State Of The Internet: 2012Henry BlodgetCEO & EIC, Business Insider
The commercial Internet is    now ~20 years old.
So, how are we doing?
2+ billion people online                                              Global Internet Popula on             2,500         ...
2/3 of the world left to go                                              Global Internet Popula on             7,000      ...
US “New media” stock value 3X “old media”                $1,200                $1,000                 $800 Market Value  (...
(When you include Apple)           $700           $600           $500           $400                                      ...
As ever, power is very concentrated…            “New Media”          Yahoo     Twi er Hulu                                ...
And now to the actual    businesses…
MEDIA
U.S. Digital Advertising is making huge gains                                        U.S. Digital Adver sing             $...
And now accounts for ~20% of total ad spend                                           U.S. Adver sing             $180    ...
Among the largest media companies, morethan one-third of ad spending is now online.                  Online vs. Offline Ad...
TV still biggest. Online close behind.                    Print getting smashed.                                          ...
Newspaper ad revenue has collapsed
TV may be next.
“Over-the-top” video is real and growing fast.                               Digital Video Revenue, 2006-2011             ...
Pay TV subscriptions are trending down.                                               Pay TV Subscriber Net Addi ons      ...
In online ads, Google is completely dominant.         Facebook’s gaining steam…                          Google
Facebook has already blown past AOL,                    Microsoft, and Yahoo                                              ...
Google, Facebook and a handful of new companies                 are winning, portals losing.                              ...
“Display” ad growth is flattening.                                                        U.S. Display Adver sing         ...
And new companies taking share from portals… YouTube, Hulu, Glam, Twitter, Demand, et al.                                 ...
SOCIAL
Americans now spend more time on               social networks than portals                             Average Time Spent...
1/7th of the world’s population use Facebook                                       Facebook Ac ve Users       1,000       ...
Within social, Facebook dominates.                                          Social Networks: Unique Visitors (U.S.)       ...
So, will Facebook be bigger than             Google?
Unlikely.
Google is the best ad product in the history of the world… because it’s     like advertising at a store.
Facebook, meanwhile, is like   advertising at a party.
Social referrals to commerce sites are still tiny                                              Drivers of E-Commerce Traff...
eCOMMERCE
E-Commerce continues to take share…                                             U.S. Retail Sales             $5,000,000  ...
New “pure-plays” launched in last few years…                                                                      U.S. E-C...
… And they’re growing fast.                                                  Social Commerce Revenues             $3,500  ...
MOBILE
Something profoundhappened last year…
Smartphone sales overtook PC sales                                                         Global Internet Device Sales   ...
And will soon dwarf them                                                         Global Internet Device Sales      3,000,0...
PC sales, meanwhile, are in a stall                                 Global PC Shipments By Manufacturer100,000            ...
Tablets will also blow past PC sales in a few years                                  Tablet Sales Forecast          500   ...
So the future is mobile                                                G-20 Internet Access           3,000           2,50...
Where are we in themobile revolution?
Globally, we’re early.                               Global Smartphone Penetra on Forecast                2,500           ...
The U.S., however, is more than halfway there        Changes In Smartphone Ownership, 2011-2012 (U.S.)  60%  50%          ...
Growth slows after hitting 50% penetration
In the US, we’ve hit that point.                        U.S. Smartphone Market: Year-Over-Year Net Adds        40        3...
Most of the under-penetrated segments in US             are older and poorer                                         Smart...
So the focus is on China, which now    accounts for a quarter of smartphone sales.                                        ...
So, what do people  do on mobile?
Well, first, they do pretty much everything they do online…
They play games and social-network…  Daily Smartphone App Consump on, Minutes Per Category                                ...
Games sessions up 20-fold in two years      iOS & Android Mobile Game Session Growth                                      ...
They listen to music...                           75%                                                                     ...
They consume content…                        Top Mobile Categories By Growth In Audience, Dec. 2010 vs. Dec. 2011 (U.S.)  ...
20                                  0%                                        10%                                         ...
And it’s scaling faster than the desktop                                                      Mobile Internet Users       ...
They look at pictures and video.             U.S. Video Engagement, Monthly Minutes Per Ac ve User                        ...
They even watch movies and TV.                                                      Time Watched By Video Length And Devic...
Especially at night                                           When People Watch Mobile Video, By Device                   ...
They Shop…• Mobile accounts for 20 % of  Gilt’s weekday sales and 30% of  its weekend sales     - The iPad accounts for 40...
They use smartphones to make buying              decisions in stores.                            U.S. Smartphone Owners Ac...
Mobile is starting to drive significant           traffic to ecommerce sites                   Ecommerce Website Traffic B...
They pay for stuff… Paypal’s mobile               payments are growing rapidly                         PayPal Mobile Payme...
Square launched about two years ago, and it’s already processing $16+ million a day                        Square Es mated...
