The New Digital Reality

Presentation to Team Colorado Leadership

Greg Maffei11.30.2011

Digital Godzilla ‘Eats’ All King Kongs…

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Digital Explosion• YouTube

• 3b views/day = 92b views/month• Avg user spends 25 minutes/visit• 48 hrs. of video uploaded/minute• Largest TV station in world• Broad demographic: 18 - 54 years old

• Facebook• 800m users• Avg user has 130 friends

• Avg user spends ~1 hour on FB /day • 50% of users log on daily

• 250m photos uploaded/day• >7m apps/websites integrated• >$4m revenue in 2011• Worth > $100b

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Number of Facebook Users(m)

YouTube Videos Uploaded per Minute

(hours)

1/08 9/08 5/09 1/10 9/10 5/110

10

20

30

40

50

60

2/09 8/09 2/10 8/10 2/11 8/110

100

200

300

400

500

600

700

800

900

Facebook Phenomenon

4

Years to reach 50 million users

38 Years

Radio

3 Years

iPod

Added over 200m

users in less than 1

year

Facebook

4 Years

Internet

13 Years

Television

1. China 1,336,450,000 6. Brazil 193,099,000

2. India 1,182,330,000 7. Pakistan 169,835,000

3. Facebook 800,000,000 8. Bangladesh 162,221,000

4. United States 309,573,000 9. Nigeria 154,729,000

5. Indonesia 231,369,500 10. Russia 141,927,297

• Changes habits and actions • Fastest growing segment is 50+; >40% of those online use social media• 1 in 5 couples married in US met via social media• Also 1 in 5 divorces are blamed on Facebook• Overtakes porn as #1 activity on web• Some universities have stopped issuing email accounts

• And business…• Social gamers will buy $6b in

virtual goods by 2013• Movie goers only buy $2.5b

in real goods• Zynga

• 232m monthly active users, 60m daily active users

• ~$1b annual revenue run-rate• >90% of revenue from

purchasing virtual currency• $15 market value?

Social Media Changing Behaviors

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The Top 10 Games on Facebook

INDICATES A ZYNGA GAME

Digital Media Global Reach

• Media is local; technology is global• Wikipedia: over 15m articles; 78% non-English

• 70% of YouTube's traffic comes from outside of US• Microsoft, Google, Oracle have >50% of revenue

from outside US…no media company• Twitter - integral force in “Arab Spring”

• China’s closed Internet exception?• China has #1 and #2 largest broadband providers

in world• QZone among world’s largest social networks

with 500m users• Chinese prefer IM over email

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Destruction of Traditional Music• Album was an artificial marketing concept

• Priced too high?• Economics destroyed through piracy, Apple’s unbundling• Consumers get what they want…

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Destruction of Traditional Media

• Newspapers - Internet premium content for free• 24 out of 25 largest

lost circulation• Cost-cutting• More effective revenue

models: eBay, Craigslist, Zillow

• Negative cycle…

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• Decline of TV stations• 2011 local advertising down 10%

• Once you train them on free…• More market value destroyed than created?

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Moore’s Law Goes to Movies

Downloading Spiderman 1.27 Gigabytes

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Download time and Cost

Storage

82 Computers x $3,572

$292,904

1978Cost to store 1.27GB

~2.23 IBM 3370 units @ $114,000 each

$254,000

Cost to playback

300kb/second – 9,407 hours$48.70/hour

$458,120

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Cost to playback

Download time and Cost

Storage

$199?$99?

2011Cost to store 1.27GB

$199 for 500GB

$.51

5 minutes @ $.10 per GBX1.27GB

$.13

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Free

Storage 2038

~$254,0001978

2011

2038

~$.51

13

$.01

Download Time & Costs 2038

$458,12019789,407 hours @ 300bps

$.13201115 minutes @ 30Mbps

20382 sec @5Gbps

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1978

<$1.00

Cost to Playback 2038$292,904

2011

2038

$199

Decline of TV?• Internet up, TV down?

• 4 hours/HH in ’75, 6 hours in ’85, 8.5 hours in ‘10

• Viewership fragmenting and aging• Networks declining

• Online viewing up 7x in a year• Netflix has 23m customers

• Will cable companies get disintermediated?

