A Research Service By Business Insider The Future Of Digital: 2014
Future of Digital 2014
Jul 07, 2015
To kick off the IGNITION conference, Business Insider CEO Henry Blodget delivered the following presentation put together with the help of the BI Intelligence team.
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A Research Service By Business Insider
The Future Of Digital: 2014
intelligence.businessinsider.com
Henry BlodgetCEO & Editor-in-Chief
Emily Adler
Senior Research Editor
Marcelo Ballvé
Editorial Director
Cale Weissman
Reporter
Hope King
Reporter
Nicholas Quah
Research Associate
John Greenough
Research Analyst
Jessica Smith
Research Associate
Tony Danova
Senior Research Analyst
Mark Hoelzel
Research Analyst
John Heggestuen
Research Analyst
Cooper Smith
Senior Research Analyst
BI Intelligence
There are now nearly 3 billion people online
Source: International Communication Union, Google
0
1
1
2
2
3
3
1990 1994 1998 2002 2006 2010 2014E
Bill
ions
Global Internet Population
Four billion to go
Global Population
Internet Population
0
1
2
3
4
5
6
7
8
1990 1994 1998 2002 2006 2010 2014E
Bill
ions
Global Internet Population
Source: International Communication Union, Google
Attention is shifting to digital, especially mobile
Source: eMarketer, April 2014
45%
25%
17%
9%7%
4%
37%
18%
11%
4%2%
23%
TV Online Radio Print Other Mobile
US Consumer Media Consumption Share
2009 2010 2011 2012 2013 2014
This is a generational shift
Source: Ofcom
0 10 20 30 40 50 60 70 80 90 100
Total
Aged 16-24
Aged 25-34
Aged 35-44
Aged 45-54
Aged 55-64
Aged 65-74
Aged 75+
Digital Is Reaching The New GenerationTop Five Media Mentions Among all Adults, 2013
Watch TV
Read Newspapers/Magazines
Listen To The Radio
One law of media…
Money follows eyeballs.
Ad spending is moving to digital (and mobile)
Source: IAB, U.S. Census Bureau, Strategy Analytics, BI Intelligence estimates
Offline
All Other Online
Mobile
$0
$60
$120
$180
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Bill
ions
U.S. Advertising
Print ads have fallen off a cliff
Source: Newspaper Association Of America *Estimate
$-
$10,000
$20,000
$30,000
$40,000
$50,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013*
Mill
ions
Newspaper Ad Revenue (Print vs. Online)
Print Online
Google is now bigger than all newspapers, magazines
Source: Google, NAA, PIB
$0
$10,000
$20,000
$30,000
$40,000
$50,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Mill
ions
Google vs. Magazine vs. Newspaper Ad Revenue, US Data, 2004-2013
Google (US)
US Magazines
US Newspapers
Google now dwarfs “big media”
Source: Company Filings, BI Intelligence estimates
$30
$18 $16
$14
$5 $5 $3 $2
$70
TimeWarner
Facebook CBS Viacom Gannett Yahoo AOL New YorkTimes
Bill
ions
Estimated 2014 RevenueSelect Media Companies
Google is almost half the size of all global TV advertising
$174
$70
Global TV Ad Revenue Google
Bill
ion
s
Estimated 2014 Ad RevenueGoogle vs. Global TV Ad Market
Source: Google, PWC
For many years TV folks have (rightly)
laughed off digital concerns
Time to stop laughing.