They even buy content! (0n tablets)                        Media Content Paid For On A Tablet, Q4 201170%60%50%40%30%20%10...
But the really interesting stuff  that people do on mobile         is what they      DON’T do online…
Angry birds has over 1 billion downloads                                              Angry Birds Downloads vs. Nintendo D...
Instagram hit 100 million users in 2 years
BOTTOM LINE:  The growth of mobile = moreInternet usage, new applications
Mobile makes Internet usage 24/7                    Share Of Device Page Traffic Over A Day:Source: comScore, Telefonica, ...
Usage is up across the board…                                                                                 U.S. Mobile ...
And people are consuming a huge       amount of content through mobile…             Media Content Accessed Through Mobile ...
So mobile advertising will be huge, right?
Hmm…
The “bullish” mobile-ad story is the huge   gap between time-spent and ad spending.         2011 U.S. Ad Spending vs. Cons...
But maybe there’s a good reason        for that gap…
The screen is really small.
Mobile monetization still behind the desktop                               ARPU, Desktop vs. Mobile                       ...
Mobile CPMs are much lower                  Effec ve CPM, Desktop vs. Mobile                       $3.50                  ...
Including for companies like Google and               Facebook.                                  Google CPC Growth15%10% 5...
Overall, mobile is still a tiny fraction of             digital ad spending.                                U.S. Digital A...
And it’s growing much slower than TV +         Internet in the first 5 years                                      Compara ...
But okay, yes, mobile ads are just getting started            (about ~$1.25 B last year)                                  ...
By the way, Google owns mobile, too                                         Mobile Ad Market Share100%90%                 ...
Because “mobile” ads are mainly just web search + display ads viewed on mobile     2011 Global Mobile Ad Spend By Category...
But “native” mobile ads are finally       beginning to appear   • Ads in timelines (Twitter / Facebook)   • Geo-located ad...
APPS
0                       5,000,000,000                                       10,000,000,000                                ...
On pace to hit 45 billion by the end of                       the year                        Apple App Store Downloads55,...
People now spend more time on apps   than they do browsing the web       U.S. Mobile Apps vs. Web Consump on, Minutes Per ...
And the disparity is growing.                                      Total Time Spent Using Mobile Web vs. Apps             ...
Mobile app revenue is growing fast, but                      still relatively small.                                      ...
Because most downloads are free            Mobile App Store Downloads, Free vs. Paid: 2011                                ...
“Freemium” is the dominant      business model
Games are the biggest money makers
Mobile has become a  platform game.
Platform markets tend tostandardize around one or two          platforms.
Right now, mobile is a two-horse race.                                                    Mobile Pla orm Market Share100%9...
Android has the largest platform globally.                                       Smartphone Market Share By OS (Global)   ...
But Apple is dominating app revenue.                                 Mobile App Revenue By Pla orm             $4,000     ...
Tablet market is early, but almost totally                dominated by Apple                                              ...
Mobile profits are going mainly to two players.                                     Opera ng Profit Share By Vendor 80%   ...
BONUS:So, are we in a new tech        bubble?
No.
Bubbles feature sky-high prices…   relative to fundamentals.
HOUSING BUBBLE: Price ratios   spiked off the charts…      Price-To-Rent: 1983-2012
STOCK BUBBLES: Price ratios   spiked off the charts…     S&P PE: 1885-2012
THIS Is A Bubble…  NASDAQ, 1991-2004
THIS Is A Bubble… House Prices: 1976-2012
Do you see that pattern yoday?         NASDAQ: 1971-2012
Are tech-company price ratios off the charts?”
No. Apple’s PE ratio has been declining for years
Recent hot IPOs are downright reasonable.                    1.4X 2012E Revenue                    2X Revenue             ...
What about Facebook?
Facebook went public at an  extremely high price…        75X EPS
Why?
Because everyone thought   “IPO” meant “free        money.”
Oops.
Investors learned a painful lesson.
But Facebook still has an excellent valuation…       45X EPS.
So don’t let anyone tell   you it’s “cheap.”
What’s happening to Facebook stock, by the way, is likely a    common transition…
High-growth stocks usually go    through a “momentum”phase, in which they’re blowing        away estimates.
Then growth slows, andexpectations come in line with           reality.
That’s followed by years of “multiple compression.”
Microsoft has been in this transition since 2000.
Google since 2008…
“Multiple compression” can be followed by steady growth…         …or death.
Amazon stock is back on the march.
Facebook’s future is   uncertain, but it’s a greatcompany, and stock could return         to “growth.”
But, for now – “multiple compression.”
One area in which investors have been too exuberant:   The private market.
Facebook’s IPO will probably dampen that enthusiasm.
Thank you very much.
Henry Blodget          Founder, CEO & Editor-in-          Chief, Business Insider         Alex Cocotas, AnalystBI Intellig...
