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모건스탠리 보고서 인터넷 모건스탠리 보고서 인터넷 Presentation Transcript

  • Internet Trends May 25, 2007 56th Annual Seminar - Santa Barbara mary.meeker@ms.com / david.joseph@ms.com / richard.ji@ms.com Morgan Stanley does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Customers of Morgan Stanley in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at www.morganstanley.com/equityresearch or can call 800-624-2063 to request a copy of this research. For our latest industry research, please visit www.morganstanley.com/techresearch. Morgan Stanley & Co. Incorporated (quot;Morgan Stanleyquot;) is currently acting as financial advisor to DoubleClick Inc (quot;DoubleClickquot;) in its announced proposed sale to Google Inc. The proposed transaction is subject to customary closing conditions. DoubleClick has agreed to pay fees to Morgan Stanley for its financial services, including transaction fees that are subject to the consummation of the proposed transaction. Morgan Stanley is currently acting as financial advisor to aQuantive Inc. (quot;aQuantivequot;) with respect to its announced proposed acquisition by Microsoft Corp. The proposed transaction is subject to the consent of aQuantive shareholders and other customary closing conditions. This report and the information provided herein is not intended to (i) provide voting advice, (ii) serve as an endorsement of the proposed transaction, or (iii) result in the procurement, withholding or revocation of a proxy or any other action by a security holder. aQuantive has agreed to pay fees to Morgan Stanley for its financial advice, including transaction fees that are subject to the consummation of the proposed transaction. For analyst certification and other important disclosures, refer to the Disclosure Section.
  • Current Internet Trends
  • Hierarchy of Needs Drives Growth?! 1943 - Maslow 2007 - ? ;) Self- actualization Internet / Mobile Esteem Belonging Shelter Safety Food / Water Physiological Created for discussion purposes and perhaps a bit of humor. Not intended to discredit Maslow’s hierarchy of needs which we believe to be accurate 3 View slide
  • Internet Highlights… • Users / Usage — Yahoo! has base of 477MM+ monthly unique visitors (+19% Y/Y with +22% Y/Y page view growth, CQ1) • Customer Acquisition — Google (500K - 1MM advertisers / vendors, and rising); Paid Clicks up 52% Y/Y in CQ1 - effective targeting should continue to improve + drive rising monetization • Commerce / Payments — PayPal (143MM accounts, +36% Y/Y, CQ1) + Shopping.com has 60MM+ products in 300+ categories 4 View slide
  • …Internet Highlights… • Advertising — 8% of total US advertising online in 2006E growing to estimated 13%+ within 5 years. Google + Yahoo! = key drivers + beneficiaries – 100%+ of overall incremental growth is online • Significant targeting / conversion improvements (related to technology improvements + data leverage) — should bolster annualized global net revenue per unique user of $21 for Google (+57% Y/Y), revenue per active customer of $173 for Amazon (+12% Y/Y) • Personalization — Recommendation engines improve monetization – examples include Amazon.com + Yahoo! Music • Music – Apple iPod + iTunes @ $21B cumulative revenue - up from $141MM 4 years ago 5
  • …Internet Highlights… • Communications / Telephony — Skype (196MM registered users, +107% Y/Y, +14% Q/Q, CQ1 – may be fastest growing product ever). Based on CQ1:07 data, Skype traffic = ~4% of global international long distance minutes. Global mobile data services revenue (ex- messaging) has $10 ARPU (and rising). IM (instant messaging) + SMS / MMS showing strong growth • Video — ~60% of Internet traffic may be P2P file sharing of largely unmonetized video — ramp in tagging (for search) + partnerships + monetization – note recent moves by likes of ABC / CBS / FOX / NBA / Sony / Warner / Universal / Google / Yahoo!. Challenges (especially related to copyright / infrastructure stress) are significant, but over time, consumer demand should rule and content creators should benefit 6
  • …Internet Highlights • Local — Google ‘Long Tail’ + eBay Classifieds (26MM+ unique visitors, +137% Y/Y, CQ4, per eBay) – traction emerging • Community / Social Media — Likes of Wikipedia, MySpace, YouTube, Yahoo! Flickr (24MM unique visitors, up 86% Y/Y*) + Yahoo! Answers (79MM unique visitors, up 596% Y/Y*) have experienced extraordinary growth. CyWorld (2MM visitors*, Korea) + Tencent (59MM visitors, China) monetizing. 71MM+ blogs per Technorati. 1B camera- enabled mobiles – ‘citizen journalism’ in infancy • Mobile — While 17% of global Internet users (38% in N. America) have residential broadband, 8% of global mobile phone subscribers use 3G. American Idol – 63MM votes (via mobiles + Internet) in final 4-hour round, China’s Super Girl – 12MM votes (primarily mobiles) in final 3- hour round. Mobile data services (bolstered by 2.5G & ex. messaging) revenue ~$20B, comparable to online advertising revenue – illustrates potential monetization opportunity for broadband Internet Source: *comScore Global MediaMetrix 4/07 7
