State of the Internet: US Growth Slows as Worldwide Audience Shifts

State of the Internet
1st Quarter 2012

Agenda

 Worldwide Context
 US Vital Signs
 State of the Internet
– Video
– Search
– Mobile
– eCommerce
 Monetization

© comScore, Inc. Proprietary and Confidential. 2

The US Is No Longer the Center of the Online Universe

US Internet Population vs. Rest of the World Distribution of Worldwide Internet Audience

Rest of the North
World 34% America
Europe
14.6% Latin
26.6% America
87% 8.9%

8.8% Middle East
US - Africa
66% Asia Pacific

41.0%

13%

1996 2012

 In 1996, 2/3 of the world’s Internet population was in the US, yet today Asia Pacific is the largest
region with over 41% of the population.
 Many emerging regions are likely to bypass old modes, skipping dial-up to go straight to broadband,
making multimedia, video, and collaborative content immediately accessible.
 Early adoption of mobile web in addition to PC web will likely be popular in many of these high-
growth areas.

© comScore, Inc. Proprietary and Confidential. 3 Source: comScore World Metrix, March 2012

9% Worldwide Growth Fueled by Country Growth

Internet Users Age 15+ (MM)

China 333.3
United States 190.7
Japan 73.5
India 56.3
Russian Federation 56.0
Germany 51.5
Brazil 45.5 While US user growth was just 5.3%
France 43.2 over the past year, India, Italy,
United Kingdom 37.6 Mexico, and the Russian Federation
have experienced impressive growth
South Korea 31.0
rates of 32%, 24%, 22%, and 18%
Italy 28.6 respectively.
Canada 24.0
Turkey 23.6
Mexico 22.8
Spain 21.6


Online Engagement by Country

Average Hours Per Visitor Per Month

Canada 44.3
United States 38.8
United Kingdom 35.1
Netherlands 33.8
Turkey 33.0
Israel 31.8
Canada is consistently the
Thailand 30.4 most engaged country. The
Poland 30.2 average visitor spent more
Vietnam 28.7 than 44 hours online in March
Norway 28.6
2012.
Brazil 28.4
Russian Federation 28.2
Finland 28.1
Argentina 26.5
Hong Kong 26.5


More Worldwide Unique Visitors Are Spending More Minutes on
Social Networking Sites than Email Sites

Global Total Unique Visitors (000)
1,400,000 +17%
Unique Visitors (000)

1,200,000
1,000,000
800,000 +13%
600,000
400,000
200,000
0
Mar-2011 May-2011 Jul-2011 Sep-2011 Nov-2011 Jan-2012 Mar-2012

Email Social Networking

500,000
Global Total Minutes (MM) +37%

400,000
Minutes (MM)

300,000

200,000

100,000
+3%
0
Mar-2011 May-2011 Jul-2011 Sep-2011 Nov-2011 Jan-2012 Mar-2012

Email Social Networking


Agenda

 US Vital Signs
– Video
– Search
– Mobile
– eCommerce
 Monetization


Is the US Internet Really Still Growing?

Total US Internet Users
250,000
+5%  Yes, the US
200,000
Internet is still
150,000 +6%
growing, albeit not
100,000
as quickly as it
50,000
had been.
0

 The Average
Total Unique Visitors (000) Average Daily Visitors (000) Minutes per Visitor
grew 9% over the
Total US Internet Engagement past year.
2,500

2,000 +9%  The average
1,500 internet user made
1,000
4 more visits to
the internet in
500
+7% March 2012 than in
0
March 2011.

Average Minutes per Visitor Average Visits per Visitor

© comScore, Inc. Proprietary and Confidential. 8 Source: comScore US Media Metrix Panel Only Data, March 2012

What Online Categories are Driving Web Usage?

The 31+ hours the average user spends online is divided among several key content
categories such as Social Media, Entertainment, and Portals.

Top Categories Reach Top Categories Engagement

Y/Y %
100% 0% +1% change Y/Y % change
+3% -3%
400 -7%
-1% +16%

Average Minutes/UV
95%
Reach

300 +24%

90% -1%
200
+10% +11%
+2%
85% 100

0

© comScore, Inc. Proprietary and Confidential. 9 Source: comScore US Media Metrix Panel Only Data, March 2012

Which Categories are Driving Web Growth?

