INTERNET TRENDS
D11 CONFERENCE
5 / 29 / 2013
Mary Meeker / Liang Wu
Outline
• Key Internet Trends – Growth Continues
• Re-Imagination – Being Re-Imagined & Uploaded
• Mobile – Aggressive Mom...
KEY INTERNET TRENDS –
GROWTH CONTINUES

3
2.4B Global Internet Users in 2012* –
8% Y/Y Growth*, Driven by Emerging Markets
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
...
Material Upside for Mobile Ad Spend vs. Mobile Usage
% of Time Spent in Media vs. % of Advertising Spending, USA 2012

% o...
80% of Top Ten Global Internet Properties ‘Made in USA’…
81% of Users Outside America
Top 10 Internet Properties by Global...
Global Smartphone Operating Systems ‘Made in USA’…
88% Share from 5% Six Years Ago
Global Smartphone Operating System Mark...
RE-IMAGINATION BEING RE-IMAGINED & UPLOADED @
AN ACCELERATING PACE

8
Long Ago, People Danced @ Concerts,
Now They Video / Click / Share / Tweet…

1990s

2010s

Source: Left image – 123RF.com....
Today = You Can Run, But You Can’t Hide
1993
On the Internet, nobody knows you’re a dog. 

2013
On the Internet, everybody...
World’s Content is Increasingly Findable + Shared + Tagged Digital Info Created + Shared up 9x in Five Years
Amount of glo...
Media + Data Uploading + Sharing from Mobiles =
Ramping Fast & Still Early Stage

Explosive
Growth, But
Still Early
Stage
...
Photos…

13
Photos = 500MM+ Uploaded & Shared Per Day,
Growth Accelerating, on Trend to Rise 2x Y/Y…
Daily Number of Photos Uploaded &...
Short-Term Sharing Exploding – Snapchat Growth From
Content That Disappears, Up >2x in 2 Months
Snapchat Daily Number of ‘...
Video…

16
Video = 100 Hours Per Minute Uploaded to YouTube,
Up from ~Nada Six Years Ago
YouTube Hours of Video Uploaded per Minute, ...
Video (Short-Form + Persistent) = Ramping Fast
Dropcam ($149 ASP)

Twitter Vine
6 Second Videos
2x M/M Growth

More Video
...
Opt-In Video – ‘Big Brother’ Meets Big Mother?
30% of Dropcam viewers used Talk Back to interact over past 2 weeks.
When I...
Sound…

20
Sound =
Emerging as Voice Comes Back to Phones…

SoundCloud

Tencent WeChat

11 Hours of Sound
Uploaded per Minute

400MM+...
Data…

22
Win-Win-Win Sharing = Growing Quickly –
You Help Me, I Help You, We Help Others
Waze
•
•

48MM Users, +2x Y/Y
1B+ Miles Dr...
Fitness Data on Mobile + Wearable Devices =
~2x Month-on-Month Growth
MyFitnessPal - # of API Calls*, 10/12 – 4/13
60

# o...
Health Outcomes –
Behavior (at 40%) is Biggest Driver of Premature Death
USA Proportional Contribution to Premature Death,...
Sharing…

26
Social Media – Facebook Leads, YouTube + Twitter + Google+
+ Pinterest + Instagram + Tumblr Rising Fast
Which of the Follo...
Americans = Sharing Underachievers…
% of Respondents Indicating They Share ‘Everything’ or ‘Most Things’ Online, 5/13
70%
...
Unprecedented Transparency in
Time of Tremendous Global Uncertainty…
Ramp in Always-On Connected Global Citizens
•

1.1B+ ...
MOBILE –
AGGRESSIVE MOMENTUM

30
Smartphones = Extraordinary Attributes Connected + Excited + Curious / Interested + Productive
USA Smartphone User Relativ...
Mobile Traffic as % of Global Internet Traffic =
Growing 1.5x per Year & Likely to Maintain Trajectory or Accelerate
Globa...
China –
Mobile Internet Access Surpassed PC, Q2:12
% of Chinese Internet Users Accessing the Web
via Desktop PCs vs. via M...
S. Korea –
Mobile Search Queries Surpassed PC, Q4:12

NHN Search Query (Indexed)

NHN Korea Search Query Trend (Indexed), ...
Groupon N. America –
45% of Transactions on Mobile, Up from <15% Two Years Ago
% of Groupon North America Transactions Com...
Facebook – Mobile Has Helped Drive Users & Revenue,
Q1 Growth = Revenue +43% Y/Y, Mobile Users +54% (to 68%), ARPU + 15%

...
Facebook =
Rising Mobile ARPU Has Offset Declining Desktop ARPU, So Far
Facebook Annualized Ad ARPU, Desktop vs. Mobile, 3...
COMPUTING –
YET ANOTHER PLATFORM CHANGE…

38
We Just Began to Figure Out
Smartphones…

39
Smartphone Subscriber Growth = Remains Rapid
1.5B Subscribers, 31% Growth, 21% Penetration in 2013E

Rank Country
1
2
3
4
...
Smartphone Usage =
Still Early Stage With Tremendous (3-4x) Upside
Global Smartphone vs. Mobile Phone Users, 2013E
6,000

...
Apple Growing Rapidly (1.4x Share Gain)…
Samsung Up 7x Over ~2 Years
Global Smartphone Unit Market Share
Q4:12
Q1:10
22%
1...
…Then Along
Came Tablets…

43
Tablet Growth =
More Rapid than Smartphones, iPad = ~3x iPhone Growth
First 12 Quarters Cumulative Unit Shipments, iPhone ...
Tablet Shipments =
Surpassed Desktop PCs & Notebooks in Q4:12, < 3 Years from Intro
Global PC (Desktop / Notebook) and Tab...
Demand for Large-Screen Computing Devices is Robust, But
Mix Favors Tablets, Not Notebooks & Desktops
Global PC (Desktop /...
Top Vendors Largely Same in Desktop & Notebook Cycles –
Very Different in Tablet (& Smartphone) Cycles
Desktop PC
Market S...
An Unusual Pattern…
In Two Computing Cycles…
1) Smartphones
2) Tablets
…Entering a Third Cycle…
3) Wearables / Drivables /...
Technology Cycles – Still Early Cycle on Smartphones + Tablets,
Now Wearables Coming on Strong, Faster than Typical 10-Yea...
New Major Technology Cycles = Often Support 10x More
Users & Devices, Driven by Lower Price + Improved Functionality

Devi...
…Wearables
(with Sensors)…

51
Smartphone Users Reach to Phone ~150x a Day…
Could be Hands-Free with Wearables
# of Times Typical User Checks Phone per D...
Sensor-Enabled Wearable Attributes
Hands-Free

•
•
•

3rd party apps
API partners
Accessories

•

Less distracting
when re...
Some People Laugh at Wearables…
And ‘SNL’ Does Rule… ;)

Source: Saturday Night Live, 5/13.

54
…Some People Laughed at PC & Internet

There is no reason
anyone would want a
computer in their home.
- Ken Olsen
(Founder...
…Drivables…

56
A Car or a Computer on Four Wheels?

57
Pandora Usage – Car / TV / Appliance Usage (~13% Now) to
Likely Surpass PC (21%) Usage in 2 Years
Share of Pandora Quarter...
…Flyables…

59
It’s a Bird, It’s a Plane, It’s a Mini-Drone…
Use Cases of Low-Cost Drones
Agriculture
GPS-Enabled Photos Help
Pinpoint Po...
Scannables –
Codes / Tags + Cameras / Sensors

61
QR Codes =
Scan & Be Scanned to Get Stuff…
SCAN

BE SCANNED

Quick Scan w/ Smartphone
For Info on Nutrition / Product /
Pr...
China - Follow UK Embassy Weibo Account by
Scanning QR Code Outside Embassy in Beijing

63
QR Code Scanning = Up 4x Y/Y in China,
Offline Businesses Driving Online Connections
China Monthly QR Codes Scanned by Use...
Tencent WeChat (400MM+ Users, +4X Y/Y, China) –
Mobile Communication + Local Commerce via QR Codes
Consumers…

Businesses…...
LOTS TO LEARN FROM CHINA –
VOLUME + INNOVATION

66
China –
iOS + Android Users Surpassed USA, Q1:13
Active iOS and Android Devices, USA vs. China (MM),
1/11 – 2/13

Active i...
China Leads USA in Mobile + Internet Time Spent vs. TV =
China @ 55% vs. 38% in USA
% of Time Spent in Media, USA vs. Chin...
Alibaba – Gross Merchandise Volume Surpassed
Amazon.com + eBay, Q4:12
Gross Merchandise Value, 1995 – 2012
Amazon.com + eB...
JD.com (360buy) – Same Day Delivery with Real-Time Item
Tracking on Map / Mobile…Often on Bicycle
Free* Same-Day Delivery ...
Taxi Apps* – China – Push to Talk to Driver / Bid Extra to
Increase Chance of Getting Car on Your Terms
Push to Talk
Say c...
Sina Weibo – 530MM+ Users (+2x Y/Y) Help Push For Social
Change…$100MM Revenue Run Rate, Up From $0 Y/Y
Notable Events / M...
GDP =
China Share Gains vs. Europe & USA are Epic
Percent of Global GDP, 1820 – 2012,
USA vs. Europe vs. China vs. India v...
MOST ENABLED ENTREPRENEURS EVER?
ZERO -> 1 MILLION USERS
IN RECORD TIME(S)

74
Is This Generation Different?
Selective Formative Events of Past 20 Years
September, 2001 USA Terrorist Attacks – Destabil...
Turning Passion Into Businesses…On an Epic Internet Palette
Sports
David Finocchio /
BleacherReport

Art / Creativity
Geor...
SO, YOU WANT TO BE A PUBLIC
COMPANY?

