State

Of The Internet: 2012

Henry Blodget
CEO & EIC, Business Insider

The commercial Internet is

now ~20 years old.

So, how are we doing?

2+ billion people online

Global)Internet)Popula4on)
2,500"

(millions))

2,000"

1,500"

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(

2/3 of the world left to go

Global&Internet&Popula*on&
7,000"

6,000"

(millions)&

5,000"

4,000"

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(

US New media stock value 3X old media

$1,200#

$1,000#

!
Market!Value!
(billions)!

$800#

$600#

$400#

$200#

$0#
New#Media#

Old#Media#

(When you include Apple)

$700

$600

Billions'

$500

$400

Market Value

$300

$200

$100

$0

Apple

Google

Amazon Facebook

Disney

Comcast News Corp

Time
Warner

Time
Warner
Cable

Viacom

CBS

As ever, power is very concentrated

New Media
Yahoo% Twi6er% Hulu%
Ne;lix%
Facebook%

Old Media
CBS'

Amazon%

Viacom'
Time'
Warner'
Cable'

Disney'

Time'Warner'

Google%
Apple%

Comcast'
News'Corp'

$366 Billion Market Value

$1,089 Billion Market Value

And now to the actual

businesses

MEDIA

U.S. Digital Advertising is making huge gains

U.S.)Digital)Adver6sing)
$35#
$30#

(billions))

$25#
$20#
$15#
$10#
$5#
$0#
1995# 1996# 1997# 1998# 1999# 2000# 2001# 2002# 2003# 2004# 2005# 2006# 2007# 2008# 2009# 2010# 2011#
Source:(IAB(

And now accounts for ~20% of total ad spend

$180#

U.S.&Adver4sing&

$160#
$140#

(billions)&

$120#
$100#
$80#
$60#

Oine&

$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(Analy7cs.(BI(Intelligence(es7mates((

Among the largest media companies, more

than one-third of ad spending is now online.
Online$vs.$Oine$Adver*sing$(U.S.),$2006<2011$
$80,000#
$70,000#
$60,000#

38%#
share#

23%#
share#

Online

$50,000#

U.S.$
$40,000#
Adver*sing$
Revenue$
(millions)$ $30,000#
77%#
share#

$20,000#

62%#
share#

Oine

$10,000#
$0#
2006#

2007#

2008#

2009#

2010#

2011#

Source:#Company#lings#and#BI#Intelligence#esFmates.#Companies#include:#Google,#Yahoo,#AOL,#MicrosoN,#Facebook,#Time#Warner,#Disney,#Viacom,#CBS,#News##
Corp,#New#York#Times,#GanneX,#McClatchy,#Time#Inc,#Entercom,#CBS#Radio,#Clear#Channel,#Citadel,#Cum#

TV still biggest. Online close behind.

Print getting smashed.
U.S.$Adver*sing,$2006:2011$
$80,000$
4%$

$70,000$
6%$

$60,000$

11%$

9%$

Print$

$50,000$
20%$

U.S.$
Adver*sing$ $40,000$
Revenue$
(millions)$ $30,000$

7%$

Outdoor$
Radio$

14%$

All$Other$Online$

13%$

23%$

Google

10%$

$20,000$

Television$

41%$

$10,000$
$0$
2006$

2007$

2008$

42%$

2009$

2010$

Source:$Represents$annual$U.S.$adverAsing$revenue$for$20$large$media$companies$based$on$company$lings$and$our$own$esAmates$

2011$

Newspaper ad revenue has collapsed

TV may be next.

Over-the-top video is real and growing fast.

Digital'Video'Revenue,'2006?2011'
$5,000#

Hulu'
$4,000#

YouTube'
Total'
Digital'
Revenues'
(millions)'

$3,000#

$2,000#

$1,000#

Ne#lix'

$0#
2006#
2007#
2008#
Source:#Company#lings#and#BI#Intelligence#esDmates#

2009#

2010#

2011#

Pay TV subscriptions are trending down.

