Random Bits: Mobile, Internet & the Cloud

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Random Bits: Mobile, Internet & the Cloud

  1. 1. For Immediate Release May 2012 Random Bits Mobile, Internet & the CloudMay 2012 Volume 5OverviewThe three inter-related platforms of Mobile, the Internet and the Cloud are in various stages ofemergence and maturity while enabling businesses to obtain significant scale at an unprecedented pace.Each requires substantial on-going investment in infrastructure and IT and the trends that they support arethe basis for significant investment in both new and legacy businesses and new business models.The Internet is increasingly described as a mature medium. The data and statistics counter this assertionand continue to demonstrate that the Internet remains a dynamic and evolving market and platform.The Mobile market has clearly matured with substantial penetration gains across the globe whilesimultaneously undergoing a fundamental and dramatic shift in consumer usage. Once largely a voicecommunication medium, the mobile market is incredibly diverse and consumer usage is nowpredominantly internet and data driven. Apple’s introduction of the iPhone in 2007 radically andirreversibly changed the game while the iPad and Android OS have further contributed to a dramatic re-shuffling of the Mobile market.Finally, with the proliferation and ownership of multiple fixed and mobile devices consumers increasinglyexpect access to content, applications and subscriptions anytime, from anywhere, from any network andover any device. This is true at home, on-the-go and in the office and the Cloud is the emerging platformto make this happen.The Internet, Mobile and the Cloud are three dynamic and increasingly inter-related platforms that willcontinue to drive investment and innovation and both shape and satisfy evolving and demandingconsumer behaviors.Life Online is Constantly ChangingThe internet has become fundamental to daily life extraordinarily rapidly. Approximately 80% of the U.S.population has access to the internet up from 44% in 2000. On a global basis 2.3 billion individualsaccess the internet, a 35% penetration rate, up from 361 million or 5% penetration in 2000. It is forecastthat by 2015 approximately 3.1 billion people will have non-mobile internet access, a 40+% penetrationrate. We provide mergers and acquisitions, private capital markets and strategic advisory services to growth companies in digital media, mobile and other industries. Coady Diemar Partners · 1370 Avenues of the Americas · New York, NY 10019 · (212) 901-2600 · www.coadydiemar.com Coady Diemar Partners is a registered broker / dealer with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority (FINRA)
  2. 2. Random Bits: Mobile, Internet & the Cloud Page 2Clearly, growth in internet penetration over the last decade has been phenomenal. The internet is stillrelatively immature and consumer behavior patterns continue to evolve and shift over time. In fact, theweb is much more complex today than a decade ago reflecting, in part, growth in mobile internet activityand the emergence of the Cloud.Social and Entertainment Driving EngagementThe web is transitioning from primarily a functional, information seeking medium to one more oriented tosocial engagement and entertainment. The most significant share shifts over the last year are decliningengagement with the Portals and increasing engagement with social networks as shown in the two chartsfollowing.A number of the key drivers of traditional Portal engagement such as, e-mail, instant messaging andhomepages, have shown declines in the last year. In fact, Instant Messengers experienced a 40% declinein time spent online last year, the largest decline of all. Further, market share of web-based email fellbelow 10% for the first time with the most significant usage declines occurring in the age 12-24demographic. At the same time, mobile email usage for the same demographic experienced double digitgrowth.Social networking continued to gain momentum in 2011. Facebook had 845 million “monthly activeusers” around the world as of December 31, 2011, up 39% over 2010. In the U.S., Facebook nowaccounts for approximately 15% of total time spent online (7 hours in December 2011) and 16% of allpage views. Not surprisingly, Facebook is also the leader in the display advertising market with a 14%share of display ad revenue.The forthcoming IPO of Facebook will focus further attention on the value of social networks whileraising substantial growth and acquisition capital for Facebook. As a matter of strategy, Facebook hasprioritized global expansion of its tightly controlled platform and user engagement relative to near-term We provide mergers and acquisitions, private capital markets and strategic advisory services to growth companies in digital media, mobile and other industries. Coady Diemar Partners · 1370 Avenues of the Americas · New York, NY 10019 · (212) 901-2600 · www.coadydiemar.com Coady Diemar Partners is a registered broker / dealer with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority (FINRA)