77
Internet IPO Standout – LinkedIn…
Registered Users = 218MM in Q1, +35% Y/Y; High Gross Margins (87%)

250

LinkedIn Regist...
…Internet IPO Standout – LinkedIn
Averaged 7% Revenue / 83% EBITDA Upside Since IPO, Shares +305%
LinkedIn Share Daily Clo...
Financial Dynamics of Internet Leaders
eCommerce
Amazon
Years Since Founding

Communication

eBay

Facebook

Tencent

Sear...
Market Value = Google + Amazon + eBay + Tencent + Priceline + Yahoo! +
Yahoo! Japan + Salesforce.com + LinkedIn Gain Y/Y… ...
HIGH-SKILLED IMMIGRATION –
PERSPECTIVE

82
Immigration in America &
The Growing Shortage of
High-Skilled Workers
Report / Presentation Can Be Found at www.kpcb.com/i...
Why Did We Publish a Report on High-Skilled Immigration?
• America is the global leader in the technology industry.
• Immi...
99% Of Americans Are Immigrants Or Descendants Of Immigrants
USA Population by Ancestry, 2010 Census

Immigrants or
Descen...
High-Skilled Immigrants Are Only 1% Of Total U.S. Population

U.S. Population at a Glance, U.S. Born vs. Immigrants
by Typ...
60% of Top 25 Tech Companies Founded By 1st & 2nd Generation
Americans = 1.3MM Employees, 2012
Founders / Co-Founders of T...
Computer Science Job Opening Forecast =
2.4x # of Computer Science Graduates
Projected Average Annual # of Graduates w/ Ba...
USA Sending More Qualified Foreign Students Home Post Graduation 3.5x Rise in Student & Employment Visa Issuance Gap Over ...
Startups & Big Tech Companies Can’t Hire Enough Engineers

Street View From Silicon Valley

Five High-Tech Companies
Alone...
Read More @ kpcb.com/insights

91
APPENDIX

92
Traditional Industries
Being Re-Imagined

93
U.S. Postal Service Mail Volume Peaked in 2006 Owing to Email Rise…
Profitability Plummeted
Pieces of Mail Delivered (MM) ...
Relative Impact of Technology on Large Organizations =
#2 Concern & Rising Rapidly
% of CEOs Who Thought The Following Ext...
Financial Services - Context
•

600MM+ credit cards in use in USA, average
American carries 3-4 credit cards in addition t...
Emerging Financial Services Metrics
Company

Gross Volume

Y/Y Growth

# Users

$15B+
Gross Payment Volume
Processed to Da...
Education - Context…
• $1.1T+ annual spending on education in USA,
$460B+ = post-secondary, cost of going to college
up +2...
Online Education Growing Rapidly =
32% of Students Taking at Least One Online Course, 2011
US Online Enrollment in Degree-...
Online Education =
Quickly Becoming More Accepted
77% of academic leaders at over 2,800 US colleges perceive online educat...
Education Being Democratized =
Fast Global MOOC (Massively Open Online Course) User Growth
iTunes U
Open University Downlo...
Healthcare – Context…
• $2.6T+ annual spend on healthcare in USA, 18% of
GDP in 2010, up from 5% in 1960, and 2x OECD
aver...
Right Story, Great Reporting…Perhaps, Right Time

When we debate health
care policy, we seem to
jump right to the issue of...
Re-Imagination is
Alive & Well

104
Re-Imagination of Basic Business Process…
Building / Funding
KickStarter

Logistics
JD.com (360buy)

Manufacturing
MakerBo...
Re-Imagination of Asset-Heavy Products / Services…
Music

Video

Textbooks

(Spotify)

(Netflix)

(Chegg)

Pay for Access ...
Re-Imagination of R&D…
Minted
•
•

85K designs submitted
4MM monthly visitors

Quirky
•
•

87K designs submitted
360K regi...
Re-Imagination of “Learning Tools” =
Twitter / YouTube / Google Docs / Google / WordPress
C4LPT Ranking of Top Learning To...
Re-Imagination of Computing Operating Systems iOS + Android = 60% Share vs. 35% for Windows
Global Market Share of Persona...
USA, Inc.

Report / Presentation Can Be Found at www.kpcb.com/insights

110
Consumer Confidence =
At Five-Year Highs, Though Still Well Below 30-Year Average
The Conference Board Consumer Confidence...
Consumers Less Concerned About Employment,
More Concerned About Rising Prices
Percent of USA Respondents Citing Their One ...
Stock Markets =
Often Leading Indicators of Economic Activity
Stock / Commodity Markets Performance (% Change From 1/93), ...
USA, Inc. – Biggest Gap Between Revenue & Expenses
in USA History Outside of World War I & II
USA Inc. Revenue & Expenses ...
Where Your Tax Dollars Go –
Entitlements = 59%
% of USA Federal Government Spending, 2012
Entitlements

