Marketers are not focusing enough on the opportunities presented by mobile, according to Business Insider's Henry Blodget. They need to understand that mobile isn’t just another platform but a marketing, communication and sales channel. In this session, he'll discuss the growth of the industry, including emerging ad formats and strategies. Moderator: Brian Morrissey, editor-in-chief, Digiday @bmorrissey Presenter: Henry Blodget, CEO, Business Insider @hblodget

1. The Future Of Mobile
Henry Blodget
CEO & EIC, Business Insider

2. 2+ billion people online
Global Internet Popula on
2,500
2,000
1,500
(millions)
1,000
500
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Interna onal Communica on Union, Google

3. 2/3 of the world left to go
Global Internet Popula on
7,000
6,000
5,000
4,000
(millions)
3,000 Global Popula on
2,000
1,000
Internet Popula on
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Interna onal Communica on Union, Google

4. Something profound
happened last year…

5. Smartphone sales blew past PC sales
Global Internet Device Sales
1,000,000,000
900,000,000
800,000,000
Tablets
700,000,000
600,000,000
Units 500,000,000
Smartphones
400,000,000
300,000,000
200,000,000
100,000,000 Personal Computers
-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Gartner, IDC, Strategy Analy cs, company filings, BI Intelligence es mates

6. PC growth stalled
Global PC Shipments By Manufacturer
100,000
iPad released
90,000
80,000
70,000
Other
60,000
50,000
Apple
40,000 Acer
30,000 Dell
20,000 Lenovo
10,000 HP
0
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12
Source: Gartner, IDC

7. Tablets are now driving all the growth in PC market
Global Computer Shipments
140,000
120,000
100,000 Tablets
(thousands)
80,000
60,000
40,000 PCs
20,000
0
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12
Source: Gartner, IDC, Strategy Analy cs company releases

8. So the future is mobile
G-20 Internet Access
3,000
2,500
2,000
Consumer
Mobile
Broadband
1,500
Connec ons
(milions)
1,000
Mobile
500
Fixed Fixed
Fixed
0
2005 2010 2015
Source: Boston Consul ng Group, Mary Meeker, Kleiner Perkins, Morgan Stanley Research, Berg Insight

9. Where are we in the
mobile revolution?

10. Globally, we’re still early…
Global Smartphone vs. Mobile Phone Users, 2012E
7,000 6B
Mobile
Phone Users
6,000
5,000
Global Users (millions)
4,000
3,000
2,000 1B
Smartphone
Users
1,000
0
Smartphone Mobile Phone
Source: Strategy Analy cs, Interna onal Telecommunica ons Union
Note: Some users own more than one device

11. But growth slows after 50% penetration

12. U.S. and other markets are past halfway point
U.S. Smartphone Penetra on
80%
70%
Feature Phones
60%
55%
50%
50%
45%
40%
Smartphones
30%
20%
10%
0%
Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12
Source: Nielsen

13. US smartphone growth starting to slow
U.S. Smartphone Market: Year-Over-Year Net Adds
40
35
30
25
Users
Added 20
(millions)
15
10
5
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2013
Source: comScore, Nielsen

14. Most future US smartphone buyers will be
older and poorer
Smartphone Penetra on By Age And Income (U.S.)
90%
80%
80% 77%
74% 75%
69% 70%
70%
65% 65% 65%
63%
60%
60% 58%
56%
53% 52%
50% 51%
50% 48%
43% 44%
41% 42%
40% 38%
31% 32%
30%
30% 27%
23% 24%
21%
20% 18%
16% 17% 16% 15% 16%
10%
0%
Ages 18 - 24 Ages 25 - 34 Ages 35 - 44 Ages 45 - 54 Ages 55 - 64 Ages 65+
<15k 15k - 35k 35k - 50k 50k - 75k 75k - 100k 100k+
Source: Nielsen

15. So the focus is on markets like China, which
now accounts for ~25% of smartphone sales.
Global Smartphone Shipments
180,000
160,000
140,000
120,000
(thousands)
100,000
80,000
Rest Of The World
60,000
40,000
20,000 China
-
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12
Source: Gartner, IDC, Strategy Analy cs, Canalys, BII es mates

16. China is already twice the size of US market
Chinese Internet Users
600
Total
500
Mobile
400
Broadband
(millions)
300
200
100
0
June 06 Dec 06 June 07 Dec 07 June 08 Dec 08 June 09 Dec 09 June 10 Dec 10 June 11 Dec 11 June 12
Source: China Internet Network Informa on Center

