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Ignition 2012 deck future of digital final

The document discusses the growth of digital media and how consumption habits are shifting online and to mobile devices. Some key points: - 2 billion people are now online, but 2/3 of the global population is still not connected - Smartphone and tablet sales are growing rapidly while PC sales have stalled - Digital advertising and content revenues are significant and growing as consumption moves online - Social networks now see more time spent than traditional websites like portals - These trends have disrupted some media like newspapers, and television may be next as viewing goes online

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The Future Of Digital Henry Blodget CEO & EIC, Business Insider
The medium is now ~20 years old.
So, how are we doing?
2+ billion people online 0 500 1,000 1,500 2,000 2,500 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (millions) Global Internet Popula on Source: Interna onal Communica on Union, Google
2/3 of the world left to go Global Popula on Internet Popula on 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (millions) Global Internet Popula on Source: Interna onal Communica on Union, Google
However…
Most of the money is already online Bo om 70 percent 18% Top 30 percent 82% Distribu on Of Global Income, 2000 Source: UN Human Development Report, Trends In Global Income Distribu on
So the market’s more mature than you think.
Meanwhile, something profound happened last year…
PC growth stalled HP Lenovo Dell Acer Apple Other 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 Global PC Shipments By Manufacturer Source: Gartner, IDC iPad released
Smartphone sales blew past PC sales Personal Computers Smartphones Tablets - 100,000,000 200,000,000 300,000,000 400,000,000 500,000,000 600,000,000 700,000,000 800,000,000 900,000,000 1,000,000,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Units Global Internet Device Sales Source: Gartner, IDC, Strategy Analy cs, company filings, BI Intelligence es mates
Tablets are now driving all the growth in PC market PCs Tablets 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 (thousands) Global Computer Shipments Source: Gartner, IDC, Strategy Analy cs company releases
So the future is mobile Fixed Fixed Fixed Mobile Mobile 0 500 1,000 1,500 2,000 2,500 3,000 2005 2010 2015 Consumer Broadband Connec ons (milions) G-20 Internet Access Source: Boston Consul ng Group, Mary Meeker, Kleiner Perkins, Morgan Stanley Research, Berg Insight
Where are we in the mobile revolution?
Globally, we’re still early… 1B Smartphone Users 6B Mobile Phone Users 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Smartphone Mobile Phone GlobalUsers(millions) Source: Strategy Analy cs, Interna onal Telecommunica ons Union Note: Some users own more than one device Global Smartphone vs. Mobile Phone Users, 2012E
But growth slows after 50% penetration
U.S. and other markets are past halfway point Feature Phones 55% Smartphones 50% 45% 0% 10% 20% 30% 40% 50% 60% 70% 80% Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 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 Apr-12 May-12 Jun-12 U.S. Smartphone Penetra on Source: Nielsen
US smartphone growth starting to slow 0 5 10 15 20 25 30 35 40 Q1 2008 Q2 2008 Q3 2008 Q4 2008 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 Q3 2013 Users Added (millions) U.S. Smartphone Market: Year-Over-Year Net Adds Source: comScore, Nielsen
Most future US smartphone buyers will be older and poorer 56% 43% 31% 18% 16% 16% 53% 58% 44% 32% 17% 15% 69% 65% 50% 30% 23% 16% 70% 65% 52% 41% 27% 21% 65% 74% 63% 51% 42% 24% 77% 80% 75% 60% 48% 38% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Ages 18 - 24 Ages 25 - 34 Ages 35 - 44 Ages 45 - 54 Ages 55 - 64 Ages 65+ Smartphone Penetra on By Age And Income (U.S.) <15k 15k - 35k 35k - 50k 50k - 75k 75k - 100k 100k+ Source: Nielsen
So the focus is on markets like China, which now accounts for ~25% of smartphone sales. Rest Of The World China - 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 (thousands) Global Smartphone Shipments Source: Gartner, IDC, Strategy Analy cs, Canalys, BII es mates
China is already twice the size of US market Mobile Broadband Total 0 100 200 300 400 500 600 June 06 Dec 06 June 07 Dec 07 June 08 Dec 08 June 09 Dec 09 June 10 Dec 10 June 11 Dec 11 June 12 (millions) Chinese Internet Users Source: China Internet Network Informa on Center
MEDIA
Remember when they said no one would ever pay for content?
Digital content revenues are exploding iTunes Ne lix $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 2005 2006 2007 2008 2009 2010 2011 Total Digital Content Revenue (thousands) Source: BI Intelligence, company filings Digital Content Revenue, 2005-2011 Zynga Dropbox Spo fy Hulu LinkedIn NY Times Digital WSJ Digital TheStreet.com Glenn Beck TV Kindle
Digital Advertising still growing rapidly $0 $5 $10 $15 $20 $25 $30 $35 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (billions) U.S. Digital Adver sing Source: IAB
At largest U.S. tech and media companies, nearly 40% of ad revenue is digital 77% share 62% share 23% share 38% share $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 2006 2007 2008 2009 2010 2011 U.S. Adver sing Revenue (millions) 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 Online vs. Offline Adver sing (U.S.), 2006-2011 Online Offline
TV still biggest. Online close behind. Print getting smashed. 41% 42% 10% 23% 13% 14% 20% 9% 11% 7% 6% 4% $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 2006 2007 2008 2009 2010 2011 U.S. Adver sing Revenue (millions) Source: Represents annual U.S. adver sing revenue for 20 large media companies based on company filings and our own es mates U.S. Adver sing, 2006-2011 All Other Online Television Print Radio Outdoor Google
Digital has already “disrupted” one media sector…