Defense

Other*

5...
USA Social Security + Medicare + Medicaid + Interest Payments Should Exceed
Federal Revenue Within 12 Years, 35 Years Soon...
Disclosure
The information offered in this presentation speaks to industry trends in general,
and should not be construed ...
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  1. 1. INTERNET TRENDS D11 CONFERENCE 5 / 29 / 2013 Mary Meeker / Liang Wu
  2. 2. Outline • Key Internet Trends – Growth Continues • Re-Imagination – Being Re-Imagined & Uploaded • Mobile – Aggressive Momentum • Computing – Yet Another Platform Change… • Lots to Learn from China – Volume + Innovation • Most Enabled Entrepreneurs Ever? • So, You Want to Be a Public Company? • High-Skilled Immigration – Perspective • Appendix – Re-Imagination is Alive & Well – Traditional Industries Being Re-Imagined – USA, Inc. 2
  3. 3. KEY INTERNET TRENDS – GROWTH CONTINUES 3
  4. 4. 2.4B Global Internet Users in 2012* – 8% Y/Y Growth*, Driven by Emerging Markets Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Country China India Indonesia Iran Russia Nigeria Philippines Brazil Mexico USA Argentina Egypt Colombia Turkey Vietnam Top 15 World 2008-2012 Internet User Adds (MMs) 264 88 39 35 33 31 28 27 19 18 17 17 14 13 12 654 902 2012 Internet Users (MMs) 564 137 55 42 70 48 34 88 42 244 28 30 25 35 31 1,473 2,406 Y/Y Growth 10% 26 58 205 6 15 32 6 9 3 57 11 39 17 7 15% 8% Population Penetration 42% 11 23 55 49 30 35 45 37 78 68 38 54 47 35 34% 34% Note: *All data (except China) as of 6/12, 2.4B global Internet users and 8% Y/Y growth rate based on the latest available data. China Internet user data as of 12/12, per CNNIC. Source: United Nations / International Telecommunications Union, internetworldstats.com. 4
  5. 5. Material Upside for Mobile Ad Spend vs. Mobile Usage % of Time Spent in Media vs. % of Advertising Spending, USA 2012 % of Total Media Consumption Time or Advertising Spending Time Spent Ad Spend 50% Internet Ad 40% 42% 43% Mobile Ad = $37B* = $4B* 30% ~$20B+ 26% 20% 23% 14% 10% Opportunity in USA 22% 12% 10% 3% 6% 0% Print Radio TV Internet Mobile Note: *Internet advertising reached $37B in USA in 2012 per IAB, Mobile advertising reached $4B per eMarketer. Print includes newspaper and magazine. $20B opportunity calculated assuming Internet and Mobile ad spend share equal their respective time spent share. Source: Time spent and ad spend share data based on eMarketer (adjusted to exclude outdoors / classified media spend), 12/12. 5
  6. 6. 80% of Top Ten Global Internet Properties ‘Made in USA’… 81% of Users Outside America Top 10 Internet Properties by Global Monthly Unique Visitors, 2/13 Google Microsoft Facebook Yahoo! Wikipedia Amazon.com Apple USA Users International Users Glam Media Tencent Baidu.com 0 200 400 600 800 Monthly Unique Visitors (MMs) 1,000 1,200 Source: comScore Global, 2/13. 6
  7. 7. Global Smartphone Operating Systems ‘Made in USA’… 88% Share from 5% Six Years Ago Global Smartphone Operating System Market Share (by Units Shipped), 2005 vs. 2012 Market Share of Smartphone OS 100% 80% Other OS iOS 60% Android Windows Phone 40% BlackBerry OS Linux Nokia Symbian 20% 0% 2005 2012 Source: 2005 data per Gartner, 2012 data per IDC. 7
  8. 8. RE-IMAGINATION BEING RE-IMAGINED & UPLOADED @ AN ACCELERATING PACE 8
  9. 9. Long Ago, People Danced @ Concerts, Now They Video / Click / Share / Tweet… 1990s 2010s Source: Left image – 123RF.com. Right image – amadarose.co.uk. 9
  10. 10. Today = You Can Run, But You Can’t Hide 1993 On the Internet, nobody knows you’re a dog.  2013 On the Internet, everybody knows you’re a dog.  Source: Quote – Joe Louis (American heavyweight boxer), 1946. Left image – Peter Steiner, cartoonbank.com, The New Yorker, 1993. Right image – Tumblr user cachorro no computador. 10
  11. 11. World’s Content is Increasingly Findable + Shared + Tagged Digital Info Created + Shared up 9x in Five Years Amount of global digital information created & shared – from documents to pictures to tweets – grew 9x in five years to nearly 2 zettabytes* in 2011, per IDC. Digital Information Created & Shared (zettabytes) Global Digital Information Created & Shared, 2005 – 2015E 8 6 4 2 0 2005 2007 2009 2011 2013E 2015E Note: * 1 zettabyte = 1 trillion gigabytes. Source: IDC report “Extracting Value from Chaos” 6/11. 11
  12. 12. Media + Data Uploading + Sharing from Mobiles = Ramping Fast & Still Early Stage Explosive Growth, But Still Early Stage Ramping Very Fast Emerging Emerging Source: Far right Illustration – Eric Prommelt. 12
  13. 13. Photos… 13
  14. 14. Photos = 500MM+ Uploaded & Shared Per Day, Growth Accelerating, on Trend to Rise 2x Y/Y… Daily Number of Photos Uploaded & Shared on Select Platforms, 2005-2013YTD # of Photos Uploaded & Shared per Day (MM) 600 500 Flickr 400 Snapchat Instagram 300 Facebook 200 100 0 2005 2006 2007 2008 2009 2010 2011 2012 2013YTD Source: KPCB estimates based on publicly disclosed company data. 14
  15. 15. Short-Term Sharing Exploding – Snapchat Growth From Content That Disappears, Up >2x in 2 Months Snapchat Daily Number of ‘Snaps’ 5/12 – 4/13 Choose How Long Your ‘Snap’ Lives 160 # of Photos Shared per Day (MM) 140 120 100 80 60 40 20 0 5/12 10/12 12/12 2/13 3/13 4/13 Source: Snapchat. 15
  16. 16. Video… 16
  17. 17. Video = 100 Hours Per Minute Uploaded to YouTube, Up from ~Nada Six Years Ago YouTube Hours of Video Uploaded per Minute, 6/07 – 5/13 Hours of Video Uploaded per Minute 120 100 80 60 40 20 0 6/07 1/09 5/09 3/10 11/10 5/11 5/12 5/13 Source: YouTube. 17
  18. 18. Video (Short-Form + Persistent) = Ramping Fast Dropcam ($149 ASP) Twitter Vine 6 Second Videos 2x M/M Growth More Video Uploaded per Minute Than YouTube Vine iOS App Monthly Active Users (MAUs) as % of Total USA iPhone MAUs, 1/13-4/13 % Share of USA iPhone Monthly Active Users 8% 6% 4% 2% 0% 1/13 2/13 3/13 4/13 Source: Onavo, Dropcam. 18
  19. 19. Opt-In Video – ‘Big Brother’ Meets Big Mother? 30% of Dropcam viewers used Talk Back to interact over past 2 weeks. When I am on the road, I still join my husband in singing bedtime lullabies using Dropcam, a Wi-Fi video monitoring camera that streams to my phone and computer. – Randi Zuckerberg Parents Can See & Talk With Children While Away From Home Source: Dropcam,5/13. Mashable, 4/13 19
  20. 20. Sound… 20
  21. 21. Sound = Emerging as Voice Comes Back to Phones… SoundCloud Tencent WeChat 11 Hours of Sound Uploaded per Minute 400MM+ Users, 4x Y/Y Source: SoundCloud, Tencent. 21
  22. 22. Data… 22
  23. 23. Win-Win-Win Sharing = Growing Quickly – You Help Me, I Help You, We Help Others Waze • • 48MM Users, +2x Y/Y 1B+ Miles Driven per Month w/ Waze Open Jawbone UP Per Day… • Billions of Steps • 700K+ Hours of Sleep • 5x App Interactions per User Yelp • • 102MM Users, +43% Y/Y 39MM User-Generated Reviews, +42% Y/Y Source: Company data. 23
  24. 24. Fitness Data on Mobile + Wearable Devices = ~2x Month-on-Month Growth MyFitnessPal - # of API Calls*, 10/12 – 4/13 60 # of API Calls (MM) 50 40 30 20 10 0 10/12 11/12 12/12 1/13 2/13 3/13 4/13 Note: *API calls are data request from fitness devices (such as Jawbone UP) and GPS-enabled activity tracking apps (such as Endomondo / Runtastic) that partner with MyFitnessPal. Source: MyFitnessPal. 24
  25. 25. Health Outcomes – Behavior (at 40%) is Biggest Driver of Premature Death USA Proportional Contribution to Premature Death, 2007 10% 5% 40% 15% 30% Behavioral Patterns* Social Circumstances Health Care Genetic Composition Environmental Exposure *Smoking: 44%, Obesity & Inactivity 37%, Alcohol 9%, Other 10%. Source: “We Can Do Better — Improving the Health of the American People” - The New England Journal of Medicine, 2007. 25
  26. 26. Sharing… 26
  27. 27. Social Media – Facebook Leads, YouTube + Twitter + Google+ + Pinterest + Instagram + Tumblr Rising Fast Which of the Following Social Media Do You Use? Facebook YouTube Twitter Google+ LinkedIn Pinterest MySpace Instagram 2012 2011 Tumblr Foursquare 0% 20% 40% 60% 80% 100% Source: Frank N. Magid Associates, “Facebook Fatigue - Fact or Fiction?”, March 2013. Based on a study of 2K social media users aged 12-64 who were asked “Which of the Following Social Media Do You Use?” 2011 Pinterest and Instagram data from 9/12 / 4/12. 27