Ratings are falling…
Source: Nielsen
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
6
6.1
6.2
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Nie
lsen H
ousehold
Rating
(% O
f H
ousehold
s
With T
V S
ets
Watc
hin
g)
Primetime Household TV Ratings
Big 4 U.S. TV Networks Average
Pay TV subscriptions are dropping…
Source: Leichtman Research Group
Cable
Satellite
Telephone
Total
(800)
(600)
(400)
(200)
-
200
400
600
Q12012
Q22012
Q32012
Q42012
Q12013
Q22013
Q32013
Q42013
Q12014
Q22014
Q32014
Net
Additio
ns I
n T
housands
Pay-TV Net Additions (US)
Facebook reaches more young people than free TV
Source: Nielsen, January 2013
58%
73%
83%89%
63%
68%
63%
42%
Age 18-24 Age 25-34 Age 35-54 Age 55+
Perc
ent
Reach
Facebook vs. TV Daily Reach(US)
Four TV Networks
Netflix now has more US subscribers than HBO
Source: Netflix, SNL Kagan
HBO
Netflix
0
10
20
30
40
4Q2011 1Q2012 2Q2012 3Q2012 4Q2012 1Q2013 2Q2013 3Q2013 4Q2013 1Q2014 2Q2014 3Q2014
Mill
ions O
f U
S S
ubscrib
ers
Paid Domestic Subscribers — Netlix v. HBO
YouTube reaches more 18-34s than any cable network
0
200
400
600
800
1000
1200
1400
2010 2011 2012 2013 2014E
Mill
ions
YouTube “Ratings”
Digital video revenue is no longer a joke…
Source: BI Intelligence estimates, Company Filings
Netflix
YouTube
Hulu
$0
$2
$4
$6
$8
$10
$12
2006 2007 2008 2009 2010 2011 2012 2013
Bill
ions
Estimated Digital Video Revenue
iTunes and Netflix already dwarf small cable networks
Source: News Reports, Company Filings
iTunes
Netflix
AMC Networks
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
2007 2008 2009 2010 2011 2012 2013
Bill
ions
Cable Network vs. Digital Content Revenue 2007-2013
YouTube is closing in on broadcast-network revenue
Source: News Reports, BI Intelligence estimates, Company Filings
$-
$2
$4
$6
$8
$10
$12
2007 2008 2009 2010 2011 2012 2013
Bill
ions
YouTube Ad Revenue vs. CBS Ad Revenue And AMC Networks Revenue
CBS Ad Revenue
YouTube Ad Revenue
AMC Networks Revenue
(Some) live sports are now being streamed
Source: Ooyala 2014
34.5
7.1
3.5
42.8
11
17.1
10.5
16.9
2.64.1
2.85.1
Desktop Tablet Mobile Connected TV
Tim
e S
pent
Per
Pla
yIn
Min
ute
s
Time Spent Watching Online Video By Content TypeGlobal
All Live Events
Sports
VOD
TV now has to share attention with digital
Source: Millward Brown, 2014
83(55%) 65
(63%)
20(45%)
68(45%)
38(37%)
24(55%)
Smartphone Laptop Tablet
Tim
e S
pent
In M
inute
s
(Perc
enta
ge O
f T
ota
l T
ime)
Daily Time Spent With Devices, While Watching TV Or Using The Device IndependentlyAges 16 - 44, United States Only
Without TV
With TV
So, eyeballs are leaving TV
But, so far, TV money is
hanging in there
TV still massive, digital video still a blip
Source: Nielsen, IAB
$0
$20
$40
$60
$80
2007 2008 2009 2010 2011 2012 2013
Total TVAd Spend(Billions)
US Ad Spend, 2007-2013TV Vs. Online Video
TV Ad Spend
Online Video Ad
So no worries in TV land?
Yes, worries.
It’s a generational shift — look what Millennials are doing
Source: Ofcom
TV
TV
TV
Radio
Radio
Radio
Computer
3
Computer
Smartphone
Smartphone
All Adults Aged 75+ Aged 16-24
“Media you would miss most”
Use A Smartphone
Go Online On AComputer/Laptop/Netbook/Tablet
Listen To The Radio
Read Newspapers/Magazines
Watch TV
Money follows eyeballs…
Source: Mary Meeker, IAB, eMarketer
5%
38%
25%
12%
20%19%
43%
22%
10%
4%
Print TV Web Radio Mobile
2013 U.S. Ad Spending vs. Consumer Time Spent By Media
So it’s only a matter of time.
What’s going on in digital?
