GGV Capital Q4 2011 CEO Dinner Mobile Web discussion document

1. Q4 CEO Dinner 2011
A Discussion on the “Mobile Internet”
December 1st, 2011
@ggvcapital
CONFIDENTIAL 1
CONFIDENTIAL ©2011 GGV CAPITAL

2. A Massive Shift Underway…
CONFIDENTIAL 2

3. “First Inning” Driven By Games and Social
CONFIDENTIAL 3

4. Where the Time is Being Spent
• Significant time spent on “existing” brand names from the PC web, with
notable exceptions in games and mCommerce
Top Free iOS Apps by Category (9/2011) Top 10 Most Used Android Apps (7/2011)
Social Android Market
• Facebook Google Maps
• Twitter Entertainment Gmail
• Skype • Crackle Facebook
• LinkedIn • Netflix Google Search
• FB Messenger • Redbox YouTube
News • IMDb Adv Tak Killer Free
• CNN • HBO GO Angry Birds
• Fox • Hulu+ QuickOffice Pro
• ABC Pandora Radio
• Yahoo News
• CNN Int‟l
CONFIDENTIAL 4

5. iOS / Android Comparison
iOS Android
Sales to date (all 265m 200m Devices
devices, oct 2011) • Apple has larger ecosystem, but has not matched
Daily new ~400k ~550k the growth of android lately.
sales/activations (nov • Key drivers of this blockage for apple have been
2011) carrier exclusivity (now solved), pent up demand for
new models, and consumers‟ price sensitivity.
US Smartphone Share 27.7% 43.7%
(aug 2011)
iPhone 4S, Tablets
• iOS has always held strong in tablets and is
UK Oct S.Ph. Sales 42.8% 35% expected to continue
• The iPhone 4S and low cost 4, 3GSs have turned
Tablet Sales 80%+ <15% around sales leaderboards for now; wait to see if it
Device configs 7 1000s lasts
# of Apps >500k >300k Monetization and Other Android Issues
• Developers find it cumbersome to work with
% of Free Apps 37% 60% android
Downloads (cum, 18Bn 6Bn • many device configs, OS versions
Q32011) • Despite strong device sales, android users are not
monetizing very well:
Share of monetization $1.7Bn $102Mn • piracy (53% devs say it‟s a big problem)
„10 • malware
• crapware (crowding out good apps)
• Low WTP of users
• Poor payment systems)
CONFIDENTIAL 5

6. US Install Base
CONFIDENTIAL 6

7. Mobile Device/OS IP Wars: The Basics
Event Impact
March 2006: NTP settle with RIMM to pay $612m for infringement. This distraction is largely credited with the slowing down of
innovation at RIMM and the missing of the smartphone
movement.
April 2010: HTC signs licensing deal with MSFT. It will pay a per phone This was a defensive move that proved very smart as MSFT has
royalty. $5/phone is rumored. gone after samsung in a big way.
June 2011: Apple settles with Nokia to pay ongoing royalty. Shows that the two agree android is enemy #1. And that even
apple can be humbled in this war.
July 2011: Nortel Patents Sale to Rockstar Bidco for $4.5Bn Allows all who are not winning from Android to go to OEMs and
extract a per device licensing fee, which may make Android
6k patents spanning mobile, search and social. AAPL, MSFT, RIMM unprofitable for OEMs and push other OS options. MSFT
(770m), ERIC (340m), SNE, EMC. Google bid $900m, but pulled : “no value reportedly demanding $15/phone from Samsung.
if all would have access.” Disputes over whether GOOG was bullied.
July 2011: Google buys 1030 IBM patents Unknown. Specifics not disclosed.
Aug 2011: Google buys MMI for $12.5Bn Largely understood to be a way to beef up the patent portfolio for
defensive purposes.
Ongoing: Apple and HTC sue each other for infringement Apple showing that it intends to flex muscle and trying to slow
-july: apple wins in ITC first round vs HTC adoption of android if possible. Result of an ITC finding can
-Aug: HTC counter sues with 3 infringement claims block imports to the US, which can be devastating.
-Aug Apple gets Samsung tablets banned in EU, Australia requests sales Counter-suits goal is likely for cross-licensing.
figures. Japan in process.
Sep 2011: Google gives HTC access to patents to counter sue apple. Google posturing that it will not allow it‟s OEMs or its OS to be
bullied out of the game.
Q4 2011: Apple and Samsung face off in Germany, NZ, AUS over right
to sell 10” tablets. Varied results.
Note: Nortel patents said to span “wireless, wireless 4G, data networking, optical, voice, internet, service provider, semiconductors and other patent portfolios. The
extensiveI patentT I A L touches nearly every aspect of telecommunications and additional markets as well, including Internet search and social networking.”
C O N F D E N portfolio 7

8. Global Market: Center of Gravity is Changing Fast
CONFIDENTIAL 8

9. China is leading the Change
CONFIDENTIAL 9

10. China By The Numbers
900m wireless
subscribers 250m Weibo (twitter)
users
350m mobile internet
users 812m QQ (chat) users
250m new devices
per year 200m Tudou monthly
actives
100m Smartphone sales
in 2011 120m Combined fans of top
10 weibo users
19% 2011 smartphone
penetration 10
Minimum number of
SNS sites with
46%
>100m users
Netizens who access
39%
internet ONLY via Users who click on
mobile mobile ads
32% Users who‟ve
made a mobile
purchase
CONFIDENTIAL 10

11. Where the Money Is (Revenue / 2014)
CONFIDENTIAL 11

12. Where the Investment $’s Have Gone
Many unfunded
players here
Sector $$MM
advertising 33 (+ 200)
apps general 160.2
Enterprise apps 30
b2b mdm 48.2
backend/platform 138.7
devices 253
digital media 92
gaming 85.2
network equipment 33.5
pymts/commerce 185.3
sms 24.4
voice/data service 56.1
Grand Total 1139
CONFIDENTIAL 12

13. $1.1Bn Invested Since 2010Q1, 70% in the Last 9 Mos.
CONFIDENTIAL 13

14. Financing Highly Correlated with Rise of Smartphones
CONFIDENTIAL 14

15. Where Do We Go From Here?
• Continued rise / impact of Android
• Importance of iOS / the App Store / etc.
• Geolocation
• China / Brazil / India
• Security / Identity
• iPad / tablet cannibalizing PC + Internet browser
• Monetization
CONFIDENTIAL 15