As news consumption moved online… 17% 5% 1% 1% 1% -1% -4% 23% -4% -7% 1% 9% -6% -7% -10% -5% 0% 5% 10% 15% 20% 25% Online Network TV Local TV Audio Cable TV Magazines Newspaper News Media Audience and Revenue Growth, 2010-2011 Audience Growth Revenue Growth Source: Nielsen Media Research, the Audit Bureau of Circula on and Arbitron, SNL Kagan, eMarketer, Veronis Suhler Stevenson, Radio Adver sing Bureau, Publishers Informa on Bureau, Na onal News Associa on, BIA/Kelsey
Newspaper ad revenue collapsed
Google now generates as much U.S. ad revenue as newspapers and magazines (all of them) $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 2004 2005 2006 2007 2008 2009 2010 2011 1H2012 U.S. Ad Revenue (millions) Source: Google, NAA, PIB Google Generates More U.S. Ad Revenue Than Newspapers Google (U.S.) U.S. Magazines U.S. Newspapers
(Some) paywall subscriptions are growing, but… 0 100 200 300 400 500 600 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 (thousands) Source: company releases Note: does not include print subcribers with digital access New York Times Digital Subscribers
“Digital dimes” don’t offset lost print dollars $- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 InMillions Source: Newspaper Associa on Of America Newspaper Ad Revenue (Print vs. Online) Print Online
Of course, print news is old news…
Now the question is…
IsTV next? 5.3 5.4 5.5 5.6 5.7 5.8 5.9 6.0 6.1 6.2 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 Nielsen Prime me Household Ra ngs Big 4 U.S. TV Networks Average
For now,TV ad spending still growing $58 $60 $62 $64 $66 $68 $70 $72 $74 2007 2008 2009 2010 2011 Total TV Ad Spend (billions) TV Ad Spend, 2007-2011 Source: Nielsen
But behavior is changing 82% 83% 64% 17% 16% 26% 6% 6% 8% 7% 2004 2008 2012 %ofTVsetusers Source: GfK U.S. Prime me TV Viewing (% of 18-49 TV set users during 8-9 PM hour, mul ple responses permi ed) Live TV Recorded TV Video game Streaming video
PayTV subscriptions are now trending down Source: Bernstein Research Cable Satellite TelCo Total -1000 -800 -600 -400 -200 0 200 400 600 800 1000 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 Subscriber Net Addi ons (thousands) Pay TV Subscriber Net Addi ons
‘Over-the-top’ video is real and growing fast. Ne lix YouTube Hulu $0 $1,000 $2,000 $3,000 $4,000 $5,000 2006 2007 2008 2009 2010 2011 Total Digital Revenues (millions) Source: Company filings and BI Intelligence es mates Digital Video Revenue, 2006-2011
Live events are increasingly being viewed over the Internet 0% 50% 100% 150% 200% 250% 300% 2-Jul 9-Jul 16-Jul 23-Jul 30-Jul 6-Aug 13-Aug 20-Aug 27-Aug 3-Sep 10-Sep 17-Sep 24-Sep Source: Ooyala Growth Of Total Live Video Viewing Time Via Connected TV Devices And Gaming Consoles (Q3 2012)
Digital video advertising is on the rise $0 $500 $1,000 $1,500 $2,000 $2,500 2006 2007 2008 2009 2010 2011 (millions) Online Video Ad Revenue (U.S.) Source: Interac ve Adver sing Bureau, eMarketer, comScore, BI Intelligence es mates
But as with print, digital = less money thanTV 75.2% 98.5% 92.1% 24.8% 1.5% 7.9% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% TV Online video Streaming TV online Source: comScore, June 2012 Ad Loads, TV vs. Digital (% share of programming) Content Ads
What does history teach us?
As habits change…
The money follows.
By the way, “old media” isn’t the only media being disrupted...
Americans now spend more time on social networks than portals Social Networks Portals 0 5 10 15 20 25 30 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 Average Minutes Per Usage Day Average Time Spent: Portals vs. Social Networks (U.S.) Source: comScore
1/7th of the world’s population now use Facebook Monthly Ac ve Users Daily Ac ve Users 0 100 200 300 400 500 600 700 800 900 1,000 1,100 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 Ac ve Users (millions) Facebook Ac ve Users
Time spent onYahoo, et al, continues to decline 0% 2% 4% 6% 8% 10% 12% 14% 16% 1Q07 2Q07 3Q07 04Q7 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Yahoo Time Spent % vs. Total Internet (U.S.) Source: comScore, Ci Investment Research And Analysis
Now, in online ads, it’s Google, Facebook, and “other”… Google
Facebook has blown past AOL, Microsoft, andYahoo Google Facebook Microso Yahoo AOL Other $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Digital Adver sing Revenue (millions) U.S Digital Adver sing Source: company filings BII es mates 40% 11% 30% 13% 6% 55% 11% 8% 7% 4% 15%
YouTube, Hulu, Glam,Twitter, Demand, et al., also taking portal share… Facebook YouTube WebMD Hulu Demand Media Twi er Federated Media Glam Media $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Digital Adver sing Revenue (millions) US Digital Adver sing: New Growth Companies Source: company filings BII es mates
“Display” ad growth is flattening Google Other Yahoo AOL Microso $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Display Adver sing Revenue (millions) U.S. Display Adver sing Source: company filings, BII es mates
Real-time bidding is automating what’s left 0% 5% 10% 15% 20% 25% 30% 2010 2011 2012 2013 2014 2015 2016 Source: eMarketer RTB As % Of Digital Display Ad Spending
So, will Facebook ever be bigger than Google?
Unlikely.
Google is like advertising at a store.
Facebook is like advertising at a party.
Social referrals to commerce sites are tiny Facebook referrals up 92% year-over- year… 80.6% 9.7% 7.5% 1.7% 0.5% 0.02% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% Google Yahoo Bing AOL Facebook Twi er Percentage Of Traffic Drivers of E-Commerce Traffic Source: RIchRelevance
And speaking of advertising at stores...
E-tailers are now building ad businesses
Amazon ad revenue is already $1+ billion a year…
And as eCommerce continues to take share… Offline Retail Sales E-Commerce $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 $5,000,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (millions) U.S. Retail Sales Source: Federal Reserve Economic Data--St. Louis Fed, BI Intelligence es mates
New brands are blending marketing and commerce Groupon Gilt Groupe LivingSocial Rue La La HauteLook Beyond The Rack Zulily Ideeli One King's Lane ShoeDazzle Fab $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 2008 2009 2010 2011 Total Revenue (millions) Social Commerce Revenues Source: Company Filings, BII Es mates
MOBILE
So, what do people do on mobile?