  28. 28. Americans = Sharing Underachievers… % of Respondents Indicating They Share ‘Everything’ or ‘Most Things’ Online, 5/13 70% 60% 50% 40% 30% 20% World Average = 24% 15% 10% 0% Note: Survey question is ‘describe how much you share online (including status updates, feelings, photos, videos, links, etc.)’ Source: Ipsos Open Thinking Exchange, via Marketingcharts.com. 28
  29. 29. Unprecedented Transparency in Time of Tremendous Global Uncertainty… Ramp in Always-On Connected Global Citizens • 1.1B+ global active Facebook users…68% on mobiles…60% log in daily…with average 200+ friends… 350MM photos uploaded daily…* • It’s hard to hide - ‘truth’ can be a photo or video / click–send away. • ‘Clean, well-lighted place to do business?’ ‘People are basically good?’ • Perhaps the world is on cusp of being safer than ever? • There are lots of sacrifices. This is new terrain. • Only time will tell how all this plays out… * Source: Facebook, 5/13. 29
  30. 30. MOBILE – AGGRESSIVE MOMENTUM 30
  31. 31. Smartphones = Extraordinary Attributes Connected + Excited + Curious / Interested + Productive USA Smartphone User Relative Sentiment Index (10 = Strongest, 0 = Weakest), 3/13 When Asked How Social and Communication Activities on Smartphones Made You Feel Relative Sentiment Index (10 = Strongest, 0 = Weakest) 8 6 4 2 0 Source: IDC, 3/13. Facebook-sponsored research asked smartphone owners how an array of social and communication activities on their phones made them feel. Most owners use ~7.4 social and communications apps on their phones. Responses are indexed above. 31
  32. 32. Mobile Traffic as % of Global Internet Traffic = Growing 1.5x per Year & Likely to Maintain Trajectory or Accelerate Global Mobile Traffic as % of Total Internet Traffic, 12/08 – 5/13 (with Trendline Projection to 5/15E) 30% Trendline % of Internet Traffic 25% 15% in 5/13 20% 10% in 5/12 15% 10% 0.9% in 5/09 2.4% in 5/10 6% in 5/11 5% 0% 12/08 12/09 12/10 12/11 12/12 12/13E 12/14E Source: StatCounter Global Stats, 5/13. Note that PC-based Internet data bolstered by streaming. 32
  33. 33. China – Mobile Internet Access Surpassed PC, Q2:12 % of Chinese Internet Users Accessing the Web via Desktop PCs vs. via Mobile Phones, 6/07 – 12/12 % of Total Internet Users in China 100% 96% 75% 80% via Desktop PC 71% 60% via Mobile Phone 40% 28% 20% 0% 6/07 12/07 6/08 12/08 6/09 12/09 6/10 12/10 6/11 12/11 6/12 12/12 Source: CNNIC, 1/13. 33
  34. 34. S. Korea – Mobile Search Queries Surpassed PC, Q4:12 NHN Search Query (Indexed) NHN Korea Search Query Trend (Indexed), PC vs. Mobile, 1/11 – 3/13 PC Query Mobile Query 1/11 3/11 5/11 7/11 9/11 11/11 1/12 3/12 5/12 7/12 9/12 11/12 1/13 Source: NHN Corporate Presentation, as of 5/13. 3/13 34
  35. 35. Groupon N. America – 45% of Transactions on Mobile, Up from <15% Two Years Ago % of Groupon North America Transactions Completed on Mobile, 1/11 – 3/13 Groupon North America Transactions Completed on Mobile (%) 50% 45% 40% 30% 20% 10% 14% 0% 1/11 4/11 7/11 10/11 1/12 4/12 7/12 10/12 1/13 Source: Groupon, as of 3/13. 35
  36. 36. Facebook – Mobile Has Helped Drive Users & Revenue, Q1 Growth = Revenue +43% Y/Y, Mobile Users +54% (to 68%), ARPU + 15% Q2:11 Q3:11 Q4:11 Q1:12 Q2:12 Q3:12 $776 $798 $943 $872 $992 $1,086 $1,329 $1,245 83% 77% 44% 37% 28% 36% 41% 43% -- -- -- -- -- 14% 23% 30% 325 376 432 488 543 604 680 751 110% 92% 76% 69% 67% 61% 57% 54% 44% 47% 51% 54% 57% 60% 64% 68% Annualized Ad ARPU ($) $4.37 $4.15 $4.59 $4.00 $4.28 $4.43 $5.15 $4.60 Ad Revenue ($MM) Y/Y Growth % from Mobile Mobile Active Users (MAUs) (MM) Y/Y Growth % of Total MAUs Q4:12 Q1:13 Y/Y Growth 18% 19% 1% 1% (2%) 7% 12% 15% Q/Q Growth 11% (5%) 11% (13%) 7% 4% 16% (11%) Source: Facebook. 36
  37. 37. Facebook = Rising Mobile ARPU Has Offset Declining Desktop ARPU, So Far Facebook Annualized Ad ARPU, Desktop vs. Mobile, 3/11-3/13 Annualized Ad ARPU ($) $6 $4 $2 0 3/11 6/11 9/11 12/11 Desktop Ad ARPU 3/12 6/12 Mobile Ad ARPU 9/12 12/12 3/13 Overall Ad ARPU Source: Facebook. 37
  38. 38. COMPUTING – YET ANOTHER PLATFORM CHANGE… 38
  39. 39. We Just Began to Figure Out Smartphones… 39
  40. 40. Smartphone Subscriber Growth = Remains Rapid 1.5B Subscribers, 31% Growth, 21% Penetration in 2013E Rank Country 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 China USA Japan* Brazil India UK Korea Indonesia France Germany Russia Mexico Saudi Arabia Italy Australia Smartphone Smartphone 2013E Sub Y/Y as % of Smartphone Growth Subs (MM) Total Subs 354 219 94 70 67 43 38 36 33 32 30 21 21 21 20 29% 58 76 23 6 53 67 11 46 29 12 19 38 23 60 2013E Global Smartphone Stats: Rank Country 31% 28 15 28 52 22 18 34 27 29 38 43 36 25 27 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Subscribers = 1,492MM Smartphone Smartphone 2013E Sub Y/Y as % of Smartphone Growth Subs (MM) Total Subs Spain Philippines Canada Thailand Turkey Argentina Malaysia South Africa Netherlands Taiwan Poland Iran Egypt Sweden Hong Kong Penetration = 21% 20 19 19 18 17 15 15 14 12 12 11 10 10 9 8 33% 18 63 21 24 25 35 20 58 37 20 10 10 60 59 14% 34 21 30 30 37 19 26 27 60 25 40 34 16 31 Growth = 31% Note: *Japan data per Morgan Stanley Research estimate. Source: Informa. 40
  41. 41. Smartphone Usage = Still Early Stage With Tremendous (3-4x) Upside Global Smartphone vs. Mobile Phone Users, 2013E 6,000 5B+ Mobile Phone Users Global Users (MM) 5,000 4,000 3,000 1.5B 2,000 Smartphone Users 1,000 0 Smartphone Mobile Phone Source: Morgan Stanley Research estimates. Note: One user may have multiple devices - actual number of actual smartphone + mobile phone devices in use (subscription numbers) may be higher than user numbers. 41
  42. 42. Apple Growing Rapidly (1.4x Share Gain)… Samsung Up 7x Over ~2 Years Global Smartphone Unit Market Share Q4:12 Q1:10 22% 16% 4% Apple 49% Samsung 80% Other 29% 55MM Units 219MM Units Source: IDC, Morgan Stanley Research. Data as of 4/13. 42
  43. 43. …Then Along Came Tablets… 43
  44. 44. Tablet Growth = More Rapid than Smartphones, iPad = ~3x iPhone Growth First 12 Quarters Cumulative Unit Shipments, iPhone vs. iPad 60,000 160,000 iPad iPad iPhone iPhone Global Unit Shipments (000) Global Unit Shipments (000) 140,000 50,000 120,000 40,000 100,000 30,000 80,000 60,000 20,000 40,000 10,000 20,000 0 0 0 0 1 1 2 2 3 3 4 5 6 7 8 9 10 11 12 12 After Launch Quarters After Launch Source: Apple, as of CQ1:13 (12 quarters post iPad launch). Launch Dates: iPhone (6/29/07), iPad (4/3/10). 44
  45. 45. Tablet Shipments = Surpassed Desktop PCs & Notebooks in Q4:12, < 3 Years from Intro Global PC (Desktop / Notebook) and Tablet Shipments by Quarter Q1:95 – Q1:13 Global Units Shipped (MMs) 60 50 40 30 20 10 0 Q1:95 Q1:97 Q1:99 Q1:01 Q1:03 Desktop PCs Q1:05 Q1:07 Notebook PCs Q1:09 Q1:11 Q1:13 Tablets Note: Notebook PCs include Netbooks. Source: Katy Huberty, Ehud Gelblum, Morgan Stanley Research. Gartner. Data as of 4/13. 45
  46. 46. Demand for Large-Screen Computing Devices is Robust, But Mix Favors Tablets, Not Notebooks & Desktops Global PC (Desktop / Notebook) and Tablet Shipments by Quarter Q1:1995 – Q1:2013 160 Global Units Shipped (MMs) 140 Desktop PCs 120 Notebook PCs Tablets 100 80 60 40 20 0 1Q95 1Q97 1Q99 1Q01 1Q03 1Q05 1Q07 1Q09 1Q11 1Q13 Note: Notebook PCs include Netbooks. Source: Katy Huberty, Ehud Gelblum, Morgan Stanley Research. Gartner. Data and Estimates as of 4/13. 46
  47. 47. Top Vendors Largely Same in Desktop & Notebook Cycles – Very Different in Tablet (& Smartphone) Cycles Desktop PC Market Share 2000 Notebook PC Market Share 2010 % Share Tablet Market Share 2012 % Share Smartphone Market Share 2012 % Share % Share Compaq 13% HP 19% Apple 51% Samsung 30% Dell 11% Acer 17% Samsung 13% Apple 19% HP 8% Dell 12% Amazon 8% Sony 5% IBM 7% Lenovo 10% ASUS 5% ZTE 5% NEC 4% ASUS 8% Lenovo 1% BlackBerry 5% Others 57% Others 34% Others 20% Others 37% Note: Notebook PCs include Netbooks. Source: Morgan Stanley Research. Gartner. Data as of 4/13. 47