  3. 3. Random Bits: Mobile, Internet & the Cloud Page 3financial metrics. Facebook and Apple are alike in this sense. Both want to control as many dimensions ofthe user experience as possible. Both have built substantial “walled gardens” on top of the internet park.“The Web is Dead. Long Live the Internet”Much has already been written about this Wired magazine cover story in August 2010. The debate overthe web’s evolution continues while the mobile revolution becomes more evident.To quote from the Wired magazine article, “One of the most important shifts in the digital world has beenthe move from the wide-open web to semi-closed platforms that use the internet for transport but not thebrowser for display . . . It’s driven primarily by the rise of the iPhone model of mobile computing . . . Andit’s the world that consumers are increasingly choosing, not because they’re rejecting the idea of the Webbut because these dedicated platforms often just work better or fit better into their lives … The fact thatit’s easier to make money on these platforms only cements the trend”.In 2008, Apple launched its iPhone App Store. The mobile app market that year generated revenue ofapproximately $350 million. In 2011 the app market approximated $7.7 billion with forecasted growth to$22.8 billion by 2015. One month ago Apple announced that 25 billion apps had been downloaded and inDecember 2011 Google’s Android market achieved 10 billion downloads.Although time spent online continues to grow, much of this growth is attributable to time spent withmobile applications. As shown below, the average smartphone user now spends more time on mobileapps than the mobile web. Games and social networking account for 74% of consumers’ total app timewith games at just over 50%.Another key trend in the evolution of the Internet is the use of mobile devices to conduct commerce.Currently, 52 % of adult cell phone owners use their devices while in a store to get help with purchasingdecisions and purchases from a mobile device represented approximately 3.9 % of all online purchase in2011, up from 1.9 % nine months earlier. We provide mergers and acquisitions, private capital markets and strategic advisory services to growth companies in digital media, mobile and other industries. Coady Diemar Partners · 1370 Avenues of the Americas · New York, NY 10019 · (212) 901-2600 · www.coadydiemar.com Coady Diemar Partners is a registered broker / dealer with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority (FINRA)
  4. 4. Random Bits: Mobile, Internet & the Cloud Page 4Reports on the death of the web are clearly premature, but there is no denying that the Internet issubstantially more complex and variable resulting from device and app explosion. As HTML5 is widelyadopted consumer and enterprise experience with the mobile web and apps will likely converge as willtime spent on each. In any event, Mobile will play an increasingly important role in the evolution of theInternet and web as it is likely that by 2014 more internet users in the U.S. will access the internet throughmobile devices than through PCs or other wireline devices.The Mobile Digital RevolutionWhile internet availability continues to increase globally, the penetration and use of mobile devices hasabsolutely exploded. Globally, there are 5.9 billion subscriptions (over twice the number of internet users)or 87% penetration. In the U.S. there are approximately 320 mm mobile subscriptions representing apenetration rate of approximately 102%.The Power of Personal and Mobile ComputersMobile devices are increasingly smart and powerful computers with the ability to access more and moreinformation at faster and faster speeds as networks migrate from 2G through 3G to 4G.The era of mobile computing is driving one of the largest shifts in consumer behavior in the last halfcentury and this shift is occurring at a much faster pace than internet access and PC adoption. In fact, thenumber of smartphones activated in the five years after the introduction of the iPhone in 2007 is twotimes the increase in the number of internet users after its first five years.As shown in the following chart, smartphones now represent 50% of the U.S. device market. Source: Nielsen We provide mergers and acquisitions, private capital markets and strategic advisory services to growth companies in digital media, mobile and other industries. Coady Diemar Partners · 1370 Avenues of the Americas · New York, NY 10019 · (212) 901-2600 · www.coadydiemar.com Coady Diemar Partners is a registered broker / dealer with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority (FINRA)
  5. 5. Random Bits: Mobile, Internet & the Cloud Page 5Tablet sales also increased dramatically last year, with 40 million tablets now in use in the U.S. after lessthan two years, significantly outpacing smartphones which took seven years to reach the same level ofadoption.IDC forecasts dramatic growth for both smartphones and tablets as the chart below demonstrates.Smartphone shipments are forecast to increase from nearly 500 million shipped in 2011 to 1 billion in2015 while tablets are forecasted to increase from 63 million to just under 200 million in 2015. A numberof prognosticators think that these tablet estimates are far too low. Both GigaOm Pro and Gartner forecasttablet shipments of approximately 300 million in 2015.Tablets are increasingly becoming the proverbial fourth screen in a heretofore three screen market. Thefour screens (TV, internet, mobile and tablet) accounted for 81% of time spent on media in 2011. TVremains the dominant medium with a 45% share, followed by the Internet with a 26% share and Mobilecomprising a 10% share.According to Nielsen data, 70% of consumers’ time spent with tablets occurs at home. Forrester hasrecently reported that 85% of U.S. tablet owners use their devices while in front of the TV while 57% ofsmartphone and tablet owners checked email, 44% visited a social network and 19% searched for productinformation while watching TV. The rapid adoption of tablets in the U.S. and their usage in front of theTV is adding fuel to emerging TV Everywhere, social TV and tablet-TV commerce strategies. We provide mergers and acquisitions, private capital markets and strategic advisory services to growth companies in digital media, mobile and other industries. Coady Diemar Partners · 1370 Avenues of the Americas · New York, NY 10019 · (212) 901-2600 · www.coadydiemar.com Coady Diemar Partners is a registered broker / dealer with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority (FINRA)
