Internet Trends

May 25, 2007

56th Annual Seminar - Santa Barbara

mary.meeker@ms.com / david.joseph@ms.com / richard.ji@ms.com

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For analyst certification and other important disclosures, refer to the Disclosure Section.
Current Internet Trends
 Hierarchy of Needs Drives Growth?!

1943 - Maslow 2007 - ? ;)

Self-
actualization Internet /
Mobile
Esteem

Belonging
Shelter

Safety

Food / Water
Physiological

Created for discussion purposes and perhaps a bit of humor. Not intended to discredit Maslow’s hierarchy of needs which we believe to be accurate

3
 Internet Highlights…

• Users / Usage — Yahoo! has base of 477MM+ monthly unique

visitors (+19% Y/Y with +22% Y/Y page view growth, CQ1)

• Customer Acquisition — Google (500K - 1MM advertisers /

vendors, and rising); Paid Clicks up 52% Y/Y in CQ1 - effective targeting
should continue to improve + drive rising monetization

• Commerce / Payments — PayPal (143MM accounts, +36% Y/Y,

CQ1) + Shopping.com has 60MM+ products in 300+ categories

4
 …Internet Highlights…

• Advertising — 8% of total US advertising online in 2006E growing to

estimated 13%+ within 5 years. Google + Yahoo! = key drivers +
beneficiaries – 100%+ of overall incremental growth is online

• Significant targeting / conversion improvements (related

to technology improvements + data leverage) — should bolster
annualized global net revenue per unique user of $21 for Google (+57%
Y/Y), revenue per active customer of $173 for Amazon (+12% Y/Y)

• Personalization — Recommendation engines improve monetization

– examples include Amazon.com + Yahoo! Music

• Music – Apple iPod + iTunes @ $21B cumulative revenue - up from

$141MM 4 years ago

5
 …Internet Highlights…

• Communications / Telephony — Skype (196MM registered

users, +107% Y/Y, +14% Q/Q, CQ1 – may be fastest growing product
ever). Based on CQ1:07 data, Skype traffic = ~4% of global international
long distance minutes. Global mobile data services revenue (ex-
messaging) has $10 ARPU (and rising). IM (instant messaging) + SMS /
MMS showing strong growth

• Video — ~60% of Internet traffic may be P2P file sharing of largely

unmonetized video — ramp in tagging (for search) + partnerships +
monetization – note recent moves by likes of ABC / CBS / FOX / NBA /
Sony / Warner / Universal / Google / Yahoo!. Challenges (especially
related to copyright / infrastructure stress) are significant, but over time,
consumer demand should rule and content creators should benefit

6
 …Internet Highlights

• Local — Google ‘Long Tail’ + eBay Classifieds (26MM+ unique

visitors, +137% Y/Y, CQ4, per eBay) – traction emerging

• Community / Social Media — Likes of Wikipedia, MySpace,

YouTube, Yahoo! Flickr (24MM unique visitors, up 86% Y/Y*) + Yahoo!
Answers (79MM unique visitors, up 596% Y/Y*) have experienced
extraordinary growth. CyWorld (2MM visitors*, Korea) + Tencent (59MM
visitors, China) monetizing. 71MM+ blogs per Technorati. 1B camera-
enabled mobiles – ‘citizen journalism’ in infancy

• Mobile — While 17% of global Internet users (38% in N. America)

have residential broadband, 8% of global mobile phone subscribers use
3G. American Idol – 63MM votes (via mobiles + Internet) in final 4-hour
round, China’s Super Girl – 12MM votes (primarily mobiles) in final 3-
hour round. Mobile data services (bolstered by 2.5G & ex. messaging)
revenue ~$20B, comparable to online advertising revenue – illustrates
potential monetization opportunity for broadband Internet
Source: *comScore Global MediaMetrix 4/07
7
# of Internet Users – ROW Continues to Rise in Relevance
N. America = 35% of Users in 2000E; 16% in 2007E