  • # of Internet Users – ROW Continues to Rise in Relevance N. America = 35% of Users in 2000E; 16% in 2007E Geographic Distribution of Internet Users (MM) 977 390 491 621 724 851 1,122 1,302 100% 80% 60% 40% 20% 0% 2000E 2001E 2002E 2003E 2004E 2005E 2006E 2007E North America Europe Asia/Pacific Rest of World Latin America Note: ROW denotes rest of the world Source: Morgan Stanley Research 8
  • User-Generated Content (UGC) – YouTube + Wikipedia + MySpace Have Moved to Top of Internet User Pack Total Global Unique Visitors (MM) Rank Property 4/07 Y/Y Growth 1 Google 528 12% 2 Microsoft 520 3 3 Yahoo! 468 1 4 Time Warner 267 21 5 eBay 248 (4) 6 Wikipedia 209 71 7 YouTube 163 506 8 Amazon 137 1 9 CNET 120 33 10 Ask 111 (9) 11 Apple 115 29 12 MySpace 107 86 13 Adobe 101 (5) 14 Lycos 79 (14) 15 Viacom 81 65 Source: comScore Global MediaMetrix 4/07 9
  • Web 2.0 – Consumer Control / Contribution / Interaction Web 1.0 Web 2.0 DoubleClick Google AdSense Ofoto Flickr Akamai BitTorrent mp3.com Napster Britannica Online Wikipedia Personal websites Blogging evite upcoming.org and EVDB Domain name speculation Search engine optimization Page views Cost per click Screen scraping Web services Publishing Participation Content management Wikis Directories (taxonomy) Tagging ('folksonomy') Stickiness Syndication Source: O’Reilly Media, Inc. 10
  • Next Generation Communications Hubs? Search Engines Internet Sites Email Providers IM / VoIP Services Payments Google Search Google MSN Hotmail MSN Messenger PayPal / eBay Unique Visitors (1) Unique Visitors (1) Active Accounts (2) Active Accounts (2) Accounts (2) (465MM) (528MM) (261MM) (215MM) (143MM) Yahoo! Search MSN – Windows Live Yahoo! Mail Skype / eBay Unique Visitors (1) Unique Visitors (1) Unique Visitors (1) Registered Users (2) (237MM) (520MM) (249MM) (196MM) Yahoo! Google GMail Yahoo! Messenger Unique Visitors (1) Unique Visitors (1) Unique Visitors (1) (468MM) (70MM) (88MM) eBay ICQ Unique Visitors (1) Unique Visitors (1) (248MM) (28MM) • Convergence is happening (many IM MySpace.com sessions end in phone call). Opportunities Unique Visitors (1) exist for non-mobile players to leverage (105MM) existing subscribers. Amazon.com • Who has the most valuable customer base Active Customers (2) as transition occurs? Who will have it over (66MM) time? (1) Source: comScore Global MediaMetrix 4/07 (2) Source: Company Reports as of CQ1 11
  • Strong Momentum in Many Emerging Fast Growers Company Market Data Points Social Network 29MM uniques vs. 21MM Y/Y (2) Social Network 22MM uniques vs. 12MM Y/Y (2) Social Network 39MM uniques vs. 13MM Y/Y (2) Social Network 3MM uniques vs. 192K Y/Y (2) Social Network 2MM uniques vs. 1.5MM Y/Y (2) Hosted Blogging (2) 35MM uniques vs. 2MM Y/Y 5MM uniques vs. 3MM Y/Y (2) P2P File Sharing Accounted for 35% of all Internet traffic in 2004 (1) 7MM uniques vs. 6MM Y/Y (2) Blog Search Engine 71MM+ blogs indexed (3) Video / Electronics 100K+ SlingBox units sold in first 6 months of shipment Network of 3K+ retailers in N. America in <9 months Online Video (2) 330K uniques vs. 30K in 12/06 Note: Criteria for choosing companies based on the following variables: recent growth in Internet traffic, absolute Internet traffic, age of company, and presence on blogs and at conferences Sources: (1) Cachelogic; (2) comScore Global MediaMetrix 4/07; (3) Technorati 12
  • Watch Where Global Younger Generation Goes Ringtone Downloads, Social Networking Video Connecting Mobile to Net Blogs Web OS Programs In-Game Advertising Tencent Instant Knowledge Sharing Messaging (PC / Mobile) 13
  • Online Advertising Trends
  • Large Gap Between Internet Consumption / Ad Spending US Media Usage (1) to Ad Spending (2) Youth Media Usage (3) to Ad Spending (2) Ratios Ratios 12.0x 11.3x 12.0x 10.0 10.0 8.0 8.0 6.0 6.0 4.7x 4.0 4.0 2.0 2.0 0.0 0.0 Newspapers Total TV Radio Internet Newspapers Total TV Radio Internet + Magazines + Magazines Sources: (1) Adapted from SRI-Knowledge Networks (2005). (2) Adapted from Universal McCann, (2005); Internet Advertising Bureau (2006). (3) Veronis Suhler Stevenson (2005), Yahoo! Analyst Day (5/04). Youth defined as age 17 and under. Ratios are calculated as percent of US media usage on a medium divided by percent of US ad spending on a medium 15
  • US Internet Ad Spend = Movin’ on Up – $217 Per Home vs. $980 for Newspapers? 2005 US Advertising Ad Spending / Spending ($B) Household ($) Medium Households (MM) 99 $1,071 Promotions $106 Newspapers 49 50 980 17 55 309 Classifieds 99 980 Direct Telephone 97 57 99 576 Direct Mail 45 99 455 Broadcast TV Radio 20 60 333 Cable TV 19 70 271 13 60 217 Internet / Online 99 162 Yellow Pages 16 Outdoor 6 99 61 Total $428 834 $5,106 Average 43 83 511 Morgan Stanley Research, PricewaterhouseCoopers, IAB, Jupiter Research, McCann-Erickson, RAB; Newspapers include Classifieds. Promotions ($106B) include: incentives ($28B), promotional products ($23B), point-of-purchase ($18B), specialty printing ($8B), coupons ($7B), premiums ($7B), promotional licensing ($6B), promotional fulfillment ($5B), product sampling ($2B), and in-store marketing ($2B). Households may use multiple advertising mediums 16
  • Recent Bets on Online Advertising – Offline to Online Migration Potentially Accelerating • $3.1B (4/07): Google + DoubleClick • $680MM (5/07): Yahoo! + Right Media • $649MM (5/07): WPP Group + 24/7 Real Media • $6.0B (5/07): Microsoft + aQuantive These acquisitions = $10B vs. $52B aggregate value of top offline advertisers (WPP + Interpublic + Omnicom + Publicis + Havas) Source: FactSet, Hoovers 17
