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The Future Of Digital
Henry Blodget
CEO & EIC, Business Insider
The medium is now ~20
years old.
So, how are we doing?
2+ billion people online
Global Internet Popula on
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
However…
Most of the money is already online
Distribu on Of Global Income, 2000
Bo om 70
percent
18%
Top 30 percent
82%
Source: UN Human Development Report, Trends In Global Income Distribu on
So the market’s more
mature than you think.
Meanwhile, something
profound happened last
year…
PC growth stalled
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 3Q12
Source: Gartner, IDC
Smartphone sales blew past 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
2000
2001
2002
2003
2004
2005
Source: Gartner, IDC, Strategy Analy cs, company filings, BI Intelligence es mates
2006
2007
2008
2009
2010
2011
Tablets are now driving all the growth in PC market
Global Computer Shipments
140,000
120,000
Tablets
(thousands)
100,000
80,000
60,000
40,000
PCs
20,000
0
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12
Source: Gartner, IDC, Strategy Analy cs company releases
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 still early…
Global Smartphone vs. Mobile Phone Users, 2012E
6B
Mobile
Phone Users
7,000
6,000
Global Users (millions)
5,000
4,000
3,000
2,000
1B
Smartphone
Users
1,000
0
Smartphone
Source: Strategy Analy cs, Interna onal Telecommunica ons Union
Note: Some users own more than one device
Mobile Phone
But growth slows after 50% penetration
U.S. and other markets are past halfway point
U.S. Smartphone Penetra on
80%
70%
Feature Phones
60%
55%
50%
50%
45%
40%
Smartphones
30%
20%
10%
0%
Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12
Source: Nielsen
US smartphone growth starting to slow
U.S. Smartphone Market: Year-Over-Year 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
Q3
2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2013
Source: comScore, Nielsen
Most future US smartphone buyers will be
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%
52%
51%
48%
50%
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 - 24
Ages 25 - 34
<15k
Source: Nielsen
Ages 35 - 44
15k - 35k
35k - 50k
Ages 45 - 54
50k - 75k
75k - 100k
Ages 55 - 64
100k+
Ages 65+
So the focus is on markets like China, which
now accounts for ~25% 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 Analy cs, Canalys, BII es mates
1Q12
2Q12
China is already twice the size of US market
Chinese Internet Users
600
Total
500
Mobile
(millions)
400
Broadband
300
200
100
0
June 06 Dec 06 June 07 Dec 07 June 08 Dec 08 June 09 Dec 09 June 10 Dec 10 June 11 Dec 11 June 12
Source: China Internet Network Informa on Center
MEDIA
Remember when they said no
one would ever pay for content?
Digital content revenues are exploding
Digital Content Revenue, 2005-2011
$14,000,000
Glenn Beck TV
$12,000,000
TheStreet.com
WSJ Digital
NY Times Digital
$10,000,000
LinkedIn
Hulu
Spo fy
Dropbox
$8,000,000
Total
Digital
Content
Revenue $6,000,000
(thousands)
Zynga
Kindle
Ne lix
$4,000,000
$2,000,000
iTunes
$0
2005
2006
Source: BI Intelligence, company filings
2007
2008
2009
2010
2011
Digital Advertising still growing rapidly
U.S. Digital Adver sing
$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
At largest U.S. tech and media companies,
nearly 40% of ad revenue is digital
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 es mates. Companies include: Google, Yahoo, AOL, Microso , Facebook, Time Warner, Disney, Viacom, CBS, News
Corp, New York Times, Ganne , 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
7%
Outdoor
Radio
11%
9%
14%
Print
$50,000
20%
U.S.