Geographic Distribution of Internet Users (MM)

390 491 621 724 851 977 1,122 1,302

100%

80%

60%

40%

20%

0%
2000E 2001E 2002E 2003E 2004E 2005E 2006E 2007E

North America Europe Asia/Pacific Rest of World Latin America

Note: ROW denotes rest of the world

Source: Morgan Stanley Research
8
User-Generated Content (UGC) – YouTube + Wikipedia +
MySpace Have Moved to Top of Internet User Pack
Total Global Unique Visitors (MM)
Rank Property 4/07 Y/Y Growth
1 Google 528 12%
2 Microsoft 520 3
3 Yahoo! 468 1
4 Time Warner 267 21
5 eBay 248 (4)
6 Wikipedia 209 71
7 YouTube 163 506
8 Amazon 137 1
9 CNET 120 33
10 Ask 111 (9)
11 Apple 115 29
12 MySpace 107 86
13 Adobe 101 (5)
14 Lycos 79 (14)
15 Viacom 81 65

Source: comScore Global MediaMetrix 4/07

9
 Web 2.0 –
Consumer Control / Contribution / Interaction

Web 1.0 Web 2.0

DoubleClick Google AdSense

Ofoto Flickr
Akamai BitTorrent
mp3.com Napster
Britannica Online Wikipedia
Personal websites Blogging
evite upcoming.org and EVDB
Domain name speculation Search engine optimization
Page views Cost per click
Screen scraping Web services
Publishing Participation
Content management Wikis
Directories (taxonomy) Tagging ('folksonomy')
Stickiness Syndication

Source: O’Reilly Media, Inc.

10
 Next Generation Communications Hubs?

Internet Sites Search Engines Email Providers IM / VoIP Services Payments

Google Google Search MSN Hotmail MSN Messenger PayPal / eBay

Unique Visitors (1) Unique Visitors (1) Active Accounts (2) Active Accounts (2) Accounts (2)
(528MM) (465MM) (261MM) (215MM) (143MM)
MSN – Windows Live Yahoo! Search Yahoo! Mail Skype / eBay
Unique Visitors (1) Unique Visitors (1) Unique Visitors (1) Registered Users (2)
(520MM) (237MM) (249MM) (196MM)
Yahoo! Google GMail Yahoo! Messenger
Unique Visitors (1) Unique Visitors (1) Unique Visitors (1)
(468MM) (70MM) (88MM)
eBay ICQ
Unique Visitors (1) Unique Visitors (1)
(248MM) (28MM)
• Convergence is happening (many IM
MySpace.com
sessions end in phone call). Opportunities
Unique Visitors (1)
exist for non-mobile players to leverage
(105MM)
existing subscribers.
Amazon.com
• Who has the most valuable customer base
Active Customers (2)
as transition occurs? Who will have it over
(66MM)
time?

(1) Source: comScore Global MediaMetrix 4/07

(2) Source: Company Reports as of CQ1
11
Strong Momentum in Many Emerging Fast Growers

Company Market Data Points

Social Network 29MM uniques vs. 21MM Y/Y (2)

Social Network 22MM uniques vs. 12MM Y/Y (2)

Social Network 39MM uniques vs. 13MM Y/Y (2)

Social Network 3MM uniques vs. 192K Y/Y (2)

Social Network 2MM uniques vs. 1.5MM Y/Y (2)

Hosted Blogging 35MM uniques vs. 2MM Y/Y (2)

5MM uniques vs. 3MM Y/Y (2)

P2P File Sharing Accounted for 35% of all Internet traffic in 2004 (1)
7MM uniques vs. 6MM Y/Y (2)
Blog Search Engine 71MM+ blogs indexed (3)

Video / Electronics 100K+ SlingBox units sold in first 6 months of shipment

Network of 3K+ retailers in N. America in <9 months

Online Video 330K uniques vs. 30K in 12/06 (2)