Smartphone sales are still booming
Source: IDC, Strategy Analytics, BI Intelligence estimates
Samsung
Apple
Xiaomi
Lenovo
Huawei LG
ZTE
Coolpad
Nokia
SonyMotorola
HTC
BlackBerry
Other
-
50
100
150
200
250
300
350
2Q08 4Q08 2Q09 4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14
Mill
ions
Global Smartphone Shipments By Vendor
PCs
Tablets
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14
Thousands
Global Computer Shipments
Tablets have carved out a chunk of PC sales
Source: Gartner, IDC, Strategy Analytics, Company Releases
“Phablets” are replacing small smartphones
Source: BI Intelligence estimates
Phablets
Tablets
Smartphones (Non-Phablet)
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2006 2008 2010 2012 2014E 2016E 2018E
Mill
ions
Global Annual Shipments By Device
Nearly half of TVs are now connected
Source: Leichtman Research Group, BI Intelligence estimates
27.7
35.7
43.8
50.1
56.5 61.1
65.7 68.6
71.4 72.6
24%
31%
38%
44%
49%53%
57%60%
62% 63%
2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E 2019E
U.S. Households With Connected TVPercentage Of Households; Number Of Households In Millions
“Wearables” are overhyped but growing
Source: BI Intelligence estimates
Smartwatches
Fitness Bands And Other Activity Trackers
Rest Of Wearables Market
0
20
40
60
80
100
120
140
160
2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E
Mill
ions O
f U
nits S
hip
ped A
nnually
Global Wearable Device Unit Shipments Forecast
35% CAGR
We Are Here
Cars are increasingly connected
Source: SBD, GSMA
In-vehicle services
Hardware
Telematics service providers
Telecom service providers
€ 0
€ 5,000
€ 10,000
€ 15,000
€ 20,000
€ 25,000
€ 30,000
€ 35,000
€ 40,000
€ 45,000
2009A 2010A 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E
Mill
ions
Connected Car Revenue Forecast
300 million PCs are still sold each year
Source: Gartner, IDC, BI Intelligence estimates
Lenovo
HP
Dell
Acer
Other
0
20,000
40,000
60,000
80,000
100,000
1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14
Thousands
Global PC Shipments By ManufactureriPad released Windows 8 released
Should you be “mobile only?”
No!
It’s a “multi-screen” world
Source: Gartner, IDC, Strategy Analytics, Company Filings, BI Intelligence estimates
Personal Computers
Smartphones
Tablets
Smart TVs
Wearables
0
1
1
2
2
3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E
Units
Bill
ions
Global Internet Connected Device Shipments
You should be “mobile, too.”
~60% of online devices are now smartphones or tablets
Source: BI Intelligence estimates
Personal Computers (Desktop And Notebook)
Smartphones
Tablets
Smart TVs
Wearables
0
1
2
3
4
5
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E
Num
ber
Of
Devic
es I
n U
se (
In B
illio
ns)
Global Internet Device Installed Base
Other8%
Visit Websites14%
Games8%
Social Networking15%
Talk26%
Text20%
Email9%Breakdown Of The Average
Smartphone Owner's Daily Time-SpendOn Average, U.S. Smartphone Owners Spend 58 Minutes Daily On Their Phones
We spend an hour a day on our smartphones
Source: Experian Marketing Services, May 2013
We spend ½ hour on tablet each time we use it
Source: Google, August 2012
43
39
30
17
TV PC/Laptop Tablet Smartphone
Average Minutes Spent Per Interaction By Device
More than ¼ of Internet traffic is mobile
Source: StatCounter, BI Intelligence estimates
0%
25%
50%
75%
100%
Dec-08 Jan-10 Feb-11 Mar-12 Apr-13 May-14
Global Internet Traffic ShareDesktop Vs. Mobile
Mobile has extended the digital day to 18/7
Source: Google Analytics, Business Insider
9/1/12 9/15/12 9/29/12 10/13/12 10/27/12 11/10/12 11/24/12 12/8/12 12/22/12 1/5/13
Mobile Visits Desktop Visits
Each device has a different “prime time”
Source: comScore, Telefonica, Macquarie Capital (USA), December 2011
Where are we in the
mobile device cycle?
