INTERNET TRENDS –

Web 2.0 Summit San Francisco, CA
Mary Meeker – October 18, 2011

Copyright 2011. All rights reserved. Copyright 2011. All rights reserved.

www.kpcb.com/internettrends2011

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KPCB (Digital Venture + Digital Growth) 2011 Investments

Copyright 2011. All rights reserved.

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Internet Trends
1. 2. 3. 4. 5. 6. 7. 8. 9. Globality – We Aren’t In Kansas Anymore… Mobile – Early Innings Growth, Still… User Interface – Text  Graphical  Touch / Sound / Move Commerce – Fast / Easy / Fun / Savings = More Important Than Ever… Advertising – Lookin’ Good… Content Creation – Changed Forever Technology / Mobile Leadership – Americans Should Be Proud Mega-Trend of 21st Century = Empowerment of People via Connected
Mobile Devices

Authentic Identity – The Good / Bad / Ugly. But Mostly Good?

10. Economy – Lots of Uncertainty 11. USA Inc. – Pay Attention! 12. Closing Thoughts
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. All rights reserved.GLOBALITY – WE AREN’T IN KANSAS ANYMORE… Copyright 2011.

Chinese (& Russian) Companies Continue to Step Up Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Total Copyright 2011.Apple.085 6.283 29.348 243 2.967 3.156 2.ru Netease Alibaba.062 8. Amazon.995 1.com Rakuten NHN Liberty Interactive ↑ Yandex Expedia LinkedIn Netflix ↑ Mail.321 34.325 2. All rights reserved.286 1. *Facebook market value per most recent trades (week of Sep 26) on SharesPost.com Verisign Ctrip Sina.com ↑ Facebook ↑ Baidu eBay Tencent Priceline.162 324 836 854 681 424 403 781 $191. Source: Google Finance.com Rackspace Region USA USA USA USA China USA China USA USA Japan USA Japan Korea USA Russia USA USA USA Russia China China USA China China USA 2011 Market Value ($B) $373 177 108 77* 46 42 41 24 20 20 17 15 10 9 8 8 8 6 6 6 5 5 5 5 5 $969 2010 Revenue ($MM) $76.com Yahoo! Yahoo! Japan Salesforce.204 -1. Google.992 5 Note: 2011 data as of 10/12/2011. Y/Y Trend Company Apple Google Amazon. .932 447 3.com & Facebook Remain Mega-Leaders.657 4.216 9.

Copyright 2011.000 1.81% of Users of Top Global Internet Properties = Outside USA Top 10 Internet Properties by Global Monthly Unique Visitors.200 Monthly Unique Visitors (MM) 6 . All rights reserved.com Apple Tencent VEVO Baidu 0 Source: comScore Global. USA Users International Users 200 400 600 800 1. 8/11. 8/11 Google Microsoft Facebook Yahoo! Wikipedia Amazon.

In 3 Years. all other data as of 12/10. Source: United Nations / International Telecommunications Union. Copyright 2011.099 2. . All rights reserved. China Added More Internet Users than Exist in USA… China / India / Nigeria / Russia / Iran = Biggest Adders 07-10 Internet User Additions (MMs) 246 42 35 25 24 22 21 18 13 12 457 693 Rank 1 2 3 4 5 6 7 8 9 10 Country China India Nigeria Russia Iran USA Brazil Philippines Mexico Pakistan Top 10 World 2010 Internet Users (MMs) 459 88 45 60 37 244 79 23 35 29 1.054 Y/Y Growth 20% 43 2 0 31 2 4 292 24 43 16% 13% Population Penetration 34% 8 28 42 49 79 41 25 31 17 29% 30% 7 Note: *Russia data as of 6/10.

5 7.2 9.0 8.8 10.3 10.1 10.4 7.8 2 4 6 8 10 12 8 Source: Social Networking users & time spent data per comScore.9 8. . Facebook data per Facebook.2 6.4 7. Internet users data per ITU. All rights reserved.7 9. 2011) Exceed Internet Users (December. 11. 2006) & 70% of Them (800MM) Use Facebook Hours Spent on Social Networking Sites per User per Month (8/11) Israel Argentina Turkey Chile Russia Philippines Venezuela Colombia Canada Mexico Peru USA 0 Copyright 2011.Social Networkers (October.