Note: Criteria for choosing companies based on the following variables: recent growth in Internet
traffic, absolute Internet traffic, age of company, and presence on blogs and at conferences
Sources: (1) Cachelogic; (2) comScore Global MediaMetrix 4/07; (3) Technorati
12
 Watch Where Global Younger Generation Goes

Ringtone Downloads, Social Networking Video

Connecting Mobile to Net

Web OS Programs Blogs In-Game Advertising

Knowledge Sharing Tencent Instant

Messaging (PC / Mobile)

13
Online Advertising Trends
 Large Gap Between Internet Consumption / Ad Spending

US Media Usage (1) to Ad Spending (2) Youth Media Usage (3) to Ad

Ratios Spending (2) Ratios
12.0x 12.0x 11.3x

10.0 10.0

8.0 8.0

6.0 6.0
4.7x

4.0 4.0

2.0 2.0

0.0 0.0
Newspapers Total TV Radio Internet Newspapers Total TV Radio Internet
+ Magazines + Magazines

Sources: (1) Adapted from SRI-Knowledge Networks (2005). (2) Adapted from Universal McCann, (2005);
Internet Advertising Bureau (2006). (3) Veronis Suhler Stevenson (2005), Yahoo! Analyst Day (5/04).
Youth defined as age 17 and under. Ratios are calculated as percent of US media usage on a medium divided by percent of US ad spending on a medium

15
 US Internet Ad Spend = Movin’ on Up –
$217 Per Home vs. $980 for Newspapers?
2005 US Advertising Ad Spending /
Medium Spending ($B) Households (MM) Household ($)

Promotions $106 99 $1,071

Newspapers 49 50 980
Classifieds 17 55 309
Direct Telephone 97 99 980
Direct Mail 57 99 576
Broadcast TV 45 99 455
Radio 20 60 333
Cable TV 19 70 271
Internet / Online 13 60 217
Yellow Pages 16 99 162
Outdoor 6 99 61

Total $428 834 $5,106

Average 43 83 511

Morgan Stanley Research, PricewaterhouseCoopers, IAB, Jupiter Research, McCann-Erickson, RAB; Newspapers include Classifieds. Promotions ($106B) include:
incentives ($28B), promotional products ($23B), point-of-purchase ($18B), specialty printing ($8B), coupons ($7B), premiums ($7B), promotional licensing ($6B),
promotional fulfillment ($5B), product sampling ($2B), and in-store marketing ($2B). Households may use multiple advertising mediums

16
 Recent Bets on Online Advertising –
Offline to Online Migration Potentially Accelerating

• $3.1B (4/07): Google + DoubleClick

• $680MM (5/07): Yahoo! + Right Media
• $649MM (5/07): WPP Group + 24/7 Real Media
• $6.0B (5/07): Microsoft + aQuantive

These acquisitions = $10B vs. $52B aggregate value of top offline

advertisers (WPP + Interpublic + Omnicom + Publicis + Havas)

Source: FactSet, Hoovers

17
 Google + Yahoo! =
~58% of US Online Ad Revenue (and Rising)

US Online Ad Revenue Mix (1)

Google, US Gross Ad Revenue (2)

Yahoo!, US Gross Ad Revenue (2)
1,400 Others (3)
31% 42%
51%
1,200
27%
US Ad Revenue ($MM)

1,000
25% 24%
800

600

400

200

0
CQ4:05 CQ4:06

(1) Source: Ad revenue totals from IAB/PriceWaterhouseCoopers Interactive Advertising reports

(2) Calculated as reported revenue multiplied by the reported percentage of US Ad Revenue
(3) Calculated as the difference between total IAB US revenue and the sum of Google, Yahoo! gross revenue
(4) Assuming that TAC of Google + Yahoo! included in ‘others’ total, this segment would have been up 20% Y/Y vs. 8% actual growth
18
 Google + Yahoo! Share Significant Portion (~30%)
of Revenue with Partners + Affiliates – Trend Should Continue