Well, first, they do pretty much everything they do online…
They play games and social-network… 25 24 15 24 11 1210 107 7 Q1 2011 Q1 2012 Daily Smartphone App Consump on, Minutes Per Category Games Social Networking News Entertainment Other Source: Flurry Analy cs
They listen to music... 5% Pandora 70% 1% Facebook 33% Twi er 55% 0% 25% 50% 75% 2008 2009 2010 2011 %ofTrafficfromMobile Source: Mary Meeker, Kleiner Perkins, companies
They consume content… 134% 94% 82% 80% 77% 74% 74% 72% 70% 69% 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 Health Informa on Online Retail Men's Magazine Content Electronic Payment Gaming Informa on Job Lis ngs General Reference Classifieds Auc on Sites Family Entertainment Total Mobile Audience (thousands) Top Mobile Categories By Growth In Audience, Dec. 2010 vs. Dec. 2011 (U.S.) Dec-10 Dec-11 Source: comScore MobieLens, 3 mon. avg. ending Dec-2011 vs. Dec-2010
They look at pictures and video. 63 93 110 152 231 276 324 378 472 425 Mar 2011 June 2011 Sept 2011 Dec 2011 Mar 2012 U.S. Video Engagement, Monthly Minutes Per Ac ve User Google Internet Sites iOS & Android Photo & Video Apps Source: Flurry Analy cs, comScore Video Matrix
They use their devices while they watchTV 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Monthly Mul ple Times A Week Daily Source: Nielsen Cross-Pla orm Report Q2, 2012 Percentage Of Smartphone Users Who Use Their Phones While Watching TV
They shop… PC Smartphone Tablet 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Ecommerce Website Traffic By Device Source: Monetate
They use smartphones to make buying decisions in stores. 19.7% 18.8% 20.4% 14.6% 13.1% 14.1% 8.3% 10.9% 6.3% 24.0% 22.3% 16.2% 20.2% 12.3% 10.0% 11.1% 7.2% 5.2% Took Picture Of Product Texted/Called Friends/Family About Product Scanned A Product Barcode Sent Picture Of Products To Family/Friends Found Store Loca on Compared Product Prices Found Coupons For Deals Research Product Features Checked Product Availability U.S. Smartphone Owners Ac vity In Retail Stores Males Females
They pay for stuff $0 $1,000 $2,000 $3,000 $4,000 $5,000 2008 2009 2010 2011 Total Payment Volume (millions) PayPal Mobile Payments Processed
They buy content 0% 10% 20% 30% 40% 50% 60% 70% Downloaded Music Books Movies Magazines TV Shows Streaming Radio Sports News Media Content Paid For On A Tablet, Q4 2011 US Italy UK Germany Source: Nielsen
And they do stuff they DON’T do online…
Play Angry Birds, et al 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 Mar 10 Jun 10 Sept 10 Dec 10 Mar 11 Jun 11 Sept 11 Dec 11 Total Downloads Or Sales (thousands) Angry Birds Downloads vs. Nintendo DS Sales Note: Includes Nintendo 3DS Sales Source: New reports, company releases, BI Intelligence estimates
Take and share pictures 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 3/2011 4/2011 5/2011 6/2011 7/2011 8/2011 9/2011 10/2011 11/2011 12/2011 1/2012 2/2012 3/2012 4/2012 5/2012 7/2012 7/2012 8/2012 9/2012 Total Users (thousands) Instagram Es mated Users Source: news reports, company releases, BII Es mates
BOTTOM LINE: Mobile devices = More Internet usage + New applications
Source: comScore, Telefonica, Macquarie Capital (USA), December 2011 In fact, mobile has made digital 24/7 Share Of Device PageTraffic Over A Day:
This leads to another big question…
Mobile usage is up across the board Sent Text Message Used Browser Used Downloaded Apps Played games Accessed Social Network Or Blog Listened to music 0% 10% 20% 30% 40% 50% 60% 70% 80% Feb 10 Apr 10 May 10 Jun 10 Jul 10 Aug 10 Sept 10 Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sept 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 June 12 July 12 Aug 12 Sep 12 Shareofmobilepopulaonthathas... U.S. Mobile Content Usage Source: comScore
People are consuming a huge amount of content through mobile… 41% 27% 26% 23% 59% 53% 29% 29% 22% 9% 10% 9% 5% 57% 53% 25% 27% 20% Books Movies TV Shows Magazines News Social Networking Downloaded Music Sports Streaming Radio Media Content Accessed Through Mobile Device Tablet Smartphone Source: Nielsen Q4 2011 Mobile Connected Device Report
As mobile increases, all other media decreases 45% 25% 17% 4% 9% 7% 44% 26% 16% 6% 8% 8% 43% 26% 15% 9% 7% 7% 42% 26% 14% 12% 6% 5% TV Online Radio Mobile Print Other Source: eMarketer, October 2012 Share Of Consumer Time Spent With Major Media 2009 2010 2011 2012
So mobile advertising will be huge, right?
Hmmm…
The “bullish” mobile-ad story is the huge gap between time-spent and ad spending. 42% 25% 22% 11% 1% 43% 7% 26% 15% 10% TV Print Web Radio Mobile 2011 U.S. Ad Spending vs. Consumer Time Spent By Media Ad Spend Per Media Time Spent Per Media Source: Mary Meeker (KPCB), eMarketer, IAB
But maybe there’s a good reason for that gap…
The screen is really small.
Mobile monetization still behind the desktop $3.87 $5.00 $17.61 $6.62 $25.00 $58.95 Pandora Zynga Tencent ARPU, Desktop vs. Mobile Mobile Desktop Source: Pandora, Zynga, Tencent
Mobile CPMs are much lower $3.50 $0.75 Desktop Internet Mobile Internet Effec ve CPM, Desktop vs. Mobile Source: comScore, Vivaki, Mobclix Exchange
Most “mobile” ads are mainly web search + display ads viewed on mobile Search 62% Display 28% Messaging 10% 2011 Global Mobile Ad Spend By Category Source: IAB
Google completely owns mobile search Google Yahoo! bing 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Global Mobile Search Market Share Source: Global StatCounter
So Google owns mobile, too Google Millennial Media Pandora Apple Yahoo MicrosoOther 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 Mobile Ad Market Share Source: news reports, company releases, BII es mates
Overall, mobile is still a tiny fraction of digital ad spending. Mobile $0 $5 $10 $15 $20 $25 $30 $35 2007 2008 2009 2010 2011 (billions) U.S. Digital Adver sing Revenues Source: IAB, BIA-Kelsey, BII es mates
And it’s growing much slower thanTV + Internet in the first 5 years $358 $1,012 $2,162 $2,162 $3,698 $80 $160 $392 $806 $1,171 $55 $267 $907 $1,920 $4,621 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 Year 1 Year 2 Year 3 Year 4 Year 5 Compara ve U.S. Adver sing Media Annual $ Revenue Growth (First 5 Years) Broadcast TV Mobile Internet Source: IAB, McCann-Erickson, BIA-Kelsey, BII es mates Note: Adjusted for infla on
But!
