Internet Trends May 25, 2007 56 th Annual Seminar - Santa Barbara [email protected] / [email protected] / [email protected]Morgan Stanley does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Customers of Morgan Stanley in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at www.morganstanley.com/equityresearch or can call 800-624-2063 to request a copy of this research. For our latest industry research, please visit www.morganstanley.com/techresearch . Morgan Stanley & Co. Incorporated ("Morgan Stanley") is currently acting as financial advisor to DoubleClick Inc ("DoubleClick") in its announced proposed sale to Google Inc. The proposed transaction is subject to customary closing conditions. DoubleClick has agreed to pay fees to Morgan Stanley for its financial services, including transaction fees that are subject to the consummation of the proposed transaction. Morgan Stanley is currently acting as financial advisor to aQuantive Inc. ("aQuantive") with respect to its announced proposed acquisition by Microsoft Corp. The proposed transaction is subject to the consent of aQuantive shareholders and other customary closing conditions. This report and the information provided herein is not intended to (i) provide voting advice, (ii) serve as an endorsement of the proposed transaction, or (iii) result in the procurement, withholding or revocation of a proxy or any other action by a security holder. aQuantive has agreed to pay fees to Morgan Stanley for its financial advice, including transaction fees that are subject to the consummation of the proposed transaction. For analyst certification and other important disclosures, refer to the Disclosure Section.
Morgan Stanley does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Customers of Morgan Stanley in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at www.morganstanley.com/equityresearch or can call 800-624-2063 to request a copy of this research. For our latest industry research, please visit www.morganstanley.com/techresearch.
Morgan Stanley & Co. Incorporated ("Morgan Stanley") is currently acting as financial advisor to DoubleClick Inc ("DoubleClick") in its announced proposed sale to Google Inc. The proposed transaction is subject to customary closing conditions. DoubleClick has agreed to pay fees to Morgan Stanley for its financial services, including transaction fees that are subject to the consummation of the proposed transaction. Morgan Stanley is currently acting as financial advisor to aQuantive Inc. ("aQuantive") with respect to its announced proposed acquisition by Microsoft Corp. The proposed transaction is subject to the consent of aQuantive shareholders and other customary closing conditions. This report and the information provided herein is not intended to (i) provide voting advice, (ii) serve as an endorsement of the proposed transaction, or (iii) result in the procurement, withholding or revocation of a proxy or any other action by a security holder. aQuantive has agreed to pay fees to Morgan Stanley for its financial advice, including transaction fees that are subject to the consummation of the proposed transaction.
For analyst certification and other important disclosures, refer to the Disclosure Section.
Current Internet Trends
3
Hierarchy of Needs Drives Growth?!
Self-actualization
Esteem
Belonging
Safety
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
1943 - Maslow 2007 - ? ;)
Internet / Mobile
Shelter
Food / Water
4
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
5
…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
6
…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
7
…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
8
# of Internet Users – ROW Continues to Rise in RelevanceN. America = 35% of Users in 2000E; 16% in 2007E
0%
20%
40%
60%
80%
100%
2000E 2001E 2002E 2003E 2004E 2005E 2006E 2007E
North America Europe Asia/Pacific Rest of World Latin America
Geographic Distribution of Internet Users (MM)
390 491 621 724 851 977 1,122 1,302
Note: ROW denotes rest of the worldSource: Morgan Stanley Research
9Source: comScore Global MediaMetrix 4/07
User-Generated Content (UGC) – YouTube + Wikipedia + MySpace Have Moved to Top of Internet User Pack
Web 2.0 –Consumer Control / Contribution / Interaction
SyndicationStickiness
Tagging ('folksonomy')Directories (taxonomy)
WikisContent management
ParticipationPublishing
Web servicesScreen scraping
Cost per clickPage views
Search engine optimizationDomain name speculation
upcoming.org and EVDBevite
BloggingPersonal websites
WikipediaBritannica Online
Napstermp3.com
BitTorrentAkamai
FlickrOfoto
Google AdSenseDoubleClick
Web 2.0Web 1.0
Source: O’Reilly Media, Inc.
11
• Convergence is happening (many IM sessions end in phone call). Opportunities exist for non-mobile players to leverage existing subscribers.
