location-based services, particularly by open source operating including location-aware advertising systems like Google Android; Google’s and offers, further expanding the decision to give away this mobile industry’s reach.
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 10IndustryPerformanceLifeCycleStage Market potential is expanding rapidly Technological innovations favor industry growth Revenue is expected to grow dramatically over the next five years 30 Maturity QualityGrowth%Growthofprofit/GDP KeyFeaturesofaGrowthIndustry Company High growth in economic consolidation; importance; weaker companies Revenue grows faster than the economy level of economic close down; developed Many new companies enter the market importance stable technology and markets Rapid technology process change 25 Growing customer acceptance of product Rapid introduction of products brands 20 15 QuantityGrowth Many new companies; minor growth in economic importance; substantial 10 technology change InternetPublishing andBroadcasting 5 E-CommerceOnlineAuctions SoftwarePublishing 0 Shake-out DataProcessingHostingServices RadioBroadcasting MovieVideo Shake-out –5 Distribution Decline PotentialHiddenGems TimeWasters Crash or Grow? Future Industries Hobby Industries –10 –10 –5 0 5 10 15 20 25 30 %Growthofestablishments SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 11IndustryPerformanceIndustryLifeCycle The Internet Publishing and rights currently provide protection to Broadcasting industry is solidly in the other broadcasters, particularly premium growth phase of its life cycle. During the cable television broadcasters, looseningT his industry ten years to 2016, industry value added is of such rules would produce outcomesis Growing expected to climb at a 6.3% annual rate, similar to what happened with print to $10.7 billion, significantly faster than media (these events are not included in the growth of the overall economy. This the industry forecast). Internet industry is a hotbed for innovation and publishing is continuously proving to be has played a significant role in the a force for democratization of media, life-cycle downturns of competing enabling would-be writers to distribute traditional broadcasters, particularly in their content in ways that were once print media (e.g. newspapers). While reserved for authors with contacts at regulatory and intellectual property publishing firms.
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 12ProductsMarketsSupplyChain | ProductsServices | DemandDeterminantsMajorMarkets | InternationalTrade | BusinessLocationsSupplyChain KEYBUYINGINDUSTRIES 9901 ConsumersintheUS The general public consumes the content produced by internet publishers and broadcasters. KEYSELLINGINDUSTRIES 51121 SoftwarePublishingintheUS This industry provides software used by internet publishers to create and publish their content. 51419a InternetServiceProvidersintheUS Internet publishers pay companies in this industry for internet access. 51421 DataProcessingHostingServicesintheUS Companies in this industry provide website hosting services for internet publishers.ProductsServices Products and services segmentation (2011) 3% 2% Image Forums and 9.8% sharing discussion boards 1.2% Video streaming Audio streaming services services 10.7% Blogs 32.6% Other content 13.7% Social networking 27% Total $38.7bn News SOURCE: WWW.IBISWORLD.COM Internet publishers produce an extremely representing the largest and broadest diverse array of content. The most category; “other content” websites popular website categories (by unique include informational and special interest visitors) are news (27.1%), social websites. The near-infinite array of networking (13.7%), blogs (10.7%) and interests represented on the internet video streaming (9.8%). Image sharing, ensures that just about any content type audio streaming and discussion boards has a constituency. Social networking are considerably less popular (3.0% or websites have been growing very quickly less of unique visits). Other types of in popularity: the largest social network, websites bring in 32.6% of unique visits, Facebook.com, was launched in 2004.Demand Demand for internet publishing and generate revenue is also tied to the sizeDeterminants broadcasting is highly dependent on the of online advertisers’ budgets; availability of broadband internet access contextual ads, banner ads and and computers. The industry’s ability to interactive ads are the sole source of
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 13ProductsMarketsDemand revenue for many websites. Internet several TV networks, is routinelyDeterminants publishers compete with other forms of hobbled by its owners placing entertainment (e.g. sports, television limitations on the number of TVcontinued and hobbies) for the scarce leisure time episodes available online. Restricting of consumers. If consumers begin the legal availability of content online spending more time playing sports then, also tends to encourage piracy. Low all else being equal, they will spend less likelihood of prosecution and broad time viewing internet content. content availability encourage some The availability of attractive content consumers to resort to online piracy of is also a major driver of industry content (particularly movies, music demand. Demand for video streaming and TV shows), typically through is currently