Waze first achieved critical mass in Israel. All rights reserved.If it Plays in Peoria…Take it to Broadway! Especially in Mobile / Social World… ‘Test Market’ / Origin* UK Company Social Service Sound Recognition / Music Discovery Music Discovery & Streaming Driving Navigation Sound Discovery & Sharing Users 100MM+ Sweden 15MM+ Israel Germany / UK / Sweden 7MM+ 7MM+ Note: *Shazam first gained traction in UK. including USA. Soundcloud first gained traction in Germany / UK / Sweden. Copyright 2011. 9 . All of these services have successfully expanded to other regions / countries. Spotify first gained traction in Sweden.

All rights reserved. STILL Copyright 2011. .MOBILE – EARLY INNINGS GROWTH.

11 . 3G data per Informa.Breakthrough Communications Technologies / Services Can Breakout Even During Breakdown Times Technology Adoption (Measured by Population Penetration) in USA Radio vs. Internet penetration data per World Bank / ITU. All rights reserved. Copyright 2011. Internet vs. 1920 – 2011E 100% 80% Population Penetration (%) 60% AM Radio TV Internet 40% Mobile Internet (Smartphone) Recessions 20% 0% 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: Radio penetration data per Broadcasting & Cable Yearbook 1996. Mobile Internet. TV vs. Mobile Internet (smartphone) data per Morgan Stanley Research.

Source: Informa WCIS+. One user may have multiple mobile subscriptions and may be counted as multiple subscriber. Q2:11 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Country USA Japan Korea China Italy UK Germany Spain Brazil Indonesia Poland France India Australia Russia Q2:11 3G 3G Subs Penetra(MM) tion 179 117 43 40 40 39 33 30 28 27 26 25 23 20 15 56% 97 82 4 47 51 32 53 13 12 54 39 3 71 7 3G Sub Y/Y Growth 26% 10 10 172 22 35 24 23 79 40 24 29 1. Copyright 2011. WCDMA. All rights reserved.050 22 59 Rank 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Country Canada Taiwan Portugal Turkey Malaysia South Africa Sweden Mexico Philippines Saudi Arabia Netherlands Austria Vietnam Israel Argentina Q2:11 3G Subs (MM) 15 14 12 11 10 9 9 9 9 9 8 7 6 6 5 3G Penetration 58% 48 73 17 28 16 69 9 10 18 40 54 6 58 10 3G Sub Y/Y Growth 47% 28 21 104 22 34 35 85 87 18 41 29 103 16 102 Global 3G Stats: Subscribers = 936MM Penetration = 17% Growth = 35% Note: *3G includes CDMA 1x EV-DO and Rev. HSPA. 12 .35% Y/Y Global Mobile 3G Subscriber Growth to 936MM (17% of all Mobile Subscribers). A/B.

Smartphones Surpassed Feature Phone Shipments in W. Note: In Japan. Japan) 60% Smartphone > Feature Phone Shipments 50% 40% 20% 0% Q1:08 Q3:08 Q1:09 Q3:09 Q1:10 Q3:10 Q1:11 Source: Data per Ehud Gelblum. Copyright 2011. ROW to Follow Smartphone Shipments as % of Total Mobile Phone Shipments by Region. Europe (Q2:10) / USA (Q1:11). Q1:08 – Q2:11 100% % of Quarterly Mobile Phone Shipments North America 80% Western Europe Rest of World (ex. 13 . All rights reserved. Morgan Stanley Research. smartphone exceeded feature phone in Q4:08.

000 0 Smartphone Users Mobile Phone Users Source: Smartphone subscriber estimates per Morgan Stanley Research. not all of them were smartphone users.000 Global Users (MM) 3. One user may have multiple mobile subscriptions.000 835MM Smartphone Subscribers 1. 14 . Copyright 2011. Mobile phone subscribers per Informa (as of Q2:11). 2011E 6. therefore actual user #s may be lower than subscriber #s.Despite Tremendous Ramp So Far.000 5. Note: While there are 936MM global 3G subscribers as of Q2:11. Mobile Phone Subscribers.6B Mobile Phone Subscribers 5.000 4. Smartphone Usage Still Has Huge Upside Global Smartphone vs. All rights reserved.000 2.