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State of the Internet: 2012 (Business Insider)

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State of the Internet: 2012 (Business Insider)

  1. 1. State Of The Internet: 2012Henry BlodgetCEO & EIC, Business Insider
  2. 2. The commercial Internet is now ~20 years old.
  3. 3. So, how are we doing?
  4. 4. 2+ billion people online Global Internet Popula on 2,500 2,000 1,500(millions) 1,000 500 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Interna onal Communica on Union, Google
  5. 5. 2/3 of the world left to go Global Internet Popula on 7,000 6,000 5,000 4,000(millions) 3,000 Global Popula on 2,000 1,000 Internet Popula on 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Interna onal Communica on Union, Google
  6. 6. US “New media” stock value 3X “old media” $1,200 $1,000 $800 Market Value (billions) $600 $400 $200 $0 New Media Old Media
  7. 7. (When you include Apple) $700 $600 $500 $400 Market ValueBillions $300 $200 $100 $0 Apple Google Amazon Facebook Disney Comcast News Corp Time Time Viacom CBS Warner Warner Cable
  8. 8. As ever, power is very concentrated… “New Media” Yahoo Twi er Hulu Ne lix Facebook “Old Media” CBS Amazon Viacom Disney Time Warner Cable Time WarnerGoogle Apple Comcast News Corp $366 Billion Market Value $1,089 Billion Market Value
  9. 9. And now to the actual businesses…
  10. 10. MEDIA
  11. 11. U.S. Digital Advertising is making huge gains U.S. Digital Adver sing $35 $30 $25(billions) $20 $15 $10 $5 $0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: IAB
  12. 12. And now accounts for ~20% of total ad spend U.S. Adver sing $180 $160 $140 $120(billions) $100 $80 Offline $60 $40 $20 Online $0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: IAB, U.S. Census Bureau, Stategy Analy cs. BI Intelligence es mates
  13. 13. Among the largest media companies, morethan one-third of ad spending is now online. Online vs. Offline Adver sing (U.S.), 2006-2011 $80,000 $70,000 $60,000 38% 23% share share $50,000 Online U.S. $40,000Adver sing Revenue (millions) $30,000 62% 77% $20,000 share Offline share $10,000 $0 2006 2007 2008 2009 2010 2011 Source: Company filings and BI Intelligence es mates. Companies include: Google, Yahoo, AOL, Microso , Facebook, Time Warner, Disney, Viacom, CBS, News Corp, New York Times, Ganne , McClatchy, Time Inc, Entercom, CBS Radio, Clear Channel, Citadel, Cum
  14. 14. TV still biggest. Online close behind. Print getting smashed. U.S. Adver sing, 2006-2011 $80,000 $70,000 4% 7% Outdoor 6% 9% $60,000 Radio 11% Print 14% $50,000 20% U.S. All Other OnlineAdver sing $40,000 23% Revenue 13% (millions) $30,000 Google 10% $20,000 41% Television 42% $10,000 $0 2006 2007 2008 2009 2010 2011 Source: Represents annual U.S. adver sing revenue for 20 large media companies based on company filings and our own es mates
  15. 15. Newspaper ad revenue has collapsed
  16. 16. TV may be next.
  17. 17. “Over-the-top” video is real and growing fast. Digital Video Revenue, 2006-2011 $5,000 Hulu $4,000 YouTube $3,000 Total Digital Revenues (millions) $2,000 $1,000 Ne lix $0 2006 2007 2008 2009 2010 2011 Source: Company filings and BI Intelligence es mates
  18. 18. Pay TV subscriptions are trending down. Pay TV Subscriber Net Addi ons 1000 800 600 400 TelCo 200 SubscriberNet Addi ons 0 (thousands) Satellite -200 -400 Total -600 Cable -800 -1000 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Source: Bernstein Research, BI Intelligence estimates
  19. 19. In online ads, Google is completely dominant. Facebook’s gaining steam… Google
  20. 20. Facebook has already blown past AOL, Microsoft, and Yahoo U.S Digital Adver sing $9,000 $8,000 15% $7,000 4% 7% $6,000 8% Other 11% Digital $5,000Adver sing AOL Revenue Facebook(millions) $4,000 Yahoo 6% 13% $3,000 Microso 30% 55% $2,000 11% Google $1,000 40% $0 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Source: company filings BII es mates
  21. 21. Google, Facebook and a handful of new companies are winning, portals losing. U.S Digital Adver sing: Winners And Losers $9,000 $8,000 11% $7,000 15% Facebook $6,000 Other Digital $5,000Adver sing 80%  Revenue share! (millions) $4,000 55% 6% Google $3,000 40% $2,000 AOL 13% Microso 4% 11% $1,000 8% 30% Yahoo 7% $0 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Source: company filings, BII es mates
  22. 22. “Display” ad growth is flattening. U.S. Display Adver sing $3,000 $2,500 Microso $2,000 AOL DisplayAdver sing $1,500 Revenue Yahoo (millions) $1,000 Other $500 Google $0 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Source: company filings, BII es mates