  • Google + Yahoo! = ~58% of US Online Ad Revenue (and Rising) US Online Ad Revenue Mix (1) Google, US Gross Ad Revenue (2) Yahoo!, US Gross Ad Revenue (2) 42% Others (3) 1,400 31% 51% 1,200 27% US Ad Revenue ($MM) 1,000 25% 24% 800 600 400 200 0 CQ4:05 CQ4:06 (1) Source: Ad revenue totals from IAB/PriceWaterhouseCoopers Interactive Advertising reports (2) Calculated as reported revenue multiplied by the reported percentage of US Ad Revenue (3) Calculated as the difference between total IAB US revenue and the sum of Google, Yahoo! gross revenue (4) Assuming that TAC of Google + Yahoo! included in ‘others’ total, this segment would have been up 20% Y/Y vs. 8% actual growth 18
  • Google + Yahoo! Share Significant Portion (~30%) of Revenue with Partners + Affiliates – Trend Should Continue • Google generated $3.6B in gross revenue in CQ1; it PAID OUT $1.1B to 1,000s of partners like AOL, Ask Jeeves, EarthLink, + HowStuffWorks • Yahoo! generated $1.7B in gross revenue in CQ1; it PAID OUT ~$489MM to 1,000s of partners like CNN, ESPN + The Wall Street Journal Source: Company Reports 19
  • Rapid P2P Growth (Mostly Video) is Stressing Internet + Is Undermonetized • Peer-to-Peer (P2P) traffic was 60% (and rising) of Internet traffic in 2004 (of which 62% was video), with BitTorrent accounting for 30% of traffic, per CacheLogic • “P2P affects Quality of Service (QoS) for ALL subscribers” (1) Internet Protocol Trends (1) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Email FTP Other P2P Web Source: (1) CacheLogic “P2P in 2005,” (9/05) 20
  • U.S. Internet Advertising – Search Has Been Growth Engine (Largely Related to Text) – Video Next? (US$ in MM, except where noted) CAGR 2001E 2006E '01E-06E Search Advertising $285 $6,752 88% % of Total 4% 40% Display and Sponsorship $4,423 $4,220 (1) % of Total 62% 25% Rich Media $357 $1,182 27 % of Total 5% 7% Classifieds $1,141 $3,038 22 % of Total 16% 18% E-mail and Other $927 $1,688 13 % of Total 13% 10% Total U.S. Internet Spending $7,134 $16,879* 19 U.S. Internet Users (MM) 143 183 5 U.S. Internet Households (MM) 55 70 5 U.S. Internet Spending per Internet Household $130 $240 13 *Note: Total U.S. Internet Spending up 35%Y/Y Source: Internet Advertising Bureau and Morgan Stanley Research estimates. 21
  • 67% of Global Internet Users Use Search Search = Top Customer Acquisition Tool for Online Retailers % of New Online Customers for Online Retailers / Marketing Spend Mix (2005) % Customers acquired from source 50% 36% 29% 40% 30% 11% 20% 10% 7% 5% 3% 10% 3% 1% 0% ls s g ts ls s c s ne er tin m ea ffi ea lis og th ra gi tra ke ld ld al g O en og in ar rta at rta ic ct pr m C g an po po pe in te ne rg pp os al ia ew O gi on ho fil pr en N Af i ti -s o ch ad lt on ai ar Tr is Em Se r pa om C Note: 8% of global Internet traffic was derived from search while 67% of global Internet users used search in 1H2006, per comScore Source: The State of Retailing Online 2006, Forrester Research 22
  • Online Video Trends
  • Video – Key Question In 3 years, what % of content used on Web will be… • Professional • Semi-professional • Amateur • Combinations (mashups) of above? 24
  • YouTube – Who Woulda Thought?... Most Watched YouTube Video – ‘Evolution of Dance’ ~50MM views / 117K comments since 4/06 Source: YouTube 25
  • …YouTube – Who Woulda Thought? Short-form entertainment… YouTube stats: Watch even • 163MM unique visitors more +506% Y/Y videos • 14B minutes +1,128% Y/Y • 13B page views Post your +905% Y/Y own video response • Acquired by Google $1.1B – 10/06 • $11MM – 2006 revenue • “Broadcast Yourself” Share your thoughts Source: comScore Media Metrix (Global, 3/07; Google, YouTube 26
  • YouTube Channels – CBS Leads with 113MM Views Leading user Broadcast generated media showing content draws strong traction 50MM views Source: YouTube as of 5/29/07 27
  • Power of the Door… Sometimes you know what you are looking for and sometimes you don’t - editing / organizing can help... Selectively placed on Yahoo!’s front page / door Exclusive THE 9 is a daily sponsorship by broadcast on Pepsi Yahoo! TV, showcasing 9 daily selections THE 9 features the from millions of 9 “best, weirdest, Web content files and funniest videos, photos, and stories” on the Web “The best Video Blog” “One of the 50 coolest websites of 2006” – Vlog host: TIME Magazine (8/06) Maria Sansone Source: Yahoo! 28
  • …Power of the Door UGC + User Participation + Social Networking + Monetization Interactive - Watch Online voting + video clips user participation from previous “THE 9”s Utilizes Yahoo! 360 as social networking tool Source: Yahoo! 29
  • Monetizing Video – Keywords + Adjacent Sponsorships – Do Users Really Want 30 Second Pre-Rolls? Keyword Ads and / Sponsorships or sponsorships Key Words reebok roddick Branding + Interactivity – Think About “Enter Sweepstakes” – Game with Andy… Note: Reebok framed ads placed for illustration purposes only Source: YouTube 30
  • Joost – Focused, User-Built TV • TV’s mass audience to the Web? − Mobile TV + Personalization + Online social network − Vision: universal TV running on a P2P platform • Old P2P: download Joost’s P2P: stream DVD-quality pictures • Connectivity driven by increased broadband Internet + PC / mobile PC penetration is key Rate watched IM / Chat content functionality Add interactive apps / plugins 31