100,000
 As expected in
90,000 an election year,
+29% Political sites
80,000
saw terrific
70,000 growth year
UVs (000)

+47% over year at
60,000
+54% +46% +28% 132%.
50,000
+30%
40,000
30,000
+132%
+52%
 The
Gay/Lesbian
20,000 category
+93%
10,000 continued to
see impressive
0 growth, growing
93% between
March 2011 and
March 2012.

March 2011 UV's March 2012 UV's
Source: comScore US Media Metrix Panel Only Data March 2012

Unique Visitors to social networking sites have increased 6% year
over year

Since reporting began in May 2011, the idea sharing website Pinterest
has seen exponential growth in Unique Visitors.

170,000
+4%
155,000
140,000
125,000
110,000
UVs (000)

95,000
80,000
+58%
65,000
50,000 +67%
35,000
+168%
20,000
5,000 +4377%
-10,000

Facebook Twitter Tumblr LinkedIn Pinterest
Source: comScore US Media Metrix Panel Only Data, March 2012

Pinterest is the fastest growing social media site in both Unique
Visitors and Clicks on search engines

Pinterest is a content sharing
website in which users “pin”
20,000 4,000
images and videos to share in
an online community. Since
18,000
3,500 reporting began in May, it is
16,000 the fastest growing social
3,000

Search Engine Clicks (000)
14,000 media site of the past year.
Unique Visitors (000)

2,500
12,000

10,000 2,000

8,000
1,500
6,000
1,000
4,000
500
2,000

0 0

Unique Visitors (000) Search Engine Clicks (000)

© comScore, Inc. Proprietary and Confidential. 12 Source: comScore US Media Metrix Data

Pinterest buyers spend more, buy more items, and conduct more
transactions than other social media buyers

Bubble size = Dollars per Buyer
Buying Power Index 5.60
300
250
5.40
200
150
5.20
100

Items per Buyer
50
5.00 Facebook
0
LinkedIn Pinterest Twitter Facebook Tumblr Pinterest
4.80 Twitter

Pinterest users are second only to LinkedIn

LinkedIn users in the Buying Power Tumblr
4.60
Index of the top 5 social media sites.
However, Pinterest buyers spend more 4.40
money, more often, and on more items
than any of the other top 5 social 4.20
media sites. 2.70 2.80 2.90 3.00 3.10
Transactions per Buyer

© comScore, Inc. Proprietary and Confidential. 13 Source: comScore US Media Metrix Data

Agenda

 US Vital Signs
– Video
– Search
– Mobile
– eCommerce
 Monetization


The average internet user viewed 243 videos with a viewing time
of 21 hours, 22 minutes

March 2012

US Video Viewers 187MM Value Drivers of Online Video
Advertising

% Of Internet Users Who Viewed  Reach of elusive audiences
83%
At Least One Video
 Better engagement
Total # of Viewed Videos 45.4B  However, monetization is still a big
challenge:
YoY Growth in Video Views 33%  User experience
 Rights for UGC (User
Generated Content)
Videos per Viewer 243

Viewing Time per Viewer 21 hr 22 min

© comScore, Inc. Proprietary and Confidential. 15 Source: comScore Video Metrix, March 2012

Males Are More Engaged Online Video Viewers than Females

Video Activity By Gender

1900 Females Males 1,807
1800
1700
1600
1500
1400
1300
1200
1100
1000
900
800 755
700
600
500
400 313
300 +116%
172
200 93 94 +120%
100 +66% +139%
+82%
0
UVs (MM) Videos per Viewer Minutes per Viewer


Duration Jumps as Long-Form Content Floods the Web

Total US Streaming Minutes and Video Views
300
Total US Duration and Video Views
250 Total Minutes Total Videos
+53%  Sites heavy with
200
long-form content
have continued to
150 grow over the
Billions

past year,
100 contributing to
the increase in
50 +47% time spent
streaming.
0
Mar '11 Apr '11 May '11 June July '11 August Sept '11 Oct '11 Nov ' 11 Dec '11 Jan '12 Feb '12 Mar '12
'11 '11