Adver sing $40,000
Revenue
(millions) $30,000
All Other Online
23%
13%
Google
10%
$20,000
Television
41%
$10,000
$0
2006
2007
2008
42%
2009
2010
Source: Represents annual U.S. adver sing revenue for 20 large media companies based on company filings and our own es mates
2011
Digital has already “disrupted”
one media sector…
As news consumption moved online…
News Media Audience and Revenue Growth, 2010-2011
25%
23%
20%
17%
15%
9%
10%
5%
5%
1%
1%
1%
1%
0%
-1%
-4%
-5%
-4%
-6%
-7%
-7%
-10%
Online
Network TV
Local TV
Audience Growth
Audio
Cable TV
Magazines
Newspaper
Revenue Growth
Source: Nielsen Media Research, the Audit Bureau of Circula on and Arbitron, SNL Kagan, eMarketer, Veronis Suhler Stevenson, Radio Adver sing Bureau, Publishers
Informa on Bureau, Na onal News Associa on, BIA/Kelsey
Newspaper ad revenue collapsed
Google now generates as much U.S. ad revenue as
newspapers and magazines (all of them)
Google Generates More U.S. Ad Revenue Than Newspapers
$50,000
$45,000
$40,000
$35,000
$30,000
U.S. Ad
Revenue $25,000
(millions)
$20,000
$15,000
$10,000
$5,000
$0
2004
2005
Source: Google, NAA, PIB
2006
Google (U.S.)
2007
2008
U.S. Magazines
2009
2010
U.S. Newspapers
2011
1H2012
(Some) paywall subscriptions are growing,
but…
New York Times Digital Subscribers
600
500
(thousands)
400
300
200
100
0
2Q11
3Q11
4Q11
Source: company releases
Note: does not include print subcribers with digital access
1Q12
2Q12
3Q12
“Digital dimes” don’t offset lost print dollars
Newspaper Ad Revenue (Print vs. Online)
$60,000
$50,000
In Millions
$40,000
$30,000
$20,000
$10,000
$2003
2004
2005
Source: Newspaper Associa on Of America
2006
Print
2007
Online
2008
2009
2010
2011
Of course, print news is
old news…
Now the question is…
Is TV next?
Nielsen Prime me Household Ra ngs
6.2
6.1
6.0
5.9
5.8
5.7
5.6
5.5
5.4
5.3
2007-2008
2008-2009
2009-2010
Big 4 U.S. TV Networks Average
2010-2011
2011-2012
For now, TV ad spending still growing
TV Ad Spend, 2007-2011
$74
$72
$70
$68
Total TV
Ad Spend $66
(billions)
$64
$62
$60
$58
2007
Source: Nielsen
2008
2009
2010
2011
But behavior is changing
U.S. Prime me TV Viewing
(% of 18-49 TV set users during 8-9 PM hour, mul ple responses permi ed)
6%
6%
17%
16%
7%
8%
% of TV set users
26%
83%
82%
64%
2004
2008
Live TV
Source: GfK
Recorded TV
Video game
2012
Streaming video
Pay TV subscriptions are now trending down
Pay TV Subscriber Net Addi ons
1000
800
600
400
TelCo
200
Subscriber
Net Addi ons
(thousands)
Satellite
0
Total
-200
-400
Cable
-600
-800
-1000
1Q09
2Q09
3Q09
Source: Bernstein Research
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
‘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 es mates
2009
2010
2011
Live events are increasingly being viewed over
the Internet
Growth Of Total Live Video Viewing Time Via Connected TV
Devices And Gaming Consoles (Q3 2012)
300%
250%
200%
150%
100%
50%
0%
2-Jul
9-Jul
Source: Ooyala
16-Jul
23-Jul
30-Jul
6-Aug 13-Aug 20-Aug 27-Aug 3-Sep 10-Sep 17-Sep 24-Sep
Digital video advertising is on the rise
Online Video Ad Revenue (U.S.)
$2,500
(millions)
$2,000
$1,500
$1,000
$500
$0
2006
2007
2008
2009
2010
Source: Interac ve Adver sing Bureau, eMarketer, comScore, BI Intelligence es mates
2011
But as with print, digital = less money than TV
Ad Loads, TV vs. Digital
(% share of programming)
1.5%
100%
90%
7.9%
24.8%
80%
70%
60%
50%
40%
98.5%
92.1%
75.2%
30%
20%
10%
0%
TV
Source: comScore, June 2012
Online video
Content
Ads
Streaming TV online
What does history teach us?
As habits change…
The money follows.
By the way, “old media” isn’t
the only media being
disrupted...
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
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
1/7th of the world’s population now use Facebook
Facebook Ac ve Users
1,100
1,000
900
800
700
Ac ve 600
Users
(millions) 500
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
3Q12
Time spent on Yahoo, et al, continues to decline
Yahoo Time Spent % vs. Total Internet (U.S.)