  • Social Media / Virtual Communities Trends
  • Growing Importance of Virtual Community • Improving PC / Internet penetration + plethora of social networking + digital content rising vitality of virtual community • Virtual communities becoming increasingly important as channels for − Building / maintaining relationship − Entertainment − Content sharing − Business / revenue generator 33
  • CyWorld – Building / Maintaining Virtual Family… CyWorld: Gift Shop: “Cy” means Purchase items “relationship” to decorate your in Korean. “MiniHompy” “Acorn” is the official currency in CyWorld, which can be purchased to obtain items for your MiniHompy. “Ilchon” represents the Search for your closest family members in friends, blogs, Korean. In CyWorld, it images, videoclips, means your closest friends. news, etc. 34
  • …CyWorld – Building / Maintaining Virtual Family • Social networking + blogging + music & video sharing + personalization = Virtual community / family • Users decorate their “Minihompy” (Mini-homepage) by − Uploading pictures / blogging − Playing music from Jukebox / buying items • Users grant their friends access to their Minihompy − Closest members are called “il-chon” (family member) − Friends can post blogs / give item gifts for their Minihompy • Impressive Statistics − 20MM users in Korea (~40% of South Korea’s total population) − ~96% of 20-29 year-olds use the site “regularly” − 100K daily video uploads − Operates in the US, China, Japan, Taiwan, Vietnam, and South Korea Source: SK Telecom 35
  • Second Life – Living in a Virtual World / Economy… Personalize “virtual you” Meet new people at events / venues and form interest groups Build / display / store virtual Discussions + Sports + objects + host events and Commercial + Entertainment + businesses Games + Education + … Source: Second Life 36
  • …Second Life – Living in a Virtual World / Economy • Internet based, 3D virtual world imagined, created and owned by its residents • Impressive statistics − 6.5MM+ total residents (vs. 1MM total residents in 10/06) (1) − 25MM total residents + 150K simultaneous online users by 3/08 (2) − $23MM+ eCommerce within Second Life in 4/07 (1) − 3.6MM unique visitors (up 1971% Y/Y) (3) − 31 average minutes per visitor (up 542% Y/Y) (3) • Existing companies beginning to go virtual in Second Life − On 10/16/07, Reuters opened its first ‘all-digital’ bureau, a building modeled on its New York and London offices, with dedicated ‘in-world’ correspondents − Nissan / Scion opened a dealership in Second Life in 10/06 / 11/06, respectively − Coldwell Banker opened a virtual sales office and started selling virtual land in Second Life in 3/07 • “In the end, this is about buying and selling homes in the real world. We’re trying to figure out how to reach what we call the ‘new customer’.” – Charlie Young, Senior Vice President of Marketing, Coldwell Banker Sources: (1) Second Life; (2) Second Life Research; (3) comScore Global MediaMetrix 4/07 37
  • Xbox Live – Videogame Community + Digital Content Distribution Channel Cumulative Xbox Live Users 6MM Xbox Live Users, as of CQ1 7 6 5 (in MM) 4 3 2 1 0 Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- 02 03 03 03 03 04 04 04 04 05 05 05 05 06 06 06 06 07 • Xbox Live: 60% attach rate for Xbox 360, up from 10% − 2.3B+ hours of online gaming • 2MM text / voice messages sent everyday on Xbox Live • 70%+ members download content from Xbox Live Marketplace • ~50% of members in the US log into Xbox Live Marketplace everyday Source: Microsoft 38
  • Mobile Internet Trends
  • At Critical Mass Inflection Point for Usage of High Speed (Broadband – 2.5+3G) Mobile Networks Global 2.5G / 3G Penetration 4,500 100% 2.5G / 3G Ramp in 25-30% Penetration Sweet Spot 90% 4,000 % of Total Wireless Subscriptions 80% 3,500 70% Subscriptions (MM) 3,000 60% 2,500 50% 2,000 40% 1,500 30% 1,000 20% 500 10% 0 0% 2005E 2006E 2007E 2008E 2009E 2010E Up to 2G Subscriptions 2.5G and Above Subscriptions % 2.5G and Above Penetration 3G likely at 25% penetration in 2010E… Source: Morgan Stanley Telecom Research Scott Coleman, John Marchetti. 40
  • Usable / Useful Content: Offerings Improving / Expanding 1999 2007 1st Generation Wireless Instant Messaging, Location-Based Application Protocol (WAP) Services (Mapping), Calendaring, Games, Portals, Avatars 41
  • Assume You Are On Candid Camera! • Mass market adoption of camera and video phones may open up new markets (Google’s Blogger.com) with potential for financial reward for citizen journalist / photographer • Check out Korea: “What allowed operators to see a return on investment on their EV-DO [3G] networks was not other content, but subscribers' own content. Content that was made by people and exchanged with others has been incredibly popular.” – Hyeon Lee, VP, Samsung Source: Samsung and Morgan Stanley Research 42
  • Reaching Consumers on the Internet
  • Google vs. Yahoo! Google – When you know what you want AKA consumer is editor 44
  • Google vs. Yahoo! Yahoo! – When you don’t necessarily know what you want AKA Yahoo! is part-time editor 45