  23. 23. And new companies taking share from portals… YouTube, Hulu, Glam, Twitter, Demand, et al. US Digital Adver sing: New Growth Companies $1,800 Glam Media $1,600 Federated Media Twi er $1,400 $1,200 Demand Media Digital $1,000 Adver sing Hulu Revenue (millions) $800 WebMD $600 $400 YouTube $200 Facebook $0 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Source: company filings BII es mates
  24. 24. SOCIAL
  25. 25. Americans now spend more time on social networks than portals Average Time Spent: Portals vs. Social Networks (U.S.) 30 Social Networks 25 20 PortalsAverage Minutes 15 Per Usage Day 10 5 0 Nov-2010 Dec-2010 Jan-2011 Feb-2011 Mar-2011 Apr-2011 May-2011 Jun-2011 Jul-2011 Aug-2011 Sep-2011 Oct-2011 Nov-2011 Dec-2011 Source: comScore
  26. 26. 1/7th of the world’s population use Facebook Facebook Ac ve Users 1,000 900 800 700 600 Ac ve Monthly Ac ve Users Users 500(millions) 400 300 200 Daily Ac ve Users 100 0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
  27. 27. Within social, Facebook dominates. Social Networks: Unique Visitors (U.S.) 200,000 Yahoo Sites Google Sites 180,000 Facebook 160,000 140,000 120,000 MonthlyUnique Visitors (thousands) 100,000 80,000 60,000 LinkedIn Twi er Google+ 40,000 20,000 Tumblr Pinterest - Nov-2010 Dec-2010 Jan-2011 Feb-2011 Mar-2011 Apr-2011 May-2011 Jun-2011 Jul-2011 Aug-2011 Sep-2011 Oct-2011 Nov-2011 Dec-2011 Source: comScore
  28. 28. So, will Facebook be bigger than Google?
  29. 29. Unlikely.
  30. 30. Google is the best ad product in the history of the world… because it’s like advertising at a store.
  31. 31. Facebook, meanwhile, is like advertising at a party.
  32. 32. Social referrals to commerce sites are still tiny Drivers of E-Commerce Traffic 90.0% 80.0% 70.0% 60.0% Facebook referrals up 92% year-over- 50.0% year…Percentage Of Traffic 40.0% 80.6% 30.0% 20.0% 10.0% 9.7% 7.5% 1.7% 0.5% 0.02% 0.0% Google Yahoo Bing AOL Facebook Twi er Source: RIchRelevance
  33. 33. eCOMMERCE
  34. 34. E-Commerce continues to take share… U.S. Retail Sales $5,000,000 E-Commerce $4,500,000 $4,000,000 $3,500,000 $3,000,000(millions) $2,500,000 $2,000,000 Offline Retail Sales $1,500,000 $1,000,000 $500,000 $0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Federal Reserve Economic Data--St. Louis Fed, BI Intelligence es mates
  35. 35. New “pure-plays” launched in last few years… U.S. E-Commerce Sales $200,000 Pure-Play "Social Commerce" $175,000 $150,000 $125,000 Total Sales $100,000(millions) $75,000 $50,000 E-Commerce $25,000 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Federal Reserve Economic Data - St. Louis Fed, Company Filings, BII Es mates
  36. 36. … And they’re growing fast. Social Commerce Revenues $3,500 Fab $3,000 ShoeDazzle One Kings Lane $2,500 Ideeli Zulily $2,000 Total Beyond The RackRevenue(millions) HauteLook $1,500 Rue La La LivingSocial $1,000 $500 Gilt Groupe Groupon $0 2008 2009 2010 2011 Source: Company Filings, BII Es mates
  37. 37. MOBILE
  38. 38. Something profoundhappened last year…
  39. 39. Smartphone sales overtook PC sales Global Internet Device Sales 1,000,000,000 900,000,000 800,000,000 Tablets 700,000,000 600,000,000Units 500,000,000 Smartphones 400,000,000 300,000,000 200,000,000 100,000,000 Personal Computers - 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Gartner, IDC, Strategy Analy cs, company filings, BI Intelligence es mates
  40. 40. And will soon dwarf them Global Internet Device Sales 3,000,000,000 2,500,000,000 2,000,000,000 TabletsUnits 1,500,000,000 We are here 1,000,000,000 Smartphones 500,000,000 Personal Computers - 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E Source: Gartner, IDC, Strategy Analy cs, company filings, BI Intelligence es mates
  41. 41. PC sales, meanwhile, are in a stall Global PC Shipments By Manufacturer100,000 iPad released 90,000 80,000 70,000 Other 60,000 50,000 Apple 40,000 Acer 30,000 Dell 20,000 Lenovo 10,000 HP 0 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Source: Gartner, IDC
  42. 42. Tablets will also blow past PC sales in a few years Tablet Sales Forecast 500 450 400 E-Readers 350 300 Units Sold 250 (millions) 200 We are here 150 100 50 0 2010 2011 2012E 2013E 2014E 2015E 2016E
  43. 43. So the future is mobile G-20 Internet Access 3,000 2,500 2,000 Consumer Mobile Broadband 1,500Connec ons (milions) 1,000 Mobile 500 Fixed Fixed Fixed 0 2005 2010 2015 Source: Boston Consul ng Group, Mary Meeker, Kleiner Perkins, Morgan Stanley Research, Berg Insight
  44. 44. Where are we in themobile revolution?