  48. 48. An Unusual Pattern… In Two Computing Cycles… 1) Smartphones 2) Tablets …Entering a Third Cycle… 3) Wearables / Drivables / Flyables / Scannables 48
  49. 49. Technology Cycles – Still Early Cycle on Smartphones + Tablets, Now Wearables Coming on Strong, Faster than Typical 10-Year Cycle Technology Cycles Have Tended to Last Ten Years Mainframe Computing 1960s Mini Computing 1970s Personal Computing 1980s Desktop Internet Computing 1990s Mobile Internet Computing 2000s Wearable / Everywhere Computing 2014+ Others? 49 Image Source: Computersciencelab.com, Wikipedia, IBM, Apple, Google, NTT docomo, Google, Jawbone, Pebble.
  50. 50. New Major Technology Cycles = Often Support 10x More Users & Devices, Driven by Lower Price + Improved Functionality Devices / Users (MM in Log Scale) Computing Growth Drivers Over Time, 1960 – 2020E 100,000 10,000 1,000 10B+ Units??? 1B+ Units / Users 100 100MM+ Units 10 1 1960 1MM+ Units 1970 10MM+ Units 1980 1990 2000 2010 2020 Note: PC installed base reached 100MM in 1993, cellphone / Internet users reached 1B in 2002 / 2005 respectively; Source: ITU, Morgan Stanley Research. 50
  51. 51. …Wearables (with Sensors)… 51
  52. 52. Smartphone Users Reach to Phone ~150x a Day… Could be Hands-Free with Wearables # of Times Typical User Checks Phone per Day Messaging 23 Voice Call 22 Checking Time 18 Music 13 Gaming 12 Social Media 9 Camera 8 Alarm 8 News & Alerts 6 Calendar 5 Web 3 Search 3 Other 14 0 5 10 15 20 Other includes voicemail, charging, and miscellaneous activities. Source: TomiAhonen Almanac 2013. 25 52
  53. 53. Sensor-Enabled Wearable Attributes Hands-Free • • • 3rd party apps API partners Accessories • Less distracting when receiving alerts / reminders / messages • Voice / gesture control • Development Platform Always-On AttentionGetting Environment -Aware Connected • • • • Wi-Fi 3G / 4G Bluetooth NFC • • Low power consumption Instant wake Background working / sensing • • • • • • GPS Accelerometer Compass Camera Microphone Other Sensors Source: MIT, KPCB. 53
  54. 54. Some People Laugh at Wearables… And ‘SNL’ Does Rule… ;) Source: Saturday Night Live, 5/13. 54
  55. 55. …Some People Laughed at PC & Internet There is no reason anyone would want a computer in their home. - Ken Olsen (Founder) Digital Equipment 1977 May 1999 55
  56. 56. …Drivables… 56
  57. 57. A Car or a Computer on Four Wheels? 57
  58. 58. Pandora Usage – Car / TV / Appliance Usage (~13% Now) to Likely Surpass PC (21%) Usage in 2 Years Share of Pandora Quarterly Listening Hours, PC vs. Mobile + Tablet vs. Other*, 4/09 – 4/13** Share of Total Listening Hours (%) 100% Other* (Car / TV, etc.) 80% PC Mobile + Tablet 60% 40% 20% 0% 4/09 10/09 4/10 10/10 4/11 10/11 4/12 10/12 4/13 Source: Pandora. Note that *listening share data for other non-mobile / non-PC devices (car / TV, etc) are KPCB estimates. **Pandora fiscal year ends Jan 31, so FQ4:13 ended Jan 31, 2013. 58
  59. 59. …Flyables… 59
  60. 60. It’s a Bird, It’s a Plane, It’s a Mini-Drone… Use Cases of Low-Cost Drones Agriculture GPS-Enabled Photos Help Pinpoint Potential Crop Damage Early On Sports / Entertainment Public Safety / Disaster Relief* Unique Angle of View Provides Insights for Training + Broadcast Audience Providing Aerial Video Coverage / First-Aid / Other Supplies in Challenging Conditions Source: Left image – Shutterstock; Middle image – Dronereport.net; *Right image – Drone carrying cameras + other sensors being deployed during search & rescue mission of 7.0-magnitude earthquake in Lushan, China (4/13). 60
  61. 61. Scannables – Codes / Tags + Cameras / Sensors 61
  62. 62. QR Codes = Scan & Be Scanned to Get Stuff… SCAN BE SCANNED Quick Scan w/ Smartphone For Info on Nutrition / Product / Price… Smartphone-Generated Codes For Boarding Pass / Ticket / Payment / Rewards… 62
  63. 63. China - Follow UK Embassy Weibo Account by Scanning QR Code Outside Embassy in Beijing 63
  64. 64. QR Code Scanning = Up 4x Y/Y in China, Offline Businesses Driving Online Connections China Monthly QR Codes Scanned by Use Case, 3/12 vs. 3/13 10 China Monthly QR Codes Scanned (MMs) 9MM 8 3% Payment 22% 6 33% Information (Nutrition Info, Business Card Exchange...) Promotions (Billboard, Advertising…) 4 2MM* 42% 2 Passcode (Coupons, Rewards, Tickets, Check-Ins...) 0 3/12 3/13 Note: * March 2012 use case breakdown not available. Source: Imageco, China QR Code Market Study, 2013. We believe data are understated. 64
  65. 65. Tencent WeChat (400MM+ Users, +4X Y/Y, China) – Mobile Communication + Local Commerce via QR Codes Consumers… Businesses… In addition to connecting w/ friends via voice / text / pictures, WeChat users can scan QR codes of merchants to stay connected and enroll in rewards programs + receive coupons. Use QR code + communication functions to manage customer acquisition and relationships. SMBs can send offers / take online orders, provide customer support via WeChat. Tencent WeChat Registered Users, 3/11-3/13 Registered Users (MM) 400 300 200 100 0 3/11 6/11 9/13 12/11 3/12 6/12 9/12 12/12 3/13 Source: User growth per Tencent and Morgan Stanley estimates. 65
  66. 66. LOTS TO LEARN FROM CHINA – VOLUME + INNOVATION 66
  67. 67. China – iOS + Android Users Surpassed USA, Q1:13 Active iOS and Android Devices, USA vs. China (MM), 1/11 – 2/13 Active iOS and Android Devices (MM) 250 China USA 200 150 100 50 0 1/11 3/11 5/11 7/11 9/11 11/11 1/12 3/12 5/12 7/12 9/12 11/12 1/13 Source: Flurry Analytics. 67
  68. 68. China Leads USA in Mobile + Internet Time Spent vs. TV = China @ 55% vs. 38% in USA % of Time Spent in Media, USA vs. China, 2012 % of Total Media Consumption Time 50% USA 40% China 42% 33% 30% 29% 26% 22% 20% 14% 10% 12% 11% 6% 0% Print 5% Radio TV Internet Mobile Source: USA media time spent share data based on eMarketer as of 12/12, China media time spent data per Miaozhen Systems’ (a leading 3rd party ad tech platform) survey of 35,750 samples as of 12/12. 68
  69. 69. Alibaba – Gross Merchandise Volume Surpassed Amazon.com + eBay, Q4:12 Gross Merchandise Value, 1995 – 2012 Amazon.com + eBay vs. Alibaba / Taobao $200 $200 Amazon.com Alibaba / Taobao $150 $150 $100 $100 $50 $50 $0 Alibaba / Taobao GMV ($B) Amazon.com + eBay GMV ($B) eBay $0 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: Company data. 69
  70. 70. JD.com (360buy) – Same Day Delivery with Real-Time Item Tracking on Map / Mobile…Often on Bicycle Free* Same-Day Delivery in 25+ Cities in China / Customer Can Track Package Location on Map / Mobile Devices and Contact Delivery Person in Real Time Note: *For orders > $8. 70
  71. 71. Taxi Apps* – China – Push to Talk to Driver / Bid Extra to Increase Chance of Getting Car on Your Terms Push to Talk Say current location and where you’re going. Your voice message will be delivered instantly to all nearby available taxis Bid to Win Increase your chance of hailing a cab during peak hours by offering extras tips up front (in addition to regular fare) Real Time Tracking View your taxi’s location in real-time, push to talk to the driver directly to coordinate pick-up *Source: Left image - Yao Yao Zhao Che; Center image – Di Di Da Che; Right image – Kuai Di Da Che. 71
  72. 72. Sina Weibo – 530MM+ Users (+2x Y/Y) Help Push For Social Change…$100MM Revenue Run Rate, Up From $0 Y/Y Notable Events / Movements Helped by Sina Weibo Beijing Air Quality Campaign – Sina Weibo users’ UGC photos / polls / reposts / suggestions helped drive government adoption of daily monitoring of air quality Real-Time SelfOrganized Emergency Relief – Through Weibo, volunteers coordinated to pick up stranded travelers at Beijing airport during torrential downpour in 7/12 Sina Weibo Registered Users & Annualized Revenue Run Rate, 4/11-3/13 $120 Registered Users Annualized Revenue Run Rate 400 $80 $40 200 $0 0 4/11 6/11 8/11 12/11 3/12 6/12 9/12 12/12 Annualized Revenue Run Rate ($MM) Registered Users (MM) 600 3/13 User / revenue source: Sina, Morgan Stanley Research. 72