  6. 6. Random Bits: Mobile, Internet & the Cloud Page 6Strong Growth of Mobile Data TrafficNot surprisingly, traffic on the mobile networks reflects the device as computer phenomena and growth inthe consumption of data or web services. The following chart demonstrates that data traffic surpassedvoice traffic commencing in Q4 2009 and now represents two and a half times voice traffic.Source: Akamai – The State of the Internet, 3rd Quarter 2011Currently, mobile and connected devices account for only approximately 8% of the internet traffic in theU.S. With the proliferation of smartphones and tablets and the roll-out of faster wireless networks, Ciscoestimates a 78% CAGR in mobile data traffic through 2016, reflecting continued smartphone adoption. We provide mergers and acquisitions, private capital markets and strategic advisory services to growth companies in digital media, mobile and other industries. Coady Diemar Partners · 1370 Avenues of the Americas · New York, NY 10019 · (212) 901-2600 · www.coadydiemar.com Coady Diemar Partners is a registered broker / dealer with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority (FINRA)
  7. 7. Random Bits: Mobile, Internet & the Cloud Page 7In terms of use, mobile video will generate the largest share of this growth in part because mobile videocontent has much higher bit rates than other mobile content types. Cisco estimates that mobile video willgrow at a CAGR of 90% between 2011 and 2016, the highest growth rate of any mobile applicationcategory forecasted generating over 70% of mobile data traffic by 2016.A continued proliferation of mobile device form factors, increases in computing power, longer batterylife, improved screen resolution, and other quality enhancements, will drive mobile device penetrationand usage, expectations and behavior. Consumers already expect access to their content, applications andsubscriptions anytime, from anywhere, over any device and from any network. As both fixed and mobiledevices and multiple device ownership proliferates consumer expectations for ubiquitous access tocontent will escalate. The Cloud is increasingly the platform that provides the foundation on which thisseemless interactivity will occur.In fact, cloud applications globally will account for 71 % of total mobile data traffic in 2016, compared to45 % at the end of 2011. Mobile cloud traffic is projected to grow 28-fold from 2011 to 2016, acompound annual growth rate of 95 %.The Cloud and “Consumerization” of the EnterpriseThe term “the Cloud” has become popularized and is most often used as a metaphor for the Internet in thesense that just as information is accessed via the Internet, it can be stored “there” as well. The Cloudinfrastructure enables the delivery of computing, software applications and information as a service wherethe computing infrastructure is shared and located remotely.The availability of high capacity networks (both wired and wireless) and the declining cost of computingand storage devices have provided the economic foundation for cloud computing. At the same time, We provide mergers and acquisitions, private capital markets and strategic advisory services to growth companies in digital media, mobile and other industries. Coady Diemar Partners · 1370 Avenues of the Americas · New York, NY 10019 · (212) 901-2600 · www.coadydiemar.com Coady Diemar Partners is a registered broker / dealer with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority (FINRA)
  8. 8. Random Bits: Mobile, Internet & the Cloud Page 8consumer behavior around internet use, mobility and multiple device ownership and usage are drivingrapid adoption of the Cloud.As noted earlier, one of the important trends in consumer technology and behavior is the proliferation ofaffordable and powerful consumer devices. The chart below shows the ownership penetration ofconsumer “gadgets” in the U.S. since 2006. In addition to these devices, 290 million Americans own atleast one TV, 253 million own a DVD player and 129 million own a DVR. It is worth noting that all ofthe mobile devices shown below show substantial increases in penetration while the fixed devices haveeither declined (desktop computers) or stabilized (game consoles).Currently, 88% of American adults have a mobile phone, 57% have a laptop, 19% own an e-book reader,and 19% own a tablet while 13% of U.S. adults own a laptop, smartphone and tablet. Approximately sixin 10 adults (63%) go online wirelessly with one of those devices.As the chart on the following page demonstrates, Cisco estimates that by 2015 nearly 70% of internetusers will use more than five network-connected devices, up from 44% at the end of 2011. We provide mergers and acquisitions, private capital markets and strategic advisory services to growth companies in digital media, mobile and other industries. Coady Diemar Partners · 1370 Avenues of the Americas · New York, NY 10019 · (212) 901-2600 · www.coadydiemar.com Coady Diemar Partners is a registered broker / dealer with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority (FINRA)