  45. 45. Globally, we’re early. Global Smartphone Penetra on Forecast 2,500 We are here 2,000 1,500 Feature Phone SalesGlobal Mobile Phone Sales (millions) 1,000 500 Smartphone Sales - 2010 2011 2012 2013 2014 2015 2016
  46. 46. The U.S., however, is more than halfway there Changes In Smartphone Ownership, 2011-2012 (U.S.) 60% 50% 48% 46% 41% 40% 35% 30% 20% 17% 12% 10% 0% Smartphone Feature Phone No Cell Phone May-11 Feb-12
  47. 47. Growth slows after hitting 50% penetration
  48. 48. In the US, we’ve hit that point. U.S. Smartphone Market: Year-Over-Year Net Adds 40 35 30 25 Users Added 20(millions) 15 10 5 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 Source: comScore, Nielsen
  49. 49. Most of the under-penetrated segments in US are older and poorer Smartphone Penetra on By Age And Income (U.S.) 90% 80% 80% 77% 74% 75% 69% 70% 70% 65% 65% 65% 63% 60% 60% 58% 56% 53% 52% 50% 51% 50% 48% 43% 44% 41% 42% 40% 38% 31% 32% 30% 30% 27% 23% 24% 21% 20% 18% 16% 17% 16% 15% 16% 10% 0% Ages 18 - 24 Ages 25 - 34 Ages 35 - 44 Ages 45 - 54 Ages 55 - 64 Ages 65+ <15k 15k - 35k 35k - 50k 50k - 75k 75k - 100k 100k+ Source: Nielsen
  50. 50. So the focus is on China, which now accounts for a quarter of smartphone sales. Global Smartphone Shipments 180,000 160,000 140,000 120,000(thousands) 100,000 80,000 Rest Of The World 60,000 40,000 20,000 China - 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Source: Gartner, IDC, Strategy Analy cs, Canalys, BII es mates
  51. 51. So, what do people do on mobile?
  52. 52. Well, first, they do pretty much everything they do online…
  53. 53. They play games and social-network… Daily Smartphone App Consump on, Minutes Per Category 7 7 10 10 12 11 24 15 25 24 Q1 2011 Q1 2012 Games Social Networking News Entertainment Other Source: Flurry Analy cs
  54. 54. Games sessions up 20-fold in two years iOS & Android Mobile Game Session Growth 20.5X 5.3X 1.0X Q1 2010 Q1 2011 Q1 2012 Source: Flurry Analy cs
  55. 55. They listen to music... 75% 70% 55%% of Traffic from Mobile Pandora 50% Twi er 33% Facebook 25% 5% 1% 0% 2008 2009 2010 2011 Source: Mary Meeker, Kleiner Perkins, companies
  56. 56. They consume content… Top Mobile Categories By Growth In Audience, Dec. 2010 vs. Dec. 2011 (U.S.) 35,000 30,000 25,000 Total 20,000 74% Mobile Audience(thousands) 15,000 72% 94% 77% 70% 80% 74% 10,000 69% 134% 5,000 82% 0 Health Online Retail Mens Electronic Gaming Job Lis ngs General Classifieds Auc on Sites Family Informa on Magazine Payment Informa on Reference Entertainment Content Dec-10 Dec-11 Source: comScore MobieLens, 3 mon. avg. ending Dec-2011 vs. Dec-2010
  57. 57. 20 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 08 20 - 12 09 20 - 02 09 20 - 04 09 1% 20 - 06Source: StatCounter 09 20 - 08 09 20 - 10 09 20 - 12 10 20 - 02 10 20 - 04 10 20 - 06 10 20 - 08 10 20 - 10 10 20 - 12 11 4% 20 - 02 11 20 - 04 11 20 - 06 11 20 - 08 11 20 - 10 11 Global Internet Trafic: Mobile vs. Desktop 20 - 12 12 20 - 02 Mobile 12 20 - 04 12 Desktop 20 - 06 12 -0 12% 8 Mobile now accounts for 12% of global internet traffic
  58. 58. And it’s scaling faster than the desktop Mobile Internet Users 2,500 Total Internet Users 2,000 1,500(millions) Mobile Internet Users 1,000 500 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Interna onal Communica on Union, Google
  59. 59. They look at pictures and video. U.S. Video Engagement, Monthly Minutes Per Ac ve User 472 425 378 324 276 231 152 110 93 63 Mar 2011 June 2011 Sept 2011 Dec 2011 Mar 2012 Google Internet Sites iOS & Android Photo & Video AppsSource: Flurry Analy cs, comScore Video Matrix