17. So, what do people
do on mobile?

18. Well, first, they do pretty much
everything they do online…

19. They play games and social-network…
Daily Smartphone App Consump on, Minutes Per Category
7
7 10
10 12
11
24
15
25 24
Q1 2011 Q1 2012
Games Social Networking News Entertainment Other
Source: Flurry Analy cs

20. They listen to music...
75%
70%
55%
% of Traffic from Mobile
Pandora
50%
Twi er
33%
Facebook
25%
5%
1%
0%
2008 2009 2010 2011
Source: Mary Meeker, Kleiner Perkins, companies

21. They consume content…
Top Mobile Categories By Growth In Audience, Dec. 2010 vs. Dec. 2011 (U.S.)
35,000
30,000
25,000
Total 20,000
74%
Mobile
Audience
(thousands) 15,000 72%
94%
77% 70%
80%
74%
10,000
69%
134%
5,000 82%
0
Health Online Retail Men's Electronic Gaming Job Lis ngs General Classifieds Auc on Sites Family
Informa on Magazine Payment Informa on Reference Entertainment
Content
Dec-10 Dec-11
Source: comScore MobieLens, 3 mon. avg. ending Dec-2011 vs. Dec-2010

22. They look at pictures and video.
U.S. Video Engagement, Monthly Minutes Per Ac ve User
472
425
378
324
276
231
152
110
93
63
Mar 2011 June 2011 Sept 2011 Dec 2011 Mar 2012
Google Internet Sites iOS & Android Photo & Video Apps
Source: Flurry Analy cs, comScore Video Matrix

23. They use their devices while they watch TV
Percentage Of Smartphone Users Who Use Their Phones
While Watching TV
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Monthly Mul ple Times A Week Daily
Source: Nielsen Cross-Pla orm Report Q2, 2012

24. They shop…
Ecommerce Website Traffic By Device
100%
Tablet
90% Smartphone
80%
70%
60%
50% PC
40%
30%
20%
10%
0%
Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Source: Monetate

25. They use smartphones to make buying
decisions in stores.
U.S. Smartphone Owners Ac vity In Retail Stores
24.0%
22.3%
20.4% 20.2%
19.7%
18.8%
16.2%
14.6%
14.1%
13.1%
12.3%
11.1% 10.9%
10.0%
8.3%
7.2%
6.3%
5.2%
Took Picture Of Texted/Called Scanned A Sent Picture Of Found Store Compared Found Coupons Research Product Checked Product
Product Friends/Family Product Barcode Products To Loca on Product Prices For Deals Features Availability
About Product Family/Friends
Males Females

26. They pay for stuff
PayPal Mobile Payments Processed
$5,000
$4,000
$3,000
Total
Payment
Volume
(millions)
$2,000
$1,000
$0
2008 2009 2010 2011

27. They buy content
Media Content Paid For On A Tablet, Q4 2011
70%
60%
50%
40%
30%
20%
10%
0%
Downloaded Books Movies Magazines TV Shows Streaming Sports News
Music Radio
US Italy UK Germany
Source: Nielsen

28. And they do stuff they
DON’T do online…

29. Play Angry Birds, et al
Angry Birds Downloads vs. Nintendo DS Sales
700,000
600,000
500,000
400,000
Total
Downloads
Or Sales
(thousands)
300,000
200,000
100,000
0
Mar 10 Jun 10 Sept 10 Dec 10 Mar 11 Jun 11 Sept 11 Dec 11
Note: Includes Nintendo 3DS Sales
Source: New reports, company releases, BI Intelligence estimates

30. Take and share pictures
Instagram Es mated Users
100,000
90,000
80,000
70,000
60,000
Total
Users 50,000
(thousands)
40,000
30,000
20,000
10,000
0
3/2011 4/2011 5/2011 6/2011 7/2011 8/2011 9/2011 10/2011 11/2011 12/2011 1/2012 2/2012 3/2012 4/2012 5/2012 7/2012 7/2012 8/2012 9/2012
Source: news reports, company releases, BII Es mates

31. BOTTOM LINE:
Mobile devices =
More Internet usage +
New applications

32. Mobile has extended digital “primetime”
Share Of Device Page Traffic Over A Day:
Source: comScore, Telefonica, Macquarie Capital (USA), December 2011

33. Mobile usage is up across the board
U.S. Mobile Content Usage
80%
Sent Text Message
70%
Share of mobile popula on that has...
60%
Used Downloaded Apps
50%
Used Browser
Accessed Social Network
40%
Or Blog
Played games
30%
Listened to music
20%
10%
0%
Feb Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Sep
10 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 11 11 11 11 11 11 12 12 12 12 12 12 12 12 12
Source: comScore

