2013  -­‐  The  Year  Ahead  In  Mobile  Alex  Cocotas  Research  Analyst,  Business  Insider  Intelligence  

Now  that  the  year-­‐end  2012  data  is  in,  where’s  the  mobile  industry  headed  

this  year?  

First, some context

As  of  year-­‐end  2012:  2.5+  billion  people  online  

0"

500"

1,000"

1,500"

2,000"

2,500"

3,000"

1990"1991"1992"1993"1994"1995"1996"1997"1998"1999"2000"2001"2002"2003"2004"2005"2006"2007"2008"2009"2010"2011"2012"

(millions))

Global)Internet)Popula4on)

Source:(Interna-onal(Communica-on(Union,(Google,(Internet(World(Stats,(BI(Intelligence(es-mates(

~35%  of  global  population  

Global&Popula*on&

Internet&Popula*on&

0"

1,000"

2,000"

3,000"

4,000"

5,000"

6,000"

7,000"

8,000"

1990"1991"1992"1993"1994"1995"1996"1997"1998"1999"2000"2001"2002"2003"2004"2005"2006"2007"2008"2009"2010"2011"2012"

(millions)&

Global&Internet&Popula*on&

Source:(Interna-onal(Communica-on(Union,(Google,(Internet(World(Stats,(BI(Intelligence(es-mates((

Mobile  is  already  1/7  of  global  Internet  traffic  and  growing  its  share  quickly  

Mobile  now  accounts  for  15%  of  global  Internet  traffic  

Desktop(

1%(4%(

Mobile(15%(

0%#

10%#

20%#

30%#

40%#

50%#

60%#

70%#

80%#

90%#

100%#

Dec#08# Apr#09# Aug#09# Dec#09# Apr#10# Aug#10# Dec#10# Apr#11# Aug#11# Dec#11# Apr#12# Aug#12# Dec#12#Source:(StatCounter(

Global(Internet(Traffic:(Mobile(vs.(Desktop(

Mobile  on  pace  to  top  25%  of  traffic  by  year-­‐end  2013  

4%#

15%#

0%#

10%#

20%#

30%#

40%#

50%#

60%#

70%#

80%#

90%#

100%#

Dec#10# Apr#11# Aug#11# Dec#11# Apr#12# Aug#12# Dec#12#Source:(StatCounter(

Mobile#Internet#As#A#Percentage#Of#Total#Internet#Traffic#

Device  sales  are  pushing  people  onto  the  mobile  

Internet    

Smartphone  growth  continued,  while  PC  shipments  actually  declined  last  year  

Personal)Computers)

Smartphones)

Tablets)

0"

200,000,000"

400,000,000"

600,000,000"

800,000,000"

1,000,000,000"

1,200,000,000"

1,400,000,000"

2000" 2001" 2002" 2003" 2004" 2005" 2006" 2007" 2008" 2009" 2010" 2011" 2012"

Global)Internet)Device)Shipments)

Source:(Gartner,(IDC,(Strategy(Analy5cs,(company(filings,(BI(Intelligence(es5mates(

Personal)Computers)

Smartphones)

Tablets)

0"

500,000,000"

1,000,000,000"

1,500,000,000"

2,000,000,000"

2,500,000,000"

3,000,000,000"

2000" 2001" 2002" 2003" 2004" 2005" 2006" 2007" 2008" 2009" 2010" 2011" 2012" 2013E" 2014E" 2015E" 2016E"

Global)Internet)Device)Shipments)Forecast)

Source:(Gartner,(IDC,(Strategy(Analy5cs,(company(filings,(BI(Intelligence(es5mates(

And  the  disparity  will  only  grow  

We  are  here  

Tablets  are  poised  to  take  a  huge  leap  this  year    

U.S.  tablet  penetration  now  ~25%,  so  plenty  of  room  to  grow  

Smartphone+Owners+

Tablet+Owners+

0"

20"

40"

60"

80"

100"

120"

140"

May+10" Aug+10" Nov+10" Feb+11" May+11" Aug+11" Nov+11" Feb+12" May+12" Aug+12" Nov+12"

(millions)+

Source:(Pew(Research(Center,(comScore,(U.S.(census(bureau(Note:(Includes(smartphones(owners(over(age(of(13(and(tablet(owners(over(the(age(of(18(

U.S+Smartphone+and+Tablet+Owners+

But  …  unlike  smartphones,  tablet  sales  aren’t  usually    

subsidized  by  carriers  

That’s  why  current  owners  tend  to  be  moneyed  

4%# 4%#

8%#10%#

3%#

8%#

16%#

27%#

3%#

10%#

20%#

32%#

9%#

22%#

36%#

47%#

0%#

5%#

10%#

15%#

20%#

25%#

30%#

35%#

40%#

45%#

50%#

Nov#10# Dec#11# Jan#12# Aug#12#

%"of"U

.S."adu

lts"th

at"own..."

