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Mary meeker-kpcb-internet-trends-2012

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This report talks about today’s Internet growth and provides an in-depth look for the following new trends: 1) review of Internet stats and notes that Internet growth remains robust and rapid mobile adoption is still in early stages; 2) run through a number of examples of business models that are being re-imagined and re-invented thanks to mobile and social; 3) highlight mixed economic trends and 4) observe that while there’s a lot to be excited about in technology, there are things to be worried about regarding America’s financial situation.
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  • 1. INTERNET TRENDSD10 CONFERENCE5/30/2012Mary Meeker

2. Outline1) Basic Stats Internet Growth Remains Robust, Rapid Mobile Adoption Still in Early Stages2) Re-Imagination of Nearly Everything3) Economy Mixed Trends, With Negative Bias4) USA, Inc. A Lot to be Excited About in Tech, A Lot to be Worried about in Other Areas5) Bubble or Not?2 3. BASIC STATS INTERNET GROWTHREMAINS ROBUST, RAPID MOBILEADOPTION STILL IN EARLY STAGES 3 4. INTERNET USERS 4 5. 2.3B Global Internet Users in 2011* 8% Growth*, Driven by Emerging Markets 2008-2011 Internet User2011 Internet PopulationRank CountryAdds (MMs)Users (MMs) Y/Y GrowthPenetration 1 China215 513 12% 38% 2 India69121 3810 3 Indonesia37 55 2223 4 Philippines28 34 4435 5 Nigeria21 45 --* 28 6 Mexico 19 42 1937 7 Russia 16 61 3 43 8 USA15245 1 79 9 Iran 14 37 --* 48 10Turkey 11 36 2649 Top 10 4441,18912% 32% World6632,250 8% 32%Note: *Nigeria / Iran data as of 12/10; Other 8 countries data as of 12/11, 2.3B global Internet users and 8% Y/Y growth rate based on the latest available data (most as of 12/11, some as of 12/10). Source: United Nations / International Telecommunications Union,5 internetworldstats.com. 6. MOBILE USERS 6 7. 1.1B Global Mobile 3G Subscribers, 37% Growth, Q4 @ Only 18% of Mobile Subscribers CQ4:11 3G 3G SubCQ4:11 3G 3G Sub3G Subs Penetr Y/Y3G Subs Penetr Y/YRank Country(MM) ation Growth Rank Country(MM) ation Growth1 USA 208 64% 31% 16 Canada1662% 34%2 Japan 12295 9 17 Taiwan14 48173 China57 611518 South Africa13 21494 Korea458510 19 Turkey13 20625 Italy445125 20 Portugal13 78196 UK 425325 21 Vietnam 12 113587 Brazil 411799 22 Mexico11 11558 India39 484123 Malaysia10 27 79 Germany383623 24 Sweden10 7325 10 Spain335721 25 Philippines 10 1145 11 France 304535 26 Saudi Arabia10 1917 12 Indonesia291127 27 Netherlands9 4434 13 Poland 285717 28 Egypt8 1060 14 Australia227621 29 Austria7 5824 15 Russia 17 8 4530 Nigeria 6 6 51Global 3G Stats: Subscribers = 1,098MMPenetration = 18%Growth = 37%Note: *3G includes CDMA 1x EV-DO and Rev. A/B, WCDMA, HSPA; One user may have multiple mobile subscriptions and may be counted asmultiple subscriber. Source: Informa WCIS+. 7 8. MODERN MOBILE DEVICE EVOLUTION 8 9. iPods Changed Media IndustryiPhones Ramped EvenFasteriPad Growth (3x iPhone) Leaves Siblings in DustFirst 8 Quarters Cumulative Unit Shipments, iPod vs. iPhone vs. iPad1,40070,000iPad iPadiPadiPhone iPhoneiPhone iPodiPod iPod 20,000 1,200 60,000Global Unit Shipments (000)Global Unit Shipments (000) 1,000 50,000 15,00080040,000 10,000 600 30,00040020,0005,00020010,000 000 000 1 11 2223 33 4 44 5 55 667 7 8 8 Quarters After LaunchQuarters After LaunchQuarters After LaunchSource: Apple, as of CQ1:12 (8 quarters post iPad launch). 