Developed mobile markets are nearing maturity
Source: comScore
18%
72%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Jan 10 Jun 10 Nov 10 Apr 11 Sep 11 Feb 12 Jul 12 Dec 12 May 13 Oct 13 Mar 14
(as a
perc
enta
ge o
f th
e m
obile
popula
tion)
U.S. Smartphone Penetration
The action is now in China, India, and emerging markets
Source: Mediacells via The Guardian
0
50
100
150
200
250
300
Mill
ions O
f S
mart
phones
Smartphone Sales In 2014 Will Be Driven By New Users In Emerging Markets
Sales To New Smartphone UsersIn 2014
Smartphone Upgrades In 2014
Top 11 Markets
Other Markets
China is already twice the size of the US market
Source: China Internet Network Information Center
Mobile Users
Total Users
US Users
0
100
200
300
400
500
600
700
June06
Dec 06 June07
Dec 07 June08
Dec 08 June09
Dec 09 June10
Dec 10 June11
Dec 11 June12
Dec 12 June13
Dec 13 June14
Mill
ions O
f In
tern
et
Users
Chinese Internet Users
Prices are dropping fast
Source: BI Intelligence estimates
$100
$150
$200
$250
$300
$350
2010A 2011A 2012A 2013E 2014E 2015E 2016E
Avera
ge S
elli
ng P
rice
Global Smartphone Average Selling Price Forecast
iPhone sales growth has slowed (iPhone 6 will help)
Source: Company Filings
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
0
10,000
20,000
30,000
40,000
50,000
60,000
3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14
YoY
Sale
s G
row
th
Unit S
ale
s (
Thousands)
iPhone Sales
Unit Sales
YoY Growth
Chinese companies sell ~25% of smartphones in world
Source: Canalys, IDC, Strategy Analytics, BI Intelligence, Company Reports
0
10
20
30
40
50
60
70
80
90
1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14
Mill
ions
Selected Local Manufacturers From China Global Quarterly Smartphone Shipments
Xiaomi
Huawei
Lenovo
ZTE
Coolpad
Global tablet growth has hit a wall
Source: IDC, Strategy Analytics, BI Intelligence estimates
Year-Over-Year Growth
-100%
-50%
0%
50%
100%
150%
200%
250%
300%
3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14
Global Tablet Shipments Quarterly Year-Over-Year Growth
Sequential Growth
(iPad now experiencing “negative growth”)
Source: Apple
-50%
0%
50%
100%
150%
200%
0
5,000
10,000
15,000
20,000
25,000
30,000
2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14
YoY
Sale
s G
row
th
Unit S
ale
(T
housands)
iPad Sales
Unit Sales
YoY Growth
Why have tablet sales cratered?
1. Long upgrade cycle
2. Phablet cannibalization
3. Need keyboard for serious input
4. Price
What about the
platform war?
We have a winner!
Apple is strong in the US, where it’s a two-horse race
Source: comScore
Android
AppleBlackBerry
Windows Phone
Other
0%
20%
40%
60%
80%
100%
Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14
US Smartphone Platform Market Share
But, globally, it’s an Android world
~85% of smartphones run Google’s Android
Source: IDC, Strategy Analytics, BI Intelligence estimates
Android
iOS
Microsoft
BlackBerry
Other
0%
25%
50%
75%
100%
1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14
Share
of
Glo
bal U
nit S
hip
ments
Global Smartphone Market Share By Platform
~65% of tablets run Android
Source: BI Intelligence estimates
Android
Apple
Amazon
BlackBerry
NookWindows
0%
25%
50%
75%
100%
3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14
Global Tablet Market Share By Platform
~70% of all new computing gadgets run Android
Source: Gartner, IDC, Strategy Analytics, Company Filings, BI Intelligence estimates
Android
Windows
Apple
BlackBerry
Other
0%
20%
40%
60%
80%
100%
1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14
Global Computing Platform Market Share
Android used to lag Apple
badly with app developers.
Not anymore.