Source:(Pew(

U.S."Tablet"Penetra6on"By"Household"Income"

<$30,000# $30,000<$49,000# $50,000<$74,999# $75,000+#

And  a  bit  older  …  

6%#

10%#

24%#25%#

6%#

14%#

27%#

31%#

4%#

8%#

15%#

27%#

2%#

5%#7%#

13%#

0%#

5%#

10%#

15%#

20%#

25%#

30%#

35%#

Nov#10# Dec#11# Jan#12# Aug#12#

%"of"U

.S."adu

lts"th

at"own..."

Source:(Pew(

U.S."Tablet"Penetra6on"By"Age"

18829# 30849# 50864# 65+#

Thankfully,  tablets  and  mini-­‐tablets  are  getting  cheaper  …  Even  Apple  is  price-­‐cutting  

$0#

$100#

$200#

$300#

$400#

$500#

$600#

$700#

Q2#2010# Q3#2010# Q4#2010# Q1#2011# Q2#2011# Q3#2011# Q4#2011# Q1#2012# Q2#2012# Q3#2012# Q4#2012#

iPad%Average%Selling%Price%

0"

50"

100"

150"

200"

250"

300"

350"

400"

450"

500"

2010" 2011" 2012E" 2013E" 2014E" 2015E" 2016E"

(millions))

Tablet)Shipments)Forecast)

Lower  prices  will  help  tablet  sales  skyrocket  

We  are  here  

And  tablet  sales  are  just  getting  started  globally  

Global&

China&0"

5"

10"

15"

20"

25"

30"

35"

40"

1Q11" 2Q11" 3Q11" 4Q11" 1Q12" 2Q12" 3Q12"

(millions)&

Source:(Analysys(Interna1onal,(iSuppli,(IDC,(BII(es1mates(

Global&Tablet&Shipments&

In  2013,  the  mobile  growth  story  will  shift  to  the  developing  world    

Mobile  is  driving  Internet  penetration  in  China  

Mobile'

Total'

0"

100"

200"

300"

400"

500"

600"

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" Dec"12"

(millions)'

Chinese'Internet'Users'

Source:(China(Internet(Network(Informa5on(Center(

(Which  stands  at  42  percent)  

9%#

42%#

0%#

5%#

10%#

15%#

20%#

25%#

30%#

35%#

40%#

45%#

50%#

Dec#05#Jun#06#Dec#06#Jun#07#Dec#07#Jun#08#Dec#08#Jun#09#Dec#09#Jun#10#Dec#10#Jun#11#Dec#11#Jun#12#Dec#12#Source:(CNNIC(

China&Internet&Penetra,on&

It  is  now  the  world’s  largest  smartphone  market  

Rest%Of%The%World%

China%

!"!!!!

!20,000!!

!40,000!!

!60,000!!

!80,000!!

!100,000!!

!120,000!!

!140,000!!

!160,000!!

!180,000!!

1Q11! 2Q11! 3Q11! 4Q11! 1Q12! 2Q12! 3Q12!

(tho

usan

ds)%

Global%Smartphone%Shipments%

Source:(Gartner,(IDC,(Strategy(Analy5cs,(Canalys,(BII(es5mates(

Android  is  winning  China’s  platform  race  

Android'

Apple'

Symbian'

Other'

0%#

10%#

20%#

30%#

40%#

50%#

60%#

70%#

80%#

90%#

100%#

Q2#2011# Q3#2011# Q4#2011# Q1#2012# Q2#2012# Q3#2012#Source:(Analysys(Interna1onal(

Chinese'Smartphone'Market'Share'By'Pla9orm'

Which  is  bad  news  for  Apple  

Because  the  next  wave  of  adoption  will  come  from  countries  like  China  

1,344%

1,241%

142%197%

1,090%

1,090%

228%259%222%

48% 33% 14%0%

200%

400%

600%

800%

1,000%

1,200%

1,400%

China% India% Russia% Brazil%

(Millions))

Sources:)Carriers,)governments,)Flurry,)TomiAhonen)Consul9ng,)Umeng,)Cybermedia)Research,)BII)Es9mates)

BRICs:)Mobile)and)Smartphone)Penetra:on)