9 10. Android Phone Adoption Has Ramped Even Faster 4x iPhoneFirst 13 Quarters Cumulative Global Android & iPhone Unit Shipments300AndroidiPhoneGlobal Cumulative Unit Shipments (MM)25020015010050 001 2345 678 910111213Quarters After Launch Source: Gartner, Morgan Stanley Research, as of Q4:11. 10 11. Despite Tremendous Ramp So Far,Smartphone User Adoption Has Huge Upside Global Smartphone vs. Mobile Phone Subscriptions, Q4:117,000 6.1B Mobile PhoneSubscriptions6,0005,000Global Subscriptions (MM)4,0003,0002,000 953MM SmartphoneSubscriptions1,000 0SmartphoneMobile PhoneSource: Mobile phone subscriptions per Informa (as of Q4:11), Smartphone subscriptions estimate based on Morgan Stanley Researchsestimated smartphone user as % of total mobile user at the end of 2011 (16%).Note: While there are 1B global 3G subscribers as of Q4:11, not all of them were smartphone users. One user may have multiple mobile11 subscriptions, therefore actual user #s may be lower than subscriber #s. 12. Impressive 29% of USA Adults Own Tablet / eReader,Up from 2% Less Than Three Years Ago% of USA Adults Who Own Tablet Computers or eReaders, 4/09 1/1235% USA Adults that own tablet computers29%30%25% or eReaders (%)20%15%10%5% 2%0%4/09 9/095/10 9/10 11/10 5/11 8/1112/111/12 Source: Pew Research Center, 1/12.12 13. MOBILE MONETIZATION TRANSITION 13 14. Good News =Global Mobile Traffic Growing Rapidly to 10% of Internet TrafficGlobal Mobile Traffic as % of Total Internet Traffic, 12/08 5/1215%10% in 5/12% of Internet Traffic10% 4% in 12/105% 1% in 12/090%12/08 4/09 8/09 12/09 4/10 8/10 12/104/11 8/1112/114/12 Source: StatCounter Global Stats. 14 15. Good News =Mobile @ 8% of USA eCommerce & Helping Accelerate Growth USA eCommerce Y/Y Growth vs. Mobile Commerce as % of TotaleCommerce, Q1:10 Q1:1220%20% USA eCommerce Y/Y GrowthMobile Commerce as % of Total USA Mobile Commerce as % of eCommerceeCommerce Y/Y Growth Rate15%15% eCommerce10%10%5% 5%0% 0%Q1:10 Q2:10 Q3:10 Q4:10 Q1:11 Q2:11 Q3:11 Q4:11 Q1:12Source: comScore. 15 16. Good News =Mobile Monetization Growing Rapidly (71% Apps, 29% Ads)Global Mobile App + Advertising Revenue, 2008 vs. 2011E$15Mobile Apps Mobile Ad + Apps Spending ($B) $12BMobile Advertising$10 $5 $0.7B $0 2008 2009 20102011ESource: Gartner. CAGR is compound annual growth rate.Note: Apple has paid >$3B $s to developers as of 9/11, implying gross app market revenue of $4B in 3 years; Google indicated duringCQ3 earnings call that it expects $2.5B mobile ad revenue in 2011E 16 17. Good News =Material Upside for Mobile Ad Spend vs. Mobile Usage% of Time Spent in Media vs. % of Advertising Spending, USA 2011Time Spent Ad Spend 50% % of Total Media Consumption TimeInternet AdMobile Ad or Advertising Spending 40%43% 42%= $30B* = $1.6B* 30% 25% 26%~$20B+ 20%22%Opportunity in USA15% 10% 11% 10% 7%1% 0%PrintRadio TV Internet MobileNote: *Internet (excl. mobile) advertising reached $30B in USA in 2011 per IAB, Mobile advertising reached $1.6B per IAB. Print includes newspaper and magazine. $20B opportunity calculated assuming Internet and Mobile ad spend share equal their respective time spentshare. Source: Time spent and ad spend share data eMarketer, 12/11, Internet and mobile ad dollar spent amount per IAB.17 18. Good / Bad News Rapidly Growing Mobile Internet Usage SurpassedMore Highly Monetized Desktop Internet Usage in May, 2012, in India India Internet Traffic by Type, Desktop vs. Mobile, 12/08 5/12100%80%% of Internet Traffic60%Desktop Internet Mobile Internet40%20% 0% 12/08 4/09 8/09 12/09 4/10 8/10 12/10 4/11 8/1112/11 4/12Source: StatCounter Global Stats. 