34. People are consuming a huge amount of
content through mobile…
Media Content Accessed Through Mobile Device
59%
57%
53% 53%
41%
29% 29%
27% 26% 27%
25%
23% 22%
20%
9% 10% 9%
5%
Books Movies TV Shows Magazines News Social Downloaded Sports Streaming
Networking Music Radio
Tablet Smartphone
Source: Nielsen Q4 2011 Mobile Connected Device Report

35. As mobile increases, all other media decreases
Share Of Consumer Time Spent With Major Media
45%
44%
43%
42%
26%26%26%
25%
17%
16%
15%
14%
12%
9% 9%
8% 8%
7% 7% 7%
6% 6%
5%
4%
TV Online Radio Mobile Print Other
2009 2010 2011 2012
Source: eMarketer, October 2012

36. This leads to another key
question…

37. Mobile advertising
will be huge, right?

38. Hmm…

39. The “bullish” mobile-ad story is the huge
gap between time-spent and ad spending.
2011 U.S. Ad Spending vs. Consumer Time Spent By Media
42% 43%
25% 26%
22%
15%
11% 10%
7%
1%
TV Print Web Radio Mobile
Ad Spend Per Media Time Spent Per Media
Source: Mary Meeker (KPCB), eMarketer, IAB

40. But maybe there’s a good reason
for that gap…

41. The screen is really small.

42. Mobile monetization still behind the desktop
ARPU, Desktop vs. Mobile
$58.95
$25.00
$17.61
$6.62 $5.00
$3.87
Pandora Zynga Tencent
Mobile Desktop
Source: Pandora, Zynga, Tencent

43. Most “mobile” ads are mainly web search +
display ads viewed on mobile
2011 Global Mobile Ad Spend By Category
Messaging
10%
Display
28%
Search
62%
Source: IAB

44. Google completely owns mobile search
Global Mobile Search Market Share
100%
Google
90%
80%
70%
60%
50%
40%
30%
20%
10% bing
Yahoo!
0%
Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep
08 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12
Source: Global StatCounter

45. So Google owns mobile, too
Mobile Ad Market Share
100%
90%
Other Microso
80%
Yahoo
Apple
70% Pandora
60%
50% Millennial Media
40%
30%
Google
20%
10%
0%
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11
Source: news reports, company releases, BII es mates

46. Overall, mobile is still a tiny fraction of
digital ad spending.
U.S. Digital Adver sing Revenues
$35
Mobile
$30
$25
(billions)
$20
$15
$10
$5
$0
2007 2008 2009 2010 2011
Source: IAB, BIA-Kelsey, BII es mates

47. And it’s growing much slower than TV +
Internet in the first 5 years
Compara ve U.S. Adver sing Media
Annual $ Revenue Growth (First 5 Years)
$5,000
$4,621
$4,500
$4,000
$3,698
$3,500
$3,000
$2,500
$2,162 $2,162
$1,920
$2,000
$1,500
$1,171
$1,012
$907
$1,000 $806
$500 $358 $392
$267
$80 $160
$55
$0
Year 1 Year 2 Year 3 Year 4 Year 5
Broadcast TV Mobile Internet
Source: IAB, McCann-Erickson, BIA-Kelsey, BII es mates Note: Adjusted for infla on

48. But!

49. “Native” mobile ads are finally beginning
to appear…
• Ads in timelines (Twitter / Facebook)
• Shareable ads
• Location-based mobile ads

50. Location-based mobile ads can target users
at the mall, restaurants, car dealers …
Monthly Ad Requests Per Mobile User By Loca on
80
70
60
50
40
30
20
10
0
ry
s
s
s
s
s
rs
s
l
l
t
al
te
or
r
r
r
pu
nt
nt
le
le
ale
ile
ra
M
Ho
rp
ra
ra
m
i
i
Lib
ta
ta
ta
De
au
u
Ai
Ca
Re
Re
Re
ta
st
r
es
l
Ca
oo
ox
ng
cs
Re
rR
ni
gB
h
hi
e
Sc
tro
he
ot
vic
Bi
Cl
Ot
ec
r
Se
El
ick
Qu
Source: JiWire, Q3 2012

51. Targeted mobile ads have higher CPMs
CPMs For Selected Mobile Ad Pla orms
xAd local $3.50
LSN Mobile local ads $5.00
Adsmobi video ads $5.00
Flurry video ads $10.00
$- $2.00 $4.00 $6.00 $8.00 $10.00 $12.00
Source: Ad pla orms, BII Research, Greg Sterling, Opus Research

52. So, yes, mobile ads are just getting started
U.S. Mobile Ad Forecast
$7,000
$6,000
Local
$5,000
Mobile Ad $4,000
Revenue
(millions)
$3,000
We are here
$2,000
Media
$1,000
$0
2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E 2017E