• Who has the most valuable customer base as transition occurs? Who will have it over time?
Email Providers
MSN Hotmail Active Accounts (2)
(261MM)
Yahoo! Mail Unique Visitors (1)
(249MM)
Google GMail Unique Visitors (1)
(70MM)
IM / VoIP Services
MSN MessengerActive Accounts (2)
(215MM)
Skype / eBayRegistered Users (2)
(196MM)
Yahoo! Messenger Unique Visitors (1)
(88MM)
ICQUnique Visitors (1)
(28MM)
Internet Sites
GoogleUnique Visitors (1)
(528MM)
MSN – Windows LiveUnique Visitors (1)
(520MM)
Yahoo! Unique Visitors (1)
(468MM)
eBayUnique Visitors (1)
(248MM)
MySpace.comUnique Visitors (1)
(105MM)
Amazon.comActive Customers (2)
(66MM)
Search Engines
Google SearchUnique Visitors (1)
(465MM)
Yahoo! SearchUnique Visitors (1)
(237MM)
(1) Source: comScore Global MediaMetrix 4/07(2) Source: Company Reports as of CQ1
Payments
PayPal / eBayAccounts (2)
(143MM)
Next Generation Communications Hubs?
12
Strong Momentum in Many Emerging Fast Growers
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
Company Market Data Points
P2P File Sharing 5MM uniques vs. 3MM Y/Y (2)
Accounted for 35% of all Internet traffic in 2004 (1)
Blog Search Engine 7MM uniques vs. 6MM Y/Y (2)
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
Hosted Blogging 35MM uniques vs. 2MM Y/Y (2)
Social Network 22MM uniques vs. 12MM Y/Y (2)
39MM uniques vs. 13MM Y/Y (2)Social Network
Social Network 29MM uniques vs. 21MM Y/Y (2)
Social Network 3MM uniques vs. 192K Y/Y (2)
Social Network 2MM uniques vs. 1.5MM Y/Y (2)
Online Video 330K uniques vs. 30K in 12/06 (2)
13
Watch Where Global Younger Generation Goes
Social NetworkingRingtone Downloads, Connecting Mobile to Net
Video
Web OS Programs In-Game AdvertisingBlogs
Tencent Instant Messaging (PC / Mobile)
Knowledge Sharing
Online Advertising Trends
15
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
US Media Usage (1) to Ad Spending (2)
Ratios
4.7x
0.0
2.0
4.0
6.0
8.0
10.0
12.0x
Newspapers+ Magazines
Total TV Radio Internet
Youth Media Usage (3) to Ad Spending (2) Ratios
11.3x
0.0
2.0
4.0
6.0
8.0
10.0
12.0x
Newspapers+ Magazines
Total TV Radio Internet
Large Gap Between Internet Consumption / Ad Spending
US Internet Ad Spend = Movin’ on Up –$217 Per Home vs. $980 for Newspapers?
17
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. $52B aggregate value of top offline advertisers (WPP + Interpublic + Omnicom + Publicis + Havas)
Source: FactSet, Hoovers
18
(1) Source: Ad revenue totals from IAB/PriceWaterhouseCoopers Interactive Advertising reports(2) Calculated as reported revenue multiplied by the reported percentage of US Ad Revenue
(3) Calculated as the difference between total IAB US revenue and the sum of Google, Yahoo! gross revenue(4) Assuming that TAC of Google + Yahoo! included in ‘others’ total, this segment would have been up 20% Y/Y vs. 8% actual growth
Google + Yahoo! =~58% of US Online Ad Revenue (and Rising)
0
200
400
600
800
1,000
1,200
1,400
CQ4:05 CQ4:06
US
Ad
Rev
enue
($M
M)
Google, US Gross Ad Revenue (2)Yahoo!, US Gross Ad Revenue (2)Others (3)
25% 24%
31%
27%
US Online Ad Revenue Mix (1)
42%51%
19
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
20
Rapid P2P Growth (Mostly Video) isStressing 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)
*Note: Total U.S. Internet Spending up 35%Y/YSource: Internet Advertising Bureau and Morgan Stanley Research estimates.
