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Emerging Media Forecast

June 2007

Emerging Media Forecast June 2007

Individual or Corporate Behavior Driver

EMERGING MEDIA IN CONTEXT

Venture capital activity reflects expectations of change

Traditional Medium Equivalent / Ad-Supported Revenue Driver

Radio/Music

TV

Online/Print

Out-of-Home

Marketing

Services

Other

Marketing

UGC

Production

of-Home Marketing Services Other Marketing UGC Production Social Content Consumption Niche Content Consumption New

Social Content Consumption

Niche Content Consumption

New Place

Consumption

Asset

Management

Content-on-

Demand

Information

Seeking

Commerce /

Shopping

Game Playing

2 Source: MAGNA Global

EMERGING MEDIA IN CONTEXT

But “Traditional” media dominates by wide margin

Total US Population: Hours Spent With Media 500,000 TV 466.5bn 450,000 400,000 Radio 350,000 300,000
Total US Population: Hours Spent With Media
500,000
TV
466.5bn
450,000
400,000
Radio
350,000
300,000
292.5bn
Consumer
Internet
250,000
Newspapers
200,000
150,000
57.0bn
Consumer
100,000
53.7bn
Magazines
50,000
Search
36.6bn
0
2.9bn
2002
2003
2004
2005
2006
Millions of Person-Hours Per Year

3 Source: MAGNA Global, US Census, Veronis Suhler, OPA

2002 2003 2004 2005 2006 Millions of Person-Hours Per Year 3 Source: MAGNA Global, US Census,

EMERGING MEDIA IN CONTEXT

And young audiences are not abandoning traditional media

Young Audiences' TV Viewing Trends

29.0 27.0 25.0 23.0 21.0 19.0 17.0 15.0 Hours of Viewing Per Week 1991-92 1992-93
29.0
27.0
25.0
23.0
21.0
19.0
17.0
15.0
Hours of Viewing Per Week
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07

P2-5P6-11 P12-17 P18-34

P6-11P2-5 P12-17 P18-34

P12-17P2-5 P6-11 P18-34

P18-34P2-5 P6-11 P12-17

4 Source: MAGNA Global analysis of Nielsen Media Research data

2005-06 2006-07 P2-5 P6-11 P12-17 P18-34 4 Source: MAGNA Global analysis of Nielsen Media Research data

EMERGING MEDIA IN CONTEXT

“Packagers” (networks, publishers) continue to drive industry

Creators

$
$

Advertisers

Producers

$ $ Media Packagers $
$
$
Media
Packagers
$

Distributors

$
$

$

Consumers

$
$

Devices / Access Points

Industry Structures Held Together By Regulations, Economic Efficiency and Copyright Law

5 Source: MAGNA Global

Points Industry Structures Held Together By Regulations, Economic Efficiency and Copyright Law 5 Source: MAGNA Global

EMERGING MEDIA IN CONTEXT

So although emerging media = emerging opportunities…

6

…look beyond early adopters

Change is constrained for most media

Business model issues

Limits to market appeal

Difficulty to change behavior

Negative utility with more choice

model issues • Limits to market appeal • Difficulty to change behavior • Negative utility with
model issues • Limits to market appeal • Difficulty to change behavior • Negative utility with

SEARCH

Media search tools have existed in many forms

7

SEARCH • Media search tools have existed in many forms 7
SEARCH • Media search tools have existed in many forms 7
SEARCH • Media search tools have existed in many forms 7
SEARCH • Media search tools have existed in many forms 7
SEARCH • Media search tools have existed in many forms 7

SEARCH

Three players have come to dominate online search

8

SEARCH • Three players have come to dominate online search 8
SEARCH • Three players have come to dominate online search 8

SEARCH

E-commerce is a key driver of search spending

When does search become too large a share of revenue?

8.0%

7.0%

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%

Search Spending as % of E-Commerce Sales 1Q00A 2Q00A 3Q00A 4Q00A 1Q01A 2Q01A 3Q01A 4Q01A
Search Spending as % of E-Commerce Sales
1Q00A
2Q00A
3Q00A
4Q00A
1Q01A
2Q01A
3Q01A
4Q01A
1Q02A
2Q02A
3Q02A
4Q02A
1Q03A
2Q03A
3Q03A
4Q03A
1Q04A
2Q04A
3Q04A
4Q04A
1Q05A
2Q05A
3Q05A
4Q05A
1Q06A
2Q06A
3Q06A
4Q06A
1Q07A
2Q04A 3Q04A 4Q04A 1Q05A 2Q05A 3Q05A 4Q05A 1Q06A 2Q06A 3Q06A 4Q06A 1Q07A 9 Source: MAGNA Global,

