Excerpts from US Internet Access Forecast, 2009 To 2014
Nearly 16 million new US broadband subscribers will emerge over the next five years, but more than half of those will come in the next two years, according to Forrester Reseearch.
Due to slowing organic growth, the Internet access market will be characterized by shifts across platforms.
- Over the next five years, xDSL subscriptions will fall as subscriptions to fiber-to-the-home (FTTH) broadband rise from 4% to 10% of US online households.
- Cable modem subscribership will remain steady, with only very modest overall broadband market share loss compared with telco broadband (fiber and xDSL combined).
- Consumers will continue to migrate away from dial-up, for which steady losses will continue over the next two years.
- Shifts will also occur relative to the speed tiers to which consumers subscribe, with both supply and demand factors encouraging more consumers to buy higher-speed service.
Technorati Tags: broadband, cable-industry, DSL, FIOS, internet, telcos
US Government IT Spending Down Despite Stimulus: (Forrester Research) http://bit.ly/2RQLvl
US Corporate Defaults Already Higher Than 2008 Total (Standard & Poor’s) http://bit.ly/2mysfv
TransUnion says quarterly growth rate for US mortgage delinquency declined for first time since end-2007 (Housing Wire) http://bit.ly/c0qdG
Internet Employment Contributes 2% of US Economic Output: (HBS) http://bit.ly/UFRWH
Global Private Equity Investments down 40% in 2008 and 80% in First Half 2009 (IFSL) http://bit.ly/40WEdx
UK retail banks may have to consider closing a third of their branches to restore profitability (Bain via FT) http://bit.ly/DRl0M
IMF Direct: The International Monetary Fund joins the Blogosphere http://bit.ly/XUP34
Housing Markets Won’t Recover Until Employment Does (CreditSights) http://bit.ly/ArqVR
RT @comScore@comScore Study Highlights Challenges and Opportunities for Microsoft-Yahoo! Search Partnership $MSFT SYHOO http://bit.ly/15Ea0Z
High Leverage May Lead Moody’s to Downgrade Some REIT http://bit.ly/d4v6u
One in four U.S. homes for sale had their prices marked down at least once since landing on the market (Trulia.com) http://bit.ly/mL0lz
Obama Wants Big Banks To Pay More for Oversight: Fees Would Fund New Regulators (Washington Post) http://bit.ly/14snV1
Technorati Tags: commercial-real-estate, corporate defaults, housing, information-technology, International-Monetary-Fund, internet, Microsoft, private-equity, REIT, u.k. banks, Yahoo
Excerpted from Quantifying the Economic Impact of the Internet
How can we quantify the economic impact of the Internet? A recent study prepared by Harvard Business School and Hamilton Consultants for the Interactive Advertising Bureau uses three methods to value the contribution of the advertising-supported Internet to the U.S. economy:
- Employment value. The Internet employs 1.2 million people directly to conduct advertising and commerce, build and maintain the infrastructure, and facilitate its use. Each Internet job supports approximately 1.54 additional jobs elsewhere in the economy, for a total of 3.05 million, or roughly 2 percent, of employed Americans. The dollar value of their wages is about $300 billion, or around 2 percent of U.S. GDP.
- Payments value. The direct economic value the Internet provides to the rest of the U.S. economy is estimated at $175 billion. It comprises $20 billion of advertising services, $85 billion of retail transactions (net of cost of goods), and $70 billion of direct payments to Internet service providers. In addition, the Internet indirectly generates economic activity that takes place elsewhere in the economy. Using the same multiplier as for employment, 1.54, then the advertising-supported Internet creates annual value of $444 billion.
- Time value. At work and at leisure, about 190 million people in the United States spend, on average, 68 hours a month on the Internet. A conservative valuation of this time is an estimated $680 billion.
The advertising-supported Internet also helps the economy by fostering innovation, entrepreneurship, and productivity, particularly among small businesses that create most new jobs in the U.S. In addition, larger companies in this sector, such as Cisco, Google, or Adobe, have been a haven of relative stability through the current economic downturn and boost the U.S. balance of trade through their global sales.
The advertising-supported Internet also helps the economy by fostering innovation, entrepreneurship, and productivity.
Consider also the social benefits of the Internet, harder to quantify but including the power of access to information as well as greater flexibility in balancing work and family obligations through telecommuting. The economic downturn is accelerating consumer interest in social networks and online communities as a source of support. And 19 percent of all U.S. marriages are now the result of bride and groom meeting via the Internet.