March 2011 March 2012
Hours per Viewer 14.7 21.4
Videos per Viewer 192.1 242.6
Minutes per Video 4.6 5.3

Agenda

 US Vital Signs
– Video
– Search
– Mobile
– eCommerce
 Monetization


Global Search Market Growth of 22% Y/Y–More Than 4.1 Million
Searches per Minute

30,000 +8% Top 10 Countries by Number of Searches (MM) Conducted*  Google sites
25,000 account for
Apr-2011
20,000 over two-
+56%
Apr-2012 thirds of the
15,000
+45% 177 billion
10,000 +21%
11% +23% +39% searches
+4% +35% +54%
5,000 conducted
worldwide in
0
United China Japan United Germany Brazil Russian France Turkey India April.
States Kingdom Federation

140,000 +21%  Chinese
Top 10 Search Properties by Searches (MM) Conducted based Baidu
120,000
Apr-2011 (13.8 billion
100,000 searches) was
80,000 Apr-2012 second in
front of
60,000
Yahoo! (9.9
40,000 +53% +6% billion
-16% +44% +97% 11%
+38% -7% -40%
20,000 searches).
0

*Searches based on “expanded search” definition, which includes searches at the top properties where search activity is observed, not only
the core search engines.

© comScore, Inc. Proprietary and Confidential. 19 Source: comScore qSearch 2.0, April 2012

qSearch 2.0: Trends in the U.S. Search Market

 27.7 billion searches were performed in April 2012, which marked an
8% growth rate over April 2011.

Total U.S. Searches for all qSearch properties (Billions)
Change vs.
April-11

29.5 29.5
28.5 +8%
28.3 28.3 28.0
27.4 27.7
27.2 27.3 27.1
26.6
25.6

Apr-11 Jul-11 Oct-11 Jan-12 Apr-12

Source: comScore qSearch 2.0, April 2012

qSearch 2.0: Trends in the U.S. Search Market
 Increases in search intensity by Heavy Searchers and Medium Searchers helped drive search
growth.
Segment Contribution to
Search Intensity
Total Searches Change vs.
Searches per Searcher April-11
Percentage of 450

Searches 370.9
389.0
400
+5%
350

300

63.8%
250

200

27.2% 150
108.6 110.5 +2%
100

9.0% 50
22.5 21.9 -3%
0


Heavy Searchers (Upper 20%) Moderate Searchers (Middle 30%) Light Searchers (Bottom 50%)


qSearch 2.0: Leading U.S. Search Properties

 Microsoft, Yahoo!, and AOL show intensity growth versus a year ago.

Leading Search Properties: Searches per Searcher
Change vs.
April-11

90
83.4 0% Google Sites
80

70

60

50 +19% Microsoft Sites
40
+2% Yahoo! Sites
30
30.4
27.8
20 +9% AOL, Inc.

10 9.3
7.8 -2% Ask Network
0


Agenda

 US Vital Signs
– Video
– Search
– Mobile
– eCommerce
 Monetization


Mobile On Track to Eclipse the Desktop

Number of Global Users (Millions)
2,000
1,800
1,600
1,400
1,200
1,000 Desktop
800 Mobile
600
400
200
0
2007 2008 2009 2010 2011 2012 2013 2014 2015

© comScore, Inc. Proprietary and Confidential. 24 Source: Morgan Stanley Research

How the U.S. Mobile Market Has Changed – Highlights of Q1 2012

 The number of Smartphone owners grew by 47% year-over-year in March 2012
 In March 2012 there were 106.7 million Smartphone owners.

Growth of U.S. Smartphone U.S. Smartphone Penetration
Installed Base

100,000

Smartphone
45.6%
# Phone Owners (000)

80,000

60,000 Not 106.7 million
Smartphone
40,000
+47% 54.4%

Year on Year Growth
20,000

0

Product: MobiLens
Data: Three month average ending March 2012
© comScore, Inc. Proprietary and Confidential. 25 Country: US, N= 30,963

Continuous Decline of Feature Phones as Newly Acquired Devices

 In March 2012 62.9% of new phone acquisitions were Smartphones.
 Google and Apple accounted for the majority of new device acquisitions in Q1
 Google had a share of 58%, while iPhones made up just over 26% of new Smartphones.