9 Source: MAGNA Global, US Census, IAB

SEARCH

And search spend reflects effectiveness for SMEs and dot-coms

Advertising Dollars Spent Per Hour of Media Consumption

$3.00

$2.50

$2.00

$1.50

$1.00

$0.50

$0.00

2002 2003 2004 2005 2006
2002
2003
2004
2005
2006

$2.44

$0.90

$0.34

$0.30

$0.12

$0.07

SearchNewspapers Consumer Magazines Consumer Internet TV Radio

NewspapersSearch Consumer Magazines Consumer Internet TV Radio

ConsumerSearch Newspapers Magazines Consumer Internet TV Radio

Magazines

ConsumerSearch Newspapers Consumer Magazines Internet TV Radio

Internet

TVSearch Newspapers Consumer Magazines Consumer Internet Radio

RadioSearch Newspapers Consumer Magazines Consumer Internet TV

Consumer Magazines Consumer Internet TV Radio 10 Source: MAGNA Global, US Census, Veronis Suhler

10 Source: MAGNA Global, US Census, Veronis Suhler

SEARCH

Paid search to exceed $11 billion in 2008

Led by more searches per person and better monetization

Paid Search $11,094.9 $12,000.0 $10,000.0 $8,770.7 $8,000.0 $6,799.0 $6,000.0 Annual Growth $4,000.0 +29.0%
Paid Search
$11,094.9
$12,000.0
$10,000.0
$8,770.7
$8,000.0
$6,799.0
$6,000.0
Annual
Growth
$4,000.0
+29.0%
+26.5%
$2,000.0
$0.0
2006A
2007E
2008E
(In millions)
Growth $4,000.0 +29.0% +26.5% $2,000.0 $0.0 2006A 2007E 2008E (In millions) 11 Source: MAGNA Global, IAB/PWC

11 Source: MAGNA Global, IAB/PWC

EMERGING OUT-OF-HOME

Platforms include cinema, digital billboards and retail networks

12

EMERGING OUT-OF-HOME • Platforms include cinema, digital billboards and retail networks 12
EMERGING OUT-OF-HOME • Platforms include cinema, digital billboards and retail networks 12
EMERGING OUT-OF-HOME • Platforms include cinema, digital billboards and retail networks 12
EMERGING OUT-OF-HOME • Platforms include cinema, digital billboards and retail networks 12
EMERGING OUT-OF-HOME • Platforms include cinema, digital billboards and retail networks 12
EMERGING OUT-OF-HOME • Platforms include cinema, digital billboards and retail networks 12
EMERGING OUT-OF-HOME • Platforms include cinema, digital billboards and retail networks 12
EMERGING OUT-OF-HOME • Platforms include cinema, digital billboards and retail networks 12

EMERGING OUT-OF-HOME

More digital billboards and new digital networks drive growth

But most activity remains at the local level

Emerging Out-of-Home Advertising

$1,711.0

$1,800.0 $1,600.0 $1,371.8 $1,400.0 $1,090.5 $1,200.0 Annual $1,000.0 Growth $800.0 $600.0 +25.8% +24.7%
$1,800.0
$1,600.0
$1,371.8
$1,400.0
$1,090.5
$1,200.0
Annual
$1,000.0
Growth
$800.0
$600.0
+25.8%
+24.7%
$400.0
$200.0
$0.0
2006A
2007E
2008E
(In millions)
Growth $800.0 $600.0 +25.8% +24.7% $400.0 $200.0 $0.0 2006A 2007E 2008E (In millions) 13 Source: MAGNA

13 Source: MAGNA Global

SOCIAL NETWORKING

Social sites emerged in late 90s as potential substitutes for portals

But post-Geocities, emphasis has been on social connectivity

14

in late 90s as potential substitutes for portals • But post-Geocities, emphasis ha s been on
in late 90s as potential substitutes for portals • But post-Geocities, emphasis ha s been on
in late 90s as potential substitutes for portals • But post-Geocities, emphasis ha s been on
in late 90s as potential substitutes for portals • But post-Geocities, emphasis ha s been on
in late 90s as potential substitutes for portals • But post-Geocities, emphasis ha s been on