Android “fragmentation” problem is improving
Source: Google
OtherFroyo
Gingerbread
Honeycomb
Ice Cream Sandwich
Jelly Bean
Kit Kat
0%
20%
40%
60%
80%
100%
9/15/12 11/15/12 1/15/13 3/15/13 5/15/13 7/15/13 9/15/13 11/15/13 1/15/14 3/15/14 5/15/14 7/15/14
Jelly Bean And Kit Kat Are Now ~80% Of Android
Android now more popular with developers than iOS
Source: Developer Economics, Q3 2014
Android 42%
iOS32%
BlackBerry 103%
Windows Phone10%
Other13%
Mobile Developers' Main Platform
Android will soon overtake iOS in app revenue
Source: Jana, App Annie, BI Intelligence estimates
$0
$1
$2
$3
$4
4Q13 2Q14 4Q14E 2Q15E 4Q15E 2Q16E
Bill
ions
Estimated App RevenueApple App Store Vs. Google Play
Android is catching up to iOS in developer payouts
Source: Jana, App Annie, BI Intelligence estimates
Apple App Store
Google Play
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
3Q13 4Q13 1Q14 2Q14
Bill
ions
Estimated App Developer PayoutApple App Store And Google Play
Android now generates more global ad traffic than iOS
Source: Opera Mediaworks
Android
iOS
BlackBerry
Symbian
Other
0%
20%
40%
60%
80%
100%
2Q12 4Q12 2Q13 4Q13 2Q14
Share
Of
Tra
ffic
Global Mobile Ad Traffic Share By Platform
The key digital media trends…
Mobile
Social
Native
Video
Programmatic
Most digital growth is now mobile
Source: comScore, April 2014
Smartphone131
Smartphone442Tablet
11
Tablet124
0
200
400
600
800
1000
1200
Dec-10 Dec-13
Bill
ions O
f M
inute
s
Time Spent By Digital Platform Per MonthU.S., December 2010 Vs. December 2013
1,040% Growth
237%
7%
Desktop
401
Desktop
429
Messaging apps are exploding
Source: Company Statements, News Reports, BI Intelligence estimates
0
100
200
300
400
500
600
Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14
Mill
ions
The Messaging Wars — MAUs For Top Apps (Monthly Active Users - Global)
Social networks and sharing are exploding
Source: BI Intelligence estimates based on data from company filings, comScore, Global Web Index, Totem and news reports
TwitterTumblr
Snapchat
Google Plus
LinkedInPinterestVine 0
500
1,000
1,500
2010 2011 2012 2013 2014E
Mill
ionsSocial Network MAUs (Global)
Mobile video is booming…
Source: Cisco, 2013
0
1
2
3
4
5
6
7
8
2011 2012 2013 2014 2015 2016 2017
Mill
ions o
f T
era
byt
es P
er
Month
Global Mobile Video Traffic Will Continue To Surge
Mobile video has enabled the rise of the YouTube stars
Source: Company Filings
35 million viewers
8 million viewers
1 million viewers
Social and music are now mostly mobile
Source: Company Filings
Pandora
0%
25%
50%
75%
100%
2008 2009 2010 2011 2012 2013
Mobile Usage: Pandora, Twitter, Facebook
Mobile is driving all of Facebook’s growth
Source: Company Filings
Advertising (Non-Mobile)
Mobile Advertising
Payments And Fees
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
Q1 10 Q3 10 Q1 11 Q3 11 Q1 12 Q3 12 Q1 13 Q3 13 Q1 14 Q3 14
Bill
ions
Facebook Revenue By Segment (Global)
Mobile is now a third of eCommerce traffic
Source: Monetate
PC
Tablet
Smartphone
0%
25%
50%
75%
100%
2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14
Ecommerce Website Traffic By Device
PayPal powers $30 billion in mobile payments
*PayPal counted a small portion of Braintree’s transaction volume as its own in the last 12 days of Q4 2013.Source: PayPal
PayPal Mobile
Braintree Mobile*
$0
$5
$10
$15
$20
$25
$30
$35
2008 2009 2010 2011 2012 2013
U.S
. D
olla
rs I
n B
illio
ns
PayPal Mobile Transaction Volume(Including Braintree 2013)
Venmo is (finally) replacing friend-to-friend payments
Source: PayPal, BI Intelligence
$81$105
$141
$194
$314
$468
$700
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014
Mill
ions O
f D
olla
rs
Venmo Payment Volume
Ad growth is mobile, social, video, native, programmatic
Source: BI Intelligence estimates based on data from BIA/Kelsey, IAB, IDC, and Magna Global Note: Formats overlap. Mobile includes all ad formats that appear on mobile.