Popula>on% Mobile%Phone%Subscrip>ons% Ac>ve%Smartphones%(YearJEnd%2012e)%

Large  populations,  low  penetration  …  but  less  money  

20%$

14%$

5%$ 5%$

0%$

5%$

10%$

15%$

20%$

25%$

China$ Russia$ India$ Brazil$

Pene

tra'

on)As)%

)Of)M

obile)Con

nec'on

s,)Year7En

d)2012)Es'mate))

Sources:)Carriers,)governments,)Flurry,)TomiAhonen)Consul9ng,)Umeng,)Cybermedia)Research,)BII)Es9mates)

BRICs:)Smartphone)Penetra'on)As)%)Of)Mobile)Subscrip'ons)

And  iPhones  aren’t  getting  any  cheaper  

$400$

$450$

$500$

$550$

$600$

$650$

$700$

Q2$2008$

Q3$2008$

Q4$2008$

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$2012$

Q4$2012$

iPhone'Average'Selling'Price'

Which  is  what  is  driving  this…  

The  shift  to  low-­‐end  emerging  markets  is  crucial  because  …  

Technology  adoption  growth  slows  after  hitting  the  50%  penetration  tipping  point  

Because  under-­‐penetrated  segments  are  older  and  less  wealthy  

59%$ 60%$

47%$

31%$

22%$

16%$

67%$72%$

58%$

46%$

34%$

25%$

74%$

81%$76%$

61%$

51%$

42%$

0%$

10%$

20%$

30%$

40%$

50%$

60%$

70%$

80%$

90%$

Ages$18$1$24$ Ages$25$1$34$ Ages$35$1$44$ Ages$45$1$54$ Ages$55$1$64$ Ages$65+$

Smartphone+Penetra-on+By+Age+And+Income+(U.S.)+

<$50k$ 50k$1$100k$ 100k+$Source:(Nielsen(Mobile(Insights,(Q1(2012(

Even  though  it  may  look  like  upside  is  still  huge  for  phone  manufacturers  

Other& Microso,&Blackberry&

Apple&

Android&

Non8Smart&

0"

50"

100"

150"

200"

250"

Q4"2009" Q1"2010" Q2"2010" Q3"2010" Q4"2010" Q1"2011" Q2"2011" Q3"2011" Q4"2011" Q1"2012" Q2"2012" Q3"2012" Q4"2012"

Total&Mobile&Users&

(millions)&

Source:(comScore(

U.S&Mobile&Market&Share&By&PlaAorm&

The  U.S.  has  already  reached  that  point  

18%$

53%$

0%#

10%#

20%#

30%#

40%#

50%#

60%#Jan#10#

Feb#10#

Mar#10#

Apr#1

0#May#10#

Jun#10#

Jul#10#

Aug#10#

Sep#10#

Oct#10#

Nov#10#

Dec#10

#Jan#11#

Feb#11#

Mar#11#

Apr#1

1#May#11#

Jun#11#

Jul#11#

Aug#11#

Sep#11#

Oct#11#

Nov#11#

Dec#11

#Jan#12#

Feb#12#

Mar#12#

Apr#1

2#May#12#

Jun#12#

Jul#12#

Aug#12#

Sep#12#

Oct#12#

Nov#12#

(as$a

$percentage$of$th

e$mob

ile$pop

ula9

on)$

Source:(comScore(

U.S.$Smartphone$Penetra9on$

So  have  the  largest  European  markets  

31%$

38%$34%$

26%$

35%$

25%$

42%$

48%$ 48%$

38%$42%$

34%$

55%$

63%$ 62%$

51%$ 51%$48%$

0%$

10%$

20%$

30%$

40%$

50%$

60%$

70%$

EU5$ Spain$ UK$ France$ Italy$ Germany$

Source:(comScore(

European)Smartphone)Penetra/on)(%)of)mobile)phone)users,)age)13+))

Dec$10$ Oct$11$ Oct$12$

And  penetration  will  slow  as  a  result  

0"

5"

10"

15"

20"

25"

30"

35"

40"

Q1"2008"

Q2"2008"

Q3"2008"

Q4"2008"

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"

Q4"2012"

Users%Added%

(millions)%

U.S.%Smartphone%Market:%Year9Over9Year%Net%Adds%

Source:(comScore,(Nielsen,(BI(Intelligence(es4mates(

But  globally,  it’s  still  early  days    

Feature'Phone'Sales'

Smartphone'Sales'

!"!!!!

!500!!

!1,000!!

!1,500!!

!2,000!!

!2,500!!

2010! 2011! 2012! 2013! 2014! 2015! 2016!

Global!Mobile!Phone!Sales!(millions)!

Global!Smartphone!Penetra>on!Forecast!