limited because content peer-to-peer file sharing services. If the providers are reluctant to fully embrace content is conveniently and legally internet broadcasting, for fear of available online, most consumers will cannibalizing revenue generated from choose to purchase content through traditional media sources like cable legal avenues, as evidenced by the television. Hulu, a joint venture of success of Apple’s iTunes.MajorMarkets Major market segmentation (2011) 16.8% Household incomes 30% under $30,000 Household incomes over $100,000 25.3% Household incomes between $30,000 and $60,000 27.9% Household incomes Total $38.7bn between $60,000 and $100,000 SOURCE: WWW.IBISWORLD.COM The income demographics of consumers regard to types of internet content. Blogs, of internet-based content skew wealthier audio streaming and image sharing than the overall population. There are websites are each visited in roughly equal two primary reasons behind this skew in rates by all demographics. the number of users: wealthier consumers are more likely to have Low income internet access at home and at work; Low income internet users are slightly poorer consumers are more likely to more likely than average to visit social share internet and computer access and networking websites. Social networking have less time to spend on the internet. websites include Facebook.com, Households with different income levels Myspace.com, Twitter.com, Tagged.com have different consumption patterns with and LinkedIn.com. This demographic is
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 14ProductsMarketsMajorMarkets less likely than average to visit special Huffingtonpost.com, and TMZ.com.continued interest and informational websites. Middle income internet users are more Lower income internet users are also the likely than most to use the internet as an most likely to access the internet via informational and news resource, and mobile phones, because computers and commonly use it to access reviews and high speed internet connections can be research products when making difficult to afford on a consistent basis purchasing decisions. for this demographic. The major social networking websites (i.e. Facebook and High income Twitter) are optimized for mobile High income internet users are more internet access, which makes it easy for likely than average to visit news websites, this demographic to keep in touch with as well as forums and discussion boards friends at all times. like Reddit.com, Digg.com and Ivillage. com. This demographic is slightly less Medium income likely to visit video streaming (Youtube. Middle income internet users are more com, Metacafe.com, Hulu.com) and likely than average to visit special special interest websites. High income interest and informational websites like internet users are less burdened by Wikipedia.com, IMDb.com, WebMD.com expensive traditional media and CNET.com. This demographic is also subscriptions (e.g. cable TV); therefore, slightly more likely to visit news websites they are less likely to seek out free like MSN.com, CNN.com, Foxnews.com, content online.InternationalTrade This industry is not involved in the broadcasting is a global enterprise international trade of any goods or however, with US sites attracting visitors services. Internet publishing and from non-US addresses on a regular basis.
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 15 ProductsMarkets BusinessLocations2011 West AK 0.0 New England ME Mid- 0.1 Great Atlantic 1 2 Lakes NY 3 WA MT ND 16.4 5 4 2.8 0.1 MN Rocky 0.1 0.9 WI OR Mountains SD 0.1 Plains 0.2 MI 1.2 PA 1.1 6 7 0.8 ID IA OH 9 8 0.1 WY 11.7 0.1 NE 0.1 IL IN WV VA 3.5 0.2 4.8West NV 1.4 0.0 KY UT MO 0.3 NC 0.3 1.0 CO KS 0.2 0.4 2.3 0.3 TN SC Southeast 0.5 CA 0.0 22.7 OK AR GA 0.4 0.1 AL 3.1 AZ MS 0.0 0.6 NM 0.1 Southwest 0.1 TX LA 0.1 FL 3.7 3.0West HI 0.2 AdditionalStates(as marked on map) Revenue(%) 1 VT 2 NH 3 MA 4 RI Lessthan3% 0.1 0.2 5.5 0.0 3%tolessthan10% 10%tolessthan20% 5 CT 6 NJ 7 DE 8 MD 9 DC 2.4 4.3 0.2 1.1 1.2 20%ormore SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 16ProductsMarketsBusinessLocations The Internet Publishing and Distribution of revenue vs. population Broadcasting industry is most heavily concentrated in the West and Mid- 30 Atlantic regions. The West produces 26.7% of industry revenue, while the Mid-Atlantic produces 24.3%. The Great 20 Percentage Lakes and Southeast region are the next largest, with 16.9% and 12.5% of revenue, respectively. California is the 10 most productive state for this industry, generating 22.7% of revenue. New York comes second, with 16.4% of revenue. 0 Ohio (11.7%), Massachusetts (5.5%) and West Great Lakes Mid-Atlantic New England Plains Rocky Mountains Southeast Southwest Virginia (4.8%) round out the top five states in this industry by revenue. The states with the highest concentrations of industry revenue all have wide availability of broadband internet Revenue access, which is a major infrastructure Population requirement for the consumption of this SOURCE: WWW.IBISWORLD.COM industry’s services. States with low levels of broadband internet access, penetration into rural states could particularly rural states like Wyoming or significantly change the geographic Montana, have a very small presence in landscape of this industry during the this industry. Increasing broadband five years to 2016.