“Native” mobile ads are finally beginning to appear… • Ads in timelines (Twitter / Facebook) • Shareable ads • Location-based mobile ads
Location-based mobile ads can target users at the mall, restaurants, car dealers … 0 10 20 30 40 50 60 70 80 M all LibrarySchoolCam pus Hotel Airport BigBoxRetailers QuickService Restaurants OtherRestaurants ElectronicsRetailers CarDealers ClothingRetailers Source: JiWire, Q3 2012 Monthly Ad Requests Per Mobile User By Loca on
Targeted mobile ads have higher CPMs $10.00 $5.00 $5.00 $3.50 $- $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 Flurry video ads Adsmobi video ads LSN Mobile local ads xAd local Source: Ad pla orms, BII Research, Greg Sterling, Opus Research CPMs For Selected Mobile Ad Pla orms
So, yes, mobile ads are just getting started Media Local $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E 2017E Mobile Ad Revenue (millions) U.S. Mobile Ad Forecast We are here
APPS
App Store downloads on pace to hit 60 billion by mid-2013 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 35,000,000,000 40,000,000,000 45,000,000,000 50,000,000,000 55,000,000,000 60,000,000,000 65,000,000,000 1/1/11 2/1/11 3/1/11 4/1/11 5/1/11 6/1/11 7/1/11 8/1/11 9/1/11 10/1/11 11/1/11 12/1/11 1/1/12 2/1/12 3/1/12 4/1/12 5/1/12 6/1/12 7/1/12 8/1/12 9/1/12 10/1/12 11/1/12 12/1/12 1/1/13 2/1/13 3/1/13 4/1/13 5/1/13 6/1/13 Apple App Store Downloads
Smartphone users spend more time on apps than web Mobile Web Apps 0 20 40 60 80 100 120 140 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 Minutes Spent Per Month (Biillions ) Total Time Spent Using Mobile Web vs. Apps Source: Nielsen Smartphone Analy cs
Mobile app revenue is growing fast, but still relatively small. $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 2008 2009 2010 2011 (millions) Mobile App Revenue Source: iSuppli, Forrester Research, company releases, BII es mates
Because most downloads are free Mobile App Store Downloads, Free vs. Paid: 2011 Source: Garner, September 2012 Total Downloads Free Downloads 89%
“Freemium” is the dominant model
Games are the biggest money makers
Mobile has become a platform game.
Platform markets tend to standardize around one or two platforms.
Right now, mobile is a two-horse race. Android Apple Blackberry Windows Other 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 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 Q3 2012 Global Mobile Pla orm Market Share Source: Gartner, IDC, Strategy Analy cs, BI Intelligence es mates, and company filings
Android has the largest smartphone platform globally. Android Apple Blackberry Symbian Other Microso 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Share of Global Unit Sales Smartphone Market Share By OS (Global) Source: Gartner
Partly because it owns China Android Apple Symbian Other 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Source: Analysys Interna onal Chinese Smartphone Market Share By Pla orm
And it’s the same two-horse story in tablets iPad Android Kindle Nook Blackberry 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Tablet Market Share By Pla orm Source: Es mates based on informa on from IDC, Strategy Analy cs, and company filings
But a big mystery has arisen...
Where are all these Android users?
Apple is dominating app revenue Apple iOS Android Other $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 2008 2009 2010 2011 (millions) Mobile App Revenue By Pla orm Source: iSuppli, Forrester Research, company releases, BII es mates
And most commerce and web traffic is from Apple iPad iPhone Android Android Tablets Other 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Source: Monetate Ecommerce Website Traffic By Mobile Pla orm
Do Android folks actually use their devices?
Mobile profits are going mainly to two players. Apple Nokia Samsung RIM Motorola Sony Ericcson LG HTC -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 2007 2008 2009 2010 2011 Q1 2012 Q2 2012 Q3 2012 Opera ng Profit Share By Vendor Source: Company releases, Canaccord Genuity es mates
So, what’s the future of media?
Digital?
Yes.
Mobile?
Yes.
Mobile ONLY?
No.
Digital is now a 4-screen world…
Maybe 5 screens soon…
But mobile FIRST?
Only if you have a totally mobile-centric app...
...Or you want to annoy your users and customers.
Thank you very much.
Henry Blodget Founder, CEO & Editor-in-Chief, Business Insider Alex Cocotas, Analyst Marcelo Ballvé, Editorial Director BI Intelligence is a new subscription service from Business Insider that provides in-depth insight, data, and analysis of the mobile industry. More info at intelligence.businessinsider.com Peter Lee, Intern Josh Luger, Director of Subscription Products

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Ignition 2012 deck future of digital final

  • 1.
    The Future OfDigital Henry Blodget CEO & EIC, Business Insider
  • 2.
    The medium isnow ~20 years old.
  • 3.
    So, how arewe doing?
  • 4.
    2+ billion peopleonline 0 500 1,000 1,500 2,000 2,500 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (millions) Global Internet Popula on Source: Interna onal Communica on Union, Google
  • 5.
    2/3 of theworld left to go Global Popula on Internet Popula on 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (millions) Global Internet Popula on Source: Interna onal Communica on Union, Google
  • 6.
  • 7.
    Most of themoney is already online Bo om 70 percent 18% Top 30 percent 82% Distribu on Of Global Income, 2000 Source: UN Human Development Report, Trends In Global Income Distribu on
  • 8.
    So the market’smore mature than you think.
  • 9.
  • 10.