• Google generated $3.6B in gross revenue in CQ1; it

PAID OUT $1.1B to 1,000s of partners like AOL, Ask
Jeeves, EarthLink, + HowStuffWorks

• Yahoo! generated $1.7B in gross revenue in CQ1; it

PAID OUT ~$489MM to 1,000s of partners like
CNN, ESPN + The Wall Street Journal

Source: Company Reports

19
 Rapid P2P Growth (Mostly Video) is
Stressing Internet + Is Undermonetized

• Peer-to-Peer (P2P) traffic was 60% (and rising) of Internet traffic in 2004
(of which 62% was video), with BitTorrent accounting for 30% of traffic,
per CacheLogic

• “P2P affects Quality of Service (QoS) for ALL subscribers” (1)

Internet Protocol Trends (1)

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Email FTP Other P2P Web

Source: (1) CacheLogic “P2P in 2005,” (9/05)

20
U.S. Internet Advertising – Search Has Been Growth Engine
(Largely Related to Text) – Video Next?
(US$ in MM, except where noted) CAGR
2001E 2006E '01E-06E
Search Advertising $285 $6,752 88%
% of Total 4% 40%

Display and Sponsorship $4,423 $4,220 (1)

% of Total 62% 25%

Rich Media $357 $1,182 27

% of Total 5% 7%

Classifieds $1,141 $3,038 22

% of Total 16% 18%

E-mail and Other $927 $1,688 13

% of Total 13% 10%

Total U.S. Internet Spending $7,134 $16,879* 19

U.S. Internet Users (MM) 143 183 5

U.S. Internet Households (MM) 55 70 5
U.S. Internet Spending per Internet Household $130 $240 13

*Note: Total U.S. Internet Spending up 35%Y/Y

Source: Internet Advertising Bureau and Morgan Stanley Research estimates.
21
 67% of Global Internet Users Use Search
Search = Top Customer Acquisition Tool for Online Retailers

% of New Online Customers for Online Retailers / Marketing Spend Mix (2005)
% Customers acquired from source

50%
36%
29%
40%

30%
11%
20%
10%
7% 5%
10% 3% 3% 1%
0%

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Note: 8% of global Internet traffic was derived from search while 67% of global Internet users used search in 1H2006, per comScore
Source: The State of Retailing Online 2006, Forrester Research
22
Online Video Trends
 Video – Key Question

In 3 years, what % of content used on Web will be…

• Professional
• Semi-professional
• Amateur
• Combinations (mashups) of above?

24
YouTube – Who Woulda Thought?...

Most Watched YouTube Video – ‘Evolution of Dance’

~50MM views / 117K comments since 4/06

Source: YouTube
25
 …YouTube – Who Woulda Thought?

Short-form entertainment… YouTube stats:

Watch even • 163MM unique visitors
more +506% Y/Y
videos
• 14B minutes
+1,128% Y/Y
• 13B page views
Post your
+905% Y/Y
own video
response • Acquired by Google
$1.1B – 10/06
• $11MM – 2006 revenue
• “Broadcast Yourself”

Share your
thoughts

Source: comScore Media Metrix (Global, 3/07; Google, YouTube

26
 YouTube Channels – CBS Leads with 113MM Views

Leading user
Broadcast generated
media showing content draws
strong traction 50MM views

Source: YouTube as of 5/29/07

27
 Power of the Door…

Sometimes you know what you are looking for and sometimes you don’t -
editing / organizing can help...