Technorati Tags: employment, internet, internet-advertising, internet-commerce
This guest post by Barry Graubart originally appeared on the Content Matters blog.
It’s hardly news that the economy is having a big impact on online advertising and the overall technology market. But online companies which provide consumers with strong value are poised to survive and even thrive in this economy.
That’s one key takeaway from a massive, 147-slide deck recently posted by Morgan Stanley Internet analyst Mary Meeker, entitled “Economy + Internet Trends“.
Meeker examines the impact of the current economic environment on Content and Internet companies. Whether you agree with her analysis, there’s plenty of data there for you to chew on.
The first 20 or so slides provide some interesting views into how the economy got here; nothing new but some useful charts and perspectives on what’s similar and what’s different from past recessions. The economy has pushed ecommerce growth to negative (starting Q3, 2008) after consistent 20% annual growth rates from 2001-2007. The technology sector’s five flat or down sequential quarters matches 2001, but the outlook this time is worse.
Key spending sectors of the S&P500 have taken a huge hit – financial services, industrials, consumer discretionary, materials, information technology, telecom and energy. Even utilities, health care and consumer staples stocks are down 30-40% from their pre-recession peak.
Then she digs into the slides that are of greatest interest to those of us in the content and technology space. The trends she highlights include:
Online advertising: ad spend is closely tied to GDP growth. On top of that, right now we’re in a very difficult period as the disruption caused by social media, video and VOIP is not yet translating into significant revenues Online CPMs are a fraction of offline CPMs. Meanwhile, doing a regression analysis, she shows how a flat GDP in 2009 could lead to a 4% drop in ad spend.
One bright note is that in difficult times, consumers spend more time, rather than less, on the Internet. It’s “a cheap/efficient/transparent thrill!” as she describes it. The Internet is becoming a necessity. Broadband Internet was the last thing to be cut in consumer survey (even after personal care, toiletries & cosmetics).
At the same time, undermonetized social media, video and VOIP creates an opportunity for marketers to capitalize on low CPMs.
Looking ahead five years, Meeker projects the online consumption mix will be what she describes as consumer-enhanced professional content: anchored with first class professional content; augmented with first class user-generated content that’s ranked/reviewed/’edited’, supplemented by all-comers user-generated content that’s ranked/reviewed, all presented in a holistic/widgeted way.
Or, as she describes it, a “clean combo of WSJ.com+bbc.co.uk + digg + techmeme + youtube + nytimes.com + allthingsd.com + facebook + twitter”
Meeker drills in to online advertising, noting that Google’s share has increased from less than 50% in Q4 2005 to 67% in Q4 of 2008. Search advertising continues to show growth and is taking budget from other forms of advertising, most notably print magazines, direct mail and newspapers.
There is still a huge advertising opportunity – today, online advertising spend is $288 per home vs. $818 per home for newspapers. While CPM’s and CPC’s may be under near-term price pressure, if targeting/ROI continues to improve (as she believes they should), there should be long-term upside.
Meeker remains bullish on the ecommerce space. While some items, such as computer equipment, event tickets, books, music and videos have seen huge adoption rates on the Web, overall US online ecommerce penetration remains only around 4-6%, though it continues to rise.
Amazon should continue to show growth as it has become the web’s most effective commerce search engine and continues to provide new technologies for its users, such as the Kindle and mobile apps for research and purchasing.
Another strong trend for Meeker is the positive growth in mobile. New mobile products, from iPhones to the Kindle to Netbooks are driving incredible growth. The enablers for this growth are:
1. broadband and wireless infrastructure; the cloud
2. Hardware: small, fast and cheap storage, touch screens, GPS and more
3. Software – browser-based tools, widgets
4. Communications tools – messaging, social media, cameras, VOIP
5. Digital content – music, video, news, search, shopping, weather, maps and more
She notes that Google Voice provides Unified Communication for consumers – one phone # + VOIP + Voicemail Transcription + SMS. That’s a pretty big game changer.
We are undergoing the greatest media transformation in history and Meeker asks “Where is the great creative” to drive it?
In closing, she reiterates her believe that companies with cogent business models that provide consumer value (Amazon, iTunes, etc) should survive and even thrive in this economy, noting “consumers need value more than they’ve needed it in a long time”.