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 17CompetitiveLandscapeMarketShareConcentration | KeySuccessFactors | CostStructureBenchmarksBasisofCompetition | BarrierstoEntry | IndustryGlobalizationMarketShare The four largest companies in the company that has a particular product orConcentration Internet Publishing and Broadcasting technology in the hopes of improving industry control about 45.2% of industry their existing offerings or to safeguard revenue. Low start-up costs, minimal against patent lawsuits. Yahoo, AOL andLevel barriers to entry and the industry’s other internet content holdingConcentration in this appeal to hobbyists create an companies prefer to acquire websitesindustry is Medium environment that encourages the start that consistently generate popular up of new players. content and offer significant value for Acquisitions are a routine feature of generating advertising revenue. this industry, but they rarely have a Facebook is a fast rising competitor in significant effect on concentration. this industry and an increasingly Major companies like Google or important force in the distribution of Facebook may purchase a smaller internet media.KeySuccessFactors Developing a clear niche essential bridge from a website’s initial Websites live and die by the loyalty of growth phase until it develops a way to their fans and their ability to keep them monetize its traffic.I BISWorld identifies interested in the site. Successful websites250 Key Success cultivate a unique culture and Producing content currentlyFactors for a continuously appeal to their user base. favored by the marketbusiness. The most Internet users can be extremely fickle. Word of mouth recommendations Keeping fresh content that is currentlyimportant for this Word of mouth recommendations are an popular with users is a crucial element toindustry are: invaluable way to build up a website’s user a website’s survival. base. Websites that can successfully get users to talk to their friends about the site, Attracting advertisers especially offline, tend to grow faster. Advertising is a major source of industry revenue. Unless a website can convince Access to investment funding users to pay subscription fees or sell For many websites, investment funding merchandise, websites must attract (e.g. venture capital funding) is an advertisers to generate revenue.CostStructure The Internet Publishing and Broadcasting operators and employees engaged inBenchmarks industry is highly profitable, reaping marketing or writing; growth in these about 17.1% of revenue as profit. The cost employee segments have diluted the of labor was once the most costly expense impact of higher wage employees for this industry, but this has declined involved with IT, database management substantially over the last five years. In and software development. This trend 2006, wages consumed 28.9% of industry is expected to continue during the five revenue, with the average employee years to 2016, with wages falling to just earning $64,000. In 2011, wages will 12.1% of revenue. account for 14.5% of revenue and workers In 2011, purchases will be the largest will earn $47,000 on average. Industry expense for companies in this industry, wages have fallen over this period due to at 15.0% of revenue. This expense growth in the number of small time includes computer equipment, software,
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 18CompetitiveLandscapeCostStructure and office supplies. Industry operators expenses related to their operations.Benchmarks routinely purchase new computers and Most companies in this industry spend software to replace obsolete equipment an average of 12.4% of revenue oncontinued and keep software up-to-date. Spending advertising expenses, which they split on new software rises particularly in between banner ads and search ads. years in which Microsoft releases new Advertising helps increase traffic to versions of the Windows operating their websites and can help build a