Pay&TV&Subscriber&Net&Addi3ons&
1000$
800$
600$
400$

TelCo&
200$

Subscriber&
Net&Addi3ons&
(thousands)&

0$

Satellite&
!200$
!400$

Total&

!600$

Cable&

!800$
!1000$
1Q09$

2Q09$

3Q09$

4Q09$

1Q10$

2Q10$

Source: Bernstein Research, BI Intelligence estimates

3Q10$

4Q10$

1Q11$

2Q11$

3Q11$

4Q11$

1Q12$

2Q12$

In online ads, Google is completely dominant.

Facebooks gaining steam

Google

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#
Digital&

Adver:sing&

8%&

Other&

$5,000#

11%&

AOL&

Revenue&

(millions)& $4,000#
$3,000#

6%&
13%&

Facebook&

Yahoo&
Microso0&

55%&

30%&

$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(lings(BII(es5mates(

Google, Facebook and a handful of new companies

are winning, portals losing.
U.S%Digital%Adver:sing:%Winners%And%Losers%
$9,000#
11%%

$8,000#
$7,000#

Facebook%
Other%

$6,000#

80%
share!

Digital% $5,000#
Adver:sing%
Revenue%
(millions)% $4,000#

Google%

6%%

$3,000#
$2,000#
$1,000#

15%%

55%%

40%%

13%%
11%%

AOL%
Microso+%

30%%

4%%
8%%

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(lings,(BII(es6mates(

Display ad growth is attening.

U.S.&Display&Adver9sing&
$3,000#

$2,500#

Microso3&
$2,000#

AOL&
Display&
Adver9sing&
$1,500#
Revenue&
(millions)&

Yahoo&
Other&

$1,000#

$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(lings,(BII(es6mates(

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(
Twi6er(

$1,400#
$1,200#

Demand(Media(
Digital( $1,000#
Adver=sing(
Revenue(
(millions)( $800#

Hulu(
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(lings(BII(es5mates(

SOCIAL

Americans now spend more time on

social networks than portals
Average'Time'Spent:'Portals'vs.'Social'Networks'(U.S.)'
30'

Social'Networks'
25'

20'

Portals'
Average'Minutes'
15'
Per'Usage'Day'

10'

5'

0'
Nov62010' Dec62010' Jan62011' Feb62011' Mar62011' Apr62011' May62011' Jun62011' Jul62011' Aug62011' Sep62011' Oct62011' Nov62011' Dec62011'
Source:(comScore(

1/7th of the worlds population use Facebook

Facebook(Ac+ve(Users(
1,000(
900(
800(
700(
600(

Ac+ve(
Users( 500(
(millions)(

Monthly(Ac+ve(Users(

400(
300(
200(

Daily(Ac+ve(Users(

100(
0(
1Q09(

2Q09(

3Q09(

4Q09(

1Q10(

2Q10(

3Q10(

4Q10(

1Q11(

2Q11(

3Q11(

4Q11(

1Q12(

2Q12(

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!!

Monthly!
Unique!Visitors!
(thousands)! !100,000!!
!80,000!!
!60,000!!

LinkedIn!

TwiTer!

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(

So, will Facebook be bigger than

Google?

Unlikely.

Google is the best ad product in the

history of the world because its
like advertising at a store.

Facebook, meanwhile, is like

advertising at a party.