In  the  developed  world,  the  focus  will  be  on  monetizing  

users  

Over  50%  of  U.S.  mobile  consumers  have  downloaded  apps,  browsed  mobile  Web  

Sent%Text%Message%

Used%Browser%

Used%Downloaded%Apps%

Played%games%

Accessed%Social%Network%%Or%Blog%

Listened%to%music%%

0%#

10%#

20%#

30%#

40%#

50%#

60%#

70%#

80%#

Feb#10#

Apr#10#

May#10#

Jun#10#

Jul#10#

Aug#10#

Sept#10#

Oct#10#

Nov#10#

Dec#10#

Jan#11#

Feb#11#

Mar#11#

Apr#11#

May#11#

Jun#11#

Jul#11#

Aug#11#

Sept#11#

Oct#11#

Nov#11#

Dec#11#

Jan#12#

Feb#12#

Mar#12#

Apr#12#

May#12#

June#12#

July#12#

Aug#12#

Sep#12#

Oct#12#

Nov#12#

%%of%m

obile%pop

ulaC

on%th

at%has...%

Source:(comScore(

U.S.%Mobile%Content%Usage%

For  now,  U.S.  mobile  audiences  are  still  growing  

62%$

60%$

56%$

53%$

51%$

50%$

48%$47%$

46%$

46%$

0$

5,000$

10,000$

15,000$

20,000$

25,000$

30,000$

35,000$

40,000$

Books$and$

Magazines$

Retail$ Payments$ Lifestyle$ Credit$cards$ Men's$

magazines$

Travel$Service$ Beauty$and$

fashion$

Kids$and$

Family$

Shopping$

Guides$

Audien

ce(Size((tho

usan

ds)(

Source:(comScore(Note:(Includes(both(mobile(web(and(app(audience(

Top(Mobile(Categories(By(Audience(Growth,(Oct.(2011(vs.(Oct(2012((U.S.)((

Oct.$2011$ Oct.$2012$

Even  among  the  largest  mobile  categories  

25%$

32%$

30%$ 26%$

26%$28%$

40%$30%$

37%$ 36%$

0$

10,000$

20,000$

30,000$

40,000$

50,000$

60,000$

70,000$

80,000$

90,000$

100,000$

Weather$ Search$ Maps$ News$ Sports$ Entertainment$News$

Banking$ Movie$Info$ Tech$news$ Restaurant$Info$

Audien

ce(Size((tho

usan

ds)(

Source:$comScore$Note:$Includes$both$mobile$web$and$app$audience$

Top(Mobile(Categories(By(Audience(Size,(Oct.(2011(vs.(Oct(2012((U.S.)((

Oct.$2011$ Oct.$2012$

Mobile  consumers  glued  to  games,  entertainment,  and  social  networks  

Games&43%&

Social&Networking&26%&

Entertainment&10%&

U<li<es&10%&

Other&11%&

Global&iOS&&&Android&Time&Spent&Per&App&Category&

Source:  Flurry,  November  2012  

In  2013,  we’ll  top  1  million  apps  on  Android  and  iOS  

2" 20"80"

200"250"

350"

600"

700"

28"

160"

250"

400" 425"

500"

650"

800"

Mar"09" Dec"09" Aug"10" May"11" Jul"11" Oct"11" Jun"12" Jan"13"

Available(Apps,(iOS(vs.(Android((thousands)(

Android" iOS"Source:(Apple,(Google,(Flurry,(news(reports"

Downloads  continue  to  grow  frantically  

0"

5,000,000,000"

10,000,000,000"

15,000,000,000"

20,000,000,000"

25,000,000,000"

30,000,000,000"

35,000,000,000"

40,000,000,000"

45,000,000,000"

7/1/08"

9/1/08"

11/1/08"

1/1/09"

3/1/09"

5/1/09"

7/1/09"

9/1/09"

11/1/09"

1/1/10"

3/1/10"

5/1/10"

7/1/10"

9/1/10"

11/1/10"

1/1/11"

3/1/11"

5/1/11"

7/1/11"

9/1/11"

11/1/11"

1/1/12"

3/1/12"

5/1/12"

7/1/12"

9/1/12"

11/1/12"

1/1/13"