SOCIAL NETWORKING

Growth is mostly share gains from other publishers

Historically monetized as residual internet traffic

Social Networking and Total Internet Page Views

700,000 Total Internet: + 2.6% 600,000 500,000 400,000 300,000 Social Networking: + 98.6% 200,000 100,000
700,000
Total Internet: + 2.6%
600,000
500,000
400,000
300,000
Social Networking: + 98.6%
200,000
100,000
0
Page Views
Jan-06
Feb-06
Mar-06
Apr-06
May-06
Jun-06
Jul-06
Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 15 Source: MAGNA Global analysis of Comscore

15 Source: MAGNA Global analysis of Comscore data

SOCIAL NETWORKING

Social Network growth slowing, but will exceed $1 billion in 2008

Dollars driven by volume of inventory and better monetization

Social Network Advertising

$1,020.0 $1,200.0 $1,000.0 $800.0 $685.0 Annual $600.0 Growth $400.0 $276.0 +148.2% +48.9% $200.0 $0.0 2006A
$1,020.0
$1,200.0
$1,000.0
$800.0
$685.0
Annual
$600.0
Growth
$400.0
$276.0
+148.2%
+48.9%
$200.0
$0.0
2006A
2007E
2008E
(In millions)
$600.0 Growth $400.0 $276.0 +148.2% +48.9% $200.0 $0.0 2006A 2007E 2008E (In millions) 16 Source: MAGNA

16 Source: MAGNA Global

ONLINE VIDEO

New media can dramatically affect an industry

Music industry often cited as case study for the video industry

Manufacturers' Shipments of Recorded Music

16,000 14,000 12,000 Napster Launched (June 1999) 10,000 BitTorrent, Kazaa, Grokster, etc. active 8,000 iTunes
16,000
14,000
12,000
Napster Launched
(June 1999)
10,000
BitTorrent, Kazaa,
Grokster, etc. active
8,000
iTunes Launch
(March 2003)
6,000
Revenues ($000s)
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006

TotalDigital Sales Retail Sales

Digital

Sales

RetailTotal Digital Sales Sales

Sales

2000 2001 2002 2003 2004 2005 2006 Total Digital Sales Retail Sales 17 Source: MAGNA Global,

17 Source: MAGNA Global, RIAA

ONLINE VIDEO

New media can dramatically affect an industry

…and classified advertising provides another example

18

affect an industry • …and classified advertising provides another example 18 Source: McKinsey, NAA, Monster Worldwide

Source: McKinsey, NAA, Monster Worldwide

ONLINE VIDEO

But TV won’t be impacted as other media (yet!)

Yes for all people under virtually all circumstances Often for most people under most circumstances
Yes for all people
under virtually all
circumstances
Often for most
people under most
circumstances
Yes for some most of
the time or yes for all
some of the time
Yes for some some of
the time or no for
most most of the time
No

19 Source: MAGNA Global

 

General Print

YP

 

Radio

TV

 
Limited TV content available today
Limited TV content
available today

Sufficient Range of Content

 
Sufficient Range of Content      
Sufficient Range of Content      
 
Sufficient Range of Content      
Sufficient Range of Content      
 
   
Internet can’t deliver high res video well
Internet can’t deliver
high res video well

Sufficient Technical Quality

 
Sufficient Technical Quality    
Sufficient Technical Quality    
 
Sufficient Technical Quality    
Sufficient Technical Quality    
     

Equipment

     

Print is tactile

 
            IPTV: no STB integration
 
            IPTV: no STB integration
     
            IPTV: no STB integration
 
IPTV: no STB integration
IPTV: no STB integration

Substitution

Substitution    
   

Sufficient Customer Service

 
Sufficient Customer Service     QoS is critical for video
Sufficient Customer Service     QoS is critical for video
 
Sufficient Customer Service     QoS is critical for video
Sufficient Customer Service     QoS is critical for video
QoS is critical for video
QoS is critical for video
     

Efficient

 
Efficient       Hard to navigate to find audio/video
Efficient       Hard to navigate to find audio/video
 
Efficient       Hard to navigate to find audio/video
Efficient       Hard to navigate to find audio/video
 

Hard to navigate to find audio/video

Navigation

       

Cheaper to Substitute

Cheaper to Substitute     Online bandwidth=more cost than free media
Cheaper to Substitute     Online bandwidth=more cost than free media
 
Cheaper to Substitute     Online bandwidth=more cost than free media
Cheaper to Substitute     Online bandwidth=more cost than free media
 

Online bandwidth=more cost than free media

       

Increased

     

Print and radio are typically portable

   
           
 
           
   
           
           
 

Convenience

SUMMARY

 
SUMMARY     Prospects for online media substitution limited by drawbacks relative to traditional media
SUMMARY     Prospects for online media substitution limited by drawbacks relative to traditional media
SUMMARY     Prospects for online media substitution limited by drawbacks relative to traditional media
SUMMARY     Prospects for online media substitution limited by drawbacks relative to traditional media
 

Prospects for online media substitution limited by drawbacks relative to traditional media

SUMMARY     Prospects for online media substitution limited by drawbacks relative to traditional media

ONLINE VIDEO

Conventional TV popularity: 90x vs. Online in 2011?