Social referrals to commerce sites are still tiny

Drivers&of&ELCommerce&Trac&
90.0%&

80.0%&

70.0%&

60.0%&

Facebook referrals up 92% year-overyear

50.0%&
Percentage&
Of&Trac&&
40.0%&

80.6%&

30.0%&

20.0%&

10.0%&
9.7%&

7.5%&

1.7%&

0.5%&

0.02%&

Yahoo&

Bing&

AOL&

Facebook&

TwiBer&

0.0%&
Google&
Source:(RIchRelevance(

eCOMMERCE

E-Commerce continues to take share

$5,000,000#
$4,500,000#

U.S.&Retail&Sales&
E.Commerce&

$4,000,000#

(millions)&

$3,500,000#
$3,000,000#
$2,500,000#
$2,000,000#
$1,500,000#

Oine&Retail&Sales&

$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(Data66St.(Louis(Fed,(BI(Intelligence(es=mates(

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)

E"Commerce)

$50,000)

$25,000)

$0)
2000)

2001)

2002)

2003)

2004)

2005)

Source:(Federal(Reserve(Economic(Data(6(St.(Louis(Fed,(Company(Filings,(BII(Es@mates(

2006)

2007)

2008)

2009)

2010)

2011)

 And theyre growing fast.

Social'Commerce'Revenues'
$3,500'

Fab'
$3,000'

ShoeDazzle'
One'King's'Lane'

$2,500'

Ideeli'

Total'
Revenue'
(millions)'

Zulily'

$2,000'

Beyond'The'Rack'
HauteLook'

$1,500'

Rue'La'La'
LivingSocial'
$1,000'

$500'

Gilt'Groupe'
Groupon'

$0'
2008'
Source:(Company(Filings,(BII(Es8mates(

2009'

2010'

2011'

MOBILE

Something profound
happened last year

Smartphone sales overtook PC sales

Global)Internet)Device)Sales)
)1,000,000,000))
)900,000,000))
)800,000,000))

Tablets)
)700,000,000))
)600,000,000))

Units) )500,000,000))
Smartphones)

)400,000,000))
)300,000,000))
)200,000,000))

Personal)Computers)

)100,000,000))
)3))))
2000)

2001)

2002)

2003)

2004)

2005)

Source:(Gartner,(IDC,(Strategy(Analy5cs,(company(lings,(BI(Intelligence(es5mates(

2006)

2007)

2008)

2009)

2010)

2011)

And will soon dwarf them

Global)Internet)Device)Sales)
)3,000,000,000))

)2,500,000,000))

Tablets)

)2,000,000,000))

Units) )1,500,000,000))

We are here

)1,000,000,000))

Smartphones)

)500,000,000))

Personal)Computers)
)3))))
2000)

2001)

2002)

2003)

2004)

2005)

2006)

2007)

Source:(Gartner,(IDC,(Strategy(Analy5cs,(company(lings,(BI(Intelligence(es5mates(

2008)

2009)

2010)

2011) 2012E) 2013E) 2014E) 2015E) 2016E)

PC sales, meanwhile, are in a stall

Global#PC#Shipments#By#Manufacturer#
100,000"
iPad"released"

90,000"
80,000"
70,000"

Other#

60,000"
50,000"

Apple#

40,000"

Acer#

30,000"

Dell#
Lenovo#

20,000"
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(

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)
150)

We are here

100)
50)
0)
2010)

2011)

2012E)

2013E)

2014E)

2015E)

2016E)

So the future is mobile

G>20&Internet&Access&
3,000&

2,500&

2,000&
Consumer&
Broadband&
1,500&
Connec:ons&
(milions)&

Mobile&

1,000&
Mobile&

500&
Fixed&

Fixed&

2005&

2010&

Fixed&

0&
2015&

Source:(Boston(Consul/ng(Group,(Mary(Meeker,(Kleiner(Perkins,(Morgan(Stanley(Research,(Berg(Insight(

Where are we in the

mobile revolution?

Globally, were early.

Global!Smartphone!Penetra>on!Forecast!
!2,500!!

We are here
!2,000!!

Feature'Phone'Sales'

!1,500!!

Global!Mobile!
Phone!Sales!
(millions)!
!1,000!!

Smartphone'Sales'

!500!!

!"!!!!
2010!

2011!

2012!

2013!

2014!

2015!

2016!