system. Depreciation consumes 7.0% of loyal user base. Sellers of digital books industry revenue, principally accounting and music pay royalties to content for the rapid obsolescence of existing owners, which average 6.0% of computers. Office space rental and revenue. Companies that run utilities account for 6.0% and 2.5% of advertising networks (e.g. Google, industry revenue, respectively. Yahoo and Microsoft) pay about 5.0% of the revenue they garner from ads Industry specific expenses back to the owner of the website; this Companies operating in different expense is referred to as traffic segments of this industry have unique acquisition costs (TAC). ■Profit IndustryCostsandAverageSectorCosts ■Rent Industry 0 2.5 100% ■Utilities Costs 17.1 6.0 7.0 37.9 14.5 15.0 ■Depreciation Profit (2011) ■Other ■Wages 3.5 AverageCosts ■Purchases ofallIndustries 9.9 7.4 37.2 20.4 19.3 Profit insector(2011) 2.2 SOURCE: WWW.IBISWORLD.COMBasisofCompetition Externally, the Internet Publishing and attractive web design, ease-of-use Broadcasting industry competes for the (website usability) and popularity among leisure time of consumers. In this respect, other users (i.e. websites that are popularLevelTrend the industry primarily competes against tend to get more popular and vice versa).Competition in other forms of entertainment including: The popularity of any individual websitethis industry is recreational sports, radio broadcasting, or service often has significant impact onMedium and the television broadcasting, tourism, the advertising rates the website is able to newspaper publishers, book publishers, charge. Social networking websites (e.g.trend is Steady video game publishers and periodical Facebook) have exploded in popularity publishers. Internally, internet publishers during the last five years by combining compete with each other for the attention exclusive content (non-members can’t of users by offering original content, view profiles or pictures) with socializing.
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 19CompetitiveLandscapeBarrierstoEntry The Internet Publishing and Broadcasting industry has extremely BarrierstoEntrychecklist LevelLevelTrend low barriers to entry. New entrants Competition Medium can launch a website with just the code Concentration MediumBarriers to Entry for the site, cash for hosting and Life Cycle Stage Growthin this industry are internet access fees and determination. Capital Intensity HighLow and Steady Regulation is extremely light and does Technology Change High not inhibit new entrants. The most Regulation Policy Light significant barrier to entry is the Industry Assistance None development of the code or software to build the website, which can range SOURCE: WWW.IBISWORLD.COM from the very simple to the exceedingly complex. A wide variety of create websites from existing vendors offer free or by-fee services templates or toolsets (e.g. Wordpress, that allow a website developer to Blogger, Blogspot and Tumblr).Industry The Internet Publishing and abroad and half of Facebook’s users liveGlobalization Broadcasting industry is not particularly outside the US. Google achieves its involved in globalization. Most firms in excellent international penetration byLevelTrend the industry are domestically owned, and striving for localized results, routinely no products or services are traded across hiring native speakers to improve theGlobalization in this borders. However, the borders of relevancy of their searches. In 2010,industry is Low and traditional nation-states are essentially Google pulled its operations out ofthe trend is Steady irrelevant to the internet, so users from mainland China due to privacy concerns different countries can easily access and and security breaches relating to Chinese enjoy the same content (unless there are censorship; for the time being, Google licensing constraints). Google earns a serves the mainland China market from little more than half of its total revenue servers based in Hong Kong.