  73. 73. GDP = China Share Gains vs. Europe & USA are Epic Percent of Global GDP, 1820 – 2012, USA vs. Europe vs. China vs. India vs. Latin America 40% % of Global GDP % of Global GDP 30% 33% 33% 33% 19% 19% USA 19% 27% 27% 27% 20% 16% 16% Europe 16% 16% 15%16% China 15% 15% 8% India 8% 8% 8% Latin 6% 6% 6% America 16% 10% 0% 2% 2% 2% 2% 2% 2% Source: Angus Maddison, University of Groningen, OECD, data post 1980 based on IMF data (GDP adjusted for purchasing power parity). 73
  74. 74. MOST ENABLED ENTREPRENEURS EVER? ZERO -> 1 MILLION USERS IN RECORD TIME(S) 74
  75. 75. Is This Generation Different? Selective Formative Events of Past 20 Years September, 2001 USA Terrorist Attacks – Destabilized sense of security Rise of China as Global Super Power – Altered global competition Global Financial Crisis, 2008+ – Destabilized financial security High Unemployment Levels – Destabilized career optimism Potential Fiscal Debt Challenges – Rise in need to depend on selves Rise of Cheap / Available Computing – 24x7 global access to loads of stuff including shared goods Rise of New ‘Geek’ Entrepreneur Heroes – Jobs + Sergey / Larry + Zuck… Rise in Social Connectivity – Ability to find / create / share / provide + get feedback Rise in Value of Social / Virtual vs. Financial + Physical Currency 75
  76. 76. Turning Passion Into Businesses…On an Epic Internet Palette Sports David Finocchio / BleacherReport Art / Creativity Georg Petschnigg / Fiftythree News & Politics Chris Altchek + Jake Horowitz / PolicyMic Books Otis Chandler / Goodreads Design / Inspiration Ben Silbermann Pinterest Product Design Ben Kaufman Quirky Music Daniel Ek / Spotify Sound Alex Ljung + Eric Wahlforss / SoundCloud Home Decoration Adi Tatarko + Alon Cohen / Houzz 76
  77. 77. SO, YOU WANT TO BE A PUBLIC COMPANY? 77
  78. 78. Internet IPO Standout – LinkedIn… Registered Users = 218MM in Q1, +35% Y/Y; High Gross Margins (87%) 250 LinkedIn Registered Members and Gross Margins, Q1:08 – Q1:13 Gross Margin 200 85% 150 80% 100 75% 50 70% 0 65% Q1:08 Q1:09 Q1:10 Q1:11 Q1:12 Gross Margins (%) Registered Members (MM) Registered Members 90% Q1:13 Source: LinkedIn. Data as of 5/27/2013. 78
  79. 79. …Internet IPO Standout – LinkedIn Averaged 7% Revenue / 83% EBITDA Upside Since IPO, Shares +305% LinkedIn Share Daily Closing Price, 5/11-5/13 $225 $200 $175 $150 5/11 – IPO @ $45 Raised $353MM 11/11 – Q3 Revenue $140MM, +129% Y/Y, 10% above consensus EBITDA $12MM, 2x consensus $125 2/12 – Q4 Revenue $168MM, +105% Y/Y, 5% above consensus EBITDA $34MM, 62% above consensus 2/13 – Q4 Revenue $304MM, +81% Y/Y, 8% above 8/12 – consensus Q2 EBITDA $79MM, Revenue $228MM, 25% above +89% Y/Y, 6% above consensus consensus EBITDA $50MM, 15% above consensus $100 $75 $50 $25 8/11 – Q2 Revenue $121MM, +124% Y/Y, 14% above consensus EBITDA $5MM, 5x consensus $0 5/11 9/11 11/11 – Follow-on offering @ $71 per share, Raised $714MM 1/12 5/12 – Q1 Revenue $188MM, +101% Y/Y, 5% above consensus EBITDA $38MM, 31% above consensus 5/12 11/12 – Q3 Revenue $252MM, +81% Y/Y, 3% above consensus EBITDA $56MM, 16% above consensus 9/12 1/13 5/13 – Q1 Revenue $325MM, +72% Y/Y, 2% above consensus EBITDA $83MM, 16% above consensus 5/13 Source: Yahoo Finance, Bloomberg, FactSet. Data as of 5/17/13. 79
  80. 80. Financial Dynamics of Internet Leaders eCommerce Amazon Years Since Founding Communication eBay Facebook Tencent Search Hardware Google Apple 19 18 9 15 15 37 91K 209MM 32K 116MM 5K 1.1B 24K 798MM 54K 1.2B 80K 500MM+ $50B $15B $9B $42B $7B $6B $5B $2B $3B $5B $2B $2B $63B $26B $20B $87B $21B $30B Revenue Gross Margin (%) Free Cash Flow $246B 27% $12B $79B 69% $19B $12B 72% $1B $20B 56% $7B $153B 72% $53B $695B 37% $138B Market Capitalization $122B $71B $62B $73B $301B $415B People Users Cumulative Operating Expense R&D Capital Expenditures Full lifetime data for all companies not available. Company (Years of Data) as follows: Amazon (19), eBay (17), Facebook (6), Tencent (12), Google (14), Apple (37 for revenue, 26 for others). Operating expenses exclude one-time, non-recurring charges and include depreciation, amortization, stock-based compensation. Data for eBay includes Paypal. eBay users are active members of eBay marketplace. Data for Google includes DoubleClick (back to 1996). Google gross margin based on revenue net of TAC. Google user data per ComScore. Market cap. figures as of 5/21/2013. Capital expenditures for Facebook include capital leases. Apple user figures based on estimated installed base of Mac, iPad, iPhone, iPod units assuming a 4year replacement cycle for Macs, 3-year for iPads, 2-year for iPhones and iPods. Figures are not de-duplicated. Source: Public filings, FactSet, Morgan Stanley Research, Yahoo! Finance, ComScore. 80
  81. 81. Market Value = Google + Amazon + eBay + Tencent + Priceline + Yahoo! + Yahoo! Japan + Salesforce.com + LinkedIn Gain Y/Y… Apple + Baidu Fall Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Total Company Apple Google Amazon eBay Tencent Facebook Priceline Baidu Yahoo! Yahoo! Japan Salesforce.com LinkedIn Rakuten Netflix Liberty Interactive NHN Yandex Tripadvisor Netease Verisign Mail.ru Mercadolibre Groupon Nexon Asos Region USA USA USA USA China USA USA China USA Japan USA USA Japan USA USA Korea Russia USA China USA Russia Argentina USA Korea UK 2013 Market Value ($B) $416 311 127 76 74 73 42 33 30 29 28 22 17 14 12 12 10 9 8 7 6 6 5 5 4 $1,375 2012 Revenue ($MM) $155,971 49,958 61,093 14,028 6,957 5,089 5,261 3,540 4,987 3,304 3,050 972 5,558 3,609 10,054 2,121 926 763 1,301 874 682 374 2,334 1,359 899 $345,064 2013 market value data as of 5/20/2013. Source: FactSet, Google Finance, Morgan Stanley Research. 81
  82. 82. HIGH-SKILLED IMMIGRATION – PERSPECTIVE 82
  83. 83. Immigration in America & The Growing Shortage of High-Skilled Workers Report / Presentation Can Be Found at www.kpcb.com/insights 83
  84. 84. Why Did We Publish a Report on High-Skilled Immigration? • America is the global leader in the technology industry. • Immigrants (often with STEM* degrees) have been (and are) especially important to the vibrancy of tech companies. • America has a shortage of high-skilled STEM workers and our tech leaders believe it's constraining their ability to compete and grow jobs in America. • Government policy helps send many qualified foreign high-skilled workers home and constrains those that can come to America. • Global environment for recruiting high-skilled STEM workers is likely to get much more competitive. • Potential for immigration reform in America is very real and the future direction will likely be determined this year. • This is a big issue for the technology industry – we encourage you to read / share / opine on the report – it can be found at kpcb.com/insights *Note: STEM = Science / Technology / Engineering / Mathematics. 84
  85. 85. 99% Of Americans Are Immigrants Or Descendants Of Immigrants USA Population by Ancestry, 2010 Census Immigrants or Descendants of Immigrants 15% 306 Million 11% German Other European Asian Native Americans 9% 15% 13% 16% Irish African American* Other / Unclassified 5% 15% English Hispanic 0.9% 3 Million 0% 20% 40% 60% 80% Note: *African-American total includes those who came as slaves and not as voluntary immigrants. Other includes North America (Canada), Australia, New Zealand, and those who have more than one ethnicity reported. Source: Census Bureau, 2010 data. 100% 85
