magna global emerging media forecast june 2007
TRANSCRIPT
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Emerging Media Forec ast
June 2007
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2
EMERGING MEDIA IN CONTEXT
Traditional Medium Equivalent / Ad-Supported Revenue Driver
Radio/Music
InformationSeeking
Commerc e /Shopp ing
IndividualorC
orporate
BehaviorDriver
TV Online/ Print Out-of-Home MarketingServices
OtherMarketing
UGCProduction
Content-on-Demand
Soc ia l ContentConsumption
Nic he ContentConsumption
New Plac e
Consumption
AssetManagement
Game Playing
Venture c apital ac tivity reflec ts expec tations of change
Source: MAGNA Global
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3 Source: MAGNA Global, US Census, Veronis Suhler, OPA
EMERGING MEDIA IN CONTEXT
But Traditional med ia dominates by wide margin
0
50,000100,000
150,000
200,000
250,000300,000
350,000
400,000
450,000500,000
2002 2003 2004 2005 2006
TV
Radio
ConsumerInternet
Newspapers
Consumer
MagazinesSearch
Millionso
fPerson-HoursPerYear
2.9bn
36.6bn
53.7bn
57.0bn
292.5bn
466.5bn
Total US Population: Hours Spent With Media
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EMERGING MEDIA IN CONTEXT
And young audiences are not abandoning traditional med ia
Young Audiences' TV Viewing Trends
15.0
17.0
19.0
21.0
23.0
25.0
27.0
29.0
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07H
oursofView
ingPerWeek P2-5
P6-11
P12-17
P18-34
Source: MAGNA Global analysis of Nielsen Media Research data
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EMERGING MEDIA IN CONTEXT
Packagers (networks, publishers) continue to drive industry
MediaPackagers
Producers DistributorsCreators
ConsumersAdvertisers
$
$$ $
$
Devices /
Access Points$
Source: MAG NA Globa l
$
Industry Structures Held Together By Regulations,Economic Efficiency and Copyright Law
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EMERGING MEDIA IN CONTEXT
So a lthough emerging media = emerging opportunities
look beyond early adop ters
Change is c onstra ined for most med ia
Business model issues
Limits to market appea l
Diffic ulty to c hange behavior Negative utility with more c hoic e
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SEARCH
Media sea rch tools have existed in many forms
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SEARCH
Three players have come to dom inate online sea rc h
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SEARCH
E-c ommerce is a key driver of search spend ing When d oes sea rc h bec ome too la rge a share o f revenue?
Search Spending as % of E-Commerce Sales
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%8.0%
1Q00A
2Q00A
3Q00A
4Q00A
1Q01A
2Q01A
3Q01A
4Q01A
1Q02A
2Q02A
3Q02A
4Q02A
1Q03A
2Q03A
3Q03A
4Q03A
1Q04A
2Q04A
3Q04A
4Q04A
1Q05A
2Q05A
3Q05A
4Q05A
1Q06A
2Q06A
3Q06A
4Q06A
1Q07A
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SEARCH
And search spend reflec ts effec tiveness for SMEs and dot-c oms
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
2002 2003 2004 2005 2006
Search
Newspapers
ConsumerMagazinesConsumerInternetTV
Radio
Advertising Dollars Spent Per Hour of Media Consumption
$0.07
$0.30
$0.90
$0.34
$2.44
$0.12
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SEARCH
Paid search to exc eed $11 billion in 2008 Led by more searc hes per person and better monetiza tion
Paid Search
$6,799.0
$8,770.7
$11,094.9
$0.0
$2,000.0
$4,000.0
$6,000.0
$8,000.0
$10,000.0
$12,000.0
2006A 2007E 2008E
(Inmillion
s)
+29.0% +26.5%
Annual
Growth
Source: MAGNA Global, IAB/PWC
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EMERGING OUT-OF-HOME
Platforms inc lude c inema, digital b illboards and retail networks
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EMERGING OUT-OF-HOME
More d igita l b illboa rds and new dig ita l networks drive growth But most ac tivity rema ins a t the loc a l level