    PC growth stalled HP Lenovo Dell Acer Apple Other 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 1Q082Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 Global PC Shipments By Manufacturer Source: Gartner, IDC iPad released
  • 11.
    Smartphone sales blewpast PC sales Personal Computers Smartphones Tablets - 100,000,000 200,000,000 300,000,000 400,000,000 500,000,000 600,000,000 700,000,000 800,000,000 900,000,000 1,000,000,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Units Global Internet Device Sales Source: Gartner, IDC, Strategy Analy cs, company filings, BI Intelligence es mates
  • 12.
    Tablets are nowdriving all the growth in PC market PCs Tablets 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 (thousands) Global Computer Shipments Source: Gartner, IDC, Strategy Analy cs company releases
  • 13.
    So the futureis mobile Fixed Fixed Fixed Mobile Mobile 0 500 1,000 1,500 2,000 2,500 3,000 2005 2010 2015 Consumer Broadband Connec ons (milions) G-20 Internet Access Source: Boston Consul ng Group, Mary Meeker, Kleiner Perkins, Morgan Stanley Research, Berg Insight
  • 14.
    Where are wein the mobile revolution?
  • 15.
    Globally, we’re stillearly… 1B Smartphone Users 6B Mobile Phone Users 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Smartphone Mobile Phone GlobalUsers(millions) Source: Strategy Analy cs, Interna onal Telecommunica ons Union Note: Some users own more than one device Global Smartphone vs. Mobile Phone Users, 2012E
  • 16.
    But growth slowsafter 50% penetration
  • 17.
    U.S. and othermarkets are past halfway point Feature Phones 55% Smartphones 50% 45% 0% 10% 20% 30% 40% 50% 60% 70% 80% Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 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 Apr-12 May-12 Jun-12 U.S. Smartphone Penetra on Source: Nielsen
  • 18.
    US smartphone growthstarting to slow 0 5 10 15 20 25 30 35 40 Q1 2008 Q2 2008 Q3 2008 Q4 2008 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 Q3 2013 Users Added (millions) U.S. Smartphone Market: Year-Over-Year Net Adds Source: comScore, Nielsen
  • 19.
    Most future USsmartphone buyers will be older and poorer 56% 43% 31% 18% 16% 16% 53% 58% 44% 32% 17% 15% 69% 65% 50% 30% 23% 16% 70% 65% 52% 41% 27% 21% 65% 74% 63% 51% 42% 24% 77% 80% 75% 60% 48% 38% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Ages 18 - 24 Ages 25 - 34 Ages 35 - 44 Ages 45 - 54 Ages 55 - 64 Ages 65+ Smartphone Penetra on By Age And Income (U.S.) <15k 15k - 35k 35k - 50k 50k - 75k 75k - 100k 100k+ Source: Nielsen
  • 20.
    So the focusis on markets like China, which now accounts for ~25% of smartphone sales. Rest Of The World China - 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 (thousands) Global Smartphone Shipments Source: Gartner, IDC, Strategy Analy cs, Canalys, BII es mates
  • 21.
    China is alreadytwice the size of US market Mobile Broadband Total 0 100 200 300 400 500 600 June 06 Dec 06 June 07 Dec 07 June 08 Dec 08 June 09 Dec 09 June 10 Dec 10 June 11 Dec 11 June 12 (millions) Chinese Internet Users Source: China Internet Network Informa on Center
  • 22.
  • 23.
    Remember when theysaid no one would ever pay for content?
  • 24.
    Digital content revenuesare exploding iTunes Ne lix $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 2005 2006 2007 2008 2009 2010 2011 Total Digital Content Revenue (thousands) Source: BI Intelligence, company filings Digital Content Revenue, 2005-2011 Zynga Dropbox Spo fy Hulu LinkedIn NY Times Digital WSJ Digital TheStreet.com Glenn Beck TV Kindle
  • 25.
    Digital Advertising stillgrowing rapidly $0 $5 $10 $15 $20 $25 $30 $35 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (billions) U.S. Digital Adver sing Source: IAB
  • 26.
    At largest U.S.tech and media companies, nearly 40% of ad revenue is digital 77% share 62% share 23% share 38% share $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 2006 2007 2008 2009 2010 2011 U.S. Adver sing Revenue (millions) 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 Online vs. Offline Adver sing (U.S.), 2006-2011 Online Offline
  • 27.
    TV still biggest.Online close behind. Print getting smashed. 41% 42% 10% 23% 13% 14% 20% 9% 11% 7% 6% 4% $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 2006 2007 2008 2009 2010 2011 U.S. Adver sing Revenue (millions) Source: Represents annual U.S. adver sing revenue for 20 large media companies based on company filings and our own es mates U.S. Adver sing, 2006-2011 All Other Online Television Print Radio Outdoor Google
  • 28.
    Digital has already“disrupted” one media sector…
  • 29.
    As news consumptionmoved online… 17% 5% 1% 1% 1% -1% -4% 23% -4% -7% 1% 9% -6% -7% -10% -5% 0% 5% 10% 15% 20% 25% Online Network TV Local TV Audio Cable TV Magazines Newspaper News Media Audience and Revenue Growth, 2010-2011 Audience Growth Revenue Growth Source: Nielsen Media Research, the Audit Bureau of Circula on and Arbitron, SNL Kagan, eMarketer, Veronis Suhler Stevenson, Radio Adver sing Bureau, Publishers Informa on Bureau, Na onal News Associa on, BIA/Kelsey
  • 30.
  • 31.
    Google now generatesas much U.S. ad revenue as newspapers and magazines (all of them) $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 2004 2005 2006 2007 2008 2009 2010 2011 1H2012 U.S. Ad Revenue (millions) Source: Google, NAA, PIB Google Generates More U.S. Ad Revenue Than Newspapers Google (U.S.) U.S. Magazines U.S. Newspapers
  • 32.
    (Some) paywall subscriptionsare growing, but… 0 100 200 300 400 500 600 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 (thousands) Source: company releases Note: does not include print subcribers with digital access New York Times Digital Subscribers
  • 33.
    “Digital dimes” don’toffset lost print dollars $- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 InMillions Source: Newspaper Associa on Of America Newspaper Ad Revenue (Print vs. Online) Print Online
  • 34.
