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#

Offline&

$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$vs.$Offline$Adver*sing$(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#

Offline  

$10,000#
$0#
2006#

2007#

2008#

2009#

2010#

2011#

Source:#Company#filings#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$company$filings$and$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#filings#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.  
Facebook’s  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(filings(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% ì  
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(filings,(BII(es6mates(

“Display”  ad  growth  is  flattening.  
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(filings,(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(filings(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  world’s  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  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&ELCommerce&Traffic&
90.0%&

80.0%&

 
 

70.0%&

60.0%&

Facebook referrals up 92% year-overyear…

 

50.0%&
Percentage&
Of&Traffic&&
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#

Offline&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  they’re  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(filings,(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(filings,(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,  we’re  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,  we’ve  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,  first,  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#Traffic#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%

Classifieds%

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  traffic  
Global(Internet(Trafic:(Mobile(vs.(Desktop(

100%#

90%#

80%#

10%#

Desktop(

70%#

60%#

50%#

40%#

30%#

20%#

1%(

Source:  StatCounter  

4%(

Mobile(
12%(

0%#

And  it’s  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  
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  

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  significant  
traffic  to  ecommerce  sites  
Ecommerce#Website#Traffic#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  stuff…  Paypal’s  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  
it’s  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  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&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  Traffic  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  there’s  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  
Effec%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  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%
$1,000%
$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(infla9on(

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  finally  
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(filings#

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(filings#

Q4#2011#

Q1#2012#

Q2#2012#

Mobile  profits  are  going  mainly  to  two  players.  
Opera?ng%Profit%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  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  today?  
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  
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  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,  and  
expectations  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  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.  

Facebook’s  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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that provides in-depth insight, data, and analysis of the mobile industry.
More info at intelligence.businessinsider.com

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