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 20MajorCompaniesGoogleInc. | Amazon.com | Yahoo!Inc.AppleComputerInc. | Facebook | OtherCompaniesMajorplayers AppleComputerInc.9.2%(Market share) Amazon.com10.0% 48.9% Other Yahoo!Inc.9.3% Facebook5.9% GoogleInc.16.7% SOURCE: WWW.IBISWORLD.COMPlayerPerformance Google is the world’s largest search engine. Google operates in this industry GoogleInc.(USsegment)– through its Blogger (a bloggingGoogleInc. financialperformance platform) and Youtube.com (video arket share: 16.7%M sharing) subsidiaries. Google’s AdSense RevenueIndustryBrandNames affiliate program also contributes to its Year ($ million) (% change)Youtube.com operations in this industry. Youtube. 2005 3,745 N/CBlogger.com com is the online video site, and the 2006 6,045 61.4Google fourth largest website in the US by 2007 8,629 42.7Google AdSense unique visitors (behind Google.com,Google AdWords 2008 10,680 23.8 Facebook.com and Yahoo.com). Blogger is the largest blogging platform, which 2009 11,116 4.1 includes Blogspot.com. Google offers a 2010 14,893 34.0 wide array of free services, including 2011* 16,137 8.4 web-based e-mail and office productivity suites (competitors to Microsoft Office). *Estimate Google generates 97% of its revenue SOURCE: ANNUAL REPORT AND IBISWORLD from online advertising, chiefly through its AdSense platform. Advertisers can also use AdSense to place ads on websites not owned by Google, but Strategy enrolled in the AdSense program, based Google’s main revenue source, on the relevancy of the ad to the website. advertising, is set up in such a way that Website owners receive a small very little of the company’s resources are proportion of this revenue, which varies spent maintaining and administering from site to site. advertising sales. Google AdSense is a Google spends most of its engineering self-serve advertising platform, allowing and software development resources advertisers to create ads and bid for ad developing products that will be placement independently. Google uses distributed freely, on iterative automatic processing algorithms to improvements to its search algorithms or approve and disapprove of ads, as well as on tangentially-related research and to place those ads on a variety of development. Google’s focus on advertising properties. Through AdSense, innovation has produced many of its advertisers can bid to place ads on a most popular services, including: Gmail, Google search engine result page (SERP) a web-based e-mail service; Android, an for specific keyword combinations, which open-source mobile operating system; can be further refined based on data and Chrome, a lightweight internet Google has about the search user (e.g. browser. By giving services away for free, location, gender or income level). Google encourages more people to use its
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 21MajorCompaniesPlayerPerformance products and websites, which increases and immense size. In 2011 alone,continued the size of its search audience and thus Google’s US operations are expected to revenue potential. Many of Google’s generate $16.1 billion in revenue, up products function much more robustly if 8.4% over 2010. During the five years to users are logged-in to their Google 2011, Google’s revenue grew at a 21.7% accounts; by using accounts in this way, annual rate, from $6.0 billion in 2006. Google can get a much more accurate Google generates this revenue from idea of individual users’ behaviors and search ads and “content ads,” which are tastes, which it uses to customize the displayed next to relevant website advertising seen by the user. content. Google’s market share has gained rapidly during the last five years, Financial performance primarily driven by its dominance as a Google is truly the juggernaut in the provider of online advertising services, Internet Publishing and Broadcasting leading to the widespread use of AdSense industry, boasting rapid revenue growth on affiliate websites. GoogleInc.–financialperformance Revenue NetIncome Year ($ million) (% change) ($ million) (% change) 2005 6,139 N/C 1,465 N/C 2006 10,605 72.7 3,077 110.0 2007 16,594 56.5 4,204 36.6 2008 21,796 31.3 4,227 0.5 2009 23,651 8.5 6,520 54.2 2010 29,786 25.9 8,857 35.8 2011* 32,933 10.6 10,355 16.9 *Estimate SOURCE: ANNUAL REPORT AND IBISWORLDPlayerPerformance Amazon.com is the largest online energy efficient “E ink” screen. By July retailer in the United States. Amazon 2010, e-book sales for the Kindle started as an online bookstore, but it outnumbered sales of hardcover booksAmazon.com soon diversified to selling DVDs, CDs, from Amazon. Amazon’s online music arket share: 10.0%M MP3 downloads, computer software, store, Amazon MP3, launched in 2007IndustryBrandNames video games, electronics, apparel, as the first digital rights managementAmazon furniture and toys. Amazon competes in (DRM)-free music store.Kindle this industry through its sale of MP3Amazon MP3 downloads and e-books (digital books). StrategyIMDb Amazon also owns the Internet Movie The core of Amazon’s business is online Database (IMDb), a popular destination retail. Amazon strives to offer an for information about movies and enormous variety of goods, acting as a actors. In 2007 Amazon launched the true “one stop shop” for online shoppers. Kindle, an e-book reader that uses an Competition in the online retail space is