    Of course, printnews is old news…
  • 35.
  • 36.
    IsTV next? 5.3 5.4 5.5 5.6 5.7 5.8 5.9 6.0 6.1 6.2 2007-2008 2008-20092009-2010 2010-2011 2011-2012 Nielsen Prime me Household Ra ngs Big 4 U.S. TV Networks Average
  • 37.
    For now,TV adspending still growing $58 $60 $62 $64 $66 $68 $70 $72 $74 2007 2008 2009 2010 2011 Total TV Ad Spend (billions) TV Ad Spend, 2007-2011 Source: Nielsen
  • 38.
    But behavior ischanging 82% 83% 64% 17% 16% 26% 6% 6% 8% 7% 2004 2008 2012 %ofTVsetusers Source: GfK U.S. Prime me TV Viewing (% of 18-49 TV set users during 8-9 PM hour, mul ple responses permi ed) Live TV Recorded TV Video game Streaming video
  • 39.
    PayTV subscriptions arenow trending down Source: Bernstein Research Cable Satellite TelCo Total -1000 -800 -600 -400 -200 0 200 400 600 800 1000 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 Subscriber Net Addi ons (thousands) Pay TV Subscriber Net Addi ons
  • 40.
    ‘Over-the-top’ video isreal and growing fast. Ne lix YouTube Hulu $0 $1,000 $2,000 $3,000 $4,000 $5,000 2006 2007 2008 2009 2010 2011 Total Digital Revenues (millions) Source: Company filings and BI Intelligence es mates Digital Video Revenue, 2006-2011
  • 41.
    Live events areincreasingly being viewed over the Internet 0% 50% 100% 150% 200% 250% 300% 2-Jul 9-Jul 16-Jul 23-Jul 30-Jul 6-Aug 13-Aug 20-Aug 27-Aug 3-Sep 10-Sep 17-Sep 24-Sep Source: Ooyala Growth Of Total Live Video Viewing Time Via Connected TV Devices And Gaming Consoles (Q3 2012)
  • 42.
    Digital video advertisingis on the rise $0 $500 $1,000 $1,500 $2,000 $2,500 2006 2007 2008 2009 2010 2011 (millions) Online Video Ad Revenue (U.S.) Source: Interac ve Adver sing Bureau, eMarketer, comScore, BI Intelligence es mates
  • 43.
    But as withprint, digital = less money thanTV 75.2% 98.5% 92.1% 24.8% 1.5% 7.9% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% TV Online video Streaming TV online Source: comScore, June 2012 Ad Loads, TV vs. Digital (% share of programming) Content Ads
  • 44.
  • 45.
  • 46.
  • 47.
    By the way,“old media” isn’t the only media being disrupted...
  • 48.
    Americans now spendmore time on social networks than portals Social Networks Portals 0 5 10 15 20 25 30 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 Average Minutes Per Usage Day Average Time Spent: Portals vs. Social Networks (U.S.) Source: comScore
  • 49.
    1/7th of theworld’s population now use Facebook Monthly Ac ve Users Daily Ac ve Users 0 100 200 300 400 500 600 700 800 900 1,000 1,100 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 Ac ve Users (millions) Facebook Ac ve Users
  • 50.
    Time spent onYahoo,et al, continues to decline 0% 2% 4% 6% 8% 10% 12% 14% 16% 1Q07 2Q07 3Q07 04Q7 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Yahoo Time Spent % vs. Total Internet (U.S.) Source: comScore, Ci Investment Research And Analysis
  • 51.
    Now, in onlineads, it’s Google, Facebook, and “other”… Google
  • 52.
    Facebook has blownpast AOL, Microsoft, andYahoo Google Facebook Microso Yahoo AOL Other $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Digital Adver sing Revenue (millions) U.S Digital Adver sing Source: company filings BII es mates 40% 11% 30% 13% 6% 55% 11% 8% 7% 4% 15%
  • 53.
    YouTube, Hulu, Glam,Twitter,Demand, et al., also taking portal share… Facebook YouTube WebMD Hulu Demand Media Twi er Federated Media Glam Media $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Digital Adver sing Revenue (millions) US Digital Adver sing: New Growth Companies Source: company filings BII es mates
  • 54.
    “Display” ad growthis flattening Google Other Yahoo AOL Microso $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Display Adver sing Revenue (millions) U.S. Display Adver sing Source: company filings, BII es mates
  • 55.
    Real-time bidding isautomating what’s left 0% 5% 10% 15% 20% 25% 30% 2010 2011 2012 2013 2014 2015 2016 Source: eMarketer RTB As % Of Digital Display Ad Spending
  • 56.
    So, will Facebookever be bigger than Google?
  • 57.
  • 58.
  • 59.
  • 60.
    Social referrals tocommerce sites are tiny Facebook referrals up 92% year-over- year… 80.6% 9.7% 7.5% 1.7% 0.5% 0.02% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% Google Yahoo Bing AOL Facebook Twi er Percentage Of Traffic Drivers of E-Commerce Traffic Source: RIchRelevance
  • 61.
    And speaking ofadvertising at stores...
  • 62.
    E-tailers are nowbuilding ad businesses
  • 63.
    Amazon ad revenueis already $1+ billion a year…
  • 64.
    And as eCommercecontinues to take share… Offline Retail Sales E-Commerce $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 $5,000,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (millions) U.S. Retail Sales Source: Federal Reserve Economic Data--St. Louis Fed, BI Intelligence es mates
  • 65.
    New brands areblending marketing and commerce Groupon Gilt Groupe LivingSocial Rue La La HauteLook Beyond The Rack Zulily Ideeli One King's Lane ShoeDazzle Fab $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 2008 2009 2010 2011 Total Revenue (millions) Social Commerce Revenues Source: Company Filings, BII Es mates
  • 66.
  • 67.
    So, what dopeople do on mobile?
  • 68.
    Well, first, theydo pretty much everything they do online…
  • 69.
    They play gamesand social-network… 25 24 15 24 11 1210 107 7 Q1 2011 Q1 2012 Daily Smartphone App Consump on, Minutes Per Category Games Social Networking News Entertainment Other Source: Flurry Analy cs
  • 70.