Source: MAG NA Globa l
Emerging Out-of-Home Advertising
$1,090.5
$1,371.8
$1,711.0
$0.0
$200.0$400.0
$600.0
$800.0
$1,000.0$1,200.0
$1,400.0
$1,600.0
$1,800.0
2006A 2007E 2008E
(Inmillions
)
+25.8% +24.7%
Annual
Growth
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SOCIAL NETWORKING
Soc ial sites emerged in late 90s as potential substitutes for portals But post-Geoc ities, emphasis has been on soc ia l c onnec tivity
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SOCIAL NETWORKING
Growth is mostly share gains from other publishers Histo ric a lly monetized as residua l internet tra ffic
Social Networking and Total Internet Page Views
0
100,000
200,000
300,000400,000
500,000
600,000
700,000
Jan-06
Feb-06
Mar-06
Apr-06
May-06
Jun-06
Jul-06
Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
Apr-07
May-07
PageV
iews
Social Networking: + 98.6%
Total Internet: + 2.6%
Source: MAGNA Global analysis of Comscore data
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SOCIAL NETWORKING
Soc ial Network growth slowing, but will exceed $1 billion in 2008 Dolla rs d riven by volume of inventory and better monetiza tion
Source: MAGNA Global
Social Network Advertising
$276.0
$685.0
$1,020.0
$0.0
$200.0
$400.0
$600.0
$800.0
$1,000.0
$1,200.0
2006A 2007E 2008E
(Inmillions
)
+148.2% +48.9%
Annual
Growth
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ONLINE VIDEO
Source: MAGNA G lobal, RIAA
6,000
8,000
10,000
12,000
14,000
16,000
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Revenues($000s)
TotalDigitalSales
RetailSales
Manufacturers' Shipments of Recorded Music
Napster Launched(June 1999)
BitTorrent, Kazaa,
Grokster, etc. activeiTunes Launch
(March 2003)
New media can dramatically a ffec t an industry Music industry often c ited as c ase stud y for the video industry
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ONLINE VIDEO
Sourc e: M cKinsey, NAA , Mo nster Wo rldwide
New media can dramatically a ffec t an industry and c lassified advertising p rovides another example
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No
Yes for some some ofthe time or no formost most of the time
Yes for some most o f
the time o r yes for a llsome o f the time
Ofte n for mostpe op le und er mostcircumstances
Yes for a ll peo p leund er virtua lly a llcircumstances
ONLINE VIDEO
Genera l Print YP Rad io TV
Suffic ient Rang eof Content
SufficientTec hnic a l Qua lity
EquipmentSubstitution
SufficientCustomer Service
Effic ientNavigation
Cheaper toSubstitute
IncreasedConvenience
SUMMARY
Limited TV contentava ilab le tod a y
Internet c an t d eliver
high res video w ell
IPTV: no STB integratio n
Qo Sis c ritic a l for video
Hard to naviga te to findaudio/video
Online ba ndwidth=morec ost than free me d ia
Print and rad io are
typica lly p ortable
Print is ta c tile
Prospec ts for onlinemed ia sub stitution limitedby drawbac ks relative to
trad itiona l med ia
But TV wont be impac ted as other media (yet!)
Source: MAG NA Globa l
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ONLINE VIDEO
Conventional TV popularity: 90x vs. Online in 2011? Yes, if last year s online growth ra tes persist
Source: M AGNA G loba l, Acc ustrea m
145.8x
119.8x
99.2x82.7x
69.4x 58.6x
0.0x
20.0x
40.0x
60.0x80.0x
100.0x
120.0x
140.0x
160.0x180.0x
200.0x
25% 30% 35% 40% 45% 50%Different Scenarios:
Assumed 5-Year Compounded Annual Growth Rate of Online Video
Popu
lari
tyFac
toro
fConventio
na
l
TV
in2011
2006 Growth Rate Was 38.8%
Above Trend
Below Trend
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ONLINE VIDEO
Online video spend growing >50% annua lly, but
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ADVANCED TV
Advanc ed TV (VOD, RFIs, iTV) has been slow to emerge User experienc e rema ins poor
Content is bette r, but limited
Ad vertising infrastruc ture still under c onstruc tion!
