Every year at the Web 2.0 Summit, Morgan Stanley Internet analyst Mary Meeker gives her view of the world, the Web, and the technology industry by quickly going through about 50 slides that illustrate the major trends she is tracking. Last year, she zeroed in on the China Bubble. This year, she talks about the root causes of the current economic downturn, the outlook for Web businesses, and where she still sees major growth (mobile and emerging markets).
She singles out the mobile industry as the one where both the most opportunity will be found and disruption will occur over the next five years. Moreover, she suggests that the U.S. is poised to lead the transition in mobile to a Web-centric model. (I totally agree). Interestingly, she points to the introduction of the first Android phone by T-Mobile, not the launch of the iPhone, as the key inflection point for the coming era of the mobile web.
Meeker’s full presentation, which she gave yesterday, is in the video embedded above and her full slide deck is below (thank you, Henry Blodget, for uploading them). The slides are also available here.
A few slides in particular stuck out for me. First, the growth rates for both e-commerce sales and Internet advertising are normalizing much faster than anyone expected they would compared to offline growth rates for retail sales and advertising. No doubt, this steep slowdown in growth is being compounded by the overall economic situation. In the first slide below, the red line is U.S. retail sales growth and the yellow line is e-commerce sales growth. See where the yellow line is headed?
In the second slide, the top green line is Internet advertising growth. At least it is still above all the other kinds of advertising and not yet in negative territory, but the trend does not look good.
In fact, as ad budgets decline and Web pages keep growing, the bigger problem is that the supply of ad slots on the Web is becoming greater than the demand to fill them. The only way to fill those slots is to lower the price of each spot. As the slide below illustrates, ad impressions keep growing, but the cost per thousand (CPM) keeps dropping (on average, to about $1.50 for banner ads and to just above $20 for rich media ads):
On the bright side, compared to the overall spending on other forms of advertising such as TV, print, and direct mail, Internet advertising still has a lot of share to gain, and will likely continue to do so.
It is interesting to see both Mary Meeker and Henry Blodget make a comeback in recent years through different channels. The drop in outdoor advertising appears to be sharpest. I wonder if outdoor primarily means billboards.
Asif,
I work for a company that produces digital billboards for some of the major advertising companies and we haven’t seen any major decline in billboards. Actually in just over the last year or so our customers have signs bought and paid for over the next 6 months or more. In which case I think outdoor advertising will continue to accelerate but not nearly as fast as web will. Just to note our customers have more then one vendor for producing billboards and from what I understand they picked us up because their other vendors could not meet the demands.
I’m sure it’ll slow down some as local pop and shops that buy billboard ads will cut back on advertising but generally I would think these people have very low revenue/reserves and can’t afford to lose business by slipping on their advertising.
Branden, digital billboards might be the one exception. That is probably the only rational explanation for Lamar (LAMR) commanding such a premium valuation.
Are you seeing any opposition from local governments/councils to the digital billboards? What is the average life of these digital billboards and how long does it take to break even on the investment to switch to digital from a regular billboard?
Thanks for your insight.
I wonder if we will ever have enough demand for internet ads, to actually have something of a shortage. Right now there is more open/cheap inventory then you can imagine. If we want to keep we 2.0 like companies afloat, we need to double cpm rates.
Or maybe start paying for services? I would pay for gmail/twitter etc.
Mary is spot on. Fuck the semantic web … the NEXT NEXT BIG HUGGGE thing is Mobile+Location Aware …. REVOLUTIONARY, not EVOLUTIONARY I am dumbfounded that less then a few 100 startups and ZERO mature companies have figured this out.
http://www.tiwttter.com/A_F
I agree somewhat. I think they need to start focusing on integration of personal life, business life, and the web via mobile, internet, and synchronized devices throughout the home. This is the future of technology. When your life is totally accessible to everything in your home and you socially can integrate with social groups in between it all.
But like you said these investors fail to realize this and it’s going to catch fire sooner then later and they will be kicking themselves for not investing in these innovative companies.
I totally agree with Andrew. I’ve been working on a system that allows people to build their own location centered games, but the team I’m with has been told by our “incubator” that they’re having trouble finding people who can find way to monetize our product. I feel that this is a result of going after the kind wrong investors.
Like you I can see the potential in location awareness, and that is why I’ve stuck with it for so long.
That said, there are going to be ethical and privacy concerns that people need to be overcome before contextually aware advertising / data mining can really take off. I guess at the end of the day, it’s all about slowly getting people used to it just like the alarm in the early days of Adsense.
If you want to understand more about the the Emerging Markets picture Mary describes download:
“America’s Shrinking Presence on the Global Internet:
here: http://www.glob...om/download.htm
Those advertising numbers will likely drop much further now that the elections are over.
A large market grows more slowly. Because the ecommerce market has been growing so quickly this was always going to happen at some point. The economy isn’t helping, but this is normal, isn’t it? You can’t double the market every year anymore – it’s too big so it’s stabilising.
For the same reason, Google can’t keep growing revenue at the stupid %’s that they were two years ago – it slows down because their share of the revenue in the market is so low.
Ahem… So high…
Amen ! Its the home ownership stupid. Now why are the Obama and Co. (Dems) bashing bush for the mess they created a long time ago and passed on the bubble.
the election’s over. you lost. get over it.
the election’s over. And reality has begun… A democrat, Evan Thomas of Newsweek, owned by The Washington Post, just called the first black US president an unknown creepy creature… A democrat!!!!
Obama’s first nomination: Rahm Emanuel, a Chicago political thug and Washington insider as the White House Chief of Staff…. Where is the “change we need”?
Just a small sample of what you stupid liberals voted for… There much more to come.
Yawn… Go post your drivel for an audience who cares. At least we don’t currently have a VP who thinks that Africa is a country.
Mahmoud Ahmadinejad, Iran’s president sent a congratulatory letter to Obama… asking him to easy-off on Al Qaeda and to forget about Israel…
From Obama’s web site: amnesty to illegal aliens in the US….
Yes, there is much more to come!
Yeah Mobile + Locale Aware is the future. A few new companies are propping up. I’m thinking on doing it for jobs. Any ideas.
Btw
Check out http://www.jobstaxi.com
New Jobs. Last.fm. Zappos.com. Gaia Interactive. Jigsaw. Slipknot. Web Giant Media
it’s definitely a crisis !
Good insights. Elections are over, so further decline.
http://vidsonly.blogspot.com
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did the first video get disabled?