The U.S., however, is more than halfway there

Changes(In(Smartphone(Ownership,(201172012((U.S.)(
60%$

50%$

46%$

48%$
41%$

40%$

35%$

30%$

20%$

17%$
12%$

10%$

0%$

Smartphone$

Feature$Phone$
May>11$

Feb>12$

No$Cell$Phone$

Growth slows after hitting 50% penetration

In the US, weve hit that point.

U.S.%Smartphone%Market:%Year9Over9Year%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(

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%$

75%$

74%$
69%$ 70%$

70%#
60%#

65%$

65%$ 65%$

63%$
60%$

58%$

56%$
53%$

50%$

50%#

52%$

51%$
48%$

44%$

43%$

42%$

41%$

38%$

40%#
32%$

31%$

30%#

30%$
27%$
24%$

23%$
18%$

20%#

16%$ 17%$

21%$
16%$ 15%$ 16%$

10%#
0%#
Ages#18#1#24#

Ages#25#1#34#
<15k#

Source: Nielsen

Ages#35#1#44#
15k#1#35k#

35k#1#50k#

Ages#45#1#54#
50k#1#75k#

75k#1#100k#

Ages#55#1#64#
100k+#

Ages#65+#

So the focus is on China, which now

accounts for a quarter of smartphone sales.
Global%Smartphone%Shipments%
!180,000!!
!160,000!!
!140,000!!

(thousands)%

!120,000!!
!100,000!!
!80,000!!

Rest%Of%The%World%

!60,000!!
!40,000!!
!20,000!!

China%

!"!!!!
1Q11!

2Q11!

3Q11!

4Q11!

Source:(Gartner,(IDC,(Strategy(Analy5cs,(Canalys,(BII(es5mates(

1Q12!

2Q12!

So, what do people

do on mobile?

Well, rst, they do pretty much

everything they do online

They play games and social-network

Daily&Smartphone&App&Consump4on,&Minutes&Per&Category&

7#
7#

10#

10#

12#

11#
24#

15#

25#

24#

Q1#2011#

Q1#2012#

Games#
Source:(Flurry(Analy/cs(

Social#Networking#

News#

Entertainment#

Other#

Games sessions up 20-fold in two years

iOS$&$Android$Mobile$Game$Session$Growth$
20.5X%

5.3X%
1.0X%
Q1%2010%
Source:(Flurry(Analy/cs(

Q1%2011%

Q1%2012%

They listen to music...

75%#

%#of#Trac#from#Mobile#

70%#

55%#

Pandora#

50%#

Twi6er#

Facebook#

33%#

25%#

5%#
0%#

1%#

2008#

2009#

Source:#Mary#Meeker,#Kleiner#Perkins,#companies#

2010#

2011#

They consume content

Top&Mobile&Categories&By&Growth&In&Audience,&Dec.&2010&vs.&Dec.&2011&(U.S.)&
35,000%

30,000%

25,000%

20,000%
Total&
Mobile&
Audience&
(thousands)& 15,000%

74%%
72%%
94%%

70%%

77%%

80%%

74%%

10,000%

69%%
134%%
82%%

5,000%

0%

Health%
Online%Retail%
Informa:on%

Men's%
Magazine%
Content%

Electronic%
Payment%

Gaming%
Informa:on%

DecS10%

Source:(comScore(MobieLens,(3(mon.(avg.(ending(Dec82011(vs.(Dec82010(

DecS11%

Job%Lis:ngs%

General%
Reference%

Classieds%

Auc:on%Sites%

Family%
Entertainment%

20
08
20 -12
09 #
20 -02
09 #
20 -04
09 #
20 -06
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 #
20 -02
11 #
20 -04
11 #
20 -06
11 #
20 -08
11 #
20 -10
11 #
20 -12
12 #
20 -02
12 #
20 -04
12 #
20 -06
12 #
-0
8#

Mobile now accounts for 12% of global internet trac

Global(Internet(Trac:(Mobile(vs.(Desktop(

100%#

90%#

80%#

10%#

Desktop(

70%#

60%#

50%#

40%#

30%#

20%#

1%(

Source: StatCounter

4%(

Mobile(
12%(

0%#

And its scaling faster than the desktop

2,500"

Mobile&Internet&Users&
Total&
Internet&Users&

2,000"

(millions)&

1,500"

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(

They look at pictures and video.