53. APPS

54. App Store downloads on pace to hit 60
billion by mid-2013
Apple App Store Downloads
65,000,000,000
60,000,000,000
55,000,000,000
50,000,000,000
45,000,000,000
40,000,000,000
35,000,000,000
30,000,000,000
25,000,000,000
20,000,000,000
15,000,000,000
10,000,000,000
5,000,000,000
0
1/1/11
2/1/11
3/1/11
4/1/11
5/1/11
6/1/11
7/1/11
8/1/11
9/1/11
10/1/11
11/1/11
12/1/11
10/1/12
11/1/12
12/1/12
1/1/12
2/1/12
3/1/12
4/1/12
5/1/12
6/1/12
7/1/12
8/1/12
9/1/12
1/1/13
2/1/13
3/1/13
4/1/13
5/1/13
6/1/13

55. Smartphone users spend more time on apps than web
Total Time Spent Using Mobile Web vs. Apps
140
120
100
80
Minutes Spent
Per Month
(Biillions )
60 Apps
40
20
Mobile Web
0
Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12
Source: Nielsen Smartphone Analy cs

56. Mobile app revenue is growing fast, but
still relatively small.
Mobile App Revenue
$4,000
$3,500
$3,000
$2,500
(millions)
$2,000
$1,500
$1,000
$500
$0
2008 2009 2010 2011
Source: iSuppli, Forrester Research, company releases, BII es mates

57. Because most downloads are free
Mobile App Store Downloads, Free vs. Paid: 2011
Total Downloads
Free Downloads
89%
Source: Garner, September 2012

58. “Freemium” is the dominant model

59. Games are the biggest money makers

60. Mobile has become a
platform game.

61. Platform markets tend to
standardize around one or two
platforms.

62. Right now, mobile is a two-horse race.
Global Mobile Pla orm Market Share
100%
90%
80% Other
70%
60%
50% Windows
Blackberry
40%
Apple
30%
20% Android
10%
0%
Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Source: Gartner, IDC, Strategy Analy cs, BI Intelligence es mates, and company filings

63. Android has the largest smartphone
platform globally.
Smartphone Market Share By OS (Global)
100%
Microso
90% Other
80%
70% Symbian
60%
Share of
Global Unit 50% Blackberry
Sales
40% Apple
30%
20%
Android
10%
0%
Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Source: Gartner

64. Partly because it owns China
Chinese Smartphone Market Share By Pla orm
100%
Other
90%
80% Symbian
Apple
70%
60%
50%
40%
Android
30%
20%
10%
0%
Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Source: Analysys Interna onal

65. And it’s the same two-horse story in tablets
Tablet Market Share By Pla orm
100% Blackberry
Nook
90%
80% Kindle
70%
60% Android
50%
40%
30%
iPad
20%
10%
0%
Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Source: Es mates based on informa on from IDC, Strategy Analy cs, and company filings

66. But a big mystery has
arisen...

67. Where are all these Android
users?

68. Apple is dominating app revenue
Mobile App Revenue By Pla orm
$4,000
$3,500
Other
$3,000
Android
$2,500
(millions)
$2,000
$1,500
$1,000
Apple iOS
$500
$0
2008 2009 2010 2011
Source: iSuppli, Forrester Research, company releases, BII es mates

69. And mobile commerce and web traffic…
Ecommerce Website Traffic By Mobile Pla orm
100% Other
Android Tablets
90%
Android
80%
70%
60%
iPhone
50%
40%
30%
iPad
20%
10%
0%
Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012
Source: Monetate

70. Do Android folks actually use
their devices?

71. Likely Answer:
Android is the mass market.

72. Mobile profits are going mainly to two players.
Opera ng Profit Share By Vendor
80%
70%
Nokia
Apple
60%
50%
Samsung
40%
30%
20%
Sony Ericcson
10%
RIM
HTC
LG
0%
Motorola
-10%
-20%
2007 2008 2009 2010 2011 Q1 2012 Q2 2012 Q3 2012
Source: Company releases, Canaccord Genuity es mates

73. So, what’s the future?

74. Digital?

75. Yes.

76. Mobile?

77. Yes.

78. Mobile ONLY?

79. No.

80. Digital is now a 4-screen world…

81. Maybe 5 screens soon…

82. But mobile FIRST?

83. Only if you have a totally
mobile-centric app...

84. ...Or you want to annoy your
users and customers.

85. Thank you very much.

86. Henry Blodget
Founder, CEO & Editor-in-Chief, Business
Insider
Marcelo Ballvé, Editorial Director
Alex Cocotas, Analyst
Josh Luger, Director of Subscription Products
Peter Lee, Intern
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