000 15.000 iPad iPad 40. 15 .000 9.000 300 5. All rights reserved.000 500 30.iPods Changed Media Industry…iPhones Ramped Even Faster…iPad Growth Leaves “Siblings” in Dust First 6 Quarters Cumulative Unit Shipments. Copyright 2011. iPod vs.000 3.000 200 10.000 400 25.000 11. iPad 15.000 0 0 -1.000 20.000 13.000 600 iPhone iPhone iPhone iPod iPod iPod Global Unit Shipments (000) Global Unit Shipments (000) 35.000 00 0 1 1 1 2 22 3 33 Quarters After Launch Quarters After Launch After Launch 44 5 5 5 6 6 Source: Apple. as of Q2:11 (6 quarters post iPad launch).000 7.000 1.000 100 5. iPhone vs.000 700 45.

Copyright 2011. All rights reserved. Morgan Stanley Research. Global Cumulative Unit Shipments (MM) 16 . as of Q2:11.Android ‘Phone’ Adoption Has Ramped Even Faster than iPhone First 11 Quarters Cumulative Global Android & iPhone Unit Shipments 180 Android Global Units Shipped Android iPhone iPhone 160 140 120 100 80 60 40 20 0 0 1 2 3 4 5 6 7 Quarters After Launch 8 9 10 11 Source: Gartner.

Morgan Stanley Research.Two Horse Races in Smartphones & Tablets. Copyright 2011. Morgan Stanley Research. ** ASP is average selling price. 17 . data are estimates for Android and Kindle. All rights reserved. Source: Apple. So Far Smartphones Apple iPhone Cumulative Shipments as of Q2:10 Google Android Tablets Apple iPad Amazon Kindle 129MM 152MM 29MM 16MMa ASP** $606 <$600 $650 <$200 Launch Date Q2:07 Q4:08 Q2:10 Q4:07 Note: a) Kindle shipment estimates per Scott Devitt.

Twitter & Facebook. Pandora.Mobile Usage – Big & Ramping Fast % of Traffic From Mobile Devices. All rights reserved. 2008 – 2011 75% % of Traffic from Mobile 60% 55% 50% Pandora Twitter 33% 25% Facebook 5% % 1% 2008 Source: Pandora S1. Copyright 2011. 2009 2010 2011 18 . Twitter. Facebook.

Copyright 2011. All rights reserved. 2007 – 2011 120 100 4x Growth in past years 80 60 40 20 0 2007 Source: Google.Mobile Search – Growing Rapidly Google US Mobile Queries (Indexed). 2008 2009 2010 2011 19 19 .

Mobile Advertising – Ramping Quickly in all Geographies InMobi – # of Fortune 1000 Companies Launching Mobile Ad Campaigns & Quarterly Smartphone Ad Impressions. Copyright 2011. 250 250 # of Global Fortune 1000 Advertisers 20 203 200 138 150 100 37 4 1/10 8 50 0 4/10 7/10 10/10 1/11 4/11 7/11 9/11 . 10/09-9/11 25 Quarterly Smartphone Mobile Ad Impressions (B) Africa South America Middle East 20 Europe North America 15 Asia # of Global Fortune 1000 Advertisers 10 62 5 25 3 0 10/09 Source: InMobi. All rights reserved.

Google indicated during CQ3 earnings call that it expects $2.7B $0 2008 2009 2010 2011E Source: Gartner. 2008 vs.5B mobile ad revenue in 2011E Copyright 2011. Up 17x in 3 Years Global Mobile App + Advertising Revenue. CAGR is compound annual growth rate. implying gross app market revenue of $4B in 3 years. 2011E $15 Mobile Ad + Apps Spending ($B) Mobile Apps Mobile Advertising $10 $12B $5 $0.Global Mobile App + Advertising Revenue = $12B in 2011E Revenue. All rights reserved. 21 . Note: Apple has paid >$3B $’s to developers as of 9/11.

which we believe to be accurate. dated April 2005 Copyright 2011.) SelfActualization Internet / Mobile Phone Shelter Esteem Belonging Safety Food / Water Physiological Note: Created for discussion purposes and a bit of humor. Not intended to discredit Maslow's hierarchy. 22 .‘Hierarchy of Needs’ Revisited? 1943 – Maslow 2011 – ? . Originally presented in Morgan Stanley’s “The Age of Engagement” presentation. All rights reserved.

. All rights reserved.USER INTERFACE – TEXT  GRAPHICAL  TOUCH / SOUND / MOVE Copyright 2011.

What Has One Insanely Great Designer / Entertainer / Leader / Businessman Wrought?