Yes, if last year’s online growth rates persist

200.0x Below Trend 180.0x 2006 Growth Rate Was 38.8% 160.0x 145.8x 140.0x 119.8x Above Trend
200.0x
Below Trend
180.0x
2006 Growth Rate Was 38.8%
160.0x
145.8x
140.0x
119.8x
Above Trend
120.0x
99.2x
100.0x
82.7x
69.4x
80.0x
58.6x
60.0x
40.0x
20.0x
0.0x
25%
30%
35%
40%
45%
50%
Different Scenarios:
Assumed 5-Year Compounded Annual Growth Rate of Online Video
Popularity Factor of Conventional
TV in 2011

20 Source: MAGNA Global, Accustream

Annual Growth Rate of Online Video Popularity Factor of Conventional TV in 2011 20 Source: MAGNA

ONLINE VIDEO

Online video spend growing >50% annually, but <1% of all TV

Significant increase in supply and advertiser interest driving results

Online Video Advertising

$560.0 $600.0 $500.0 $365.5 $400.0 Annual $300.0 $235.0 Growth $200.0 +55.5% +53.2% $100.0 $0.0 2006A
$560.0
$600.0
$500.0
$365.5
$400.0
Annual
$300.0
$235.0
Growth
$200.0
+55.5%
+53.2%
$100.0
$0.0
2006A
2007E
2008E
(In millions)
$300.0 $235.0 Growth $200.0 +55.5% +53.2% $100.0 $0.0 2006A 2007E 2008E (In millions) 21 Source: MAGNA

21 Source: MAGNA Global

ADVANCED TV

Advanced TV (VOD, RFIs, iTV) has been slow to emerge

User experience remains poor Content is better, but limited Advertising infrastructure still under construction!

Advertising Infrastructure Components

Unduplicated/unique reach

Uniform technological standards

Establishment of creative formats

Smooth buying process

Provision of robust user data

High-quality service / product standards

22 Source: MAGNA Global

process • Provision of robust user data • High-quality service / product standards 22 Source: MAGNA

ADVANCED TV

VOD is largest component, followed by RFIs and other iTV

VOD likely generates $85mm in 2007, $105mm in 2008

Advanced TV Advertising

$178.0

$200.0 $180.0 $160.0 $140.0 $140.0 $107.0 $120.0 Annual $100.0 Growth $80.0 $60.0 +30.8% +27.1% $40.0
$200.0
$180.0
$160.0
$140.0
$140.0
$107.0
$120.0
Annual
$100.0
Growth
$80.0
$60.0
+30.8%
+27.1%
$40.0
$20.0
$0.0
2006A
2007E
2008E
(In millions)
Growth $80.0 $60.0 +30.8% +27.1% $40.0 $20.0 $0.0 2006A 2007E 2008E (In millions) 23 Source: MAGNA

23 Source: MAGNA Global

MOBILE

Mobile (WAP, video, SMS, LBS) attracts great interest, few $ today

Infrastructure issues potentially similar to advanced TV

Consumer proposition is being defined

Long-term opportunity to use mobile devices for CRM

Many new products compelling, but scale remains too small for most national advertisers given their broader objectives

24 Source: MAGNA Global

but scale remains too small for most national advertisers given their broader objectives 24 Source: MAGNA

MOBILE

Growth driven in near-term by introduction of new supply

Carriers opening up “decks” and new mobile ad models

Mobile Advertising

$194.0

$200.0 $180.0 $160.0 $140.0 $120.0 $105.0 Annual $100.0 Growth $80.0 $55.0 $60.0 +90.9% +84.8% $40.0
$200.0
$180.0
$160.0
$140.0
$120.0
$105.0
Annual
$100.0
Growth
$80.0
$55.0
$60.0
+90.9%
+84.8%
$40.0
$20.0
$0.0
2006A
2007E
2008E
(In millions)
$80.0 $55.0 $60.0 +90.9% +84.8% $40.0 $20.0 $0.0 2006A 2007E 2008E (In millions) 25 Source: MAGNA