16%
14%
12%
10%
8%
6%
4%
2%
0%
1Q07 2Q07 3Q07 04Q7 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12
Source: comScore, Ci Investment Research And Analysis
Now, in online ads, it’s Google, Facebook, and “other”…
Google
Facebook has blown past AOL,
Microsoft, and Yahoo
U.S Digital Adver sing
$9,000
$8,000
15%
$7,000
4%
7%
$6,000
Digital
8%
Other
$5,000
11%
AOL
Adver sing
Revenue
Facebook
(millions) $4,000
$3,000
Yahoo
6%
13%
Microso
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 es mates
YouTube, Hulu, Glam, Twitter, Demand, et al.,
also taking portal share…
US Digital Adver sing: New Growth Companies
$1,800
Glam Media
$1,600
Federated Media
Twi er
$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 es mates
“Display” ad growth is flattening
U.S. Display Adver sing
$3,000
$2,500
Microso
$2,000
AOL
Display
Adver sing
$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 es mates
Real-time bidding is automating what’s left
RTB As % Of Digital Display Ad Spending
30%
25%
20%
15%
10%
5%
0%
2010
Source: eMarketer
2011
2012
2013
2014
2015
2016
So, will Facebook ever be bigger
than Google?
Unlikely.
Google is like
advertising at a store.
Facebook is like
advertising at a party.
Social referrals to commerce sites are tiny
Drivers of E-Commerce 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%
Bing
AOL
Facebook
Twi er
0.0%
Google
Source: RIchRelevance
Yahoo
And speaking of advertising
at stores...
E-tailers are now building ad businesses
Amazon ad revenue is already $1+ billion a year…
And as eCommerce continues to take share…
$5,000,000
U.S. Retail Sales
E-Commerce
$4,500,000
$4,000,000
(millions)
$3,500,000
$3,000,000
$2,500,000
$2,000,000
Offline Retail Sales
$1,500,000
$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 Data--St. Louis Fed, BI Intelligence es mates
New brands are blending marketing and commerce
Social Commerce Revenues
$3,500
Fab
$3,000
ShoeDazzle
One King's Lane
$2,500
Ideeli
Zulily
$2,000
Total
Revenue
(millions)
Beyond The Rack
HauteLook
$1,500
Rue La La
LivingSocial
$1,000
$500
Gilt Groupe
Groupon
$0
2008
Source: Company Filings, BII Es mates
2009
2010
2011
MOBILE
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 Consump on, 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
They listen to music...
75%
% of Traffic from Mobile
70%
55%
Pandora
50%
Twi er
33%
Facebook
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
Informa on
Online Retail
Men's
Magazine
Content
Electronic
Payment
Gaming
Informa on
Dec-10
Source: comScore MobieLens, 3 mon. avg. ending Dec-2011 vs. Dec-2010
Dec-11
Job Lis ngs
General
Reference
Classifieds
Auc on Sites
Family
Entertainment
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 use their devices while they watch TV
Percentage Of Smartphone Users Who Use Their Phones
While Watching TV
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Monthly
Source: Nielsen Cross-Pla orm Report Q2, 2012
Mul ple Times A Week
Daily
They shop…
Ecommerce Website Traffic By Device
100%
Tablet
Smartphone
90%
80%
70%
60%
PC
50%
40%
30%
20%
10%
0%
Q1 2011
Q2 2011
Source: Monetate
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
They use smartphones to make buying
decisions in stores.