    They listen tomusic... 5% Pandora 70% 1% Facebook 33% Twi er 55% 0% 25% 50% 75% 2008 2009 2010 2011 %ofTrafficfromMobile Source: Mary Meeker, Kleiner Perkins, companies
  • 71.
    They consume content… 134% 94% 82% 80% 77% 74% 74% 72% 70% 69% 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 Health Informaon Online Retail Men's Magazine Content Electronic Payment Gaming Informa on Job Lis ngs General Reference Classifieds Auc on Sites Family Entertainment Total Mobile Audience (thousands) Top Mobile Categories By Growth In Audience, Dec. 2010 vs. Dec. 2011 (U.S.) Dec-10 Dec-11 Source: comScore MobieLens, 3 mon. avg. ending Dec-2011 vs. Dec-2010
  • 72.
    They look atpictures and video. 63 93 110 152 231 276 324 378 472 425 Mar 2011 June 2011 Sept 2011 Dec 2011 Mar 2012 U.S. Video Engagement, Monthly Minutes Per Ac ve User Google Internet Sites iOS & Android Photo & Video Apps Source: Flurry Analy cs, comScore Video Matrix
  • 73.
    They use theirdevices while they watchTV 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Monthly Mul ple Times A Week Daily Source: Nielsen Cross-Pla orm Report Q2, 2012 Percentage Of Smartphone Users Who Use Their Phones While Watching TV
  • 74.
    They shop… PC Smartphone Tablet 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q1 2011Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Ecommerce Website Traffic By Device Source: Monetate
  • 75.
    They use smartphonesto make buying decisions in stores. 19.7% 18.8% 20.4% 14.6% 13.1% 14.1% 8.3% 10.9% 6.3% 24.0% 22.3% 16.2% 20.2% 12.3% 10.0% 11.1% 7.2% 5.2% Took Picture Of Product Texted/Called Friends/Family About Product Scanned A Product Barcode Sent Picture Of Products To Family/Friends Found Store Loca on Compared Product Prices Found Coupons For Deals Research Product Features Checked Product Availability U.S. Smartphone Owners Ac vity In Retail Stores Males Females
  • 76.
    They pay forstuff $0 $1,000 $2,000 $3,000 $4,000 $5,000 2008 2009 2010 2011 Total Payment Volume (millions) PayPal Mobile Payments Processed
  • 77.
    They buy content 0% 10% 20% 30% 40% 50% 60% 70% Downloaded Music BooksMovies Magazines TV Shows Streaming Radio Sports News Media Content Paid For On A Tablet, Q4 2011 US Italy UK Germany Source: Nielsen
  • 78.
    And they dostuff they DON’T do online…
  • 79.
    Play Angry Birds,et al 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 Mar 10 Jun 10 Sept 10 Dec 10 Mar 11 Jun 11 Sept 11 Dec 11 Total Downloads Or Sales (thousands) Angry Birds Downloads vs. Nintendo DS Sales Note: Includes Nintendo 3DS Sales Source: New reports, company releases, BI Intelligence estimates
  • 80.
    Take and sharepictures 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 3/2011 4/2011 5/2011 6/2011 7/2011 8/2011 9/2011 10/2011 11/2011 12/2011 1/2012 2/2012 3/2012 4/2012 5/2012 7/2012 7/2012 8/2012 9/2012 Total Users (thousands) Instagram Es mated Users Source: news reports, company releases, BII Es mates
  • 81.
    BOTTOM LINE: Mobile devices= More Internet usage + New applications
  • 82.
    Source: comScore, Telefonica,Macquarie Capital (USA), December 2011 In fact, mobile has made digital 24/7 Share Of Device PageTraffic Over A Day:
  • 83.
    This leads toanother big question…
  • 84.
    Mobile usage isup across the board Sent Text Message Used Browser Used Downloaded Apps Played games Accessed Social Network Or Blog Listened to music 0% 10% 20% 30% 40% 50% 60% 70% 80% Feb 10 Apr 10 May 10 Jun 10 Jul 10 Aug 10 Sept 10 Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sept 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 June 12 July 12 Aug 12 Sep 12 Shareofmobilepopulaonthathas... U.S. Mobile Content Usage Source: comScore
  • 85.
    People are consuminga huge amount of content through mobile… 41% 27% 26% 23% 59% 53% 29% 29% 22% 9% 10% 9% 5% 57% 53% 25% 27% 20% Books Movies TV Shows Magazines News Social Networking Downloaded Music Sports Streaming Radio Media Content Accessed Through Mobile Device Tablet Smartphone Source: Nielsen Q4 2011 Mobile Connected Device Report
  • 86.
    As mobile increases,all other media decreases 45% 25% 17% 4% 9% 7% 44% 26% 16% 6% 8% 8% 43% 26% 15% 9% 7% 7% 42% 26% 14% 12% 6% 5% TV Online Radio Mobile Print Other Source: eMarketer, October 2012 Share Of Consumer Time Spent With Major Media 2009 2010 2011 2012
  • 87.
  • 88.
  • 89.
    The “bullish” mobile-adstory is the huge gap between time-spent and ad spending. 42% 25% 22% 11% 1% 43% 7% 26% 15% 10% TV Print Web Radio Mobile 2011 U.S. Ad Spending vs. Consumer Time Spent By Media Ad Spend Per Media Time Spent Per Media Source: Mary Meeker (KPCB), eMarketer, IAB
  • 90.
    But maybe there’sa good reason for that gap…
  • 91.
    The screen isreally small.
  • 92.
    Mobile monetization stillbehind the desktop $3.87 $5.00 $17.61 $6.62 $25.00 $58.95 Pandora Zynga Tencent ARPU, Desktop vs. Mobile Mobile Desktop Source: Pandora, Zynga, Tencent
  • 93.
    Mobile CPMs aremuch lower $3.50 $0.75 Desktop Internet Mobile Internet Effec ve CPM, Desktop vs. Mobile Source: comScore, Vivaki, Mobclix Exchange
  • 94.
    Most “mobile” adsare mainly web search + display ads viewed on mobile Search 62% Display 28% Messaging 10% 2011 Global Mobile Ad Spend By Category Source: IAB
  • 95.