  86. 86. High-Skilled Immigrants Are Only 1% Of Total U.S. Population U.S. Population at a Glance, U.S. Born vs. Immigrants by Type of Admission, 2010 4MM, 1% 270MM U.S. Born 87% of Total Population 19MM, 6% 40MM Immigrants 13% 6MM, 2% 11MM, 4% Legal Immigrants (High-Skilled) Legal Immigrants (Family-Based) Legal Immigrants (Refugees & Other) Undocumented Immigrants Total USA Population = 310MM Note: Number of undocumented immigrants currently residing in USA is an estimate by PEW Hispanic Center based on Census data. Precise breakdown of legal immigrants currently residing in USA by type of admission is not available and is an estimate based on Census data as well as Department of Homeland Security immigrant admission data from 1986 to 2010. Source: Census Bureau, PEW, DHS. 86
  87. 87. 60% of Top 25 Tech Companies Founded By 1st & 2nd Generation Americans = 1.3MM Employees, 2012 Founders / Co-Founders of Top 25 U.S. Public Tech Companies, Ranked by Market Capitalization Rank Company Mkt Cap ($MM) 1 Apple 2 Google 3 IBM 4 Microsoft  5 Oracle  6 Amazon.com 7 Cisco 8 Intel  9 Ebay 10 Facebook 11 EMC 12 Hewlett‐Packard  13 Texas Instruments 14 VMware 15 Priceline 16 Automatic Data Processing 17 salesforce.com 18 Dell 19 Yahoo! 20 Cognizant Technology 21 Adobe 22 Broadcom  23 Intuit 24 LinkedIn  25 Symantec  Total Founded by 1st or 2nd Gen Immigrants $416,622 268,445 239,530 234,828 172,044 119,011 116,904 105,721 65,357 63,472 53,347 43,118 38,756 35,917 35,583 31,274 25,840 25,003 24,306 23,648 20,640 19,713 19,393 19,357 16,916 $1,633,048 LTM Rev ($MM) $164,346 49,958 104,507 72,764 37,230 61,093 47,252 53,341 14,028 5,089 21,714 118,397 12,690 4,605 5,261 10,945 3,050 56,982 4,987 7,346 4,373 8,006 4,153 972 6,839 $555,768 Employees 76,100 53,861 434,246 94,000 115,000 88,400 66,639 105,000 31,500 4,619 60,000 331,800 34,151 13,800 7,000 57,000 9,800 111,300 11,700 156,700 11,144 11,300 8,500 3,458 20,500 1,252,216 Founder / Co‐ Founder Steve Jobs Sergey Brin Herman Hollerith Bill Gates Larry Ellison Jeff Bezos Leonard Bosack Andrew Grove Pierre Omidyar Mark Zuckerberg Roger Marino William Hewlett Cecil Green Edouard Bugnion Jay Walker Henry Taub Marc Benioff Michael Dell Jerry Yang Francisco D'Souza John Warnock Henry Samueli Scott Cook Konstantin Guericke Gary Hendrix Generation 2nd‐Gen, Syria 1st‐Gen, Russia 2nd‐Gen, Germany ‐‐ 2nd‐Gen, Russia 2nd‐Gen, Cuba ‐‐ 1st‐Gen, Hungary 1st‐Gen, France ‐‐ 2nd‐Gen, Italy ‐‐ 1st‐Gen, UK 1st‐Gen, Switzerland ‐‐ 2nd‐Gen, Poland ‐‐ ‐‐ 1st‐Gen, Taiwan 1st‐Gen, Nairobi ‐‐ 2nd‐Gen, Poland ‐‐ 1st‐Gen, Germany ‐‐ Source: FactSet as of 3/13; “The ‘New American’ Fortune 500”, a report by the Partnership for a New American Economy; “American Made, The Impact of Immigrant Founders & Professionals on U.S. Corporations” 87
  88. 88. Computer Science Job Opening Forecast = 2.4x # of Computer Science Graduates Projected Average Annual # of Graduates w/ Bachelors Degree in Computer Science vs. # of Job Openings Requiring a Bachelors Degree in Computer Science, 2010-2020E # of Graduates w/ Bachelors Degree in Computer Science 51,474 # of Job Openings Requiring a Bachelor's Degree in Computer Science 122,300 0 50,000 100,000 150,000 Number of People, per Year Source: Microsoft analysis (published in 2013) based on Bureau of Labor Statistics data. 88
  89. 89. USA Sending More Qualified Foreign Students Home Post Graduation 3.5x Rise in Student & Employment Visa Issuance Gap Over Decade Number of Student (F1) vs. Employment (H-1B) Visas Issued per Year, 1992 - 2012 600 Number of Visas Issued (000s) F1 Student Visa Issued H-1B Employment Visa Issued 500 400 ~350K Difference 300 200 ~100K Difference 100 85K H-1B Visas Subject to Cap 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: U.S. Department of State. 89
  90. 90. Startups & Big Tech Companies Can’t Hire Enough Engineers Street View From Silicon Valley Five High-Tech Companies Alone – IBM, Intel, Microsoft, Oracle And Qualcomm – Have Combined 10,000 Current Openings In The United States. Image: View outside of Quixey’s office on Castro St. in Mountain View, CA. Picture by Joshua StantonSavitz. Data source: Technology CEO letter to the president and lawmakers, 3/13. http://www.scribd.com/doc/130388692/Tech-CEO-letter 90
  91. 91. Read More @ kpcb.com/insights 91
  92. 92. APPENDIX 92
  93. 93. Traditional Industries Being Re-Imagined 93
  94. 94. U.S. Postal Service Mail Volume Peaked in 2006 Owing to Email Rise… Profitability Plummeted Pieces of Mail Delivered (MM) and Net Profit / (Loss) ($MM) of U.S. Postal Service, 1886 - 2012 250,000 $5,000 Net Profit / (Loss) ($MM) 200,000 $0 150,000 ($5,000) 100,000 ($10,000) 50,000 ($15,000) 0 Net Profit / (Loss) ($MM) Pieces of Mail Delivered (MM) Pieces of Mail (MM) ($20,000) 2012 1886 1900 1914 1928 1942 1956 1970 1984 1998 Source: Annual Report of the Postmaster General. Data not available for 1914 - 1925. 94
  95. 95. Relative Impact of Technology on Large Organizations = #2 Concern & Rising Rapidly % of CEOs Who Thought The Following External Factors Would Have The Biggest Impact on Their Organizations… 84% 67% 48% 56% 42% 44% 48% 39% 39% 41% 35% Market Factors Technological Factors Macroeconomic Factors 38% People Skills 37% Regulatory Concerns 33% 25% Globalization 21% Environmental Issues Socioeconomic Factors Geopolitical Factors 2004 2006 2008 2010 Source: IBM, “Capitalizing on Complexity: Insights from Global CEO Study”, May 2010. Study consisted of face-to-face conversations with over 1,500 CEOs worldwide. Executives were asked to discuss top three external forces that will have the biggest impact on their organizations. 95
  96. 96. Financial Services - Context • 600MM+ credit cards in use in USA, average American carries 3-4 credit cards in addition to check cards / loyalty cards / coupons / cash in wallet. • 17% average credit card borrowing rate vs. 1.8% 10-Year US Treasury bond yield*. • 16B paper bills sent per year in USA. • 4.3B bills paid by paper check per year in USA. Source: *Credit Card #s per Federal Reserve Bank of Boston, Credit Card interest rate per Indexcreditcards, 10-year Treasury yield are 5/13 averages, per Dept. of Treasury. Bill data per Fiserv. 96
  97. 97. Emerging Financial Services Metrics Company Gross Volume Y/Y Growth # Users $15B+ Gross Payment Volume Processed to Date ~3x Y/Y 4MM+ Merchants $1.8B+ Loans Issued to Date ~3x Y/Y 137K+ Loans Funded to Date $500MM+ Gross Payment Volume of bills Per Year ~17x Y/Y 8MM+ Registered Users 18MM+ Cumulative Transactions ~5x Y/Y 11MM+ Bitcoins in Circulation $29B+ Gross Mobile Payment Volume Per Year ~2.5x Y/Y 20MM+ Registered Users Square Y/Y growth excludes partnerships. Lending Club loans issued to date as of 5/25/2013. Bitcoins data as of 5/25/2013, per Blockchain. Source: Square, LendingClub, Check, Blockchain.info, JP Morgan Chase. 97
  98. 98. Education - Context… • $1.1T+ annual spending on education in USA, $460B+ = post-secondary, cost of going to college up +2x (inflation adjusted) over 30 years. • $914B** student loans outstanding ($25K per graduating student), bigger than credit card ($672B) & auto loans ($750B). • Student loans up 8x over ten years. Source: **Federal Reserve Bank of New York. Programme for International Student Assessment (PISA). 98
  99. 99. Online Education Growing Rapidly = 32% of Students Taking at Least One Online Course, 2011 US Online Enrollment in Degree-Granting Postsecondary Institutions & % of Total Enrollment, 2002 - 2011 30% 6 25% 5 20% 4 15% 3 10% 2 1 5% 0 % of Total Enrollment 35% 7 Online Students (MM) 8 0% Fall 2002 Fall 2003 Fall 2004 Fall 2005 Fall 2006 Fall 2007 Fall 2008 Fall 2009 Fall 2010 Fall 2011 Students Taking at Least One Online Course Online Enrollment as a % of Total Enrollment Source: Changing Course: 10 Years of Tracking Online Education in the United States. Babson Survey Research Group 1/13. 99
  100. 100. Online Education = Quickly Becoming More Accepted 77% of academic leaders at over 2,800 US colleges perceive online education as the same or superior as compared to face-to-face education Academic Leaders’ Perceptions of Learning Outcomes in Online Education Compared to face-to-face 2012 2011 2010 2009 2006 2004 2003 0% 20% 40% Inferior & Somewhat Inferior Same 60% 80% 100% Superior & Somewhat Superior Source: Changing Course: 10 Years of Tracking Online Education in the United States. Babson Survey Research Group 1/13. 100