Selectively placed on Yahoo!’s front page / door

THE 9 is a daily Exclusive
broadcast on sponsorship by
Yahoo! TV, Pepsi
showcasing 9
daily selections
THE 9 features the
from millions of
9 “best, weirdest,
Web content files
and funniest videos,
photos, and stories”
on the Web

“The best Video Blog”

“One of the 50 coolest
Vlog host: websites of 2006” –
Maria Sansone TIME Magazine (8/06)

Source: Yahoo!
28
 …Power of the Door

UGC + User Participation + Social Networking + Monetization

Watch Interactive -
video clips Online voting +
from user participation
previous
“THE 9”s

Utilizes Yahoo! 360 as

social networking tool

Source: Yahoo!
29
Monetizing Video – Keywords + Adjacent Sponsorships –
Do Users Really Want 30 Second Pre-Rolls?

Sponsorships Keyword Ads and /

or sponsorships

Key Words reebok roddick

Branding + Interactivity –
Think About “Enter Sweepstakes” – Game with Andy…
Note: Reebok framed ads placed for illustration purposes only
Source: YouTube
30
 Joost – Focused, User-Built TV

• TV’s mass audience to the Web?

− Mobile TV + Personalization + Online social network
− Vision: universal TV running on a P2P platform
• Old P2P: download Æ Joost’s P2P: stream DVD-quality pictures
• Connectivity driven by increased broadband Internet + PC / mobile
PC penetration is key
Rate
watched
IM / Chat content
functionality

Add
interactive
apps /
plugins

31
Social Media / Virtual Communities Trends
 Growing Importance of Virtual Community

• Improving PC / Internet penetration + plethora of social networking +

digital content Æ rising vitality of virtual community

• Virtual communities becoming increasingly important as channels for

− Building / maintaining relationship
− Entertainment
− Content sharing
− Business / revenue generator

33
 CyWorld – Building / Maintaining Virtual Family…

CyWorld: Gift Shop:

“Cy” means Purchase items
“relationship” to decorate your
in Korean. “MiniHompy”

“Acorn” is the
official currency
in CyWorld,
which can be
purchased to
obtain items for
your MiniHompy.

“Ilchon” represents the Search for your

closest family members in friends, blogs,
Korean. In CyWorld, it images, videoclips,
means your closest friends. news, etc.

34
 …CyWorld – Building / Maintaining Virtual Family

• Social networking + blogging + music & video sharing + personalization = Virtual

community / family

• Users decorate their “Minihompy” (Mini-homepage) by

− Uploading pictures / blogging
− Playing music from Jukebox / buying items

• Users grant their friends access to their Minihompy

− Closest members are called “il-chon” (family member)
− Friends can post blogs / give item gifts for their Minihompy

• Impressive Statistics
− 20MM users in Korea (~40% of South Korea’s total population)
− ~96% of 20-29 year-olds use the site “regularly”
− 100K daily video uploads
− Operates in the US, China, Japan, Taiwan, Vietnam, and South Korea

Source: SK Telecom
35
Second Life – Living in a Virtual World / Economy…

Personalize “virtual you” Meet new people at events /

venues and form interest groups

Build / display / store virtual Discussions + Sports +

objects + host events and Commercial + Entertainment +
businesses Games + Education + …
Source: Second Life
36
…Second Life – Living in a Virtual World / Economy
• Internet based, 3D virtual world imagined, created and owned by its residents

• Impressive statistics
− 6.5MM+ total residents (vs. 1MM total residents in 10/06) (1)
− 25MM total residents + 150K simultaneous online users by 3/08 (2)
− $23MM+ eCommerce within Second Life in 4/07 (1)
− 3.6MM unique visitors (up 1971% Y/Y) (3)
− 31 average minutes per visitor (up 542% Y/Y) (3)

• Existing companies beginning to go virtual in Second Life

− On 10/16/07, Reuters opened its first ‘all-digital’ bureau, a building modeled on its
New York and London offices, with dedicated ‘in-world’ correspondents
− Nissan / Scion opened a dealership in Second Life in 10/06 / 11/06, respectively
− Coldwell Banker opened a virtual sales office and started selling virtual land in
Second Life in 3/07
• “In the end, this is about buying and selling homes in the real world. We’re trying
to figure out how to reach what we call the ‘new customer’.”
– Charlie Young, Senior Vice President of Marketing, Coldwell Banker