Advertising Infrastruc ture Components
Unduplic a ted / unique rea c h
Uniform tec hnolog ic a l standards
Estab lishment of c rea tive formats
Smooth b uying proc ess
Provision o f robust user da ta
High-qua lity servic e / p roduc t standards
Source: MAG NA Globa l
C
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ADVANCED TV
VOD is largest component, followed by RFIs and other iTV VOD likely genera tes $85mm in 2007, $105mm in 2008
Advanced TV Advertising
$107.0
$140.0
$178.0
$0.0
$20.0$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0
$180.0
$200.0
2006A 2007E 2008E
(Inmillions)
+30.8% +27.1%
Annual
Growth
Source: MAG NA Globa l
MOBILE
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MOBILE
Mobile (WAP, video, SMS, LBS) attrac ts great interest, few $ today Infrastruc ture issues potentia lly simila r to adva nc ed TV
Consumer p roposition is being defined
Long-term opportunity to use mob ile devic es for CRM
Ma ny new produc ts c ompelling, but sc a le rema ins too sma ll formost na tiona l advertisers g iven their b roader ob jec tives
Source: MAG NA Globa l
MOBILE
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MOBILE
Growth driven in nea r-term by introduc tion of new supply Ca rriers op ening up dec ks and new mob ile ad models
Mobile Advertising
$55.0
$105.0
$194.0
$0.0
$20.0$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
$160.0
$180.0
$200.0
2006A 2007E 2008E
(Inmillions)
+90.9% +84.8%
Annual
Growth
Source: MAG NA Globa l
GAMING
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GAMING
Gaming growth like ly slower than for other new media Many advertisers rema in interested , but few invest
Game-Related Advertising
$187.2
$216.9
$238.6
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
2006A 2007E 2008E
(Inmillions)
+15.9% +10.0%
Annual
Growth
Source: MAG NA Globa l
SUMMARY
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SUMMARY
Annua l emerging media g rowth = ~ 30% in 2007 and 2008
Source: MAG NA Globa l
EMERGING MEDIA AD EXPENDITURES (in millions) 2006A 2007E 2008E
Search $6,799.1 $8,770.9 $11,095.1 Annual Growth ------ 29.0% 26.5%
Emerging Out-of-Home 1,090.5 1,371.8 1,711.0 Annual Growth ------ 25.8% 24.7%
Social Networking 276.0 685.0 1,020.0 Annual Growth ------ 148.2% 48.9%
Online Video 235.0 365.5 560.0 Annual Growth ------ 55.5% 53.2%
Advanced TV 107.0 140.0 178.0 Annual Growth ------ 30.8% 27.1%
Mobile Marketing 55.0 105.0 194.0 Annual Growth ------ 90.9% 84.8%
Gaming 187.2 216.9 238.6 Annual Growth ------ 15.9% 10.0%
Total $8,749.8 $11,655.1 $14,996.7 Annual Growth ------ 33.2% 28.7%
Less Estimated Duplication (Search via Social Networking) 0.0 (135.0) (250.0)Total Emerging Media $8,749.8 $11,520.4 $14,747.0 Annual Growth ------ 31.7% 28.0%
APPENDIX
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APPENDIX
Emerging med ia services and devices forec asts
Source: MAG NA Globa l
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
140.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
%
ofUSH
ouseholds
US Digital Cable, Satellite andTelcoTV Households
US DVR Subscriptions
US VOD Households
US Broadband Households
US Satellite RadioSubscriptions
US HD Subscriptions
US Digital TV Shipments
US Mobile PhoneSubscriptions
NOTES ABOUT METHODOLOGY
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NOTES ABOUT METHODOLOGY
Estima tes and forec asts reflec t d a ta for the United Sta tes only
Genera l me thod ology involves deriving bottoms-up estima tes and forec asts for ea c hsupp lier of med ia in ea c h emerg ing med ia sec tor
Estima tes and forec asts inc lude med ia expe nd itures (or approximate a lloc a tions) only,and exc lude market ing servic es and related ac tivities suc h as p roduc tion of c rea tive
assets
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Contac t: Brian Wieser, CFATel: 917-542-7008 Email: brian.wieser@magnaglob al.com