  101. 101. Education Being Democratized = Fast Global MOOC (Massively Open Online Course) User Growth iTunes U Open University Downloads, 6/08 – 3/13 60 Coursera Users & Course Enrollment, 9/12 – 3/13 Downloads (MM) 10 8 (MM) 40 20 6 4 2 0 0 6/08 3/09 1/10 11/10 9/11 7/12 9/12 11/12 1/13 Students iTunes U Open University Downloads, by Region 3/13 Course Enrollment Coursera Users, by Region 16% 46% 25% 35% 13% 16% 16% 13% United States China UK Other North America Asia Europe Source: The Open University 3/13, & Coursera Company Data, 4/13. Other 101
  102. 102. Healthcare – Context… • $2.6T+ annual spend on healthcare in USA, 18% of GDP in 2010, up from 5% in 1960, and 2x OECD average. • ~100MM Americans (30%) of Americans considered obese in 2012, up from 15% in 1990. • $147B estimated medical costs associated with obesity in 2008, up from $79B in 1998. Source: American Heart Association, Center for Medicare & Medicaid Services, 2012, OECD. 102
  103. 103. Right Story, Great Reporting…Perhaps, Right Time When we debate health care policy, we seem to jump right to the issue of who should pay the bills, blowing past what should be the first question: Why exactly are the bills so high? - Steven Brill, Time, March 2013 103
  104. 104. Re-Imagination is Alive & Well 104
  105. 105. Re-Imagination of Basic Business Process… Building / Funding KickStarter Logistics JD.com (360buy) Manufacturing MakerBot Online / Social Distribution / Real-Time Progress At Your Door Same-Day Delivery / RealTime Tracking / Last Mile on Bikes 3-D Prototyping / Printing Education Codecademy Housing Airbnb Transportation Uber Accessible by Anyone, Anywhere, Anytime Turn Privately-Owned Properties into Hotel Experience On-Demand Transportation 105
  106. 106. Re-Imagination of Asset-Heavy Products / Services… Music Video Textbooks (Spotify) (Netflix) (Chegg) Pay for Access / Instant On-Demand Streaming on Internet-Enabled Devices On-Demand / Instant Access Anywhere Pay For Usage Rights During Semester Wallet Employment Store Fronts (Square) (oDesk / eLance) (Zaarly) Smartphone is the New Wallet Workforce as a Service (WaaS) / On-Demand / Global Anyone Can Open / Beautifully Designed 106
  107. 107. Re-Imagination of R&D… Minted • • 85K designs submitted 4MM monthly visitors Quirky • • 87K designs submitted 360K registered users 99Designs • • 228K designers 216K contests Source: Company data. 107
  108. 108. Re-Imagination of “Learning Tools” = Twitter / YouTube / Google Docs / Google / WordPress C4LPT Ranking of Top Learning Tools • 582 learning professionals worldwide were asked to provide their top 10 tools used for learning in 2012 / 2009 2009 Rank Twitter 1 1 YouTube 2 3 3 5 Google Search 4 8 WordPress 5 6 Dropbox 6 71 Skype 7 11 Powerpoint 8 13 Facebook 9 31 Wikipedia 10 17 Moodle 11 14 Evernote 12 27 Slideshare 13 7 Prezi 14 28 Blogger / BlogSpot • The 2012 survey compiled data from 582 learning professionals worldwide (55% working in education & 45% in noneducational organizations 2012 Rank Google Docs* • ‘Learning tool’ is defined as any tool that you could use to create or deliver learning content/solutions for others, or a tool you use for your own personal learning Company 15 14 108 Source: Centre for Learning & Performance Technology (C4LPT) Top 100 Tools For Learning 2012.
  109. 109. Re-Imagination of Computing Operating Systems iOS + Android = 60% Share vs. 35% for Windows Global Market Share of Personal Computing Platforms by Operating System Shipments, 1975 – 2012 1983 Wintel - 25% 1998 – 2005 Wintel – 96% 2012 Wintel – 35% Market Share of Personal Computing Platforms by Operating Systems (%) 100% 90% 80% 70% 60% Atari WinTel TRS-80 50% 40% Apple 30% 20% Other 10% Commodore Amiga Android 0% 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Source: Asymco.com (as of 2011), Public Filings, Morgan Stanley Research, Gartner for 2012 data. 109
  110. 110. USA, Inc. Report / Presentation Can Be Found at www.kpcb.com/insights 110
  111. 111. Consumer Confidence = At Five-Year Highs, Though Still Well Below 30-Year Average The Conference Board Consumer Confidence Index, 1978 – 2013 YTD 160 140 Consumer Confidence Index (1985=100) 120 35 Year Average CCI = 91.5 4/13 CCI = 68.1 100 80 60 40 20 2/09 Trough CCI = 25.3 0 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Note: Index started in 1967 / benchmarked to 1985=100. The Index is calculated each month on the basis of a household survey of consumers' opinions on current conditions and future expectations of the economy. Source: The Conference Board, 5/13. 111
  112. 112. Consumers Less Concerned About Employment, More Concerned About Rising Prices Percent of USA Respondents Citing Their One Most Important Issue, 4/09 – 4/13 Q. Based on your current situation, which one of the following economic conditions most concerns you? 54% 50% 48% 46% 42% 42% Unemployment / Job Security 40% Rising Prices 32% 32% 44% 45% 42% 33% 30% 28% 29% Financial Markets 29% 43% 38% 37% 37% 36% 27% 44% 47% 45% 45% 33% 37% 34% 31% 33% 31% 26% Real Estate / Home Values 4/09 7/09 10/09 1/10 4/10 7/10 10/10 1/11 4/11 7/11 10/11 1/12 4/12 7/12 10/12 1/13 4/13 Source: comScore surveys, 4/13. 112
  113. 113. Stock Markets = Often Leading Indicators of Economic Activity Stock / Commodity Markets Performance (% Change From 1/93), 1/93 – 5/13 800% 700% Index Value (1/1/1993 = 100%) 600% 500% 400% 300% 200% 100% 0% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 S&P 500 NASDAQ China Shanghai Composite MSCI Europe Oil Gold Note: All values are indexed to 1 (100%) on Jan 1, 1993. Data as of 5/24/13. Source: FactSet. 113
  114. 114. USA, Inc. – Biggest Gap Between Revenue & Expenses in USA History Outside of World War I & II USA Inc. Revenue & Expenses as % of GDP, 1901 – 2012 50% $16 40% $14 Biggest Gap Between Revenue & Expenses in USA History Outside of World War I & II Expenses as % of GDP (Left Axis) Real GDP (Right Axis) $12 $10 30% $8 20% $6 $4 10% Real GDP (in Trillions of 2005 Dollars) Revenue & Expenses as % of GDP Revenue as % of GDP (Left Axis) $2 0% 1901 $0 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001 2011 Source: 1910 – 1930 per Census Bureau, 1940-2012 per White House OMB. Real GDP adjusted for inflation, in 2005 dollars. 114
  115. 115. Where Your Tax Dollars Go – Entitlements = 59% % of USA Federal Government Spending, 2012 Entitlements Defense Other* 59% 0% 20% 19% 40% 60% Interest 16% 6% 80% 100% Note: Federal entitlement expenses include Social Security, Medicare and Medicaid. Source: White House OMB. 115
  116. 116. USA Social Security + Medicare + Medicaid + Interest Payments Should Exceed Federal Revenue Within 12 Years, 35 Years Sooner than 1999 Forecast, per CBO Federal Social Security + Medicare + Medicaid + Interest Payments vs. Revenue as % of GDP, 1980 – 2042E 40% Revenue Federal Social Security + Medicare + Medicaid + Net Interest Payments % of GDP 30% 20% 10% 0% 1980 1990 2000 2010 2020E 2030E 2040E Source: Congressional Budget Office (CBO) Long-Term Budget Outlook (6/12). Data in our chart is based on CBO’s ‘alternative fiscal scenario’ forecast, which assumes a continuation of today’s underlying fiscal policy. Note that CBO also maintains an ‘extended-baseline’ scenario, which adheres closely to current law. The alternative fiscal scenario deviates from CBO’s baseline because it incorporates some policy changes that are widely expected to occur and that policymakers have regularly made in the past. 116
  117. 117. Disclosure The information offered in this presentation speaks to industry trends in general, and should not be construed as providing any particular recommendations or analysis for any specific company that is mentioned in this presentation. KPCB is a venture capital firm that owns significant equity positions in certain of the companies referenced in this presentation. 117

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