U.S.$Video$Engagement,$Monthly$Minutes$Per$Ac;ve$User$
472#
425#
378#
324#
276#
231#

152#
93#

110#

63#

Mar#2011#

June#2011#
Google#Internet#Sites#

Source:(Flurry(Analy/cs,(comScore(Video(Matrix(

Sept#2011#

Dec#2011#

iOS#&#Android#Photo#&#Video#Apps#

Mar#2012#

They even watch movies and TV.

Time'Watched'By'Video'Length'And'Device'
100%$
90%$

Percent'Of'All'Hours'Watched'

80%$
70%$
60%$
50%$

93%$

40%$
30%$

67%$

62%$
48%$

20%$
10%$
0%$

Desktop$

Smartphone$
>$10$min$

Source:(Ooyala,(Q2(2012(

6$to$10$min$

Tablet$
Video'Length'
3$to$6$min$

1$to$3$min$

Connected$TV$
<$1$min$

Especially at night
When&People&Watch&Mobile&Video,&By&Device&
10%#

Share&Of&Total&Time&Watched&

9%#
8%#
7%#
6%#
5%#
4%#
3%#
2%#
1%#
0%#
0#

1#

2#

3#

4#

Tablet#Weekday#

Source:(Ooyala(

5#

6#

7#

8#

9# 10# 11# 12# 13# 14# 15# 16# 17# 18# 19# 20# 21# 22# 23#
Time&Of&Day&

Tablet#Weekend#

Smartphone#Weekday#

Smartphone#Weekend#

They Shop

Mobile accounts for 20 % of
Gilts 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

They use smartphones to make buying

decisions in stores.
U.S.$Smartphone$Owners$Ac3vity$In$Retail$Stores$

24.0%&
22.3%&
19.7%&

20.4%&

20.2%&

18.8%&
16.2%&
14.6%&
13.1%&

14.1%&
12.3%&
11.1%&

10.0%&
8.3%&

Took&Picture&Of& Texted/Called&
Scanned&A&
Sent&Picture&Of&
Product&
Friends/Family& Product&Barcode& Products&To&
About&Product&
Family/Friends&

Found&Store&
LocaJon&
Males&

10.9%&

7.2%&

6.3%&

5.2%&

Compared&
Found&Coupons& Research&Product&Checked&Product&
Product&Prices&
For&Deals&
Features&
Availability&

Females&

Mobile is starting to drive signicant

trac to ecommerce sites
Ecommerce#Website#Trac#By#Device#
100%#

Smartphone#
Tablet#

90%#
80%#
70%#
60%#

PC#

50%#
40%#
30%#
20%#
10%#
0%#
Q1#2011#
Source:(Monetate(

Q2#2011#

Q3#2011#

Q4#2011#

Q1#2012#

They pay for stu Paypals mobile

payments are growing rapidly
PayPal#Mobile#Payments#Processed#
$5,000#

$4,000#

$3,000#
Total##
Payment#
Volume#
(millions)#
$2,000#

$1,000#

$0#
2008#

2009#

2010#

2011#

Square launched about two years ago, and

its already processing $16+ million a day
Square(Es9mated(Daily(Payment(Volume(and(Revenues(
$18,000#
$16,000#
$14,000#

(Thousands)(

$12,000#

Payment(Volume(
$10,000#
$8,000#
$6,000#
$4,000#
$2,000#

Revenues(

$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#

They even buy content! (0n tablets)