Apple%App%Store%Downloads%

And  time  spent  in  apps  continues  to  skyrocket  

70# 72# 70#66#

94#

127#

0#

20#

40#

60#

80#

100#

120#

140#

Dec#2010# Dec#2011# Dec#2012#

Minutes(Per(Day(

Source:(comScore,(Alexa,(U.S.(Bureau(Of(Labor(Sta7s7cs,(Flurry(Analy7cs(

U.S.(Web(vs.(Mobile(App(Consump:on(

Web#Browsing# Mobile#Apps#

Mobile  gaming  population  has  reached  ~35%  

0%#

5%#

10%#

15%#

20%#

25%#

30%#

35%#

40%#

Feb#10#

Apr#10#

May#10#

Jun#10#

Jul#10#

Aug#10#

Sept#10#

Oct#10#

Nov#10#

Dec#10#

Jan#11#

Feb#11#

Mar#11#

Apr#11#

May#11#

Jun#11#

Jul#11#

Aug#11#

Sept#11#

Oct#11#

Nov#11#

Dec#11#

Jan#12#

Feb#12#

Mar#12#

Apr#12#

May#12#

June#12#

July#12#

Aug#12#

Sep#12#

Oct#12#

Nov#12#

%"of"m

obile"pop

ula-

on"th

at"has"played"a"game"on

"their"p

hone

"

Source:(comScore(

U.S."Mobile"Gaming"Popula-on"

(Games  suck  up  the  most  user  time)  

Games&43%&

Social&Networking&26%&

Entertainment&10%&

U<li<es&10%&

Other&11%&

Global&iOS&&&Android&Time&Spent&Per&App&Category&

Source:  Flurry,  November  2012  

(And  are  the  biggest  money  makers)  

But,  games  aside,  there’s  a  problem  with  the  whole  

mobile  story  …  where’s  the  money?    

Mobile  app  revenues  are  smaller  than  you  think  

$0#

$500#

$1,000#

$1,500#

$2,000#

$2,500#

$3,000#

$3,500#

$4,000#

$4,500#

2008# 2009# 2010# 2011# 2012#

(millions))

Source:(news(reports,(company(releases#

Apple)App)Store)Revenues)

~$4  billion  across  over  800,000  apps  is  significant  but  

won’t  create  the  next  generation  of  Internet  giants  

Most  app  downloads  are  free  

Mobile'App'Store'Downloads,'Free'vs.'Paid:'2011'

Source:(Garner,(September(2012(

Total'Downloads'

Free$Downloads$89%$

   

So  this  …  

0"

10,000"

20,000"

30,000"

40,000"

50,000"

60,000"

70,000"

80,000"

90,000"

100,000"

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"

Total&&Users&

(thousands)&

Instagram&Es5mated&Users&

Source:(news(reports,(company(releases,(BII(Es6mates(

   

…  and  this  …  

0"

2,500"

5,000"

7,500"

10,000"

12,500"

15,000"

17,500"

20,000"

Dec"09" Mar"10" Jun"10" Sept"10" Dec"10" Mar"11" Jun"11" Sept"11" Dec"11" Mar"12"

(tho

usan

ds)+

Foursquare+Users+

Source:(news(reports,(company(releases(

Have  not  necessarily  translated  to  $$$    

The  mobile  platform  wars  play  a  role  in  the  monetization  gap  

In  terms  of  operating  systems,  mobile  is  a  two-­‐horse  race  

Android'

Apple'

Blackberry'

Windows'

Other'

0%#

10%#

20%#

30%#

40%#

50%#

60%#

70%#

80%#

90%#

100%#

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(Analy5cs,(BI(Intelligence(es5mates,(and(company(filings#

Global'Mobile'Pla:orm'Market'Share'

Android  has  by  far  the  largest  platform  for  smartphones  

Android'

Apple'

Blackberry'

Symbian'

Other'

Microso8'

0%#

10%#

20%#

30%#

40%#

50%#

60%#

70%#

80%#

90%#

100%#

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#

Share'of'Global'Unit'

Sales'

Source:(Gartner(

Smartphone'Market'Share'By'OS'(Global)'

Apple  dominates  the  tablet  market,  with  Android  making  a  run  

iPad%

Android%

Kindle%Fire%

Nook%Blackberry%

0%#

10%#

20%#

30%#

40%#

50%#

60%#

70%#

80%#

90%#

100%#

Q2#2010# Q3#2010# Q4#2010# Q1#2011# Q2#2011# Q3#2011# Q4#2011# Q1#2012# Q2#2012# Q3#2012#

Tablet%Market%Share%By%Pla9orm%

Source:(Es+mates(based(on(informa+on(from(IDC,(Strategy(Analy+cs,(and(company(filings#

So  Apple  users  are  a  minority  …  but  its  platform  pays  4X  better  

Cross%Pla)orm+Revenues:+iOS+vs.+Android+

Source:(Flurry(Analy/cs,(June(2012(

iOS+

Android'24%'

Which  is  why  it  has  developer’s  attention  

iPhone'

Android'Phone'

iPad'

Android'Tablet'

Windows''Phone'

Blackberry'

HTML5'

Kindle'Fire'

Windows'8'Tablets'