U.S. Internet Advertising – Search Has Been Growth Engine (Largely Related to Text) – Video Next?
13$240 $130 U.S. Internet Spending per Internet Household
570 55 U.S. Internet Households (MM)
5183 143 U.S. Internet Users (MM)
19$16,879* $7,134 Total U.S. Internet Spending
10%13%% of Total
13$1,688 $927 E-mail and Other
18%16%% of Total
22$3,038 $1,141 Classifieds
7%5%% of Total
27$1,182 $357 Rich Media
25%62%% of Total
(1) $4,220 $4,423 Display and Sponsorship
40%4%% of Total
88%$6,752 $285 Search Advertising
'01E-06E2006E2001E
CAGR(US$ in MM, except where noted)
22
67% of Global Internet Users Use SearchSearch = Top Customer Acquisition Tool for Online Retailers
Note: 8% of global Internet traffic was derived from search while 67% of global Internet users used search in 1H2006, per comScoreSource: The State of Retailing Online 2006, Forrester Research
% of New Online Customers for Online Retailers / Marketing Spend Mix (2005)
1%3%3%5%7%10%
11%
29%36%
0%
10%
20%
30%
40%
50%
Search
engin
e mark
eting
Organic
traffic
Catalog
sAffil
iate p
rogram
s
Compa
rison
-shop
ping e
ngine
s
Email to
pros
pecti
ng lis
ts
Traditio
nal p
ortal
deals
New po
rtal d
eals
Other
% C
usto
mer
s ac
quire
d fr
om s
ourc
e
Online Video Trends
24
Video – Key Question
In 3 years, what % of content used on Web will be…
• Professional
• Semi-professional
• Amateur
• Combinations (mashups) of above?
25
YouTube – Who Woulda Thought?...
Most Watched YouTube Video – ‘Evolution of Dance’~50MM views / 117K comments since 4/06
Source: YouTube
26
…YouTube – Who Woulda Thought?
YouTube stats:
• 163MM unique visitors +506% Y/Y
• 14B minutes+1,128% Y/Y
• 13B page views+905% Y/Y
• Acquired by Google$1.1B – 10/06
• $11MM – 2006 revenue
• “Broadcast Yourself”
Short-form entertainment…
Watch even more
videos
Post your own video response
Share your thoughts
Source: comScore Media Metrix (Global, 3/07; Google, YouTube
27
YouTube Channels – CBS Leads with 113MM Views
Source: YouTube as of 5/29/07
Broadcast media showing strong traction
Leading user generated
content draws 50MM views
28
Power of the Door…
Sometimes you know what you are looking for and sometimes you don’t -editing / organizing can help...
THE 9 is a daily broadcast on Yahoo! TV,
showcasing 9daily selections from millions of Web content files
THE 9 features the 9 “best, weirdest,
and funniest videos, photos, and stories”
on the Web
Vlog host: Maria Sansone
“The best Video Blog”“One of the 50 coolest
websites of 2006” –TIME Magazine (8/06)
Exclusive sponsorship by
Pepsi
Selectively placed on Yahoo!’s front page / door
Source: Yahoo!
29
…Power of the Door
UGC + User Participation + Social Networking + Monetization
Watch video clips
from previous “THE 9”s
Interactive -Online voting +
user participation
Utilizes Yahoo! 360 as social networking tool
Source: Yahoo!
30
Monetizing Video – Keywords + Adjacent Sponsorships –Do Users Really Want 30 Second Pre-Rolls?
Branding + Interactivity –Think About “Enter Sweepstakes” – Game with Andy…
roddickreebok
Note: Reebok framed ads placed for illustration purposes onlySource: YouTube
Key Words
Sponsorships Keyword Ads and / or sponsorships
31
• TV’s mass audience to the Web?− Mobile TV + Personalization + Online social network− Vision: universal TV running on a P2P platform
• Old P2P: download Joost’s P2P: stream DVD-quality pictures• Connectivity driven by increased broadband Internet + PC / mobile
PC penetration is key
Joost – Focused, User-Built TV
IM / Chatfunctionality
Add interactive
apps / plugins
Rate watched content
Social Media / Virtual Communities Trends
33
Growing Importance of Virtual Community
• Improving PC / Internet penetration + plethora of social networking + digital content rising vitality of virtual community
• Virtual communities becoming increasingly important as channels for − Building / maintaining relationship − Entertainment− Content sharing− Business / revenue generator
34
CyWorld – Building / Maintaining Virtual Family…
Gift Shop:Purchase items to decorate your “MiniHompy”
CyWorld:“Cy” means “relationship”in Korean.