18 19. Bad News =eCPMs 5x Lower on Mobile than Desktop Effective CPM, Desktop Internet* vs. Mobile Internet** Desktop Internet*$3.50 Mobile Internet**$0.75 Mobile eCPM by CategoryWeather $1.24Education$1.17Lifestyle$0.89 Utilities$0.68Health & Fitness$0.68Entertainment $0.68Medical$0.63Reference $0.55 Games $0.51Navigation $0.49 $- $1$2 $3$4 Note: * Desktop Internet is a weighted average CPM calculation based on comScore Display ad share data and Vivaki CPM by category data as of Q3:11. **Mobile Internet is a simple average eCPM calculation based on Mobclix Exchange USA data as of 3/12. 19 20. Bad News =ARPU (Average Revenue per User) 1.7-5x Lower on Mobile than DesktopARPUDesktop MobileDesktop ARPU Company DefinitionARPU ARPU/ Mobile ARPU Ad Revenue per PandoraUser$6.62$3.87 1.7x(Trailing 12-Month) Revenue per Tencent Paying User $58.95 $17.61 3.3x (Annualized)Bookings per Daily Zynga Active User $25.00 $5.00* 5.0x(Annualized)Note: *Zynga data are estimates. All data as of 5/12. Source: Pandora, Tencent, Zynga. 20 21. Google Mobile Growth Helping Boost Clicks but Reducing Cost perClick thus Constraining Revenue Growth Q1:11Q2:11 Q3:11 Q4:11Q1:12Gross Advertising Revenue($MM)$8,306$8,716$9,335 $10,174 $10,225 Y/Y Growth28% 33% 33% 25%23%Aggregate Paid Clicks (MM) 15,24515,00416,87619,66121,116 Y/Y Growth17% 18% 28% 35%39%Cost per Click (CPC - $)$0.54$0.58 $0.55 $0.52$0.48 Y/Y Growth10% 12% 4% (8%)(12%) Q/Q Growth (3%) 7% (5%)(8%)(6%)Source: Google, Paid clicks and CPC data per Morgan Stanley Research estimates. 21 22. Facebook Mobile Growth Helping Drive Users but ContainingARPU thus Constraining Revenue GrowthQ1:11Q2:11 Q3:11Q4:11 Q1:12Ad Revenue ($MM)$637 $776$798 $943 $872 Y/Y Growth 87%83% 77%44% 37%Mobile Active Users (MAUs) (MM)288325 376432 488 Y/Y Growth123% 110% 92%76% 69% % of Total MAUs42%44% 47%51% 54%Annualized Ad ARPU ($)$3.96$4.37 $4.15$4.59 $4.00 Y/Y Growth 15%18% 19% 1% 1% Q/Q Growth(13%) 11% (5%) 11% (13%) Source: Facebook S-1. 22 23. Good News = Mobile ARPU Can Rise Rapidly, as Evinced byJapan Mobile Game Maker GREE GREE Annualized Mobile ARPU (per Registered Member), Q3:09 Q1:12 $307/11 New Game Tanken$24 Annualized ARPU ($)Driland Introduced $23 $20$17$12$10 $10 $9 $7$8$8 $6$7$0Q3:09 Q4:09 Q1:10 Q2:10 Q3:10 Q4:10 Q1:11 Q2:11 Q3:11 Q4:11 Q1:12Note: GREE is a Japanese social / mobile gaming company. Source: GREE, Mia Nagasaka, Morgan Stanley Research. 23 24. Good News = Mobile ARPU Should Surpass Desktop ARPU, asEvinced by Japan Mobile Game Maker CyberAgentCyberAgent Ameba Annualized ARPU* (Per Paying User), Desktop vs. Mobile, 6/09 12/11 $45012/11 Average Revenue per Paying User ($) $400Desktop ARPUMobile ARPU = $418 $350Mobile ARPU $300 $250 $200 $150 $100 $50 8/09Mobile ARPU = $60$06/099/0912/093/10 6/10 9/10 12/10 3/116/11 9/1112/11Note: CyberAgent is a Japanese social / mobile gaming company. *Users can purchase 1 AmeGold for 1 Japanese Yen. Users could also earn a small amount of AmeGold from completing certain in-game tasks. Source: CyberAgent. 24 25. Mobile Monetization Good News = Desktop InternetProved Ad $ Follow Eyeballs, it Just Takes Time 1995E 2011EGlobal Internet Ad Revenue$55MM $73BAd Revenue per User $9 $49Global Internet Users 6MM 1.5BMobile Monetization has More Going for It than Early Desktop Monetization Had:- Very Rapid User Growth- App + In-App Monetization (44% of apps are free, 56% of apps priced at $3.77 average)- Rapid Growth of Mobile Commerce + Payment Systems- Large Number of Innovative Developers- Broad Base of Sophisticated Advertisers + Marketers- Highly Engaged Consu

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