  60. 60. They even watch movies and TV. Time Watched By Video Length And Device 100% 90% 80%Percent Of All Hours Watched 70% 60% 50% 93% 40% 67% 30% 62% 48% 20% 10% 0% Desktop Smartphone Tablet Connected TV Video Length > 10 min 6 to 10 min 3 to 6 min 1 to 3 min < 1 min Source: Ooyala, Q2 2012
  61. 61. Especially at night When People Watch Mobile Video, By Device 10% 9% 8%Share Of Total Time Watched 7% 6% 5% 4% 3% 2% 1% 0% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Time Of Day Tablet Weekday Tablet Weekend Smartphone Weekday Smartphone Weekend Source: Ooyala
  62. 62. They Shop…• Mobile accounts for 20 % of Gilt’s weekday sales and 30% of its weekend sales - The iPad accounts for 40% of mobile sales• 38% of U.S. consumers have used smartphones to buy products or services - comScore, Dec 2011
  63. 63. They use smartphones to make buying decisions in stores. U.S. Smartphone Owners Ac vity In Retail Stores 24.0% 22.3% 20.4% 20.2% 19.7% 18.8% 16.2% 14.6% 14.1% 13.1% 12.3% 11.1% 10.9% 10.0% 8.3% 7.2% 6.3% 5.2%Took Picture Of Texted/Called Scanned A Sent Picture Of Found Store Compared Found Coupons Research Product Checked Product Product Friends/Family Product Barcode Products To Loca on Product Prices For Deals Features Availability About Product Family/Friends Males Females
  64. 64. Mobile is starting to drive significant traffic to ecommerce sites Ecommerce Website Traffic By Device100% Smartphone Tablet90%80%70%60%50% PC40%30%20%10% 0% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Source: Monetate
  65. 65. They pay for stuff… Paypal’s mobile payments are growing rapidly PayPal Mobile Payments Processed $5,000 $4,000 $3,000 TotalPayment Volume(millions) $2,000 $1,000 $0 2008 2009 2010 2011
  66. 66. Square launched about two years ago, and it’s already processing $16+ million a day Square Es mated Daily Payment Volume and Revenues $18,000 $16,000 $14,000 $12,000 Payment Volume(Thousands) $10,000 $8,000 $6,000 $4,000 Revenues $2,000 $0 3/11 4/11 5/11 6/11 7/11 8/11 9/11 10/11 11/11 12/11 1/12 2/12 3/12 4/12 5/12 6/12
  67. 67. They even buy content! (0n tablets) Media Content Paid For On A Tablet, Q4 201170%60%50%40%30%20%10%0% Downloaded Books Movies Magazines TV Shows Streaming Sports News Music Radio US Italy UK Germany Source: Nielsen
  68. 68. But the really interesting stuff that people do on mobile is what they DON’T do online…
  69. 69. Angry birds has over 1 billion downloads Angry Birds Downloads vs. Nintendo DS Sales 700,000 600,000 500,000 400,000 TotalDownloads Or Sales(thousands) 300,000 200,000 100,000 0 Mar 10 Jun 10 Sept 10 Dec 10 Mar 11 Jun 11 Sept 11 Dec 11 Source: New reports, company releases, BI Intelligence estimates Note: Includes Nintendo 3DS Sales
  70. 70. Instagram hit 100 million users in 2 years
  71. 71. BOTTOM LINE: The growth of mobile = moreInternet usage, new applications
  72. 72. Mobile makes Internet usage 24/7 Share Of Device Page Traffic Over A Day:Source: comScore, Telefonica, Macquarie Capital (USA), December 2011
  73. 73. Usage is up across the board… U.S. Mobile Content Usage 80% Sent Text Message 70%Share of mobile popula on that has... 60% Used Downloaded Apps 50% Used Browser Accessed Social Network 40% Or Blog Played games 30% Listened to music 20% 10% 0% Feb Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July 10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 Source: comScore
  74. 74. And people are consuming a huge amount of content through mobile… Media Content Accessed Through Mobile Device 59% 57% 53% 53%41% 29% 29% 27% 26% 27% 25% 23% 22% 20% 9% 10% 9% 5%Books Movies TV Shows Magazines News Social Downloaded Sports Streaming Networking Music Radio Tablet SmartphoneSource: Nielsen Q4 2011 Mobile Connected Device Report
  75. 75. So mobile advertising will be huge, right?