0%#

10%#

20%#

30%#

40%#

50%#

60%#

70%#

80%#

90%#

100%#

1Q11# 2Q11# 3Q11# 4Q11# 1Q12# 2Q12# 3Q12# 4Q12#

Developer'Interest'In'PlaBorms'

Source:(Appcelerator(

And  why  Apple  has  dominated  app  revenues  

Apple%iOS%

Android%%

Other%

$0#

$500#

$1,000#

$1,500#

$2,000#

$2,500#

$3,000#

$3,500#

$4,000#

2008# 2009# 2010# 2011#

(millions)%

Mobile%App%Revenue%By%Pla<orm%

Source:(iSuppli,(Forrester(Research,(company(releases,(BII(es8mates(

And  has  the  most  new  project  starts  

63%$73%$

75%$ 73%$ 69%$37%$

27%$

25%$27%$

31%$

0$

2$

4$

6$

8$

10$

12$

14$

16$

18$

20$

1Q11$ 2Q11$ 3Q11$ 4Q11$ 1Q12$

Total&New&Project&Starts&(thousands)&

New&Project&Starts,&iOS&vs.&Android&

iOS$ Android$Source:(Flurry(Analy/cs,(January(20116March(2012(

Android’s  lagging  monetization  has  partly  been  a  function  of  its  fragmentation  problem  

Donut&1%&

Eclair&4%&

Froyo&14%&

Gingerbread&58%&

Honeycomb&2%&

Ice&Cream&Sandwich&21%&

Jelly&Bean&1%&

Android'Pla+orm'Distribu2on,'September'2012'

Source:(developer.android.com&

Android  can’t  get  its  users  to  update  to  more  modern  versions  of  the  system  

But  in  2013  Android  will  make  headway  on  this,  and  it  already  has  

Donut&0%&

Eclair&2%&

Froyo&9%&

Gingerbread&48%&

Honeycomb&2%&

Ice&Cream&Sandwich&29%&

Jelly&Bean&10%&

Android'Pla+orm'Distribu2on,'January'2013'

Source:(developer.android.com&

Expect  the  Android/iOS  monetization  gap  to  narrow  

However,  because  of  Android’s  massive  audience  base,  revenue-­‐per-­‐user  will  

still  be  low  

Mobile  advertising  will  grab  the  spotlight  in  2013  

Many  look  at  this  

45%$

25%$

17%$

4%$

9%$7%$

44%$

26%$

16%$

6%$8%$ 8%$

43%$

26%$

15%$

9%$7%$ 7%$

42%$

26%$

14%$12%$

6%$ 5%$

0%$

5%$

10%$

15%$

20%$

25%$

30%$

35%$

40%$

45%$

50%$

TV$ Online$ Radio$ Mobile$ Print$ Other$

Source:(eMarketer,(October(2012(

U.S.$Consumer$Media$Consump2on$Share$

2009$ 2010$ 2011$ 2012$

Tripled  since  2009  

And  this      

42%$

25%$22%$

11%$

1%$

43%$

7%$

26%$

15%$

10%$

TV$ Print$ Web$ Radio$ Mobile$

2011$U.S.$Ad$Spending$vs.$Consumer$Time$Spent$By$Media$

Ad$Spend$Per$Media$ Time$Spent$Per$Media$Source:  Mary  Meeker  (KPCB),  eMarketer,  IAB  

9%  gap  

And  assume  mobile  advertising  will  skyrocket  

But  it’s  been  slow  to  scale  

$358%

$1,012%

$2,162% $2,162%

$3,698%

$80% $160%$392%

$806%

$1,171%

$55%$267%

$907%

$1,920%

$4,621%

$0%

$500%

$1,000%

$1,500%

$2,000%

$2,500%

$3,000%

$3,500%

$4,000%

$4,500%

$5,000%

Year%1% Year%2% Year%3% Year%4% Year%5%

Compara've*U.S.*Adver'sing*Media*Annual*$*Revenue*Growth*(First*5*Years)*

Broadcast%TV% Mobile% Internet%

Source:((IAB,(McCann1Erickson,(BIA1Kelsey,(BII(es9mates( Note:(Adjusted(for(infla9on(

And  it’s  still  a  pretty  small  slice  of  digital  

Mobile'

$0#

$5#

$10#

$15#

$20#

$25#

$30#

$35#

$40#

2007# 2008# 2009# 2010# 2011# 2012E#

(billions)'

U.S.'Digital'Adver7sing'Revenues'

Source:((IAB,(BIA-Kelsey,(BII(es2mates(

But  maybe  there’s  a  good  reason  for  that  revenue  gap  …  

   

 The  screen  is  really  small  

 