-0.4%
15.1%
2.3%
42.6%
18.0%
34.7% 35.7%
Desktop Display Desktop Video Desktop Search Mobile Social Native Programmatic
Advertising Revenue Growth (US)
CAGR 2013 - 2018
Mobile is a “green field”
Source: eMarketer
$1 $1 $1$3
$10$12
$1 $1 $1$3
$15
$30
$1 $1 $1
$4
$19
$46
Latin America Middle East andAfrica
Eastern Europe Asia-Pacific Western Europe North America
Annual Mobile Ad Spend Per Mobile Internet UserBy Region
2011 2012 2013
Social is booming
Source: BI Intelligence estimates, BIA/Kelsey
Non-Mobile
Mobile
$-
$2
$4
$6
$8
$10
$12
$14
$16
2013 2014E 2015E 2016E 2017E 2018E
Bill
ions
FORECAST: Social Media Advertising Spend(US)
“Display” ad spending is still respectable, but…
Source: Company Filings, BI Intelligence estimates
Other
Yahoo
AOL
Microsoft
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2Q06 4Q06 2Q07 4Q07 2Q08 4Q08 2Q09 4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 2Q14
TotalDisplay
AdvertisingRevenue(Millions)
US Display Advertising, 2006-2014 (Quarterly)
Growth is shifting to “native”…
Source: BI Intelligence estimates, IAB
$1.0 $1.3 $1.9 $2.7 $3.9
$5.7
$0.8 $1.0 $1.3
$2.0
$2.7
$3.4
$2.9
$5.6
$7.5
$9.2
$10.7
$11.9
$0
$5
$10
$15
$20
$25
2013 2014E 2015E 2016E 2017E 2018E
Bill
ions
Native Advertising Revenue (US)
Desktop And Mobile
Native-Style Display Sponsorship Social
And “programmatic”
Source: BI Intelligence estimates, Magna Global, IDC
$6
$8
$12
$18
$23
$28
2013 2014E 2015E 2016E 2017E 2018E
Ad S
pend I
n B
illio
ns
FORECAST: Programmatic Ad Spend (U.S.)
Google is still the digital advertising king
Source: Company Filings Note: Based on GAAP revenue.
Yahoo
AOL
$0
$4
$8
$12
$16
$20
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14
Bill
ions
Digital Advertising Revenues (Global)
Google’s YouTube dominates digital video and video ads
Source: Company Filings, BI Intelligence estimates
YouTube
Tremor
YuMe
TubeMogul
$0
$250
$500
$750
$1,000
$1,250
$1,500
$1,750
Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014
Revenue I
n M
illio
ns
Global Digital Video Advertising Revenue(Select Companies)
Google’s Chrome browser is crushing Firefox and IE
Source: StatCounter
Other
Safari
Firefox
Internet Explorer
Chrome
Opera0%
10%
20%
30%
40%
50%
60%
2010 2011 2012 2013 2014
Global Web Browser Usage Share
Google’s Android has peak-Windows-like market share
Source: IDC, Strategy Analytics, BI Intelligence estimates
Android
iOS
Microsoft
BlackBerry
Other
0%
20%
40%
60%
80%
100%
1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14
Share
of
Glo
bal U
nit S
hip
ments
Global Smartphone Market Share By Platform
Google93%
Bing3%
Yahoo2%
Other2% Europe Search Market Share
Oct. 2014
In Europe, Google has peak-Windows-like search share
Source: StatCounter
Basically, Google is swallowing the world…
Source: Google, 2014 Is An Estimate
$-
$10
$20
$30
$40
$50
$60
$70
2009 2010 2011 2012 2013 2014E
Bill
ions
Google Global Annual Revenue
(And people are noticing!)
Source: StatCounter
(For Microsoft, DOJ attack was the beginning of the end)
Source: StatCounter
Have Google and Facebook won?