Sources: (1) Second Life; (2) Second Life Research; (3) comScore Global MediaMetrix 4/07
37
 Xbox Live – Videogame Community +
Digital Content Distribution Channel
Cumulative Xbox Live Users 6MM Xbox
Live Users,
7 as of CQ1

5
(in MM)

0
Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar-
02 03 03 03 03 04 04 04 04 05 05 05 05 06 06 06 06 07

• Xbox Live: 60% attach rate for Xbox 360, up from 10%
− 2.3B+ hours of online gaming
• 2MM text / voice messages sent everyday on Xbox Live
• 70%+ members download content from Xbox Live Marketplace
• ~50% of members in the US log into Xbox Live Marketplace everyday
Source: Microsoft
38
Mobile Internet Trends
At Critical Mass Inflection Point for Usage of High Speed
(Broadband – 2.5+3G) Mobile Networks
Global 2.5G / 3G Penetration

4,500 2.5G / 3G Ramp in 25-30% 100%

4,000 Penetration Sweet Spot 90%

% of Total Wireless Subscriptions

3,500 80%

70%
Subscriptions (MM)

3,000
60%
2,500
50%
2,000
40%
1,500
30%
1,000 20%
500 10%

0 0%
2005E 2006E 2007E 2008E 2009E 2010E

Up to 2G Subscriptions 2.5G and Above Subscriptions % 2.5G and Above Penetration

3G likely at 25% penetration in 2010E…

Source: Morgan Stanley Telecom Research Scott Coleman, John Marchetti.

40
Usable / Useful Content: Offerings Improving / Expanding

1999 2007

1st Generation Wireless Instant Messaging, Location-Based

Application Protocol (WAP) Services (Mapping), Calendaring,
Games, Portals, Avatars

41
 Assume You Are On Candid Camera!

• Mass market adoption of camera and video phones may open up new markets
(Google’s Blogger.com) with potential for financial reward for citizen journalist /
photographer

• Check out Korea:

“What allowed operators to see a return on investment on their EV-DO [3G]
networks was not other content, but subscribers' own content. Content that was
made by people and exchanged with others has been incredibly popular.”
– Hyeon Lee, VP, Samsung

Source: Samsung and Morgan Stanley Research

42
Reaching Consumers on the Internet
 Google vs. Yahoo!

Google – When you know what you want AKA consumer is editor

44
 Google vs. Yahoo!
Yahoo! – When you don’t necessarily know what you want
AKA Yahoo! is part-time editor

45
 What is Google?

Users Advertisers
A place to find things World’s greatest customer acquisition tool

Google is a distribution platform based on natural + sponsored links

46
 Google Zeitgeist – What Do People Want? Data…
Top 2006 Searches Top 2006 News Searches
1. bebo 1. paris hilton
2. myspace 2. orlando bloom
3. world cup 3. cancer
4. metacafe 4. podcasting
5. radioblog 5. hurricane katrina
6. wikipedia 6. Bankruptcy
7. video 7. martina hingis
8. rebelde 8. autism
9. mininova 9. 2006 nfl draft
10. wiki 10. celebrity big brother
2006

Source: Google
47
Yahoo! Buzz Index – What Do People Want? Data…

Yahoo’s Search Ranking by Query Score

Source: Yahoo!
48
Reaching Users through User-Generated Community
Channels…
Yahoo! Answers - When you don’t necessarily know answer or question

72MM unique
visitors
+828% Y/Y

Yahoo! 367MM minutes

generated +1,110% Y/Y
results
460MM views
+1,163% Y/Y

User
generated
questions

User
generated
responses

Source: comScore Global MediaMetrix 4/07

49
 Amazon.com – Consumers in Control
Recommendation Engines / Personalization = Rule

Tools based on consumer

opinions / experiences help
What other
users maneuver through
What other
customers are
customers
35K+ results in books alone
thinking from “Santa Barbara”
are buying