U.S. Smartphone Owners Ac vity In Retail Stores
24.0%
22.3%
19.7%
20.4%
20.2%
18.8%
16.2%
14.6%
14.1%
13.1%
12.3%
11.1%
10.0%
10.9%
8.3%
7.2%
6.3%
5.2%
Took Picture Of Texted/Called
Scanned A
Sent Picture Of
Product
Friends/Family Product Barcode Products To
About Product
Family/Friends
Found Store
Loca on
Males
Compared
Product Prices
Females
Found Coupons Research Product Checked Product
For Deals
Features
Availability
They pay for stuff
PayPal Mobile Payments Processed
$5,000
$4,000
$3,000
Total
Payment
Volume
(millions)
$2,000
$1,000
$0
2008
2009
2010
2011
They buy content
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
And they do stuff they
DON’T do online…
Play Angry Birds, et al
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
Note: Includes Nintendo 3DS Sales
Source: New reports, company releases, BI Intelligence estimates
Dec 10
Mar 11
Jun 11
Sept 11
Dec 11
Take and share pictures
Instagram Es mated Users
100,000
90,000
80,000
70,000
60,000
Total
Users
50,000
(thousands)
40,000
30,000
20,000
10,000
0
3/2011 4/2011 5/2011 6/2011 7/2011 8/2011 9/2011 10/2011 11/2011 12/2011 1/2012 2/2012 3/2012 4/2012 5/2012 7/2012 7/2012 8/2012 9/2012
Source: news reports, company releases, BII Es mates
BOTTOM LINE:
Mobile devices =
More Internet usage +
New applications
In fact, mobile has made digital 24/7
Share Of Device Page Traffic Over A Day:
Source: comScore, Telefonica, Macquarie Capital (USA), December 2011
This leads to another big
question…
Mobile usage is up across the board
U.S. Mobile Content Usage
80%
Sent Text Message
Share of mobile popula on 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 Aug Sep
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 12 12
Source: comScore
People are consuming a huge amount of
content through mobile…
Media Content Accessed Through Mobile Device
59%
57%
53% 53%
41%
27%
9%
29%
26%
10%
29%
25%
23%
27%
22%
20%
9%
5%
Books
Movies
TV Shows
Magazines
News
Tablet
Source: Nielsen Q4 2011 Mobile Connected Device Report
Social
Downloaded
Networking
Music
Smartphone
Sports
Streaming
Radio
As mobile increases, all other media decreases
Share Of Consumer Time Spent With Major Media
45%
44%
43%
42%
26%26%26%
25%
17%
16%
15%
14%
12%
9%
6%
9%
8%
7%
6%
7%
8%
7%
5%
4%
TV
Online
Source: eMarketer, October 2012
Radio
2009
2010
Mobile
2011
2012
Print
Other
So mobile advertising
will be huge, right?
Hmmm…
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
Tencent
Desktop
Mobile CPMs are much lower
Effec ve CPM, Desktop vs. Mobile
$3.50
$0.75
Desktop Internet
Source: comScore, Vivaki, Mobclix Exchange
Mobile Internet
Most “mobile” ads are mainly web search +
display ads viewed on mobile
2011 Global Mobile Ad Spend By Category
Messaging
10%
Display
28%
Search
62%
Source: IAB
Google completely owns mobile search
Global Mobile Search Market Share
100%
Google
90%
80%
70%
60%
50%
40%
30%
20%
10%
bing
Yahoo!
0%
Dec Mar
08
09
Jun
09
Sep
09
Source: Global StatCounter
Dec Mar
09
10
Jun
10
Sep
10
Dec Mar
10
11
Jun
11
Sep
11
Dec Mar
11
12
Jun
12
Sep
12
So Google owns mobile, too
Mobile Ad Market Share
100%
90%
Microso
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 es mates
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Overall, mobile is still a tiny fraction of
digital ad spending.
U.S. Digital Adver sing Revenues
$35
Mobile
$30
(billions)
$25
$20
$15
$10
$5
$0
2007
2008
Source: IAB, BIA-Kelsey, BII es mates
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
$1,171
$1,012
$907
$1,000
$500
$358
$80
$55
$160
$267
$806
$392
$0
Year 1
Year 2
Year 3
Broadcast TV
Source: IAB, McCann-Erickson, BIA-Kelsey, BII es mates
Mobile
Year 4
Year 5
Internet
Note: Adjusted for infla on
But!