Technorati Tags: advertising, Amazon, Google, internet, Mary-Meeker, morgan-stanley, online-advertising, social-media
This post first appeared on the Content Matters blog.
Pew Internet has released its 2009 State of the News Media study, its sixth annual study of trends and analysis in the news media industry. Though there was not a lot of positive news for those in the media industry, the study did suggest that the picture may not be quite as gloomy as some project.
For newspapers, 2009 does not bring good news. But while the study anticipates further bankruptcies and closures in the newspaper industry, it notes that for 2008, the industry overall remained profitable. The study attributes about 50% of the industry’s current woes to the economic downturn and 50% to structural problems caused by online competition. The key question then is” whether newspapers can find a way to convert their growing online audience into sufficient revenue to sustain the industry before their shrinking revenues from print fall too far? And if some succeed and some don’t, what are the characteristics of a newspaper organization that survives and one that doesn’t?”
Pew suggests that abandoning print does not yet make sense, as newspapers typically generate 90% of their revenues from print, while eliminating it will only save 40% of their costs. They do expect to see more of the hybrid model, initially taken by the East Valley Tribune and the Detroit Free Press, where they go online-only during weekdays, with printed copies on the weekend.
The industry challenges are those that are well-documented: eroding circulation, rapidly diminishing advertising revenues (in print and online) and often a large amount of corporate debt, all leading to plunging earnings. The study notes that “after losing 42 % of their value between 2005 and the end of 2007, publicly traded newspaper stocks lost 83% of their remaining value during 2008.” And, while the $38 billion advertising revenue generated by the industry in 2008 won’t disappear overnight, profit pressures will continue to reduce the amount newspapers are willing to spend on journalism.
While newspapers continue in free-fall, the Pew study noted that 2008 was a banner year in some ways for online news. Online surpassed print as a source of news, second only to broadcast television as a news destination. Helped in part by the elections, traffic to both traditional and alternative news sites grew throughout the year. Yet the slowdown in the online advertising market did little to answer the revenue question for news organizations.
The Pew study also points out that, despite years facing these problems, the traditional media industry largely refuses to face those challenges. Specifically, “the problem facing American journalism is not fundamentally an audience problem or a credibility problem. It is a revenue problem—the decoupling, as we have described it before, of advertising from news.” Yet, it continues, “There are growing doubts within the business, indeed, about whether the generation in charge has the vision and the boldness to reinvent the industry. It is unclear, say some, who the innovative leaders are, and a good many well-known figures have left the business. Reinvention does not usually come from managers prudently charting course. It tends to come from risk takers trying the unreasonable, seeing what others cannot, imagining what is not there and creating it. We did not see much of it when times were better. Times are harder now.”
The Pew conclusions are similar to those posed by prominent Internet analyst Clay Shirky in a blog post last week. As Shirky says “The problem newspapers face isn’t that they didn’t see the internet coming. They not only saw it miles off, they figured out early on that they needed a plan to deal with it, and during the early 90s they came up with not just one plan but several.” Yet, in all the scenarios they explored, they avoided what Shirky refers to as the unthinkable scenario: “The ability to share content wouldn’t shrink, it would grow. Walled gardens would prove unpopular. Digital advertising would reduce inefficiencies, and therefore profits. Dislike of micropayments would prevent widespread use. People would resist being educated to act against their own desires. Old habits of advertisers and readers would not transfer online. Even ferocious litigation would be inadequate to constrain massive, sustained law-breaking.”
Instead, traditional media organizations hatched various plans, all with a common basis: “Here’s how we’re going to preserve the old forms of organization in a world of cheap perfect copies!”
Shirky compares the current environment to the impact of Gutenberg’s printing press. Not the long-term benefits, which have been long documented, but the disruptive and chaotic period as the printing press was introduced in 1500. He suggests “That is what real revolutions are like. The old stuff gets broken faster than the new stuff is put in its place. The importance of any given experiment isn’t apparent at the moment it appears; big changes stall, small changes spread. Even the revolutionaries can’t predict what will happen. Agreements on all sides that core institutions must be protected are rendered meaningless by the very people doing the agreeing.”
And so, the coming years will be a period of confusion and difficulty for traditional media. Shirky notes that there was no real basis for advertiser-based support for journalism. There was no underlying logic for why Wal-Mart ads should fund a newspaper’s Baghdad bureau. It was merely accidental that advertisers spent money with a medium that used those funds to cover the cost of journalism. Now that there are many methods to reach an audience, those loose ties now fall aside. All things considered, the online media industry is still quite nascent. It may be several decades before the new business models for online news are fully established. And that means many more years of disruption and continued challenges for traditional media organizations.
