Internet Markets: crisis 2.0?


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Internet Markets: crisis 2.0?

  1. 1. Mick Gourevitch RBC Internet Markets: crisis 2.0?
  2. 2. Internet drivers: <ul><li>the end of 1990’s: news sites; </li></ul><ul><li>mid 2000’s: blogs; </li></ul><ul><li>2006-2007: social networks; </li></ul><ul><li> 2008 and further: video + mobile? </li></ul>
  3. 3. Video <ul><li>New huge market: </li></ul><ul><li>Analysts predicted </li></ul><ul><li>600% growth </li></ul><ul><li>for 2007-2012 </li></ul>
  4. 4. Mobile <ul><li>The growth of users with 240x320 screen resolution in Runet (Liveinternet data) </li></ul>
  5. 5. Mobile advertising revenues <ul><li>$19,5 billion in 2012; </li></ul><ul><li>3,5 billion mobile phones </li></ul><ul><li>worldwide; </li></ul><ul><li>70% penetration 3G </li></ul><ul><li>in Korea and Japan; </li></ul><ul><li>Worldwide mobile television subscriptions are expected to grow 5x to $19 bln by 2012 compared with $408 mln in 2007, Pricewaterhouse said . </li></ul>
  6. 6. <ul><li>Do you really want to talk about it? </li></ul>
  7. 7. Autumn 2008: <ul><li>“ Verge of collapse” </li></ul><ul><li>“ Global economic meltdown” </li></ul><ul><li>“ The end of web 2.0 era” </li></ul><ul><li>We all die? </li></ul>
  8. 8. Fact Pack (1/3) <ul><li>Plans to lay-off company stuff: </li></ul><ul><li>Yahoo: 10% of more till the end of year; </li></ul><ul><li>eBay: 10% (about 1600 employees); </li></ul><ul><li>Online ad network AdBrite: 40%; </li></ul><ul><li>Top 3 social network Hi5: 15%; </li></ul><ul><li>Those companies, that haven’t cut off the staff, have frozen their new vacancies </li></ul><ul><li>Who will be the next?.. </li></ul>
  9. 9. Fact Pack (2/3) <ul><li>Industry forecasts are lowered: </li></ul><ul><li>ZenithOptimedia: Global ad spending growth </li></ul><ul><ul><li>2008 6,6% 4,3% </li></ul></ul><ul><ul><li>2009 6,0% 4,0% </li></ul></ul><ul><li>Goldman Sachs: decline in separate ad revenues </li></ul><ul><ul><ul><li>for TV – 7% </li></ul></ul></ul><ul><ul><ul><li>for broadcast networks – 5% </li></ul></ul></ul><ul><ul><ul><li>for the radio, outdoor, magazines sectors – 5-10% </li></ul></ul></ul>
  10. 10. Fact Pack (3/3) <ul><li>ZenithOptimedia: </li></ul><ul><li>2009-2010 – 12% growth ad spending in CEE; </li></ul><ul><li>Internet advertising is expected to grow by an average of 23% per year between 2007 and 2010 globally; </li></ul><ul><li>Russia is expected to be top 6 ad market (Oct. 2008 forecast). </li></ul>
  11. 11. Are they right?
  12. 12. Internet crisises: history <ul><li>1998 crisis in emerging countries; </li></ul><ul><li> burst 2000’s; </li></ul><ul><li>2008-… </li></ul>
  13. 13. crisis 2000’s: outcome <ul><li> Shake-out; </li></ul><ul><li> Many start-ups have been frozen; </li></ul><ul><li> Companies, which have had a strong monetization model and invested resources in technical development, became the leaders of new epoch. </li></ul><ul><li>They created new web 2.0 Internet </li></ul>
  14. 14. Crisis 2008: net out <ul><li>Good news: </li></ul><ul><ul><li>World Internet penetration is more then 20% of population (Russia – 23%, Poland – 42%); </li></ul></ul><ul><ul><li>Internet is a basic sociological necessit y of life now; </li></ul></ul><ul><ul><li>Diversified revenues of Internet-companies (media ads, context ads, micropayments, e-commerce); </li></ul></ul><ul><ul><li>Internet became a whole industry; </li></ul></ul><ul><ul><li>Internet dictates its will to the traditional economics </li></ul></ul><ul><ul><li>(music industry, for ex.) </li></ul></ul>
  15. 15. Crisis 2008: net out <ul><li>Bad news: </li></ul><ul><ul><li>Huge amount of startups without established revenue model </li></ul></ul><ul><ul><li>(they still try to sell happiness); </li></ul></ul><ul><ul><li>Huge cost expenses (esp. for videohostings); </li></ul></ul><ul><ul><li>Stock market dependence; </li></ul></ul><ul><ul><li>Owners of start-ups still need to justify previous funding </li></ul></ul><ul><ul><li>GET YOUR REVENUE MODEL NOW OR GO HOME </li></ul></ul>
  16. 16. Our forecast: We will survive! <not all of us> :)