That  drags  on  mobile  ad  prices,  or  CPMs  

$3.50&

$0.75&

Desktop&Internet& Mobile&Internet&

Effec%ve'CPM,'Desktop'vs.'Mobile'

Source:(comScore,(Vivaki,(Mobclix(Exchange(

The  ecosystem  is  confusing  

And  incredibly  fractured  

For  now,  the  lion’s  share  of  mobile  ad  spend  is  still  going  to  search  

Search'49%'

Display'42%'

Messaging'9%'

Es#mated)2012)Mobile)Ad)Spend)By)Format)

Source:(eMarketer,(September(2012(

(Which  means  Google  …  but  even  Google  has  mobile  headaches)  

Google&

Yahoo!& bing&

0%#

10%#

20%#

30%#

40%#

50%#

60%#

70%#

80%#

90%#

100%#

Dec#08#

Mar#09#

Jun#09#

Sep#09#

Dec#09#

Mar#10#

Jun#10#

Sep#10#

Dec#10#

Mar#11#

Jun#11#

Sep#11#

Dec#11#

Mar#12#

Jun#12##

Sep#12#

Dec#12#

Global&Mobile&Search&Market&Share&

Source:(Global(StatCounter(

Year-­‐on-­‐year,  Google  CPC  growth  negative,  partly  because  of  cheap  mobile  clicks  

!20%%

!15%%

!10%%

!5%%

0%%

5%%

10%%

15%%

4Q09% 1Q10% 2Q10% 3Q10% 4Q10% 1Q11% 2Q11% 3Q11% 4Q11% 1Q12% 2Q12% 3Q12% 4Q12%

Google&CPC&Growth&

Source:(Company(data,(Evercore(Group(LLC(Research(

A  few  big  companies  with  good  mobile  ad  formats  can  make  mobile  ads  pay  

Mobile'

$0#

$200#

$400#

$600#

$800#

$1,000#

$1,200#

1Q10# 2Q10# 3Q10# 4Q10# 1Q11# 2Q11# 3Q11# 4Q11# 1Q12# 2Q12# 3Q12#

Total'Ad'Revenues'(millions)'

Facebook'Ad'Revenues'

But  until  the  industry  streamlines  and  consolidates,  smaller  

publishers  won’t  reap  the  benefits  

There  are  some  encouraging  signals  …  

Machine-­‐buying  and  automated  real-­‐time  bidding  may  help  mobile  advertising  scale  

!$#!!!!

!$1,000!!

!$2,000!!

!$3,000!!

!$4,000!!

!$5,000!!

!$6,000!!

!$7,000!!

!$8,000!!

2010! 2011! 2012E! 2013E! 2014E! 2015E! 2016E!

Millions'Of'U

SD''

Source:(eMarketer(

RTB'Digital'Display'Ad'Spend'To'Hit'$6'Billion'In'2015'(PC'and'Mobile)'

More  mobile  video  ads  and  location-­‐based  ads  will  lift  CPMs  

!$10.00!!

!$5.00!!

!$5.00!!

!$3.50!!

!$(!!!! !$2.00!! !$4.00!! !$6.00!! !$8.00!! !$10.00!! !$12.00!!

Flurry!video!ads!

Adsmobi!video!ads!

LSN!Mobile!local!ads!!

xAd!local!

Source:(Ad(pla.orms,(BII(Research,(Greg(Sterling,(Opus(Research(

CPMs%For%Selected%Mobile%Ad%Pla3orms%

More  opportunities  for  TV-­‐style  video  ads  as  consumers  watch  more  and  longer  videos  

60%$48%$

71%$

94%$

0%$

10%$

20%$

30%$

40%$

50%$

60%$

70%$

80%$

90%$

100%$

Desktop$ Smartphone$ Tablet$ Connected$TV$

Percen

t'Of'A

ll'Ho

urs'W

atched

'

Video'Length'

Time'Watched'By'Video'Length'And'Device'

>$10$min$ 6$to$10$min$ 3$to$6$min$ 1$to$3$min$ <$1$min$Source:(Ooyala,(Q3(2012(

Tablets  provide  a  boost  to  mobile  ad  prices  

0%#

10%#

20%#

30%#

40%#

50%#

60%#

70%#

80%#

90%#

100%#

March# April# May# June## July# August#

CPC#As#Percentage#of#Desktop

##

Source:(Performics(

Tablets(Have(Edge(Over(Smartphones(on(CPC(For(Search(Ads(

Meanwhile,  the  mobile  ad  industry  is  just  starting  to  consolidate  and  simplify  …    

So,  in  revenue  terms,  “Freemium”  and  in-­‐app  commerce  remains  the  

top  app  business  model  

But  advertising  is  now  the  most  popular  monetization  tool  

33%#34%#

19%#18%#

12%#

38%#

32%#

26%#25%#

12%#

0%#

5%#

10%#

15%#

20%#

25%#

30%#

35%#

40%#

Adver1sing# Pay#Per#Download# In>App#Purchases# Freemium# Subscrip1ons#

Source:(Developer(Economics(2013(

%"Of"Developers"Who"Use"Following"Mone6za6on"Models"

Jan>12# Jan>13#

What  are  other  trends  to  watch  in  2013?  