Media&Content&Paid&For&On&A&Tablet,&Q4&2011&

70%#
60%#
50%#
40%#
30%#
20%#
10%#
0%#
Downloaded#
Music#
Source:(Nielsen(

Books#

Movies#

Magazines#
US#

Italy#

TV#Shows#
UK##

Germany#

Streaming#
Radio#

Sports#

News#

But the really interesting stu

that people do on mobile
is what they
DONT do online

Angry birds has over 1 billion downloads

Angry&Birds&Downloads&vs.&Nintendo&DS&Sales&
700,000"

600,000"

500,000"

Total&
Downloads&
Or&Sales&
(thousands)&

400,000"

300,000"

200,000"

100,000"

0"
Mar"10"

Jun"10"

Sept"10"

Source: New reports, company releases, BI Intelligence estimates

Note:&Includes&Nintendo&3DS&Sales&

Dec"10"

Mar"11"

Jun"11"

Sept"11"

Dec"11"

Instagram hit 100 million users in 2 years

BOTTOM LINE:

The growth of mobile = more
Internet usage, new applications

Mobile makes Internet usage 24/7

Share Of Device Page Trac Over A Day:

Source: comScore, Telefonica, Macquarie Capital (USA), December 2011

Usage is up across the board

U.S.%Mobile%Content%Usage%
80%#

Sent%Text%Message%

Share%of%mobile%populaCon%that%has...%

70%#

60%#

Used%Downloaded%Apps%
50%#

Used%Browser%
Accessed%Social%Network%
Or%Blog%

40%#

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(

And people are consuming a huge

amount of content through mobile
Media&Content&Accessed&Through&Mobile&Device&
59%$
57%$
53%$53%$

41%$

27%$

9%$

10%$

26%$

29%$
25%$

23%$

29%$
27%$
22%$
20%$

9%$
5%$

Books$

Movies$

TV$Shows$

Magazines$
Tablet$

News$

Social$ Downloaded$
Networking$
Music$

Smartphone$

Source:(Nielsen(Q4(2011(Mobile(Connected(Device(Report(

Sports$

Streaming$
Radio$

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.$Consumer$Time$Spent$By$Media$
43%$

42%$

26%$

25%$
22%$

15%$
11%$

10%$

7%$
1%$

TV$

Print$

Web$

Ad$Spend$Per$Media$
Source: Mary Meeker (KPCB), eMarketer, IAB

Radio$
Time$Spent$Per$Media$

Mobile$

But maybe theres a good reason

for that gap

The screen is really small.

Mobile monetization still behind the desktop

ARPU,&Desktop&vs.&Mobile&&
$58.95&

$25.00&
$17.61&

$3.87&

$6.62&

Pandora&

$5.00&

Zynga&
Mobile&

Source:(Pandora,(Zynga,(Tencent(

Desktop&

Tencent&

Mobile CPMs are much lower

Eec%ve'CPM,'Desktop'vs.'Mobile'
$3.50&

$0.75&

Desktop&Internet&
Source:(comScore,(Vivaki,(Mobclix(Exchange(

Mobile&Internet&

Including for companies like Google and

Facebook.
Google&CPC&Growth&
15%%
10%%
5%%
0%%
!5%%
!10%%
!15%%
4Q09%

1Q10%

2Q10%

3Q10%

4Q10%

Source:(Company(data,(Evercore(Group(LLC(Research(

1Q11%

2Q11%

3Q11%

4Q11%

1Q12%

Overall, mobile is still a tiny fraction of

digital ad spending.
U.S.'Digital'Adver7sing'Revenues'
$35#

Mobile'

$30#

(billions)'

$25#
$20#
$15#
$10#
$5#
$0#
2007#

2008#

Source:((IAB,(BIA-Kelsey,(BII(es2mates(

2009#

2010#

2011#

And its growing much slower than TV +

Internet in the rst 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%
$1,000%
$500%