  17. 17. Social networking and dating sites <ul><li>People need to communicate every day </li></ul><ul><li>Diversified revenue model; </li></ul><ul><li>Vast audience; </li></ul><ul><li>Micropayments; </li></ul><ul><li>It is very good for you, if you have API. </li></ul>
  18. 18. Video <ul><li>You should find a revenue model or you have problems </li></ul><ul><li>Still have no revenue model; </li></ul><ul><li>Cost expenses are highest (servers, channels); </li></ul><ul><li>The most experimental forms of ads (video ads included) are the most susceptible to cutbacks. </li></ul><ul><li>But: </li></ul><ul><li>Vast audience; </li></ul><ul><li>People will prefer to watch a new film at home, not in cinema. </li></ul>
  19. 19. Search <ul><li>Search still feels good!  </li></ul><ul><li>Search is the most protected area of online advertising, with its low price and high CTR </li></ul><ul><li>SearchIgnite report: </li></ul><ul><li>27% growth in search spending for 3Q2008/3Q2007 </li></ul><ul><li>But: </li></ul><ul><li>Many advertisers leaves the market </li></ul><ul><li>The fall of CPC </li></ul>
  20. 20. Email <ul><li>IM and social networks to overtake email </li></ul><ul><li>With the growth of social networks and IM-audience, email loses its market share. </li></ul><ul><li>IDC: IM is set to overtake email as the preferred form of business communication by the 2 nd half of 2010. </li></ul><ul><li>Email services moves to became more social </li></ul>
  21. 21. Marketing services <ul><li>Audience measurement; </li></ul><ul><ul><li>For startups it is still necessary to endorse its audience for venture investors. </li></ul></ul><ul><li>Marketing researches; </li></ul><ul><ul><li>Are needed to understand new trends and directions for development. </li></ul></ul><ul><li>Advertising networks. </li></ul><ul><ul><li>Will need to reduce the prices; weak networks will die. </li></ul></ul>
  22. 22. Mobile <ul><li>It is not enough just to “produce and sell ring tones” any more. </li></ul><ul><li>You need to move forward and diversify your core services or prepare to be eaten by mobile operators. </li></ul>
  23. 23. New products <ul><li>We have new market rules here: </li></ul><ul><li>No more fast money: if you have no clear monetization model, you have no funding. </li></ul><ul><li>No more “another facebook clones” for fast selling. </li></ul><ul><li>Investors don’t want </li></ul><ul><li>to see “sellers of happiness” any more </li></ul>
  24. 24. Brave New World
  25. 25. Audience <ul><li>We predict the growth of the time spent in Internet : </li></ul><ul><ul><li>People need to know news every day. </li></ul></ul><ul><ul><li>People need to reduce their expenses (YouTube and Hulu instead of cinema; social networks instead of clubs and restaurants). </li></ul></ul><ul><ul><li>On the other hand, we see the decline of local broadband penetration on further months. It gives a chance for mobile Internet. </li></ul></ul>
  26. 26. Internet advertising <ul><li>We predict no decline, but the growth wouldn’t be so impressive as it used to be before. </li></ul><ul><li>The hardest hit ad category – financing advertising – contributes only about 4% of global ad expenditure. </li></ul><ul><li>So why Internet advertising should decline hardly? </li></ul><ul><li>Huge TV-, Outdoor and Print ad budgets would be redistributed to the benefit of Internet (depends on the market) </li></ul><ul><li>Context and search ads will expand. </li></ul>
  27. 27. Portals/ Media-holdings <ul><li>The point depends of: </li></ul><ul><ul><li>Degree of your revenue stability and diversification. </li></ul></ul><ul><ul><li>Amount of your venture initiatives. </li></ul></ul><ul><ul><li>Internet could be your driving force </li></ul></ul>
  28. 28. What analytics says: <ul><li>People will stop to buy; </li></ul><ul><li>People will stop to get fun and go to cinema; </li></ul><ul><li>People will stop to eat; </li></ul><ul><li>People will need no sex….. </li></ul><ul><li>Are they right? </li></ul>
  29. 29. So what to do? <ul><li>Be realistic. </li></ul><ul><li>Adapt quickly. </li></ul><ul><li>Make cuts. </li></ul><ul><li>Became cash-flow positive ASAP. </li></ul><ul><li>GET REAL! </li></ul>
  30. 30. Believe me!
  31. 31. Any questions about video and mobile? :) [email_address]