Before Steve Jobs… computers were utilitarian tools for computation. After Steve… computers became beautiful objects we could use in thousands of ways to aim to make life better. Steve’s design aesthetic was second to none.
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Natural User Interface Revolution – Now in Touch / Sound / Move Era
1980s Text 1990s Graphical 2000s Touch / Sound / Move

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The Next Big Thing(s)? Those Two Big Things on the Sides of Your Head…
High Quality / Compact Wireless Speakers Connected Car Audio

Noise Cancellation / Better Audio Quality Headsets

Sound Recognition + Understanding

4B+ Bluetooth Enabled Devices

Sound Creation + Sharing

ONLINE AUDIO
Source: Bluetooth enabled devices shipment per iSuppli and Instat, assumes a 2.5 year replacement cycle.
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Founder & CEO. 27 .Perhaps its Time to Hear About the Ear Sound is going to be bigger than video… ‘Record’ is the new QWERTY. Alexander Ljung. All rights reserved. SoundCloud Copyright 2011.

All rights reserved.COMMERCE – FAST / EASY / FUN / SAVINGS = MORE IMPORTANT THAN EVER… Copyright 2011. .

Total Retail Sales Note: eCommerce sales excludes travel. All rights reserved. Copyright 2011. Retail E-Commerce Sales -10% U.S. Q1:03 –Q2:11 30% USA Retail Sales & eCommerce Y/Y Growth Rates 20% 10% 0% Q1:03 Q1:04 Q1:05 Q1:06 Q1:07 Q1:08 Q1:09 Q1:10 Q1:11 U.eCommerce = Four Quarters of Accelerating Growth USA Retail Sales & eCommerce Y/Y Growth Rates. comScore.S. Source: U. auto and auctions. Census Bureau. 29 .S.

30 .8512) Note: (1) : e-Commerce share is shown as a percent of DOC’s Total Retail Sales excluding Food Service & Drinking.1443x + 4. Food & Bev. Q1:04 – Q4:13E 12% eCommerce as % of Total Retail Sales 10% 8% 6% 4% 2% 0% Q1:04 eCommerce Penetration 8% in Q2:11 Q1:05 Q1:06 Q1:07 Q1:08 Q1:09 Q1:10 Q1:11 Q1:12 eCommerce Penetration Linear Trendline (y=0. Motor Vehicles & Parts.eCommerce Continues to Gain Share from Offline… at 8% Share of USA Commerce with Lots of Headroom USA eCommerce % Share(1) of Total Retail Sales. All rights reserved. Stores. of Commerce.0428. comScore. R^2=0. Copyright 2011. Gasoline Stations and Health & Personal Care Stores Source: US Dept.

31 . Square. Copyright 2011.com disclosed 2010 mobile gross sale. 2009 / 2011 data are KPCB estimates. 2009-2011E $5 Gross Mobile Sales or Payment Volume ($B) $4 eBay PayPal Target $3 $2 Amazon.com.com / Target / Square.Mobile Commerce = We Have Lift Off! Mobile Sales or Payment Volume – eBay / PayPal / Amazon. Source: eBay. Target.com Square $1 $0 2009 2010 2011 Note: Amazon. Amazon. All rights reserved.

All rights reserved.Old Magazine Paradigm Finally Comes Alive = It’s a Bird. It’s a Plane? It’s Click & Buy (on Mobile Device)… Copyright 2011. 32 .

7/11 Found it online for a better price Found it at another store for a better price Saw a negative review about the item I bought a similar item instead It was not available in-store No longer needed the item None of the above 52% 51% 34% 21% 17% 7% 1% % of Respondents Source: comScore US smartphone user survey. So while mobile Internet is helping drive foot traffic to local stores. All rights reserved. 7/11. it is also helping make pricing info more transparent for the consumers.In a Mobile-ized / Transparent World = Pricing Matters A LOT! Reasons for In-Store Purchase Abandonment Among USA Smartphone Users. Copyright 2011. Note: the same survey also indicated that 50% of USA smartphone users have used their smartphones to find a nearby store. 33 .

All rights reserved.Local Commerce = Rejuvenated by Mobile Coupons + Demand Generation 20MM+ Users* Payments + Inventory Management 2MM+ Users* Reviews + Business Information / Leads 40MM+ Users* Check Ins + Driving Foot Traffic 15MM+ Users* Note: *Users are comScore USA’s aggregate monthly unique visitor data for companies listed under each category. Total USA local advertising for 2011E is $68B. Copyright 2011. LOCAL COMMERCE 34 . per Morgan Stanley Research.