New Devices Acquired by Type New Smartphones Acquired by OS
Microsoft Other OS
100%
4.6% 1.3%
% Acquired Device in Month

90%
80% 40.5% 37.1%
52.5% 52.0% 47.5% RIM
70%
9.5%
60%
50%
40% Google
30% 59.5% 62.9% Apple 58.3%
47.5% 48.0% 52.5% 26.3%
20%
10%
0%
Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012
Smartphone Not Smartphone Product: MobiLens

Android And Apple Devices Dominate U.S. Smartphone Market

Smartphone Operating System  Google’s Android platform share
grew rapidly over the past year,
Share
increasing its market share to
100%
51.0%.
90% Google
 Apple’s share increased from
34.8% 25.0% to over 30%. Android and
80%
Apple combined now account for
51.0%
over 80% of the Smartphone
% Smartphone Installed Base

70% Apple
market.
60%
 RIM has taken 3rd position in the
50%
25.5%
RIM Smartphone market. In March 2012,
RIM handsets accounted for only
40% 12.3% of all Smartphones
30.7%
30% Microsoft  Microsoft based devices also lost
27.1% market share and represented 3.9%
20% in March 2012.

10%
12.3%
7.5% Other OS
5.1% 3.9%
0% 2.1%
Product: MobiLens

15.0% of all U.S. Smartphone Owners Accessed Digital Books or
Magazines on their phones in March 2012

 16.8% of these 16 million Smartphone owners accessed digital books or
magazines on their devices ‘almost every day’.
 Amazon’s app had the highest reach among all Smartphone owners
using eReader apps.

Frequency of Accessing Digital Books Reach of apps among Smartphone
or Magazines owners with eReader apps
60.0% 54.0%
50.0%
40.0% 11%
29.2% Amazon.com
30.0% Google
16% 38%
20.0% 16.8%
Barnes & Noble
10.0% iBook
16%
0.0% 19%
eReader.com
Almost every At least once Once to three
day each week times throughout
the month

Product: MobiLens

Multi-Device Ownership: The Rise of the Digital Omnivore

 Tablets have led to the rise of the “Digital Omnivore” – consumers who
engage seamlessly with multiple online touch points daily.
 24.9% of all U.S. Smartphone owners also owned a tablet, up 308% from the
previous year.

Percentage of Smartphone Audience Also
Owning a Tablet

24.9%

8.9%


Product: MobiLens
Data: One month snapshot, March 2011 / March 2012

Agenda

 US Vital Signs
– Video
– Search
– Mobile
– eCommerce
 Monetization


Overall e-Commerce dollar sales have posted double-digit gains in every
quarter since Q4 2010 and are now well ahead of pre-recession levels

e-Commerce Dollar Sales ($ Billions)
Source: comScore e-Commerce Measurement

% Chg vs. YA

+13% +6% -3% 0% -1% -2% +3% +10% +9% +9% +11% +12% +14% +13% +14% +17%

$49.7
Compared to pre-recession levels
(Q1 2008), total retail in Q1 2012 is$43.4 $44.3

$38.1 $39.0 up 10%...
$38.0 $37.5 $36.3
$33.9
Billions ($)

$32.9
$30.6 $30.3 $31.0 $30.2 e-Commerce is up +42%
$29.6
$32.1

Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12


Led by Amazon’s +29% growth, many retail sites posted double-digit
gains in unique visitors in Q1 vs. a year ago

Avg. Monthly UVs (MM) on Select Retail Sites in Q1 2012
Source: comScore Media Metrix, U.S.
Y/Y Change

Amazon Sites 107.4 +29%

Apple.com 48.3 +25%

Wal-Mart 39.7 +18%

Netflix.com 28.2 +9%

Target Corporation 24.7 +8%

Best Buy Sites 19.9 +12%

Ticketmaster 15.7
+42%

Sears.com 13.4
+23%

Hewlett Packard 12.9
-21%

Macy's Inc. 12.9
+26%


About 1 in 10 consumers had aided awareness of the term
‘showrooming’

“Showrooming” – verb.
Visiting a brick-and-mortar store to see a
product but instead purchasing the product
online. Shoppers may intend from the start to
purchase the product online, or may decide to
purchase online, rather than in-person, after
viewing the item at the store.