Not necessarily.
Money follows eyeballs.
Search click growth is finally decelerating
Source: Google
20%23%
26%
31%
26%25%
17%
Q1 13 Q3 13 Q1 14 Q3 14
Google Paid Clicks GrowthGlobal, Year-Over-Year
US desktop search queries are now shrinking
Source: comScore Note: Explicit user initiated search queries only.
10%
12%
14%
10%
7%
4%
0%
-3%-5%
-7% -8% -7% -7%
Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14
Total Monthly Search Query Growth U.S., Year-Over-Year; Desktop Only
“No one uses Facebook anymore” — Gen Z-er
Source: Piper Jaffray
42%
33%
27%
23%27%
30%
31%
27%
12%
17%
27%
30%
Fall 2012 Spring 2013 Fall 2013 Spring 2014
The Most Important Social Networks To US TeensPercent Of Respondents Who Say The Network Is Most Important
Why do teens love Instagram?
0
50
100
150
200
250
300
2010 2011 2012 2013 2014E
Mill
ions
“Because parents see that camera icon and think it’s a photo app. They don’t know it’s a social network.”
What’s Tumblr for?
0
50
100
150
200
250
300
350
2010 2011 2012 2013 2014E
Mill
ions
Tumblr
“Fandom. And depressed and creepy people.”
What about phone calls? Do people talk anymore?
0
200
400
600
800
2010 2011 2012 2013 2014E
Mill
ions
“No. Everyone has phone numbers, but they’re for texting.”
Digital is the medium for the
new generation.
Digital will grow for decades.
So, what’s next?
Connected cars — we spend 1.2 hours a day in them
Source: Bureau Of Labor Statistics
8.8 hours
7.6 hours
2.5 hours
1.2 hours1.1 hours1.1 hours
1.7 hours
0
12
24
Average Daily Time Spent Per PersonU.S. Employed Citizens ages 25 to 54
Other
Household Activities
Eating And Drinking
In The Car
Leisure And Sports
Sleeping
Working
Wearables (someday)
Source: BI Intelligence estimates
Smartwatches
Fitness Bands And Other Activity Trackers
Rest Of Wearables Market
0
20
40
60
80
100
120
140
160
2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E
Mill
ions O
f U
nits S
hip
ped A
nnually
Global Wearable Device Unit Shipments Forecast
35% CAGR
We Are Here
Smartwatches, like Apple Watch, should do okay
Source: BI Intelligence estimates
Total SmartwatchMarket
Apple Watch
0
20
40
60
80
100
120
140
2013 2014 2015E 2016E 2017E 2018E 2019E 2020E
Mill
ions
Apple Watch Annual Shipments Forecast2015-2020
Fitness bands will remain niche
Source: NPD Group, BI Intelligence estimates; Annual Data From April Through March
Fitbit
Jawbone
Nike
Other
-
500
1,000
1,500
2,000
2,500
3,000
3,500
2010-2011 2011-2012 2012-2013 2013-2014
Thousands O
f F
itness B
ands S
old
Fitness Band Hardware Annual Unit SalesBy Device Maker, US Only
“Internet of Things” — 20B connected devices by 2020
Source: BI Intelligence estimates
Enterprise
Government/Infrastructure
Home
-
5
10
15
20
25
2014E 2015E 2016E 2017E 2018E 2019E
Bill
ions o
f D
evic
es
Estimated Number of InstalledIoT Devices by Sector
We’ll fill our houses with smart devices
Source: ABI Research, TechNavio, Pike Research, BI Intelligence estimates
Smart Home Energy
Smart Home Security
Smart Appliances
Other Systems
0
500
1,000
1,500
2,000
2012 2013 2014E 2015E 2016E 2017E 2018E 2019E
Mill
ions
Global Connected Home Device ShipmentsBy Device Category
And companies will buy them by the billions
Source: BI Intelligence estimates
-
1
2
3
4
5
6
7
8
9
10
2014E 2015E 2016E 2017E 2018E 2019E
Bill
ions o
f D
evic
es
Global Enterprise Device Growth
Five-Year (2014-2019) CAGR 49%
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