ADVERTISING – LOOKIN’ GOOD… Copyright 2011. . All rights reserved.

5% Mobile 25% 19% 43% 43% Ad Spend ~$20B Opportunity in USA Note: Print includes newspaper and magazine. USA 2010 Time Spent % of Total Media Consumption Time or Advertising Spending 50% 40% 30% 27% 20% 16% 10% 8% 0% Print Radio TV Internet 11% 8% 0. 36 . % of Advertising Spending. Ad Spend Still Out of Whack Internet / Mobile (upside…) vs. 3/11. Print (downside…) % of Time Spent in Media vs. Source: eMarketer. Copyright 2011. All rights reserved.Media Time Spent vs. $20B opportunity calculated assuming Internet and Mobile ad spend share equal their respective time spent share.

All rights reserved. Copyright 2011. Internet users per Morgan Stanley estimate (1995) and comScore (2011).Advertising $s Follow Eyeballs – Ad Revenue per User = $49 in 2011E vs. We note that comScore reports a lower global Internet user # than International Telecommunications Union. 37 . $0 in 1994E 1995E 2011E Global Internet Ad Revenue $55MM $73B $49 1.5B Ad Revenue per User $9 Global Internet Users 6MM Source: Global online ad revenue per Jupiter Communications (1995). ZenithOptimedia (2011).

032 22% Q4:10 $8.56 7% $0.54 10% $0.53 6% $0.876 28% Cost per Click (CPC . 38 .245 17% 15.157 16% 14.52 7% $0.562 23% Q3:10 $7.55 4% Source: Google.Google Paid Clicks & Cost-Per-Click Continue to Grow Rapidly.$) Y/Y Growth $0. All rights reserved.716 33% Q3:11 $9.306 28% Q2:11 $8.335 33% Aggregate Paid Clicks (MM) Y/Y Growth 12.651 15% 13. Copyright 2011.58 12% $0.004 18% 16. Mobile Helping Q2:10 Gross Advertising Revenue ($MM) Y/Y Growth $6. Morgan Stanley Research.669 18% 15.167 26% Q1:11 $8.

Copyright 2011. Social Networking Sites. 6/08 – 7/11 120 Portals 100 Social Networking Monthly Time Spent (Bs of Minutes) June 2011 Time Spent Social Networking > Portals 80 60 40 20 0 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 3/11 6/11 Source: comScore Media Metrix USA panel-only data. All rights reserved.Time Spent on Social Networking Sites Surpassed Portals. USA USA Monthly Time Spent. Portals vs. 39 . June 2011.

All rights reserved. Copyright 2011.30 $4.45 $3. as of Q3:11.25 $2. CPM data per Vivaki.70 $6.89 $5.80 $5 CPM ($) $10 $15 $0.00 $9. Display ad unit share as of 8/11.Social Networking CPMs = Have Begun to Punch Closer to Their Weight Share of Total USA Online Display Ad Units (as of 8/11) + CPM (as of Q3:11).90 Share of Total US Online Display Ad Units Source: comScore. 40 . by Top Publisher Categories Business / Finance Directories Online Gaming Sports Email News / Information Entertainment Portals Social Networking 0% 10% 20% 2% 2% 3% 5% 10% 11% 14% 21% 30% 30% 40% $0 $2.

CONTENT CREATION – CHANGED FOREVER… Copyright 2011. All rights reserved. .

price is competed down to marginal cost. • How does one create differentiated content in an economically viable manner. Display = 23% of Online Ad Revenue ($7B) in 2011 vs.0 presentation. $12 $8 $4 $0 Q1:06 Q4:06 Q3:07 Q2:08 Q1:09 Q4:09 Q3:10 Q2:11 USA Total Newspaper Print + Online Revenue Google USA Revenue Source: Demand Media. 42 . Quarterly Revenue ($B) USA Total Newspaper Print + Online Revenue vs. Google USA Revenue. are experiencing 5th straight year of declining revenue. All rights reserved. once the bastions of content creation / curation. Q1:06 – Q2:11 $16 • With undifferentiated products. Note that Search = ~50% of USA Online Ad Revenue ($15B based on Q2 run rate) in 2011 vs. check out Joanne Bradford’s Web 2. when few want to pay for it? – For insights. <5% in 2001. 62% in 2001 Copyright 2011.Content Commoditization – Value Shift from Creators to Aggregators • Newspapers. And the marginal cost for digital content is $0.