What other
customers User-
are doing generated
lists

What other
customers
are saying

Source: Amazon.com
50
 Increasing Importance of Blogging Communities…

Bloggers report
on WalMart / Dell
announcement… Readers
respond

Video
blogs Photo
sharing by
shoppers

51
 New Targeting Opportunities

Southwest Airlines sponsored group on Penetrating 50K local, special

Facebook for college students interest groups on Meetup.com

Giveaways
for joining Host their
next
event?

Register for
college
rewards
program
Apply for
summer
internships

52
 Internet is a Distribution Channel

[Six Flags] had a promotion for their 45th anniversary.

They wanted to give away 45,000 tickets for opening day
to drive traffic. So we got a brief to do whatever: ads,
microsite, whatever. But our interactive creative director
just went off and posted it on Craigslist. Five hours later,
45,000 tickets were spoken for…

-Jan Leth, Executive Creative Director of Ogilvy Interactive N.

America, per Bob Garfield’s Chaos Scenario 2.0

53
How Internet is Helping Reshape
Politics
How Can Candidates Leverage the Internet to
Reach Their Audiences?

+ =?

December 2006 October 2006

Source: Time Magazine

55
Changing the Face of Politics – Then

C1996 -First Presidential Campaign Websites

Sources: Clinton/Gore ’96, Dole/Kemp ‘96

56
Changing the Face of Politics – Now

Internet Offers Direct Communication with Voters

Campaign launches on
candidate websites

Within hours of launching bid,

campaign website had:
• 10K messages of support,
• 2.2K submissions for its blog
• Email list growing at a rate of
100 per min

Candidate-focused
pages on facebook +
MySpace

“One Million Strong for Barack”

group created on Facebook:
• 100 members in first hour
• 10K members in <5 days
• 200K members by 3rd week
• 500+ groups within a month of
Obama’s announcement

Sources: Obama for America, Hillary Clinton for President, Facebook, MySpace, YouTube
57
 10 Downing Street YouTube Channel – 86K Views

Links to Downing
St. homepage,
newsletters,
podcasts,
E-petitions, etc.

Send message /
add comment / Sort most
share channel viewed /
discussed
Downing
St. videos

Source: YouTube as of 5/29/07

58
YouChoose ’08 – YouTube Channels for Candidates

Centralized hub of
candidate-created
channels that feature:
• Campaign videos
• Speeches
• Informal chats
• Behind-the-scenes
footage

Source: YouTube
59
 Changing the Face of Politics – Then

C2004: Howard Dean Breaks New Ground in Internet Fundraising

Howard Dean’s CQ1:03 Fundraising :

• $750K+ from Internet contributions
(28% of total)
• ~$180 average contribution
• 12K+ individual donors
• Followed with $3.5MM+ from
Internet contributions in CQ2:03
(50%+ of total)

Source: Dean for America

60
 Changing the Face of Politics – Now

Internet is Key Fundraising Tool

~$7MM raised
online matches
John Kerry’s CQ1:07 Fundraising Totals
entire CQ1:03

Non-Internet Internet
30
CQ1:07 Fundraising ($MM)

25
$4.2MM
$6.9MM
20
$7.2MM
15
$3.3MM
10

0
Mitt Romney Barack Obama Hillary Clinton John Edwards

Sources: FEC, Obama for America, Hillary Clinton for President, John Edwards for President, Romney for President
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Changing the Face of Politics – Then

Traditional Debate Formats

1858 1960

2004
62
 Changing the Face of Politics – Now

2008 Election - First Online Presidential Debate

• 2 online-only debates (one for each party) in September, 2007

• Candidates able to appear online from any location + streamed
on Yahoo! network + Huffington Post + Slate sites
• PBS host Charlie Rose will moderate, selecting questions from
Internet audience