  • What is Google? Users Advertisers A place to find things World’s greatest customer acquisition tool Google is a distribution platform based on natural + sponsored links 46
  • Google Zeitgeist – What Do People Want? Data… Top 2006 News Searches Top 2006 Searches 1. paris hilton 1. bebo 2. orlando bloom 2. myspace 3. cancer 3. world cup 4. podcasting 4. metacafe 5. hurricane katrina 5. radioblog 6. Bankruptcy 6. wikipedia 7. martina hingis 7. video 8. autism 8. rebelde 9. 2006 nfl draft 9. mininova 10. wiki 10. celebrity big brother 2006 Source: Google 47
  • Yahoo! Buzz Index – What Do People Want? Data… Yahoo’s Search Ranking by Query Score Source: Yahoo! 48
  • Reaching Users through User-Generated Community Channels… Yahoo! Answers - When you don’t necessarily know answer or question 72MM unique visitors +828% Y/Y 367MM minutes Yahoo! +1,110% Y/Y generated results 460MM views +1,163% Y/Y User generated questions User generated responses Source: comScore Global MediaMetrix 4/07 49
  • Amazon.com – Consumers in Control Recommendation Engines / Personalization = Rule Tools based on consumer opinions / experiences help users maneuver through What other What other 35K+ results in books alone customers are customers thinking from “Santa Barbara” are buying What other customers User- are doing generated lists What other customers are saying Source: Amazon.com 50
  • Increasing Importance of Blogging Communities… Bloggers report on WalMart / Dell announcement… Readers respond Video Photo blogs sharing by shoppers 51
  • New Targeting Opportunities Southwest Airlines sponsored group on Penetrating 50K local, special interest groups on Meetup.com Facebook for college students Giveaways for joining Host their next event? Register for college rewards program Apply for summer internships 52
  • Internet is a Distribution Channel [Six Flags] had a promotion for their 45th anniversary. They wanted to give away 45,000 tickets for opening day to drive traffic. So we got a brief to do whatever: ads, microsite, whatever. But our interactive creative director just went off and posted it on Craigslist. Five hours later, 45,000 tickets were spoken for… -Jan Leth, Executive Creative Director of Ogilvy Interactive N. America, per Bob Garfield’s Chaos Scenario 2.0 53
  • How Internet is Helping Reshape Politics
  • How Can Candidates Leverage the Internet to Reach Their Audiences? + =? December 2006 October 2006 Source: Time Magazine 55
  • Changing the Face of Politics – Then C1996 -First Presidential Campaign Websites Sources: Clinton/Gore ’96, Dole/Kemp ‘96 56
  • Changing the Face of Politics – Now Internet Offers Direct Communication with Voters Campaign launches on candidate websites Within hours of launching bid, campaign website had: • 10K messages of support, • 2.2K submissions for its blog • Email list growing at a rate of 100 per min Candidate-focused pages on facebook + MySpace “One Million Strong for Barack” group created on Facebook: • 100 members in first hour • 10K members in <5 days • 200K members by 3rd week • 500+ groups within a month of Obama’s announcement Sources: Obama for America, Hillary Clinton for President, Facebook, MySpace, YouTube 57
  • 10 Downing Street YouTube Channel – 86K Views Links to Downing St. homepage, newsletters, podcasts, E-petitions, etc. Send message / Sort most add comment / viewed / share channel discussed Downing St. videos Source: YouTube as of 5/29/07 58
  • YouChoose ’08 – YouTube Channels for Candidates Centralized hub of candidate-created channels that feature: • Campaign videos • Speeches • Informal chats • Behind-the-scenes footage Source: YouTube 59
  • Changing the Face of Politics – Then C2004: Howard Dean Breaks New Ground in Internet Fundraising Howard Dean’s CQ1:03 Fundraising : • $750K+ from Internet contributions (28% of total) • ~$180 average contribution • 12K+ individual donors • Followed with $3.5MM+ from Internet contributions in CQ2:03 (50%+ of total) Source: Dean for America 60
  • Changing the Face of Politics – Now Internet is Key Fundraising Tool ~$7MM raised online matches CQ1:07 Fundraising Totals John Kerry’s entire CQ1:03 Non-Internet Internet 30 CQ1:07 Fundraising ($MM) 25 $4.2MM $6.9MM 20 $7.2MM 15 $3.3MM 10 5 0 Mitt Romney Barack Obama Hillary Clinton John Edwards Sources: FEC, Obama for America, Hillary Clinton for President, John Edwards for President, Romney for President 61
  • Changing the Face of Politics – Then Traditional Debate Formats 1858 1960 2004 62
  • Changing the Face of Politics – Now 2008 Election - First Online Presidential Debate • 2 online-only debates (one for each party) in September, 2007 • Candidates able to appear online from any location + streamed on Yahoo! network + Huffington Post + Slate sites • PBS host Charlie Rose will moderate, selecting questions from Internet audience Sources: Yahoo!, Slate, Huffington Post 63
  • Summary
  • Information / Data Overload & Addiction A weekday edition of ‘The New York Times’ contains more information than the average person was likely to come across in a lifetime in seventeenth-century England - Richard Saul Warman, Information Anxiety (2000) 65
  • Only 25% of 30 Year-Olds Read Newspapers Daily Daily Newspaper Readership by Age 100% 90% 80% 70% % Penetration 60% 50% 40% 30% 20% 10% 0% 1900 1910 1920 1930 1940 1950 1960 1970 Year of Birth Source: General Social Survey Archive, 1972-2004 66