“Ilchon” represents the closest family members in Korean. In CyWorld, it means your closest friends.
“Acorn” is the official currency in CyWorld, which can be purchased to obtain items for your MiniHompy.
Search for your friends, blogs, images, videoclips, news, etc.
35
• 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
…CyWorld – Building / Maintaining Virtual Family
Source: SK Telecom
36
Second Life – Living in a Virtual World / Economy…
Source: Second Life
Personalize “virtual you” Meet new people at events / venues and form interest groups
Build / display / store virtual objects + host events and
businesses
Discussions + Sports + Commercial + Entertainment +
Games + Education + …
37
• 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
…Second Life – Living in a Virtual World / Economy
38
Cumulative Xbox Live Users
0
1
2
3
4
5
6
7
Dec-02
Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
(in M
M)
6MM Xbox Live Users, as of CQ1
Source: Microsoft
• 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
Xbox Live – Videogame Community + Digital Content Distribution Channel
Mobile Internet Trends
40
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2005E 2006E 2007E 2008E 2009E 2010E
Sub
scrip
tions
(MM
)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% o
f Tot
al W
irele
ss S
ubsc
riptio
ns
Up to 2G Subscriptions 2.5G and Above Subscriptions % 2.5G and Above Penetration
At Critical Mass Inflection Point for Usage of High Speed (Broadband – 2.5+3G) Mobile Networks
Source: Morgan Stanley Telecom Research Scott Coleman, John Marchetti.
• 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
Reaching Consumers on the Internet
44
Google vs. Yahoo!
Google – When you know what you want AKA consumer is editor
45
Google vs. Yahoo!
Yahoo! – When you don’t necessarily know what you want AKA Yahoo! is part-time editor
Google is a distribution platform based on natural + sponsored links
47
Google Zeitgeist – What Do People Want? Data…
Top 2006 Searches1. bebo2. myspace3. world cup4. metacafe5. radioblog6. wikipedia7. video8. rebelde9. mininova10. wiki
Top 2006 News Searches1. paris hilton2. orlando bloom3. cancer4. podcasting5. hurricane katrina6. Bankruptcy7. martina hingis8. autism9. 2006 nfl draft
10. celebrity big brother 2006
Source: Google
48
Yahoo! Buzz Index – What Do People Want? Data…
Source: Yahoo!
Yahoo’s Search Ranking by Query Score
49
Reaching Users through User-Generated Community Channels…
Yahoo! Answers - When you don’t necessarily know answer or question
72MM unique visitors
+828% Y/Y
367MM minutes+1,110% Y/Y
460MM views+1,163% Y/Y
Source: comScore Global MediaMetrix 4/07
Yahoo! generated
results
User generated responses
User generated questions
50
Amazon.com – Consumers in ControlRecommendation Engines / Personalization = Rule
Source: Amazon.com
Tools based on consumer opinions / experiences help users maneuver through 35K+ results in books alone from “Santa Barbara”
What other customers are
thinking
What other customers are buying
What other customers are doing
What other customers are saying
User-generated
lists
51
Increasing Importance of Blogging Communities…
Video blogs
Bloggers report on WalMart / Dell announcement… Readers
respond
Photo sharing by shoppers
52
New Targeting Opportunities
Giveaways for joining
Register for college rewards program
Apply for summer
internships
Southwest Airlines sponsored group on Facebook for college students
Penetrating 50K local, special interest groups on Meetup.com
Host their next
event?
53
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
How Internet is Helping Reshape Politics
55
How Can Candidates Leverage the Internet to Reach Their Audiences?
+ = ?