“Native” mobile ads are finally beginning
to appear…
• Ads in timelines (Twitter / Facebook)
• Shareable ads
• Location-based mobile ads
Location-based mobile ads can target users
at the mall, restaurants, car dealers …
Monthly Ad Requests Per Mobile User By Loca on
ick
s
Re
ta
ile
r
rs
Cl
ot
hi
ng
De
ale
s
Ca
r
ni
cs
Re
ta
i
le
r
s
ra
nt
tro
El
ec
s
ra
nt
Ot
he
rR
es
ta
u
s
Se
r
vic
e
Re
st
au
Re
ta
i
ox
Qu
Source: JiWire, Q3 2012
le
r
t
or
Ai
rp
Bi
gB
oo
l
Sc
h
Ho
te
l
s
Ca
m
pu
ry
ra
Lib
M
al
l
80
70
60
50
40
30
20
10
0
Targeted mobile ads have higher CPMs
CPMs For Selected Mobile Ad Pla orms
xAd local
$3.50
LSN Mobile local ads
$5.00
Adsmobi video ads
$5.00
Flurry video ads
$10.00
$-
$2.00
$4.00
$6.00
Source: Ad pla orms, BII Research, Greg Sterling, Opus Research
$8.00
$10.00
$12.00
So, yes, mobile ads are just getting started
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
APPS
App Store downloads on pace to hit 60
billion by mid-2013
Apple App Store Downloads
65,000,000,000
60,000,000,000
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
6/1/13
5/1/13
4/1/13
3/1/13
2/1/13
1/1/13
12/1/12
11/1/12
10/1/12
9/1/12
8/1/12
7/1/12
6/1/12
5/1/12
4/1/12
3/1/12
2/1/12
1/1/12
12/1/11
11/1/11
10/1/11
9/1/11
8/1/11
7/1/11
6/1/11
5/1/11
4/1/11
3/1/11
2/1/11
0
1/1/11
5,000,000,000
Smartphone users spend more time on apps than web
Total Time Spent Using Mobile Web vs. Apps
140
120
100
80
Minutes Spent
Per Month
(Biillions )
Apps
60
40
20
Mobile Web
0
Mar-11
Apr-11
May-11
Jun-11
Source: Nielsen Smartphone Analy cs
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
$3,000
(millions)
$2,500
$2,000
$1,500
$1,000
$500
$0
2008
2009
2010
Source: iSuppli, Forrester Research, company releases, BII es mates
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 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.
Global Mobile Pla orm Market Share
100%
90%
Other
80%
70%
60%
50%
40%
30%
Windows
Blackberry
Apple
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 Q3 2012
Source: Gartner, IDC, Strategy Analy cs, BI Intelligence es mates, and company filings
Android has the largest smartphone
platform globally.
Smartphone Market Share By OS (Global)
100%
90%
Microso
Other
80%
70%
Symbian
60%
Share of
Global Unit 50%
Sales
40%
Blackberry
Apple
30%
20%
Android
10%
0%
Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Source: Gartner
Partly because it owns China
Chinese Smartphone Market Share By Pla orm
100%
90%
80%
Other
Symbian
70%
Apple
60%
50%
40%
Android
30%
20%
10%
0%
Q2 2011
Q3 2011
Source: Analysys Interna onal
Q4 2011
Q1 2012
Q2 2012
Q3 2012
And it’s the same two-horse story in tablets
Tablet Market Share By Pla orm
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
Q3 2012
But a big mystery has
arisen...
Where are all these Android
users?
Apple is dominating app revenue
Mobile App Revenue By Pla orm
$4,000
$3,500
Other
$3,000
Android
(millions)
$2,500
$2,000
$1,500
$1,000
Apple iOS
$500
$0
2008
2009
2010
Source: iSuppli, Forrester Research, company releases, BII es mates
2011
And most commerce and web traffic is from Apple
Ecommerce Website Traffic By Mobile Pla orm
100%
Android Tablets
Other
90%
Android
80%
70%
60%
iPhone
50%
40%
30%
iPad
20%
10%
0%
Q1 2011
Q2 2011
Source: Monetate
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Do Android folks actually use
their devices?
Mobile profits are going mainly to two players.
Opera ng Profit Share By Vendor
80%
70%
Nokia
Apple
60%
50%
Samsung
40%
30%
20%
10%
0%
-10%
Sony Ericcson
RIM
HTC
LG
Motorola
-20%
2007
2008
2009
Source: Company releases, Canaccord Genuity es mates
2010
2011
Q1 2012
Q2 2012
Q3 2012
So, what’s the future of media?
Digital?
Yes.
Mobile?
Yes.
Mobile ONLY?
No.
Digital is now a 4-screen world…
Maybe 5 screens soon…
But mobile FIRST?
Only if you have a totally
mobile-centric app...
...Or you want to annoy your
users and customers.
Thank you very much.
Henry Blodget
Founder, CEO & Editor-in-Chief, Business
Insider
Marcelo Ballvé, Editorial Director
Alex Cocotas, Analyst
Josh Luger, Director of Subscription Products
Peter Lee, Intern
BI Intelligence is a new subscription service from Business Insider
that provides in-depth insight, data, and analysis of the mobile industry.
More info at intelligence.businessinsider.com
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