Technorati Tags: internet, news media, newspapers, online news
While China’s athletes continue to collect gold medals in the Olympic Games, the host country’s venture capitalists are busy with their own quests for gold, reports Dow Jones Venture Wire.
The amount of venture capital fueling companies in China surged 85% in the first half of 2008, thanks partly to large injections of capital into mature Internet concerns.
Venture firms invested $2.15 billion in mainland China companies during the six-month period, up from $1.16 billion a year earlier, according to data released today by Dow Jones VentureSource.
A $430 million investment in Internet conglomerate Oak Pacific Interactive fattened the latest amount, but even excluding that deal, investment still rose 48%. Of the six largest deals of the second quarter worth more than $30 million, four including Oak Pacific were late-stage Internet companies. The others were Tudou.com ($57 million), 51.com ($51 million) and Leyou.com ($35 million).
While the overall amount invested rose significantly in the first half, the number of deals dropped to 116 from 123, continuing a trend of the past few quarters. Venture capital firms are simply placing larger bets in more mature companies while remaining highly selective with their early-stage investments.
Eighty deals, or 69% of the first-half total, involved companies “shipping product,” while another 30, or 26%, deal with profitable companies, according to VentureSource. Those companies were funded with $2.11 billion. Only $42.3 million went into six companies in product development, while no companies getting off the ground received capital.
Technorati Tags: china, internet, venture-capital
Forrester Research lays out a future landscape dominated by video in a new report How Video Will Take Over The World.
Analyst James L. McQuivey, Ph.D, envisages consumers being confronted with “a dozen video platforms per day.”
He asks us to imagine:
- waking up to a video alarm clock;
- checking satellite weather videos on your mobile phone;
- watching traffic videos on your GPS unit while driving in to work;
- watching an ad for a Ford Edge on Gas TV while fueling up at a gas station;
- streaming MSNBC stock reports from your desktop at work;
- seeing a short address from your CEO in a meeting-room photo frame;
- watching a promo for American Gladiators in the back of a video-enabled taxi on the way to the airport;
- hearing Glenn Beck’s take on the elections while waiting at the airport gate;
- watching a clip from your daughter’s middle-school debut in Guys and Dolls that your spouse emailed as you board the plane;
- indulging in American Idol on the satellite TV on your JetBlue flight;
- checking in at your hotel through a video kiosk; and finally
- catching Iron Man in HD on the hotel room’s flat-screen TV.”
In five years, it will be a rare day in which you don’t experience this many different video platforms.
What McQuivey calls OmniVideo “is about to explode, driving up total video viewing time from 4 hours per day to 5 hours by 2013.”
“Once video becomes this easy to produce, deliver, store, and share, every agent in society will not only want to participate but will have to participate in order to have a shot at reaching people with its products and services.”
In his view that means:
- Consolidation and collaboration will increase even faster than before. But The pick-a-winner approach to integrating content with devices will get blown wide open as companies like Sony and Panasonic realize they can’t bet on a single partner but have to offer access to all major content partners.
- Companies will continuously “broadcast” video from inside the enterprise. The Internet has forced marketers to go far beyond a few ads and some brochures in their communications efforts. The shift to video will be much more taxing because companies have to have a strategy for communicating every message — internal or external — with video.
- Every video surface will become a marketing platform. When nearly every surface in your environment can display video, marketers will pay a pretty penny to show up at the bottom of a food bowl or in a bathroom mirror, where their product marketing message will be far more relevant than it is on a TV today. “The only broker of this ad space in your home is you: We envision ad networks one day paying you for the right to aggregate your ad experiences.”
Technorati Tags: internet, online-marketing, video
A couple of conflicting economic indicators emerge from comScore’s latest web site rankings. Other than flowers (driven by Mothers’ Day), the money-saving coupon site category showed the sharpest month-on-month increase in May. However, jewelry and luxury goods also posted a strong increase.
The coupon category grew 11 percent to 24.5 million visitors during the month, as each of the top five sites in the category experienced double-digit gains. Coupons, Inc. led the category with 7.2 million visitors (up 20 percent), followed by Eversave.com with 5.2 million visitors (up 13 percent) and CoolSavings.com with more than 5.1 million visitors (up 24 percent).