Source: Time Magazine
December 2006 October 2006
56Sources: Clinton/Gore ’96, Dole/Kemp ‘96
C1996 -First Presidential Campaign Websites
Changing the Face of Politics – Then
57Sources: Obama for America, Hillary Clinton for President, Facebook, MySpace, YouTube
Internet Offers Direct Communication with Voters
Campaign launches on candidate websites
Candidate-focused pages on facebook +
MySpace
Changing the Face of Politics – Now
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
“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
58Source: YouTube as of 5/29/07
10 Downing Street YouTube Channel – 86K Views
Send message / add comment / share channel
Sort most viewed / discussed Downing St. videos
Links to Downing St. homepage, newsletters, podcasts, E-petitions, etc.
59Source: YouTube
YouChoose ’08 – YouTube Channels for Candidates
Centralized hub of candidate-created channels that feature:
• Campaign videos
• Speeches
• Informal chats
• Behind-the-scenes footage
60Source: Dean for America
C2004: Howard Dean Breaks New Ground in Internet Fundraising
Changing the Face of Politics – Then
Howard Dean’s CQ1:03 Fundraising :
• $750K+ from Internet contributions (28% of total)
• ~$180 average contribution
• 12K+ individual donors
• Followed with $3.5MM+ from Internet contributions in CQ2:03 (50%+ of total)
61Sources: FEC, Obama for America, Hillary Clinton for President, John Edwards for President, Romney for President
Internet is Key Fundraising Tool
Changing the Face of Politics – Now
0
5
10
15
20
25
30
Mitt Romney Barack Obama Hillary Clinton John Edwards
CQ
1:07
Fun
drai
sing
($M
M)
Non-Internet Internet
CQ1:07 Fundraising Totals
$6.9MM$6.9MM$4.2MM$4.2MM
$3.3MM$3.3MM
$7.2MM$7.2MM
~$7MM raised online matches
John Kerry’s entire CQ1:03
62
Traditional Debate Formats
Changing the Face of Politics – Then
1858 1960
2004
63Sources: Yahoo!, Slate, Huffington Post
2008 Election - First Online Presidential Debate
Changing the Face of Politics – Now
• 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
Summary
65
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)
66Source: General Social Survey Archive, 1972-2004
Only 25% of 30 Year-Olds Read Newspapers Daily
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1900 1910 1920 1930 1940 1950 1960 1970
Year of Birth
% P
enet
ratio
nDaily Newspaper Readership by Age
67Source: Company Reports
Print Circulation Down
1.12
1.13
1.14
C2004 C2005 C20062.22
2.25
2.28
2.31
C2004 C2005 C2006
Prin
t Circ
ulat
ion
(MM
)
Prin
t Circ
ulat
ion
(MM
)
0.65
0.70
0.75
C2004 C2005 C20061.64
1.70
1.76
1.82
C2004 C2005 C2006
Prin
t Circ
ulat
ion
(MM
)
Prin
t Circ
ulat
ion
(MM
)
68Sources: MS Media team, comScore US MediaMetrix 4/07
Newshounds Migrating Online
21
57
9
26
31
37
0
5
10
15
20
25
30
35
40
45
Circulationof Top 50
Newspapers
WashingtonPost
USA Today NY Times CNN MSNBC Yahoo! News
Circulation of top 50 newspapers vs. online news unique users
US
Uni
que
Use
rs (M
M)
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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)
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)
971K unique visitors (+520% Y/Y)4MM total pages viewed (+486% Y/Y)
• Greater user participation + personalization User generated content
• Information less filtered + communicated directly to the public 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.
• “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
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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 YouTubecontent has proven, again, consumers love a good story…
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The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report: Mary Meeker.
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The following analyst, strategist, or research associate (or a household member) owns securities in a company that he or she covers or recommends in this report: Mary Meeker -Amazon.com (common stock), eBay (common stock), Intuit (common stock), Microsoft (common stock), Yahoo! (common stock). Morgan Stanley policy prohibits research analysts, strategists and research associates from investing in securities in their sub industry as defined by the Global Industry Classification Standard ("GICS," which was developed by and is the exclusive property of MSCI and S&P). Analysts may nevertheless own such securities to the extent acquired under a prior policy or in a merger, fund distribution or other involuntary acquisition.
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