25 Source: MAGNA Global

GAMING

Gaming growth likely slower than for other new media

Many advertisers remain interested, but few invest

Game-Related Advertising

$238.6

$250.0 $216.9 $187.2 $200.0 $150.0 Annual Growth $100.0 +15.9% +10.0% $50.0 $0.0 2006A 2007E 2008E
$250.0
$216.9
$187.2
$200.0
$150.0
Annual
Growth
$100.0
+15.9%
+10.0%
$50.0
$0.0
2006A
2007E
2008E
(In millions)
$150.0 Annual Growth $100.0 +15.9% +10.0% $50.0 $0.0 2006A 2007E 2008E (In millions) 26 Source: MAGNA

26 Source: MAGNA Global

SUMMARY

Annual emerging media growth = ~ 30% in 2007 and 2008

EMERGING MEDIA AD EXPENDITURES (in millions) 2006A 2007E 2008E Search $6,799.1 $8,770.9 $11,095.1 • Annual
EMERGING MEDIA AD EXPENDITURES (in millions)
2006A
2007E
2008E
Search
$6,799.1
$8,770.9
$11,095.1
• Annual Growth
------
29.0%
26.5%
Emerging Out-of-Home
1,090.5
1,371.8
1,711.0
• Annual Growth
------
25.8%
24.7%
Social Networking
276.0
685.0
1,020.0
• Annual Growth
------
148.2%
48.9%
Online Video
235.0
365.5
560.0
• Annual Growth
------
55.5%
53.2%
Advanced TV
107.0
140.0
178.0
• Annual Growth
------
30.8%
27.1%
Mobile Marketing
55.0
105.0
194.0
• Annual Growth
------
90.9%
84.8%
Gaming
187.2
216.9
238.6
• Annual Growth
------
15.9%
10.0%
Total
$8,749.8
$11,655.1
$14,996.7
• Annual Growth
------
33.2%
28.7%
Less Estimated Duplication (Search via Social Networking)
Total Emerging Media
0.0
(135.0)
(250.0)
$8,749.8
$11,520.4
$14,747.0
• Annual Growth
------
31.7%
28.0%

27 Source: MAGNA Global

0.0 (135.0) (250.0) $8,749.8 $11,520.4 $14,747.0 • Annual Growth ------ 31.7% 28.0% 27 Source: MAGNA Global

APPENDIX

Emerging media services and devices forecasts

140.0% 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% % of US Households
140.0%
120.0%
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
% of US Households

US Digital Cable, Satellite and TelcoTV HouseholdsUS DVR Subscriptions US VOD Households US Broadband Households US Satellite Radio Subscriptions US HD

US DVR SubscriptionsUS Digital Cable, Satellite and TelcoTV Households US VOD Households US Broadband Households US Satellite Radio

US VOD HouseholdsCable, Satellite and TelcoTV Households US DVR Subscriptions US Broadband Households US Satellite Radio Subscriptions US

US Broadband HouseholdsTelcoTV Households US DVR Subscriptions US VOD Households US Satellite Radio Subscriptions US HD Subscriptions US

US Satellite Radio SubscriptionsDVR Subscriptions US VOD Households US Broadband Households US HD Subscriptions US Digital TV Shipments US

US HD SubscriptionsHouseholds US Broadband Households US Satellite Radio Subscriptions US Digital TV Shipments US Mobile Phone Subscriptions

US Digital TV ShipmentsVOD Households US Broadband Households US Satellite Radio Subscriptions US HD Subscriptions US Mobile Phone Subscriptions

US Mobile Phone Subscriptions

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

28 Source: MAGNA Global

US Mobile Phone Subscriptions 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

NOTES ABOUT METHODOLOGY

Estimates and forecasts reflect data for the United States only

General methodology involves deriving “bottoms-up” estimates and forecasts for each supplier of media in each emerging media sector

Estimates and forecasts include media expenditures (or approximate allocations) only, and exclude marketing services and related activities such as production of creative assets

29

e allocations) only, and exclude marketing services and related ac tivities such as production of creative
Contact: Brian Wieser, CFA Tel: 917-542-7008 Email: br ian.wieser@magnaglobal.com

Contact: Brian Wieser, CFA Tel: 917-542-7008 Email: brian.wieser@magnaglobal.com