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 22MajorCompaniesPlayerPerformance extremely tight, but Amazon keeps a legcontinued up on its rivals through the diversity of Amazon.com(USmediasegment) its products, responsive customer service and free shipping incentives. –financialperformance Customers who spend more than $25 Revenue can choose a slower free shipping option Year ($ million) (% change) (shipping at most retailers is at least $5); 2006 3,582 N/C customers who subscribe to Amazon 2007 4,630 29.3 Prime get free shipping on all of their 2008 5,350 15.6 purchases for a $100 annual fee. Amazon further enhances the customer 2009 5,964 11.5 service experience by allowing reviews 2010 6,881 15.4 on all of its items. 2011* 7,775 13.0 In the digital music market, Amazon is a potent price competitor. Amazon *Estimate MP3 one-ups Apple’s iTunes store by SOURCE: ANNUAL REPORT AND IBISWORLD offering music at a standard price of $0.89 per song, compared to iTunes’ and iPad) and Google Android devices. $0.99. Furthermore, music purchased Amazon’s Kindle is the best selling from Amazon does not include dedicated e-reader, with its e-ink screen restrictive DRM technology, which providing a key advantage: the Kindle prevents users from creating copies of can easily be read in direct sunlight and their music. Despite these advantages, does not draw power continuously. Amazon MP3 still trails behind iTunes, principally due to the latter’s strong Financial performance affiliation with iPod media players. Amazon’s US media segment is In the digital book space, Amazon expected to boast 10.0% annual benefits from first mover advantage: revenue growth from 2006 to 2011. In Amazon’s Kindle was the first affordable, 2011 alone, segment revenue is portable e-book reader. Kindle e-books expected to rise 13.0% to $7.8 billion. can be read on most internet-connected Growth since 2007 has been driven by devices, including computers, Kindle the launch of Amazon’s digital music e-readers, Apple iOS devices (e.g. iPhone and e-book stores.PlayerPerformance Yahoo is the second most popular search main website (Yahoo.com) acts as a “web engine in the US, and a major publisher portal” connecting users to their wide of internet content. Since 2009, Yahoo variety of free services, as well asYahoo!Inc. has been distancing itself from the displaying links to current news stories. arket share: 9.3%M “search engine” label because it has beenIndustryBrandNames unable to gain ground against its rival StrategyFlickr.com Google. Yahoo now prefers to focus on its Prior to 2009, Yahoo’s main strength wasYahoo.com content generating properties, including search advertising, facilitated by theYahoo! Search Marketing Yahoo.com and Flickr.com (an image second largest customer base of searchYahoo! Widget Engine sharing site). Flickr is the most popular engine users. Yahoo has suffered from dedicated image sharing website continuous erosion of its search market (Facebook is a larger social networking share (see 51913a – Search Engines) as it website that also hosts images). Yahoo’s struggled to compete against Google.
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 23MajorCompaniesPlayerPerformance Yahoo’s struggles against Google stemcontinued from Yahoo’s less systematic search Yahoo!Inc.