• Will the cable bundle survive?• The Longhorn Network• DIRECTV’s $90 ARPU v. Netflix’s $7.99

• Mediocre content will get swamped• Free/user-generated beats mediocre

• Compelling content will do fine• 9 min YouTube video can’t compete with

The Sopranos

• Online aggregators will create video portals and build powerful new businesses…

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Median Age of Nightly News Viewers2004 - 2009

Median Age of Morning News Viewers2004 - 2009

Internet Rules• If it can be free, it

will be

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• If it can be known, it will be

• If it can be rated, it will be

• It’s who you know, not just what you know

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eCommerce History• Web 1.0 – Information

• Internet provides transparency and information, but limited capacity to absorb the data

• Web 2.0 – Evaluation• Look to “knowledgeable influencers” when making decisions

• Web 3.0 – Recommendations• Facebook: volume of recommendations, one friend recommends

something we consider it, three friends recommend certain to consider it

• Web 3.1 – Not just any friend• Google+ circles - look to quality of relations/closeness• Lockerz Decalz / FWB - advocacy

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Recommendations & Referrals

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Recommendations and Referrals

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Social Graph

Discover => Evaluate => Buy

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Group Buying

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See who’s sitting where

Tag your seat

Tag your friends

Consumers who connect through Facebook spend $5 more on average

than those who just buy tickets

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Forums and Communities

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Field Tests

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Online Education• Online education is $34b industry

• Currently >3m online-only students in US• ~50% of college students take at least one class online• Nearly half of online students are 26+• Phoenix University largest US university

• Enrolls >500k students = >10x University of Colorado• Spends $200m/year improving it’s teaching…what can CU

spend?

• By 2019, estimated that 50% of all classes taught will be delivered online• Many of these will be available for free

• Encyclopedia Britannica => Microsoft Encarta => Wikipedia

Education Ready To Be Disrupted• Education, like housing, overpriced bubble

• Consumers/students not getting their money’s worth• Ineffectiveness of college degree• Need for technical/continuous education• Rise of part-time students• Personalization - different rate at which students learn• Students perform better learning online than with face-to-face

instruction*

• Khan Academy – 2,100 free educational videos• From 1+1=2 to college-level physics, finance• Linking to Facebook to track progress• Raised $5m from Bill Gates and others

• Open Culture, Academic Earth, P2PU, Skillshare, Scitable, Skype (connections to professors and tutors)

• 350k lectures on iTunes from Stanford, Yale and Oxford• Stanford University online high school• Students perform better learning online than with face-to-face instruction(1)*Evaluation of Evidence-Based Practices in Online Learning: A Meta-Analysis and Review of Online Learning

Studies, U.S. Department of Education Office of Planning, Evaluation, and Policy Development Policy and Program Studies Service, 2010

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Disrupting Government• If it can be known, it will be known:

• Wikileaks• Viral videos and photos force greater accountability from public officials - exposing inconsistent policy

positions in US to We Are All Khaled Saeed - Egypt • Increased voter demands for effectiveness and transparency

• If it can be rated, it will be rated:• Increased consumer participation in forums and comment procedures• “Yelping” the DMV• Healthcare – rating doctors, insurance rates, procedure costs• Government 2.0

• Open data movement that combines city data with smartphone apps to improve services• SeeClickFix lets residents file public requests for city services from their mobile phones• Other apps include street sweeper alarms, neighborhood crime notifiers, alerts when people enter

restaurants that recently got low marks on inspections

• If it can be free, it will be:• Post Office “killed” by email• Privatizing/unbundling/forum shopping for “government” services: Fed Ex• Education

• It’s not just what you know, but who you know:• More direct interaction between electeds and citizens (ie, Allen’s Macaaca video, Brownback v.

Tweeting Teen, Huntsman's daughters)• Six years after Katrina, social media totally changed emergency response

• Citizens turn to Facebook and Twitter• Gov encouraging this behavior (i.e. Lifeline Facebook App Challenge)

• Facebook connections and ratings• Occupy Denver…

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Questions