. All rights reserved.TECHNOLOGY / MOBILE LEADERSHIP – AMERICANS SHOULD BE PROUD Copyright 2011.

Copyright 2011.We are Living Through a Once Every 10-20 Years Technology Evolution – The Mobile Computing Cycle… • Smartphones + tablets outshipped PCs (notebooks + desktops) in Q4:10. 44 . • Windows operating system fell to installation on <50% of Internet-enabled devices in Q2:10. All rights reserved. Source: Morgan Stanley Research. Gartner.

2011E 100% Market Share of Smartphone OS 80% Other OS 60% iOS Android Windows Mobile 40% BlackBerry OS Linux Nokia Symbian 20% 0% 2005 Source: Morgan Stanley Research. 2011E 45 . All rights reserved. Gartner. 2005 vs.‘Made in USA’ Smartphone Operating Systems = 64% Share from 5% Five Years Ago Smartphone Operating System Market Share. Copyright 2011.

46 .Still Early-Innings Era of Smart-Phones to Smarter-Phones • Pace of innovation in Silicon Valley may be unprecedented. All rights reserved. • Combination of technology improvements and elegant design may be unprecedented. Copyright 2011.com / Facebook) may be unprecedented. • Intensity / focus / leadership of USA-based companies (Apple / Google / Amazon.

MEGA-TREND OF 21ST CENTURY = EMPOWERMENT OF PEOPLE VIA CONNECTED MOBILE DEVICES Copyright 2011. . All rights reserved.

Copyright 2011. the sense of human frailty mixed with lifesaving information. all mixing at hyper-speed. Pink lines indicate tweets coming into Japan. the messages of those seeking comfort and those seeing some kind of divine retribution. 48 .Global Information Flow Real-Time + Fast + Broad 16 Minutes Before / After Japan Earthquake on 3/11/11 Snapshots of @replies From & To Twitter Users in Japan 2:30pm Japan Time Before Earthquake / Tsunami 2:46pm Japan Time After Earthquake / Tsunami In 140-character bites. the story unfolded: the shock and terror. Source: Twitter. – LATimes. 3/11/11 Note: Yellow lines indicate tweets coming out of Japan. All rights reserved.

All rights reserved. both of which do not require bank accounts but utilize mobile phones as identity verification / payment confirmation. **There are 90MM Kisan credit card users and 118MM job card users. Copyright 2011. electrical grid (80%). providing greater reach vs.Global Information Flow – Remote Locations Getting Connected • 85% of world’s population covered by commercial wireless signals.* • 200MM+ farmers in India receiving government payments / subsidies via mobile devices.** Source: *GSM Association. 49 . Government of India. per Ministry of Rural Development. United Nations.

1960 .Global Economies / People = Increasingly Connected / Co-Dependent World Trade as % of World GDP. Source: Trade data per World Trade Organization (WTO). Copyright 2011. Japan and South Korea. All rights reserved. 50 . The biggest trading partners of USA includes EU nations. GDP data per United Nations (UN). China. Canada. Mexico.2010 30% 25% World Trade as % of GDP 20% 15% 2010 World Trade = 24% of World GDP 10% 5% 0% 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Note: World trade calculated as the sum of all countries’ imports (or exports).

All rights reserved. . BUT MOSTLY GOOD? Copyright 2011.AUTHENTIC IDENTITY – THE GOOD / BAD / UGLY.

4B within two years)… It’s hard to hide. 10/11. connected citizens of the world. Copyright 2011. The ‘truth’ is often just a photo/click–send away. 52 . well-lighted place to do business?’ ‘People are basically good?’ In a world with tremendous uncertainty – owing to the rapid ramp in always-on. perhaps. All rights reserved. Only time will tell how all this plays out… Source: Facebook. ‘Clean. the world is on the cusp of being safer than ever? There are lots of sacrifices.Authentic Identity – The Good / Bad / Ugly. But Mostly Good? With 800MM global active Facebook users…50% that log on in any given day…with an average of 130 friends…and an average of 80 community pages / groups / events…and more than 250MM photos uploaded per day and 350MM active mobile users…* And 835MM smartphone users (likely ramping to 1. This is new terrain.

.ECONOMY – LOTS OF UNCERTAINTY Copyright 2011. All rights reserved.