Sources: Yahoo!, Slate, Huffington Post

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Summary
 Information / Data Overload & Addiction

A weekday edition of ‘The New York Times’

contains more information than the average
person was likely to come across in a lifetime
in seventeenth-century England
- Richard Saul Warman, Information Anxiety (2000)

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Only 25% of 30 Year-Olds Read Newspapers Daily

Daily Newspaper Readership by Age

100%

90%

80%

70%
% Penetration

60%

50%

40%

30%

20%

10%

0%
1900 1910 1920 1930 1940 1950 1960 1970

Year of Birth
Source: General Social Survey Archive, 1972-2004
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 Print Circulation Down

1.14 2.31

Print Circulation (MM)

Print Circulation (MM)

2.28

1.13

2.25

1.12 2.22
C2004 C2005 C2006 C2004 C2005 C2006

0.75 1.82

Print Circulation (MM)

Print Circulation (MM)

1.76
0.70

1.70

0.65
1.64
C2004 C2005 C2006
C2004 C2005 C2006
Source: Company Reports
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 Newshounds Migrating Online

Circulation of top 50 newspapers vs. online news unique users

45

40 37
35
US Unique Users (MM)

31
30
26
25
21
20

15
9
10
7
5
5

0
Circulation Washington USA Today NY Times CNN MSNBC Yahoo! News
of Top 50 Post
Newspapers
Sources: MS Media team, comScore US MediaMetrix 4/07
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Era of Mass Personalization - Blogs Gaining Traction

Blogs Data Points

3.7MM unique visitors (+80% Y/Y)
15MM total pages viewed (+55% Y/Y)

3.2MM unique visitors (+190% Y/Y)

8MM total pages viewed (+18% Y/Y)
971K unique visitors (+520% Y/Y)
4MM total pages viewed (+486% Y/Y)

837K unique visitors (+62% Y/Y)

3MM total pages viewed (+37% Y/Y)

250K unique visitors (+30% Y/Y)

2MM total pages viewed (+96% Y/Y)

• Greater user participation + personalization

Æ User generated content
• Information less filtered + communicated directly to the public
Æ Immediate & objective source of information + feedback
• While lots of blog content is rubbish, there are many useful nuggets of insight. Over
time, increased editing (often user generated) and reviews should effectively lead to
higher standards, as likes of Wikipedia and Amazon.com have illustrated
Sources: comScore Global MediaMetrix 4/07
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 Influence of Blogs

• Growing importance of blogging + online citizen journalism

− During the 2004 US Presidential Election, Democratic + Republican parties
issued press credentials to citizen bloggers covering the convention.

− OhmyNews: online citizen journalism newspaper blog

• 3,000+ citizen reporters from 100+ countries
• 1.4MM unique visitors vs. 565K visitors Y/Y (1)
• “The people’s new source” – TIME
• “OhmyNews: Voices from the street” – Business Week

Souce: comScore Global MediaMetrix 4/07

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 Global Internet Thesis

10-15% user growth

20-30% usage growth

30%+ monetization growth

71
 How Does the Internet Shape
Public Relations Over Next 5-10 Years?

There’s no place to hide… no more

- Uncle Tupelo - ’Shaky Ground’

Just the facts ma’am

- Detective Joe Friday – ‘Dragnet’

Consumers want ‘just the facts’ (supported by data) and

want them yesterday…and want them to be easily findable /
searchable when / where / how they want them.

The Internet is a fabulous distribution channel…as YouTube

content has proven, again, consumers love a good story…

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Coverage Universe Investment Banking Clients (IBC)

% of Total% of Rating
Stock Rating Category Count % of Total Count IBC Category
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Underweight/Sell 368 17% 97 14% 26%
Total 2,226 691

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