    Google completely ownsmobile search Google Yahoo! bing 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Global Mobile Search Market Share Source: Global StatCounter
  • 96.
    So Google ownsmobile, too Google Millennial Media Pandora Apple Yahoo MicrosoOther 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 Mobile Ad Market Share Source: news reports, company releases, BII es mates
  • 97.
    Overall, mobile isstill a tiny fraction of digital ad spending. Mobile $0 $5 $10 $15 $20 $25 $30 $35 2007 2008 2009 2010 2011 (billions) U.S. Digital Adver sing Revenues Source: IAB, BIA-Kelsey, BII es mates
  • 98.
    And it’s growingmuch slower thanTV + Internet in the first 5 years $358 $1,012 $2,162 $2,162 $3,698 $80 $160 $392 $806 $1,171 $55 $267 $907 $1,920 $4,621 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 Year 1 Year 2 Year 3 Year 4 Year 5 Compara ve U.S. Adver sing Media Annual $ Revenue Growth (First 5 Years) Broadcast TV Mobile Internet Source: IAB, McCann-Erickson, BIA-Kelsey, BII es mates Note: Adjusted for infla on
  • 99.
  • 100.
    “Native” mobile adsare finally beginning to appear… • Ads in timelines (Twitter / Facebook) • Shareable ads • Location-based mobile ads
  • 101.
    Location-based mobile adscan target users at the mall, restaurants, car dealers … 0 10 20 30 40 50 60 70 80 M all LibrarySchoolCam pus Hotel Airport BigBoxRetailers QuickService Restaurants OtherRestaurants ElectronicsRetailers CarDealers ClothingRetailers Source: JiWire, Q3 2012 Monthly Ad Requests Per Mobile User By Loca on
  • 102.
    Targeted mobile adshave higher CPMs $10.00 $5.00 $5.00 $3.50 $- $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 Flurry video ads Adsmobi video ads LSN Mobile local ads xAd local Source: Ad pla orms, BII Research, Greg Sterling, Opus Research CPMs For Selected Mobile Ad Pla orms
  • 103.
    So, yes, mobileads are just getting started Media Local $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E 2017E Mobile Ad Revenue (millions) U.S. Mobile Ad Forecast We are here
  • 104.
  • 105.
    App Store downloadson pace to hit 60 billion by mid-2013 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 35,000,000,000 40,000,000,000 45,000,000,000 50,000,000,000 55,000,000,000 60,000,000,000 65,000,000,000 1/1/11 2/1/11 3/1/11 4/1/11 5/1/11 6/1/11 7/1/11 8/1/11 9/1/11 10/1/11 11/1/11 12/1/11 1/1/12 2/1/12 3/1/12 4/1/12 5/1/12 6/1/12 7/1/12 8/1/12 9/1/12 10/1/12 11/1/12 12/1/12 1/1/13 2/1/13 3/1/13 4/1/13 5/1/13 6/1/13 Apple App Store Downloads
  • 106.
    Smartphone users spendmore time on apps than web Mobile Web Apps 0 20 40 60 80 100 120 140 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 Minutes Spent Per Month (Biillions ) Total Time Spent Using Mobile Web vs. Apps Source: Nielsen Smartphone Analy cs
  • 107.
    Mobile app revenueis growing fast, but still relatively small. $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 2008 2009 2010 2011 (millions) Mobile App Revenue Source: iSuppli, Forrester Research, company releases, BII es mates
  • 108.
    Because most downloadsare free Mobile App Store Downloads, Free vs. Paid: 2011 Source: Garner, September 2012 Total Downloads Free Downloads 89%
  • 109.
    “Freemium” is thedominant model
  • 110.
    Games are thebiggest money makers
  • 111.
    Mobile has becomea platform game.
  • 112.
    Platform markets tendto standardize around one or two platforms.
  • 113.
    Right now, mobileis a two-horse race. Android Apple Blackberry Windows Other 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 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 Q3 2012 Global Mobile Pla orm Market Share Source: Gartner, IDC, Strategy Analy cs, BI Intelligence es mates, and company filings
  • 114.
    Android has thelargest smartphone platform globally. Android Apple Blackberry Symbian Other Microso 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Share of Global Unit Sales Smartphone Market Share By OS (Global) Source: Gartner
  • 115.
    Partly because itowns China Android Apple Symbian Other 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Source: Analysys Interna onal Chinese Smartphone Market Share By Pla orm
  • 116.
    And it’s thesame two-horse story in tablets iPad Android Kindle Nook Blackberry 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Tablet Market Share By Pla orm Source: Es mates based on informa on from IDC, Strategy Analy cs, and company filings
  • 117.
    But a bigmystery has arisen...
  • 118.
    Where are allthese Android users?
  • 119.
    Apple is dominatingapp revenue Apple iOS Android Other $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 2008 2009 2010 2011 (millions) Mobile App Revenue By Pla orm Source: iSuppli, Forrester Research, company releases, BII es mates
  • 120.
    And most commerceand web traffic is from Apple iPad iPhone Android Android Tablets Other 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Source: Monetate Ecommerce Website Traffic By Mobile Pla orm
  • 121.
    Do Android folksactually use their devices?
  • 122.
    Mobile profits aregoing mainly to two players. Apple Nokia Samsung RIM Motorola Sony Ericcson LG HTC -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 2007 2008 2009 2010 2011 Q1 2012 Q2 2012 Q3 2012 Opera ng Profit Share By Vendor Source: Company releases, Canaccord Genuity es mates
  • 123.
    So, what’s thefuture of media?
  • 124.
  • 125.
  • 126.
  • 127.
  • 128.
  • 129.
  • 130.
    Digital is nowa 4-screen world…
  • 131.
  • 132.
  • 133.
    Only if youhave a totally mobile-centric app...
  • 134.
    ...Or you wantto annoy your users and customers.
  • 135.
  • 136.
    Henry Blodget Founder, CEO& Editor-in-Chief, Business Insider Alex Cocotas, Analyst Marcelo Ballvé, Editorial Director BI Intelligence is a new subscription service from Business Insider that provides in-depth insight, data, and analysis of the mobile industry. More info at intelligence.businessinsider.com Peter Lee, Intern Josh Luger, Director of Subscription Products