54 . VIX is a measure of implied volatility of S&P 500 index options. Source: CBOE. All rights reserved. Copyright 2011. Illustrating Uncertainty 100% Chicago Board Options Exchange (CBOE) Volatility Index (VIX). Morgan Stanley Research. 1990 – 2011 YTD 80% VIX Index Value (%) 60% Current (10/11) Level = 40% 40% 1990-2011 Average = 20% 20% 0% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Note: Data as of 10/11.Stock Market Volatility = 2x Historical Average.

10/11. Illustrating Uncertainty The Conference Board Consumer Confidence Index. 55 . Source: The Conference Board. 1978 – 2011 YTD 160 140 Consumer Confidence Index (1985=100) 120 30 Year Average CCI = 92. All rights reserved. The Index is calculated each month on the basis of a household survey of consumers' opinions on current conditions and future expectations of the economy.3 20 0 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Note: Index started in 1967 / benchmarked to 1985=100.Consumer Confidence = Well Below Historical Average.4 100 80 60 40 2/09 Trough CCI = 25. Copyright 2011.7 10/11 CCI = 45.

1/08 – 7/11 Think about your company’s overall capital budget for the current quarter. have there been any adjustments made over the past 90 days? 50% Revised Lower Revised Higher 40% % of Respondents 23% of Respondents Have Revised Capital Budgets Lower in CQ3:11 30% 20% 10% 0% 1/08 4/08 7/08 10/08 1/09 4/09 7/09 10/09 1/10 4/10 7/10 10/10 1/11 4/11 7/11 Source: ChangeWave Research. Copyright 2011. 56 . Illustrating Uncertainty Survey Results of Corporate Capital Spending Budget Revisions. All rights reserved.USA Corporate Capital Spending Budgets = Being Revised Down.

7 2. 2009 -3.3 -0.6 6.3 -0.5 9.4 -0.1 1.6 2.2 6.9 6.3 9.0 10.0% -0.3 3. All rights reserved.6 1.9% -0.4 4.5 Note: Data is annual GDP percent change.6 -3.2 -0.3 5.6 -0.5 3.1 4.1 -0.8 1.5 7.9 -6.4 -0.2 -0.0 -0.1 2011E 1. 9/11.4 0.1 4.5 4.4 0. 57 .7 -0.3 9.0 2011E -1.8% 1.6 1.0 2012E 1.3 -4.6 -0.3 2012E -0.6 -0.3 -0.5 -0.1 3.8 -0. 9/11 Country / Region USA Euro Zone UK Japan China India Russia Brazil Developed Markets Emerging Markets World Copyright 2011.8 -7.1 -0.5% -4.8 -0.3 10.5% 1.7 -0.0% 1.7 2010 3.5 -0.8 4. Illustrating Uncertainty Difference from 6/11 IMF Forecasts IMF Forecasts. Source: IMF World Economic Outlook.GDP Growth Forecasts = Being Revised Down.8 1.0 7.4 4.0 7.1 7.

Stock Markets = Often Leading Indicators of Economic Activity Russia -33% from 52-Week High. Data as of 10/17/11. Source: Morgan Stanley Research. All rights reserved. 2010. Yahoo! Finance. 1/10 – 10/11 160% Index Value (1/1/2010 = 100%) 140% 120% 100% 80% New 2-Week Trendline? 60% 1/10 3/10 5/10 7/10 9/10 11/10 1/11 3/11 5/11 7/11 9/11 S&P500 NASDAQ China Shanghai Composite MSCI Europe Russia RTS Oil Gold Note: All values are indexed to 1 (100%) on Jan 1. Oil (-24%) / China (-23%) / Europe (-23%) / S&P500 (-12%) / Nasdaq (-9%) 180% Stock / Commodity Markets Performance (% Change From 1/10). 58 . Copyright 2011.

.USA INC. All rights reserved. – PAY ATTENTION! Copyright 2011.

Real GDP adjusted for inflation. 1901 – 2011E 50% Revenue as % of GDP (Left Axis) Revenue & Expenses as % of GDP 40% Expenses as % of GDP (Left Axis) Real GDP (Right Axis) 30% $10 $8 20% $6 $4 10% $2 0% 1901 $0 2011E $16 $14 $12 Real GDP (in Trillions of 2005 Dollars) 60 Biggest Peace Time Gap Between Revenue & Expenses in USA History 1911 1921 1931 1941 1951 1961 1971 1981 1991 2001 Source: 1910 – 1930 per Census Bureau. in 2005 dollars. Current State = Revenue Problem? Spending Problem? USA Inc. All rights reserved. Copyright 2011.America’s Revenue & Expenses as % of GDP Over 110 Years. Revenue & Expenses as % of GDP. 1940-2010 per White House OMB. .