  76. 76. Hmm…
  77. 77. The “bullish” mobile-ad story is the huge gap between time-spent and ad spending. 2011 U.S. Ad Spending vs. Consumer Time Spent By Media 42% 43% 25% 26% 22% 15% 11% 10% 7% 1% TV Print Web Radio MobileSource: Mary Meeker (KPCB), eMarketer, IAB Spend Per Media Ad Time Spent Per Media
  78. 78. But maybe there’s a good reason for that gap…
  79. 79. The screen is really small.
  80. 80. Mobile monetization still behind the desktop ARPU, Desktop vs. Mobile $58.95 $25.00 $17.61 $6.62 $5.00 $3.87 Pandora Zynga Tencent Mobile Desktop Source: Pandora, Zynga, Tencent
  81. 81. Mobile CPMs are much lower Effec ve CPM, Desktop vs. Mobile $3.50 $0.75 Desktop Internet Mobile InternetSource: comScore, Vivaki, Mobclix Exchange
  82. 82. Including for companies like Google and Facebook. Google CPC Growth15%10% 5% 0%-5%-10%-15% 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Source: Company data, Evercore Group LLC Research
  83. 83. Overall, mobile is still a tiny fraction of digital ad spending. U.S. Digital Adver sing Revenues $35 Mobile $30 $25(billions) $20 $15 $10 $5 $0 2007 2008 2009 2010 2011 Source: IAB, BIA-Kelsey, BII es mates
  84. 84. And it’s growing much slower than TV + Internet in the first 5 years Compara ve U.S. Adver sing Media Annual $ Revenue Growth (First 5 Years)$5,000 $4,621$4,500$4,000 $3,698$3,500$3,000$2,500 $2,162 $2,162 $1,920$2,000$1,500 $1,171 $1,012 $907$1,000 $806 $500 $358 $392 $267 $80 $160 $55 $0 Year 1 Year 2 Year 3 Year 4 Year 5 Broadcast TV Mobile Internet Source: IAB, McCann-Erickson, BIA-Kelsey, BII es mates Note: Adjusted for infla on
  85. 85. But okay, yes, mobile ads are just getting started (about ~$1.25 B last year) U.S. Mobile Ad Forecast $7,000 $6,000 Local $5,000 Mobile Ad $4,000 Revenue (millions) $3,000 We are here $2,000 Media $1,000 $0 2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E 2017E
  86. 86. By the way, Google owns mobile, too Mobile Ad Market Share100%90% Other Microso80% Yahoo Apple70% Pandora60%50% Millennial Media40%30% Google20%10% 0% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 Source: news reports, company releases, BII es mates
  87. 87. Because “mobile” ads are mainly just web search + display ads viewed on mobile 2011 Global Mobile Ad Spend By Category Messaging 10% Display 28% Search 62% Source: IAB
  88. 88. But “native” mobile ads are finally beginning to appear • Ads in timelines (Twitter / Facebook) • Geo-located ads • Shareable ads
  89. 89. APPS
  90. 90. 0 5,000,000,000 10,000,000,000 15,000,000,000 20,000,000,000 25,000,000,000 30,000,000,000 7/ 1/ 08 9/ 1/ 0811 /1 /0 8 1/ 1/ 09 3/ 1/ 09 5/ 1/ 09 7/ 1/ 09 9/ 1/ 0911 /1 /0 9 1/ 1/ 10 3/ 1/ 10 5/ 1/ 10 7/ 1/ 10 9/ 1/ 1011 /1 /1 0 1/ 1/ 11 3/ 1/ Apple App Store Downloads 11 5/ 1/ 11 7/ 1/ 11 9/ 1/ 1111 /1 /1 1 1/ 1/ 12 3/ 1/ 12 5/ App downloads are growing frantically 1/ 12
  91. 91. On pace to hit 45 billion by the end of the year Apple App Store Downloads55,000,000,00050,000,000,00045,000,000,00040,000,000,00035,000,000,00030,000,000,00025,000,000,00020,000,000,00015,000,000,00010,000,000,000 5,000,000,000 0 2/ 1 3/ 1 4/ 1 5/ 1 6/ 1 7/ 1 8/ 1 9/ 1 10 11 11 11 12 11 1/ 1 2/ 2 3/ 2 4/ 2 5/ 2 6/ 2 7/ 2 8/ 2 9/ 2 10 12 13 11 12 12 12 1/ 2 1 1 1 1 1 1 1 1 /1 1 1 1 1 1 1 1 1 /1 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ / / 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ 1/ / / 1/ /1 /1 /1 /1 /1 /1 1/
  92. 92. People now spend more time on apps than they do browsing the web U.S. Mobile Apps vs. Web Consump on, Minutes Per Day 94 81 74 72 70 64 66 43 June 2010 Dec 2010 June 2011 Dec 2011 Web browsing Mobile appsSource: Flurry Analy cs, Alexa, comScore
  93. 93. And the disparity is growing. Total Time Spent Using Mobile Web vs. Apps 140 120 100 80Minutes Spent Per Month (Biillions ) 60 Apps 40 20 Mobile Web 0 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Source: Nielsen Smartphone Analy cs
  94. 94. Mobile app revenue is growing fast, but still relatively small. Mobile App Revenue $4,000 $3,500 $3,000 $2,500(millions) $2,000 $1,500 $1,000 $500 $0 2008 2009 2010 2011 Source: iSuppli, Forrester Research, company releases, BII es mates
  95. 95. Because most downloads are free Mobile App Store Downloads, Free vs. Paid: 2011 Total Downloads Free Downloads 89%Source: Garner, September 2012
  96. 96. “Freemium” is the dominant business model
  97. 97. Games are the biggest money makers
  98. 98. Mobile has become a platform game.