Mobile  payments  are  growing  exponentially  

$0#

$2,000#

$4,000#

$6,000#

$8,000#

$10,000#

$12,000#

$14,000#

$16,000#

2008# 2009# 2010# 2011# 2012#

Total&&Payment&Volume&(millions)&

PayPal&Mobile&Payments&Processed&

Now  10  percent  of  PayPal’s  payments  processed  

Mobile'

$0#

$30,000#

$60,000#

$90,000#

$120,000#

$150,000#

2008# 2009# 2010# 2011# 2012#

Total''Payment'Volume'(millions)'

PayPal'Payments'Processed'

Square  now  at  over  $25  million  a  day  

Payment(Volume(

Revenues(

$0#

$5,000#

$10,000#

$15,000#

$20,000#

$25,000#

$30,000#

3/11# 4/11# 5/11# 6/11# 7/11# 8/11# 9/11# 10/11#11/11#12/11# 1/12# 2/12# 3/12# 4/12# 5/12# 6/12# 7/12## 8/12# 9/12# 10/12#11/12#

(Tho

usan

ds)(

Source:(news(reports,(company(releases#

Square(Es9mated(Daily(Payment(Volume(and(Revenues(

Payments  should  get  a  boost  from  increased  mobile  traffic  to  ecommerce  sites  

PC#

Smartphone#Tablet#

0%#

10%#

20%#

30%#

40%#

50%#

60%#

70%#

80%#

90%#

100%#

Q1#2011# Q2#2011# Q3#2011# Q4#2011# Q1#2012# Q2#2012# Q3#2012#Source:(Monetate(

Ecommerce#Website#Traffic#By#Device#

Tablet  shoppers  boost  ecommerce  because  they  tend  to  complete  purchases  on  their  device  

55%#

28%#

Tablets# Smartphones#

Source:(Adobe,(Nov.0Dec.(2012(

Mobile'Shoppers'(Percentage'of'owners'that'have'made'a'purchase'on'their'device)'

And  Because  They  Are  Engaged  Shoppers  

47%$ 47%$

48%$

49%$

52%$

44%$

45%$

46%$

47%$

48%$

49%$

50%$

51%$

52%$

53%$

Support$for$loyalty$programs$

Support$for$couponing$ Ability$to$purchase$directly$from$the$app$

Images$and$slideshows$of$products$at$different$angles$

Money$saving$offers$

%"Of"S

hopp

ers"O

n"Tablet"App

s"Who

"Think

"Following"Ap

p"Ch

aracteris;c"Is"Im

portan

t""

Source:(Adobe,(Nov.0Dec.(2012((

Tablet"Shoppers"Are"Looking"For"Bargains,"But"Also"Rich"Product"Images"

Not  all  ecommerce  mobile  volume  is  cannibalized  from  desktop,  at  eBay  1/3  of  it  is  

incremental  

5%#

9%#

2%# 4%#

0%#

10%#

20%#

30%#

40%#

50%#

60%#

70%#

80%#

90%#

100%#

2011# 2012e#

Sources:)eBay,)Morgan)Stanley)Research)*Volume)is)Gross)Merchandise)Value)(GMV),)or)value)of)all)merchandise)transacted)))

Mobile'Transac.on'Volume*'Grows'On'eBay'To'13%'Of'Total'

Desktop#Volume# Mobile#Volume#Cannibalized#From#Desktop# Incremental#Mobile#Volume#

2013-­‐  THE  BOTTOM  LINE  •  Tablet  sales  make  a  huge  leap  this  year,  driven  by  falling  prices  and  the  growth  of  mini-­‐tablets.  

•  Smartphone  growth  slows  in  the  West  with  huge  consequences  for  platform  operators,  handset  manufacturers,  and,  eventually,  app  developers.    

•  Mobile  apps  have  yet  to  effectively  monetize  a  huge  user  base  and  will  refocus  on  monetization  strategies.  

•  Mobile  advertising  needs  to  consolidate  and  streamline  if  smaller  mobile  properties  are  to  rely  on  it.  

Thanks!