  9. 9. Random Bits: Mobile, Internet & the Cloud Page 9 2010 2011 2012 2013 2014 2015 Source: Cisco Global Cloud Index: Forecast and Methodology, 2010–2015As relates to mobile users, 25% will have more than one mobile-connected device and 9% will have threeor more by 2015. Mobile devices have memory and speed limitations which Cloud applications andservices mitigate. For example, a consumer with an 8 GB smartphone who streams video and music willconsume more content over the course of two years than can be stored on the device itself. Similarly, asmartphone user adopting Netflix, Pandora, and Facebook will generate more than twice the volume oftraffic generated by a smartphone user adopting only email and web applications.Consumer behavior trends of mobility, social network usage and ownership of multiple devices are alsoexerting pressure on businesses to make enterprise applications available in similar ways. A significantproportion of the mobile devices used in the business arena today are personal devices, sourced by theemployee rather than provided by the employer company. Research firm Forrester forecasts that 200million of the 350 million employees who will use mobile devices for work in 2016 will use their owndevices rather than devices provided by their employers while the average business will need to supporttwice as many end-user devices in 2015 compared to the end of 2010. This ‘bring your own device’culture is increasingly leading to the embrace by corporate IT departments of the consumerization of theenterprise, further driving Cloud adoption.According to Forrester, the global Cloud computing market will grow from $40.7 billion in 2011 to morethan $241 billion in 2020. A Forrester report published in mid-2011 provides forecasts for the three corelayers of cloud computing – the public cloud, the virtual private cloud, and the private cloud. While eachsegment has its own key drivers, rapid growth is forecast across all three segments. The Cloud is a keyfacilitating platform for continued innovation of the Internet, the web and Mobile.Looking AheadThe Internet, Mobile and the Cloud are rapidly and profoundly changing the way that we consumecontent and conduct commerce. The ubiquity of wireless connectivity combined with increasing We provide mergers and acquisitions, private capital markets and strategic advisory services to growth companies in digital media, mobile and other industries. Coady Diemar Partners · 1370 Avenues of the Americas · New York, NY 10019 · (212) 901-2600 · www.coadydiemar.com Coady Diemar Partners is a registered broker / dealer with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority (FINRA)
  10. 10. Random Bits: Mobile, Internet & the Cloud Page 10functionality and speed of connected devices and networks will drive continued growth in the creationand consumption of media, content and products enabled by and across these platforms. The evolvingMobile market will result in more rapid internet penetration globally while the functionality of mobiledevices will continue to increase inherently and through the Cloud.Facebook has built a business with 850 million global users in 10 years. Online social networking andmicroblogging service Twitter launched six years ago and now reports 140 million active users generatingover 340 million tweets daily. Five years after its founding, social gaming company Zynga has 240million users across 175 countries. Instagram, founded less than two years ago offering a free mobilephoto sharing program, ramped to 30 million registered users and was acquired by Facebook recently for$1.0 billion in cash and stock. These and other companies have successfully leveraged the infrastructureand services of the Internet, Mobile and the Cloud to achieve unheard of reach and scale in unbelievablyshort timeframes.The Digital Media & Commerce markets are growing and evolving rapidly fueled by investment in newtechnology and fundamental shifts in consumer behavior. We have written widely on these topics. Pleaseaccess all of our thought pieces via the Resources tab on our website at www.coadydiemar.com. Colin Knudsen (212) 901-2620 colin@coadydiemar.comAbout Coady Diemar PartnersCoady Diemar is a boutique investment banking firm providing mergers and acquisitions, private capitalmarkets and strategic advisory services to growth companies in digital media, mobile and other industries.We offer a breadth of transaction experience and expertise, industry knowledge and institutionalrelationships and provide clients creative solutions and unparalleled access to ideas and capital. We areacutely sensitive to the specific and unique requirements of each client and opportunity.Visit our website www.coadydiemar.com to learn more about Coady Diemar Partners and to downloadpresentations on digital and traditional media and the M & A and private capital markets. Contact ColinKnudsen at colin@coadydiemar.com or Chris Ensley at chrise@coadydiemar.com for additionalinformation or to arrange a meeting.If you would like to be added to our email distribution list for periodic industry and market commentary,please contact Ryan Williams at ryan@coadydiemar.com. Independent Advice. Seamless Execution.This announcement is neither an offer to sell nor a solicitation to buy securities. This announcement appears as amatter of record only. Copyright (C) 2011 Coady Diemar Partners, LLC. All rights reserved. We provide mergers and acquisitions, private capital markets and strategic advisory services to growth companies in digital media, mobile and other industries. Coady Diemar Partners · 1370 Avenues of the Americas · New York, NY 10019 · (212) 901-2600 · www.coadydiemar.com Coady Diemar Partners is a registered broker / dealer with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority (FINRA)

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