516 -$788 52% $223 15% --$272 18% $232 15% -$164 -12% $2.352 -$590 44% $484 36% $157 12% $120 9% $1.295 52% $497 20% --$495 20% $184 7% -$318 -15% $2. and economic stimulus Significant increase owing to ongoing War on Terror Decreased owing to historic low interest rates USA Inc. Copyright 2011. median net margin between 1995 & 2010 = -8% Note: USA federal fiscal year ends in September.293 -60% On average.005 50% $653 32% $207 10% $161 8% $1.789 5% $937 52% $335 19% --$294 16% $223 12% $237 12% $2.456 -2% $1.984 57% $431 12% $152 4% $694 20% $196 6% -$1.026 11% $1. relatively stable On average. 61 . expense grew 6% Y/Y over past 15 years Significant increase owing to aging population + rising healthcare cost Includes education / law enforcement / transportation… Includes discretionary spending on TARP.154 15% $927 43% $794 37% $278 13% $154 7% $2.America’s Income Statement – -60% Net Margin in F2010 USA Inc. Profit & Loss Statement. revenue grew 3% Y/Y over past 15 years Largest driver of revenue Payroll tax on Social Security + Medicare Fluctuates significantly with economic conditions Includes estate & gift taxes / duties & fees.163 3% $899 42% $865 40% $191 9% $208 10% $3. Non-defense discretionary includes federal spending on education. law enforcement. F1995 / F2000 / F2005 / F2010 Comments F1995 … F2000 … F2005 … F2010 Revenue ($B) Y/Y Growth Individual Income Taxes* % of Revenue Social Insurance Taxes % of Revenue Corporate Income Taxes* % of Revenue Other % of Revenue Expense ($B) Y/Y Growth Entitlement / Mandatory % of Expense Non-Defense Discretionary % of Expense "One-Time" Items % of Expense Defense % of Expense Net Interest on Public Debt % of Expense Surplus / Deficit ($B) Net Margin (%) $1. *individual & corporate income taxes include capital gains taxes.472 8% $1. infrastructure. All rights reserved. GSEs. judiciary functions… Source: White House Office of Management and Budget.

707 213 12 2.699 161 272 47 1.324 2.009 19 436 53 97 2.046 497 14 848 23 100 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Country Japan Jamaica Greece Lebanon Iraq Italy Belgium Singapore Ireland USA Portugal Iceland Germany Canada France % of GDP 220% 143 143 134 120 119 97 96 95 94 93 92 84 84 82 Rank 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Country Hungary Israel UK Egypt Austria Sudan Brazil Jordan Côte d'Ivoire India Netherlands Cyprus Spain Uruguay Pakistan % of GDP 80% 77 76 74 72 72 67 67 67 64 64 61 60 57 57 Note: Ranking excludes countries with gross government debt less than $10MM in 2010. 62 .445 452 214 196 13. Gross government debt includes intragovernment obligations (such as Treasuries held by the Social Security Trust Fund in US’ case).397 18 15 1.759 1. All rights reserved.110 2010 Gross Government Debt ($MM) $105 168 1.America’s Debt Level Relative to Other Countries – You Do the Math… 2010 Gross Government Debt ($MM) $12. Copyright 2011. Source: The International Monetary Fund (IMF).

com 90K+ Total Views 14K+ YouTube Views 7K+ Facebook Likes 2K+ Retweets Copyright 2011. 63 .com / amazon. All rights reserved.USA Inc. @ kpcb.com / youtube.

.CLOSING THOUGHTS Copyright 2011. All rights reserved.

At least we know what the problems are.‘If’ Copyright 2011. 65 . Now we need the resolve to fix them. Tech Industry – Wow! Unprecedented times! If you can keep your head when all about you are losing theirs…* *Rudyard Kipling . All rights reserved. Across-the-board sacrifice needed.Economy – Often darkest before dawn.

KPCB is a venture capital firm that owns significant equity positions in certain of the companies referenced in this presentation. All rights reserved.Disclosure The information offered in this presentation speaks to industry trends in general. and should not be construed as providing any particular recommendations or analysis for any specific company that is mentioned in this presentation. 66 . Copyright 2011.

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