$1,171%

$1,012%

$358%
$80% $55%

$160%

$907%

$267%

$806%

$392%

$0%
Year%1%

Year%2%
Broadcast%TV%

Source:((IAB,(McCann1Erickson,(BIA1Kelsey,(BII(es9mates(

Year%3%
Mobile%

Year%4%

Year%5%

Internet%
Note:(Adjusted(for(ina9on(

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#
$2,000#

We are here
Media&

$1,000#
$0#
2009A#

2010A#

2011A#

2012E#

2013E#

2014E#

2015E#

2016E#

2017E#

By the way, Google owns mobile, too

Mobile&Ad&Market&Share&
100%#
90%#

Microso4&
Yahoo&

Other&

80%#

Apple&
Pandora&

70%#
60%#

Millennial&Media&

50%#
40%#
30%#

Google&

20%#
10%#
0%#
1Q09#

2Q09#

3Q09#

4Q09#

1Q10#

2Q10#

Source:(news(reports,(company(releases,(BII(es5mates(

3Q10#

4Q10#

1Q11#

2Q11#

3Q11#

4Q11#

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(

But native mobile ads are nally

beginning to appear

Ads in timelines (Twitter / Facebook)

Geo-located ads
Shareable ads

APPS

7/
1/
08
9/ "
1/
0
11 8"
/1
/0
8
1/ "
1/
09
3/ "
1/
09
5/ "
1/
09
7/ "
1/
09
9/ "
1/
0
11 9"
/1
/0
9
1/ "
1/
10
3/ "
1/
10
5/ "
1/
10
7/ "
1/
10
9/ "
1/
1
11 0"
/1
/1
0
1/ "
1/
11
3/ "
1/
11
5/ "
1/
11
7/ "
1/
11
9/ "
1/
1
11 1"
/1
/1
1
1/ "
1/
12
3/ "
1/
12
5/ "
1/
12
"

App downloads are growing frantically

Apple%App%Store%Downloads%

30,000,000,000"

25,000,000,000"

20,000,000,000"

15,000,000,000"

10,000,000,000"

5,000,000,000"

0"

On pace to hit 45 billion by the end of

the year
Apple%App%Store%Downloads%
55,000,000,000"
50,000,000,000"
45,000,000,000"
40,000,000,000"
35,000,000,000"
30,000,000,000"
25,000,000,000"
20,000,000,000"
15,000,000,000"
10,000,000,000"
5,000,000,000"

1/
1/
1
2/ 1"
1/
1
3/ 1"
1/
1
4/ 1"
1/
1
5/ 1"
1/
1
6/ 1"
1/
1
7/ 1"
1/
1
8/ 1"
1/
1
9/ 1"
1/
10 11"
/1
/
11 11"
/1
/
12 11"
/1
/1
1/ 1"
1/
1
2/ 2"
1/
1
3/ 2"
1/
1
4/ 2"
1/
1
5/ 2"
1/
1
6/ 2"
1/
1
7/ 2"
1/
1
8/ 2"
1/
1
9/ 2"
1/
10 12"
/1
/
11 12"
/1
/
12 12"
/1
/1
1/ 2"
1/
13
"

0"

People now spend more time on apps

than they do browsing the web
U.S.$Mobile$Apps$vs.$Web$Consump4on,$Minutes$Per$Day$
94#
81#
70#

64#

74#
66#

72#

43#

June#2010#

Dec#2010#
Web#browsing#

Source:(Flurry(Analy/cs,(Alexa,(comScore(

June#2011#
Mobile#apps#

Dec#2011#

And the disparity is growing.

Total'Time'Spent'Using'Mobile'Web'vs.'Apps'

140"

120"

100"

Minutes'Spent'
Per'Month'
(Biillions')'

80"

Apps'

60"

40"

20"

Mobile'Web''
0"
Mar+11"

Apr+11"

May+11"

Jun+11"

Source:(Nielsen(Smartphone(Analy5cs(

Jul+11"

Aug+11"

Sep+11"

Oct+11"

Nov+11"

Dec+11"

Jan+12"

Feb+12"

Mar+12"

Mobile app revenue is growing fast, but

still relatively small.
Mobile)App)Revenue)
$4,000#
$3,500#

(millions))

$3,000#
$2,500#
$2,000#
$1,500#
$1,000#
$500#
$0#
2008#

2009#

2010#

Source:(iSuppli,(Forrester(Research,(company(releases,(BII(es8mates(

2011#

Because most downloads are free

Mobile'App'Store'Downloads,'Free'vs.'Paid:'2011'
Total'Downloads'

Free$Downloads$
89%$

Source:(Garner,(September(2012(

Freemium is the dominant

business 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.