  99. 99. Platform markets tend tostandardize around one or two platforms.
  100. 100. Right now, mobile is a two-horse race. Mobile Pla orm Market Share100%90%80% Other70%60%50% Windows40% Blackberry30% Apple iOS20% Android10% 0% Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Source: Gartner, IDC, Strategy Analy cs, BI Intelligence es mates, and company filings
  101. 101. Android has the largest platform globally. Smartphone Market Share By OS (Global) 100% Microso 90% Other Blackberry 80% 70% Symbian 60% Share ofGlobal Unit 50% Sales 40% Apple 30% 20% Android 10% 0% Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Source: Gartner
  102. 102. But Apple is dominating app revenue. Mobile App Revenue By Pla orm $4,000 $3,500 Other $3,000 Android $2,500(millions) $2,000 $1,500 $1,000 Apple iOS $500 $0 2008 2009 2010 2011 Source: iSuppli, Forrester Research, company releases, BII es mates
  103. 103. Tablet market is early, but almost totally dominated by Apple Tablet Market Share By OS100% Blackberry Nook90%80% Kindle70% Android60%50%40%30% iPad20%10% 0% Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Source: Es mates based on informa on from IDC, Strategy Analy cs, and company filings
  104. 104. Mobile profits are going mainly to two players. Opera ng Profit Share By Vendor 80% Apple 70% Nokia 60% 50% 40% Samsung 30% 20% Sony Ericsson 10% RIM HTC LG 0% Motorola -10% -20% 2007 2008 2009 2010 2011 Q1 2012 Q2 2012 Source: Company releases, Canaccord Genuity es mates
  105. 105. BONUS:So, are we in a new tech bubble?
  106. 106. No.
  107. 107. Bubbles feature sky-high prices… relative to fundamentals.
  108. 108. HOUSING BUBBLE: Price ratios spiked off the charts… Price-To-Rent: 1983-2012
  109. 109. STOCK BUBBLES: Price ratios spiked off the charts… S&P PE: 1885-2012
  110. 110. THIS Is A Bubble… NASDAQ, 1991-2004
  111. 111. THIS Is A Bubble… House Prices: 1976-2012
  112. 112. Do you see that pattern yoday? NASDAQ: 1971-2012
  113. 113. Are tech-company price ratios off the charts?”
  114. 114. No. Apple’s PE ratio has been declining for years
  115. 115. Recent hot IPOs are downright reasonable. 1.4X 2012E Revenue 2X Revenue 4X Revenue 14X Revenue
  116. 116. What about Facebook?
  117. 117. Facebook went public at an extremely high price… 75X EPS
  118. 118. Why?
  119. 119. Because everyone thought “IPO” meant “free money.”
  120. 120. Oops.
  121. 121. Investors learned a painful lesson.
  122. 122. But Facebook still has an excellent valuation… 45X EPS.
  123. 123. So don’t let anyone tell you it’s “cheap.”
  124. 124. What’s happening to Facebook stock, by the way, is likely a common transition…
  125. 125. High-growth stocks usually go through a “momentum”phase, in which they’re blowing away estimates.
  126. 126. Then growth slows, andexpectations come in line with reality.
  127. 127. That’s followed by years of “multiple compression.”
  128. 128. Microsoft has been in this transition since 2000.
  129. 129. Google since 2008…
  130. 130. “Multiple compression” can be followed by steady growth… …or death.
  131. 131. Amazon stock is back on the march.
  132. 132. Facebook’s future is uncertain, but it’s a greatcompany, and stock could return to “growth.”
  133. 133. But, for now – “multiple compression.”
  134. 134. One area in which investors have been too exuberant: The private market.
  135. 135. Facebook’s IPO will probably dampen that enthusiasm.
  136. 136. Thank you very much.
  137. 137. Henry Blodget Founder, CEO & Editor-in- Chief, Business Insider Alex Cocotas, AnalystBI Intelligence is a new subscription research service from Business Insiderthat provides in-depth insight, data, and analysis of the mobile industry.More info at intelligence.businessinsider.com

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