(USsegment)– algorithms (Google’s are entirely financialperformance automated, whereas Yahoo allowed advertisers to promote their websites in Revenue line with standard results) and declining Year ($ million) (% change) popularity of services like Yahoo Mail. In 2005 3,681 N/C 2009, Yahoo signed an agreement with 2006 4,370 18.7 Microsoft to use Microsoft’s Bing search 2007 4,739 8.4 algorithms behind the scenes for Yahoo 2008 5,190 9.5 Search. The agreement allowed Yahoo to stop spending resources on search engine 2009 4,716 -9.1 development while still receiving a 2010* 4,898 3.9 portion of the proceeds from advertising 2011* 5,148 5.1 on the SERP. Yahoo’s strategy from then onward has been to acquire and develop *Estimate websites with established user bases, SOURCE: ANNUAL REPORT AND IBISWORLD primarily generating revenue through advertising on those sites. rejecting Microsoft’s acquisition offer, Yahoo has periodically improved its Yahoo continued to face dwindling search technology offerings through acquisitions. marketing share and eventually ended up In 2007, Yahoo acquired Blue Lithium for giving Microsoft access to Yahoo Search $300 million. Blue Lithium offered a technology anyway. During this upheaval, combination of behavioral targeting and Yahoo’s new CEO, Carol Bartz, sold off analysis software to help optimize investments in Gmarket (a Korean advertising campaigns; after the shopping website) and Alibaba (a China- acquisition, Blue Lithium was renamed based business-to-business sourcing Yahoo! Advertising. In 2009 Yahoo faced website) to generate liquidity. a rollercoaster of upheaval: Yahoo’s board of directors rejected an acquisition offer Financial performance from Microsoft, resulting in the ouster of During the five years to 2011, Yahoo is founder and CEO Jerry Yang. After expected to achieve annualized revenue Yahoo!Inc.–financialperformance Revenue NetIncome Year ($ million) (% change) ($ million) (% change) 2005 5,258 N/C 1,877 N/C 2006 6,426 22.2 732 -61.0 2007 6,969 8.5 639 -12.7 2008 7,209 3.4 418 -34.6 2009 6,460 -10.4 598 43.1 2010* 6,530 1.1 1,450 142.5 2011* 6,686 2.4 1,355 -6.6 *Estimate SOURCE: ANNUAL REPORT AND IBISWORLD
WWW.IBISWORLD.COM InternetPublishingandBroadcastingintheUS February 2011 24MajorCompaniesPlayerPerformance growth of 3.3% to $6.6 billion, with search results; Yahoo’s internal searchcontinued 2.4% growth in 2011 alone. Yahoo’s technology was only in use from 2004 growth has lagged significantly behind through 2009, when Microsoft’s Bing its newer rivals (Yahoo was founded in took over as the provider of Yahoo! 1995, Google in 1998 and Facebook in Search. Unfortunately for Yahoo, the 2004) during the last five years. technology behind search turned out to Fundamentally, Yahoo’s vision for its be the most lucrative tool for monetizing role on the internet has changed internet traffic, and Yahoo struggled to fundamentally since its founding: keep up with its rival Google, which was Yahoo’s co-founder Jerry Yang always founded with a core focus on search wanted Yahoo to be a “portal” website technology. Under the leadership of where users began each session on the Carol Bartz, Yahoo has decided to stop internet. Yahoo began lagging behind fighting a losing battle over search when search became the key technology technology, and instead focus on behind web portals. In fact, from 2000 providing a wealth of desirable internet to 2004, Google provided Yahoo’s content and communities.PlayerPerformance Apple competes in the Internet Publishing and Broadcasting industry AppleComputerInc.(iTunes through its iTunes Store division. WithAppleComputer iTunes, users can download and manage segment)–financialperformance Inc. a huge range of music, movies, television Revenue shows, podcasts or games. During the Year ($ million) (% change) arket share: 9.2%M five years to 2011, Apple’s iTunes store is 2006 1,885 N/CIndustryBrandNames expected to boast annualized revenue 2007 2,496 32.4Apple growth of 25.8%, to $5.9 billion. In 2011iTunes 2008 3,340 33.8 alone, IBISWorld expects 19.9% revenueiPod 2009 4,036 20.8 growth for iTunes.iPhone 2010 4,948 22.6iPad Strategy 2011* 5,935 19.9 Apple’s strategy with iTunes relies on two general principles: standardized pricing *Estimate and association with premium products. SOURCE: ANNUAL REPORT AND IBISWORLD Early on in the evolution of iTunes, Apple stood a hard line in negotiations with successfully lured many music lovers record labels; record labels wanted to be away from free illegal music through able to set prices on their albums and convenience. If record labels had instead songs, while Apple pushed for standard been allowed to price music at parity with pricing with minimal exceptions. In the retail CD sales, illegal distribution of end Apple got its way, which ended up music would likely continue to dominate. being hugely beneficial to both Apple and The second half of iTunes’ success is the record labels. Prior to iTunes, the really the success of Apple’s portable predominant method of acquiring digital media devices. Apple was certainly not music was through illegal sources (e.g. the first company to release portable peer-to-peer networks like Napster, digital music players, but it was the Limewire or Bittorrent). By standardizing first to make them simple and easy to music prices at $0.99 per song, Apple use. Apple’s iPhone smartphone and