Mobile'Pla:orm'Market'Share'
100%#
90%#

Other'

80%#
70%#
60%#
50%#
40%#
30%#

Windows'
Blackberry'
Apple'iOS'

20%#

Android'

10%#
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(Analy5cs,(BI(Intelligence(es5mates,(and(company(lings#

Android has the largest platform globally.

Smartphone'Market'Share'By'OS'(Global)'
100%#

Microso8'

90%#

Other'
Blackberry'

80%#
70%#

Symbian'

60%#

Share'of'
Global'Unit' 50%#
Sales'

Apple'

40%#
30%#

Android'

20%#
10%#
0%#
Q3#2009#

Q4#2009#

Source:(Gartner(

Q1#2010#

Q2#2010#

Q3#2010#

Q4#2010#

Q1#2011#

Q2#2011#

Q3#2011#

Q4#2011#

Q1#2012#

Q2#2012#

But Apple is dominating app revenue.

Mobile%App%Revenue%By%Pla<orm%
$4,000#
$3,500#
Other%

$3,000#

(millions)%

Android%%
$2,500#
$2,000#
$1,500#
$1,000#
Apple%iOS%

$500#
$0#
2008#

2009#

2010#

Source:(iSuppli,(Forrester(Research,(company(releases,(BII(es8mates(

2011#

Tablet market is early, but almost totally

dominated by Apple
Tablet%Market%Share%By%OS%
100%#

Blackberry%

Nook%

90%#

Kindle%

80%#
70%#

Android%

60%#
50%#
40%#
30%#

iPad%

20%#
10%#
0%#
Q2#2010#

Q3#2010#

Q4#2010#

Q1#2011#

Q2#2011#

Q3#2011#

Source:(Es+mates(based(on(informa+on(from(IDC,(Strategy(Analy+cs,(and(company(lings#

Q4#2011#

Q1#2012#

Q2#2012#

Mobile prots are going mainly to two players.

Opera?ng%Prot%Share%By%Vendor%
80%%
Apple%

70%%

Nokia%

60%%
50%%
40%%

Samsung%

30%%
20%%
10%%
0%%
!10%%

Sony%Ericsson%
RIM%

HTC%

LG%
Motorola%

!20%%
2007%

2008%

2009%

Source:(Company(releases,(Canaccord(Genuity(es6mates(

2010%

2011%

Q1%2012%

Q2%2012%

BONUS:
So, are we in a new tech
bubble?

No.

Bubbles feature sky-high prices

relative to fundamentals.

HOUSING BUBBLE: Price ratios

spiked o the charts
Price-To-Rent: 1983-2012

STOCK BUBBLES: Price ratios

spiked o 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 o the charts?

No. Apples PE ratio has been declining for years

Recent hot IPOs are downright reasonable.

1.4X 2012E Revenue
2X Revenue
4X Revenue
14X 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 dont let anyone tell

you its cheap.

Whats happening to Facebook

stock, by the way, is likely a
common transition

High-growth stocks usually go

through a momentum phase,
in which theyre blowing away
estimates.

Then growth slows, and

expectations come in line with
reality.

Thats 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.

Facebooks future is uncertain,

but its a great company, and
stock could return to growth.

But, for now multiple compression.

One area in which investors

have been too exuberant:

The private market.

Facebooks IPO will probably

dampen that enthusiasm.

Thank you very much.

Henry Blodget
Founder, CEO & Editor-in-Chief,
Business Insider

Alex Cocotas, Analyst

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