16%

12%

All respondents
8%
Men

Women

% who have heard of
'showrooming'


35% of respondents have engaged in ‘showrooming’. Most intended to
buy at brick-and-mortar but changed their mind at the store

Consumer Usage of Showrooming
Q. Based on this definition, have you ever done this activity? (showrooming)
Source: comScore Survey – April 2012

Who’s engaging in
showrooming?

 35% of all respondents
…and did they plan it?
 50% of respondents ages 25-34,  6 in 10 ‘showroomers’ say they
the highest of any age group originally planned to purchase at the
store, but changed their mind while
 48% of tablet owners and 43% of
smartphone owners there & instead bought online

 43% of Millenials*  32% said they went to the store always
intending to buy online

* - defined as ages 18-29

Price was the biggest driver of ‘showrooming,’ while some wanted to
see item in person before deciding to purchase

Why Consumers Are Engaging in ‘Showrooming’
Q. Which of the following describe why you utilized showrooming? (Please select all that apply)

Price was better online 72%

Planned to buy online but wanted to see item(s)
in person before ordering 45%

Item was out of stock at store 24%

Would rather have item(s) shipped to home than
18%
Location, Location, Location
take home with me Respondents living in urban areas were
nearly twice as likely (26%) to choose
this option than those living in suburban
Was not convenient to buy in-person at the time 17% or rural areas (15% for both)

Other 5%

% among those who engaged in 'showrooming'


Consumer Electronics and Apparel were the most popular categories
among consumers who bought via showrooming

Product Categories Most Likely to be Purchased via Showrooming
Q. Which of the following types of item have you bought online after using ‘showrooming?’
(Please select all that apply)

Consumer electronics 63%

Apparel, clothing & accessories 43%

Books 29%

Appliances 22%

Toys 22%

Jewelry / watches 16%

Other 10%

% among those who engaged in 'showrooming'


Agenda

 US Vital Signs
– Video
– Search
– Mobile
– eCommerce
 Monetization


US Online Ad Spend Poised to Grow 18% in 2012

US Online Ad Spending 2010-2015
$ Billions and % Change
$50

$45

$40

$35

$30

$25

$20

$15 20.2%
17.6%
$10 14.9% 12.0%
10.4%
8.8%
$5

$0
2010 2011 2012 2013 2014 2015

© comScore, Inc. Proprietary and Confidential. 38 Source: eMarketer: US Online AdSpend Poised to Grow 20% in 2011

Who are the top advertisers in the online market in March 2012?

Top 10 Online Advertisers
Total Display Ad Impressions

10,000,000
9,000,000
8,000,000
7,000,000
(000)

6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0

Telecommunications company AT&T has a large online advertising presences.

Top advertisers also include Microsoft and business/finance companies, Experian and Scottrade.

© comScore, Inc. Proprietary and Confidential. 39 Source: comScore US Ad Metrix, March 2012

Are consumers actually seeing the ads?

US CA EU
67%
69% 65%
AVERAGE AVERAGE
AVERAGE

Campaign In-view ad rates ranged from:
US 55% to 93% EU 64% to 72% CA 56% to 74%

© comScore, Inc. Proprietary and Confidential. 40 Source: comScore vCE Charter Studies

Large sites within a content category do a better job than
smaller sites at ensuring the ads are actually viewable

Percentage of Ads Served In-View within a Given Site Category

The difference in in-view rates between Top 50 sites
versus the long tail sites in their category
was a full 16-percentage points
Source: comScore vCE Charter Studies

Digital Ad Economics:
The good guys aren’t necessarily winning

Correlation of In-View Rates & CPM

An equally as weak correlation was also observed between
CPM and ability to hit a primary demographic target
Source: comScore vCE Charter Studies

Thank You!


State of the Internet: US Growth Slows as Worldwide Audience Shifts

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