  • Print Circulation Down 2.31 1.14 Print Circulation (MM) Print Circulation (MM) 2.28 1.13 2.25 2.22 1.12 C2004 C2005 C2006 C2004 C2005 C2006 0.75 1.82 Print Circulation (MM) Print Circulation (MM) 1.76 0.70 1.70 0.65 1.64 C2004 C2005 C2006 C2004 C2005 C2006 Source: Company Reports 67
  • Newshounds Migrating Online Circulation of top 50 newspapers vs. online news unique users 45 40 37 35 US Unique Users (MM) 31 30 26 25 21 20 15 9 10 7 5 5 0 Circulation Washington USA Today NY Times CNN MSNBC Yahoo! News of Top 50 Post Newspapers Sources: MS Media team, comScore US MediaMetrix 4/07 68
  • Era of Mass Personalization - Blogs Gaining Traction Blogs Data Points 3.7MM unique visitors (+80% Y/Y) 15MM total pages viewed (+55% Y/Y) 3.2MM unique visitors (+190% Y/Y) 8MM total pages viewed (+18% Y/Y) 971K unique visitors (+520% Y/Y) 4MM total pages viewed (+486% Y/Y) 837K unique visitors (+62% Y/Y) 3MM total pages viewed (+37% Y/Y) 250K unique visitors (+30% Y/Y) 2MM total pages viewed (+96% Y/Y) • Greater user participation + personalization User generated content • Information less filtered + communicated directly to the public Immediate & objective source of information + feedback • While lots of blog content is rubbish, there are many useful nuggets of insight. Over time, increased editing (often user generated) and reviews should effectively lead to higher standards, as likes of Wikipedia and Amazon.com have illustrated Sources: comScore Global MediaMetrix 4/07 69
  • Influence of Blogs • Growing importance of blogging + online citizen journalism − During the 2004 US Presidential Election, Democratic + Republican parties issued press credentials to citizen bloggers covering the convention. − OhmyNews: online citizen journalism newspaper blog • 3,000+ citizen reporters from 100+ countries • 1.4MM unique visitors vs. 565K visitors Y/Y (1) • “The people’s new source” – TIME • “OhmyNews: Voices from the street” – Business Week Souce: comScore Global MediaMetrix 4/07 70
  • Global Internet Thesis 10-15% user growth 20-30% usage growth 30%+ monetization growth 71
  • How Does the Internet Shape Public Relations Over Next 5-10 Years? There’s no place to hide… no more - Uncle Tupelo - ’Shaky Ground’ Just the facts ma’am - Detective Joe Friday – ‘Dragnet’ Consumers want ‘just the facts’ (supported by data) and want them yesterday…and want them to be easily findable / searchable when / where / how they want them. The Internet is a fabulous distribution channel…as YouTube content has proven, again, consumers love a good story… 72
  • Disclaimer – www.morganstanley.com/techresearch The information and opinions in this report were prepared by Morgan Stanley & Co. Incorporated and its affiliates (collectively, quot;Morgan Stanleyquot;). Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report: Mary Meeker. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts. Global Research Conflict Management Policy This research has been published in accordance with our conflict management policy, which is available at www.morganstanley.com/institutional/research/conflictpolicies. Important US Regulatory Disclosures on Subject Companies The following analyst, strategist, or research associate (or a household member) owns securities in a company that he or she covers or recommends in this report: Mary Meeker - Amazon.com (common stock), eBay (common stock), Intuit (common stock), Microsoft (common stock), Yahoo! (common stock). Morgan Stanley policy prohibits research analysts, strategists and research associates from investing in securities in their sub industry as defined by the Global Industry Classification Standard (quot;GICS,quot; which was developed by and is the exclusive property of MSCI and S&P). Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger, fund distribution or other involuntary acquisition. As of April 30, 2007, Morgan Stanley beneficially owned 1% or more of a class of common equity securities of the following companies covered in this report: Amazon.com, CNET, eBay, Google, Yahoo!. As of April 30, 2007, Morgan Stanley held a net long or short position of US$1 million or more of the debt securities of the following issuers covered in this report (including where guarantor of the securities): Amazon.com, eBay, Intuit, Microsoft, Yahoo!. Within the last 12 months, Morgan Stanley managed or co-managed a public offering of securities of GSI COMMERCE, Intuit. Within the last 12 months, Morgan Stanley has received compensation for investment banking services from eBay, Intuit, Microsoft. In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from Amazon.com, CNET, eBay, Google, GSI COMMERCE, Intuit, Microsoft, Yahoo!. Within the last 12 months, Morgan Stanley & Co. Incorporated has received compensation for products and services other than investment banking services from CNET, eBay, Microsoft. Within the last 12 months, Morgan Stanley has provided or is providing investment banking services to, or has an investment banking client relationship with, the following companies covered in this report: Amazon.com, CNET, eBay, Google, GSI COMMERCE, Intuit, Microsoft, Yahoo!. Within the last 12 months, Morgan Stanley has either provided or is providing non-investment banking, securities-related services to and/or in the past has entered into an agreement to provide services or has a client relationship with the following companies covered in this report: CNET, eBay, Google, Intuit, Microsoft. The research analysts, strategists, or research associates principally responsible for the preparation of this research report have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues. An employee or director of Morgan Stanley & Co. Incorporated is a director of Microsoft, Yahoo!. Morgan Stanley & Co. Incorporated makes a market in the securities of Amazon.com, CNET, drugstore.com, eBay, Google, GSI COMMERCE, Intuit, Microsoft, Yahoo!. Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions. 73
  • Disclaimer – www.morganstanley.com/techresearch Morgan Stanley & Co. Incorporated (quot;Morgan Stanleyquot;) is currently acting as financial advisor to DoubleClick Inc (quot;DoubleClickquot;) in its announced proposed sale to Google Inc. The proposed transaction is subject to customary closing conditions. DoubleClick has agreed to pay fees to Morgan Stanley for its financial services, including transaction fees that are subject to the consummation of the proposed transaction. Morgan Stanley is currently acting as financial advisor to aQuantive Inc. (quot;aQuantivequot;) with respect to its announced proposed acquisition by Microsoft Corp. The proposed transaction is subject to the consent of aQuantive shareholders and other customary closing conditions. This report and the information provided herein is not intended to (i) provide voting advice, (ii) serve as an endorsement of the proposed transaction, or (iii) result in the procurement, withholding or revocation of a proxy or any other action by a security holder. aQuantive has agreed to pay fees to Morgan Stanley for its financial advice, including transaction fees that are subject to the consummation of the proposed transaction. STOCK RATINGS Different securities firms use a variety of rating terms as well as different rating systems to describe their recommendations. For example, Morgan Stanley uses a relative rating system including terms such as Overweight, Equal-weight or Underweight (see definitions below). A rating system using terms such as buy, hold and sell is not equivalent to our rating system. Investors should carefully read the definitions of all ratings used in each research report. In addition, since the research report contains more complete information concerning the analyst's views, investors should carefully read the entire research report and not infer its contents from the rating alone. In any case, ratings (or research) should not be used or relied upon as investment advice. An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing holdings) and other considerations. Global Stock Ratings Distribution (as of April 30, 2007) For disclosure purposes only (in accordance with NASD and NYSE requirements), we include the category headings of Buy, Hold, and Sell alongside our ratings of Overweight, Equal-weight and Underweight. Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, and Underweight are not the equivalent of buy, hold, and sell but represent recommended relative weightings (see definitions below). To satisfy regulatory requirements, we correspond Overweight, our most positive stock rating, with a buy recommendation; we correspond Equal-weight and Underweight to hold and sell recommendations, respectively. Coverage Universe Investment Banking Clients (IBC) % of Total% of Rating Stock Rating Category Count % of Total Count IBC Category 850 38% 291 42% 34% Overweight/Buy 45% 303 44% 30% Equal-weight/Hold 1008 368 17% 97 14% 26% Underweight/Sell 2,226 691 Total 74
  • Disclaimer – www.morganstanley.com/techresearch Data include common stock and ADRs currently assigned ratings. An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing holdings) and other considerations. Investment Banking Clients are companies from whom Morgan Stanley or an affiliate received investment banking compensation in the last 12 months. Analyst Stock Ratings Overweight (O). The stock's total return is expected to exceed the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months. Equal-weight (E). The stock's total return is expected to be in line with the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months. Underweight (U). The stock's total return is expected to be below the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months. More volatile (V). We estimate that this stock has more than a 25% chance of a price move (up or down) of more than 25% in a month, based on a quantitative assessment of historical data, or in the analyst's view, it is likely to become materially more volatile over the next 1-12 months compared with the past three years. Stocks with less than one year of trading history are automatically rated as more volatile (unless otherwise noted). We note that securities that we do not currently consider quot;more volatilequot; can still perform in that manner. Unless otherwise specified, the time frame for price targets included in this report is 12 to 18 months. Analyst Industry Views Attractive (A): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs. the relevant broad market benchmark, as indicated below. In-Line (I): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark, as indicated below. Cautious (C): The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs. the relevant broad market benchmark, as indicated below. Benchmarks for each region are as follows: North America - S&P 500; Latin America - relevant MSCI country index or MSCI Latin America Index; Europe - MSCI Europe; Japan - TOPIX; Asia - relevant MSCI country index. Stock price charts and rating histories for companies discussed in this report are available at www.morganstanley.com/companycharts or from your local investment representative. You may also request this information by writing to Morgan Stanley at 1585 Broadway, (Attention: Equity Research Management), New York, NY, 10036 USA. 75
  • Disclaimer – www.morganstanley.com/techresearch Other Important Disclosures For a discussion, if applicable, of the valuation methods used to determine the price targets included in this summary and the risks related to achieving these targets, please refer to the latest relevant published research on these stocks. Research is available through your sales representative or on Client Link at www.morganstanley.com and other electronic systems. This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The securities discussed in this report may not be suitable for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. 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Information on securities that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities. MSTL may not execute transactions for clients in these securities. To our readers in Hong Kong: Information is distributed in Hong Kong by and on behalf of, and is attributable to, Morgan Stanley Dean Witter Asia Limited as part of its regulated activities in Hong Kong. If you have any queries concerning this publication, please contact our Hong Kong sales representatives. 76
  • Disclaimer – www.morganstanley.com/techresearch This publication is disseminated in Japan by Morgan Stanley Japan Securities Co., Ltd.; in Hong Kong by Morgan Stanley Dean Witter Asia Limited (which accepts responsibility for its contents); in Singapore by Morgan Stanley Dean Witter Asia (Singapore) Pte. (Registration number 199206298Z) and/or Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H), regulated by the Monetary Authority of Singapore, which accepts responsibility for its contents; in Australia by Morgan Stanley Dean Witter Australia Limited A.B.N. 67 003 734 576, holder of Australian financial services licence No. 233742, which accepts responsibility for its contents; in Korea by Morgan Stanley & Co International Limited, Seoul Branch; in India by JM Morgan Stanley Securities Private Limited; in Price Canada by Morgan Stanley Canada Limited, which has approved of, and has Ticker 5/29/07 Rating Industry View agreed to take responsibility for, the contents of this publication in Canada; in Germany by Morgan Stanley Bank AG, Frankfurt am Main, regulated by AAPL $114.35 Overweight In-Line Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin); in Spain by Morgan Stanley, S.V., S.A., a Morgan Stanley group company, which is supervised by the CSCO 25.90 Overweight-V In-Line Spanish Securities Markets Commission (CNMV) and states that this document has been written and distributed in accordance with the rules of conduct applicable to DELL 26.11 Overweight In-Line financial research as established under Spanish regulations; in the United States by EBAY 32.41 Overweight-V Attractive Morgan Stanley & Co. Incorporated and Morgan Stanley DW Inc., which accept responsibility for its contents. Morgan Stanley & Co. International Limited, GOOG 487.11 Overweight-V Attractive authorized and regulated by Financial Services Authority, disseminates in the UK research that it has prepared, and approves solely for the purposes of section 21 of MSFT 30.79 Equal-weight-V Attractive the Financial Services and Markets Act 2000, research which has been prepared by any of its affiliates. Private U.K. investors should obtain the advice of their Morgan YHOO 28.40 Overweight-V Attractive Stanley & Co. International Limited representative about the investments concerned. In Australia, this report, and any access to it, is intended only for quot;wholesale clientsquot; AMZN 69.63 Overweight-V Attractive within the meaning of the Australian Corporations Act. The trademarks and service marks contained herein are the property of their VRSN 27.94 Overweight-V In-Line respective owners. Third-party data providers make no warranties or representations of any kind relating to the accuracy, completeness, or timeliness of the data they TWX 21.44 Overweight Attractive provide and shall not have liability for any damages of any kind relating to such data. The Global Industry Classification Standard (quot;GICSquot;) was developed by and is the exclusive property of MSCI and S&P. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Morgan Stanley. Morgan Stanley research is disseminated and available primarily electronically, and, in some cases, in printed form. Additional information on recommended securities is available on request. © 2007 Morgan Stanley 77