Google Sites maintained its #1 position in the Top Properties ranking, reaching 143.4 million Americans in May. Yahoo! Sites ranked second with nearly 143 million visitors, followed by Microsoft Sites with 121.3 million visitors. Time Warner – Excluding AOL moved up one position to #9 with 56 million visitors. IRS.gov jumped 14 positions to #20 with 31 million visitors, propelled by Americans checking the status of tax refunds and stimulus checks.
Technorati Tags: internet, internet-commerce, online-shopping, search
Internet use continues to eat into time spent with other media in the UK, according to a new syrvey by Forrester. Consumers are now spending more time online than listening to radio, but television watching still has a significant lead.
According to the report The Impact Of The Internet On UK Consumers’ Media Behavior:
- Nearly 70% of UK consumers use the Internet.
- UK consumers still spend more time on TV than on any other media. In 2004, online UK consumers spent nearly 15 hours per week watching television and almost nine hours listening to the radio. Three years later, this has dropped by 1 hour for both media.
- Online users browsed the Web for an average of 10 hours per week in 2007: That is still four hours less per week than what they devote to television.
- More users with lower income surf the Net.
- Younger UK consumers spend as much time on TV as on the Internet.
The report contains a number of suggestions for attracting different types with varying media and communications plans. It was based on a large sample of online respondents who were motivated to respond with various incentives.
Technorati Tags: internet, marketing, television
Google (NASD:GOOG) and Amazon (NASD:AMZN) are the two big winners in the Internet race, while Yahoo and IAC/Interactive Corp are also-rans. That’s the conclusion of the new Sanford Bernstein Black Book, U.S. Internet: the End of the Beginning.
The report looks at the ultimate winners and losers during the first decade of the Internet, as well as the potential impact of the current economic slowdown on the online segment.
Bernstein suggests that the Internet is somewhat recession resistant. Compared to the burst of the bubble in 2001, they feel the sector is strongly positioned. Online advertising accounts for 8% of all U.S. advertising and is growing at a 20% annual rate. In fact, as the economy sours, they expect more offline advertising to move online, where metrics allow advertisers to quantify the ROI on their investment. With Bernstein estimating offline advertising revenues in the US of $299 billion in 2008, each 1% that moves online is roughly $3 billion. On a global basis, Bernstein forecasts online advertising, estimated at $55 billion for 2008, to grow to $97 billion in 2012, at which time it will account for 13.1% of all advertising spend.
Breaking down the individual components of online advertising, they remain most bullish on paid search (CPC), continuing to strengthen Google’s dominance. Paid search should generate $19.1 billion in 2008, according to their model, growing to more than $36 billion in 2012, a 20% annual growth rate.
Bernstein projects hyper growth for the nascent IP video and mobile advertising markets, with mobile growing from $4.7 billion in 2008 to $17.5 billion in 2012 while video grows from $2.8 billion to $10 billion over the same period.
At greatest risk from economic pressures is CPM-based display advertising, used more for brand awareness than driving specific actions. Brand advertising online is likely to behave similarly to traditional media advertising, with advertisers pulling back during difficult markets. That won’t be comforting to Yahoo nor to the ad networks that were the target of last year’s M&A frenzy, such as DoubleClick, Right Media and aQuantive.
Meanwhile, consumer comfort with eCommerce is strong, and Bernstein expects etailers to be the beneficiary of consumers moving more of their retail spend online. For 2008, Bernstein projects online retail revenues of $362 billion, less than 3% of the total retail spending of $13.2 trillion. They project the online spend growing to $692 billion in 2012, more than 4.2% of their $16 trillion global retail forecast.
The report explores other factors, such as whether U.S.-based internet players will be able to penetrate Asia, the impact of regulatory issues (online sales tax, net neutrality) and the future for video and mobile.
So, how will it all shake out?
No surprises here. Bernstein views Google and Amazon as the big winners. They also see eBay as a bit of a comeback story, while projecting its eventual acquisition. The losers in the segment – Yahoo (NASD:YHOO), which they still believe may be acquired by Microsoft, and IAC/Interactive Corp (NASD:IACI), though they seem optimistic that the restructuring and divestitures could give IAC the kick it needs to get back on track.
(Contributed by Barry Graubart.)
Technorati Tags: Amazon, Google, IAC, internet, internet-advertising, Microsoft, Yahoo
