Mick Gourevitch

RBC

Internet Markets: crisis 2.0?

Internet drivers:

the end of 1990’s: news sites;

mid 2000’s: blogs;

2006-2007: social networks;

2008 and further: video + mobile?

Video

New huge market:

Analysts predicted

600% growth

for 2007-2012

Mobile

The growth of users with 240x320 screen resolution in Runet (Liveinternet data)

Mobile advertising revenues $19,5 billion in 2012; 3,5 billion mobile phones

worldwide; 70% penetration 3G

in Korea and Japan; Worldwide mobile television

subscriptions are expected to grow 5x to $19 bln by 2012 compared with $408 mln in 2007, Pricewaterhouse said.

People are ready to watch video on mobile

As it follows from the last Azuki Systems Inc. survey,

25% of US respondents already access video on their mobile phones every week

But it is still irregular pastime: only 6% spend more then 4 hours for it Source: Azuki Systems Inc., September 2008

Do you really want to talk about it?

Autumn 2008: “Verge of collapse” “Global economic meltdown” “The end of web 2.0 era”

We all die?

Fact Pack (1/3)

Plans to lay-off company stuff: Yahoo: 10% of more till the end of year; eBay: 10% (about 1600 employees); Online ad network AdBrite: 40%; Top 3 social network Hi5: 15%;

Those companies, that haven’t cut off the staff, have frozen their new vacanciesWho will be the next?..

Fact Pack (2/3)

Industry forecasts are lowered: ZenithOptimedia: Global ad spending growth

2008 6,6% 4,3% 2009 6,0% 4,0%

Goldman Sachs: decline in separate ad revenues for TV – 7% for broadcast networks – 5% for the radio, outdoor, magazines sectors – 5-10%

Fact Pack (3/3)

ZenithOptimedia: 2009-2010 – 12% growth ad spending in CEE; Internet advertising is expected to grow by an average of 23% per

year between 2007 and 2010 globally; Russia is expected to be top 6 ad market (Oct. 2008 forecast).

Are they right?

Internet crisises: history

1998 crisis in emerging countries; Dot.com burst 2000’s; 2008-…

Dot.com crisis 2000’s: outcome

Shake-out; Many start-ups have been frozen; Companies, which have had a strong

monetization model and invested resources in technical development, became the leaders of new epoch.

They created new web 2.0 Internet

Crisis 2008: net out

Good news: World Internet penetration is more then 20% of population

(Russia – 32%, Poland – 42%); Internet is a basic social necessity of life now; Diversified revenues of Internet-companies (media ads,

context ads, micropayments, e-commerce); Internet became a whole industry; Internet dictates its will to the traditional economics

(music industry, for ex.)

Crisis 2008: net out

Bad news: Huge amount of startups without established revenue model

(they still try to sell happiness); Huge cost expenses (esp. for videohostings); Stock market dependence; Owners of start-ups still need to justify previous funding

GET YOUR REVENUE MODEL NOW OR GO HOME

Our forecast: We will survive! <not all of us> :)

Social networking and dating sites

People need to communicate every day

Diversified revenue model;

Vast audience; Micropayments; It is very good for you, if

you have API.

Video

You should find a revenue model or you have problems

Still have no revenue model; Cost expenses are highest

(servers, channels); The most experimental forms of

ads (video ads included) are the most susceptible to cutbacks.

But: Vast audience; People will prefer to watch a

new film at home, not in cinema.

Search

Search still feels good!

Search is the most protected area of online advertising, with its low price and high CTR

SearchIgnite report:

27% growth in search spending for 3Q2008/3Q2007

But: Many advertisers leaves the

market The fall of CPC

Email

IM and social networks to overtake email

With the growth of social networks and IM-audience, email loses its market share.

IDC: IM is set to overtake email as the preferred form of business communication by the 2nd half of 2010.

Email services moves to become more social

Marketing services

Audience measurement; For startups it is still necessary to endorse its audience for

venture investors. But where are those investors?

Marketing researches; Are needed to understand new trends and directions for

development. But who will pay for it?

Advertising networks. Will need to reduce the prices; weak networks will die. But

today most of networks become to be more contextual.

Mobile It is not enough just to

“produce and sell ring tones” any more.

You need to move forward and diversify your core services or prepare to be eaten by mobile operators.

New products

We have new market rules here: No more fast money: if you have no clear

monetization model, you have no funding. No more “another facebook clones” for fast selling.

Investors don’t want

to see “sellers of happiness” any more

Brave New World

Audience

We predict the growth of the time spent in Internet: People need to know news every day. People need to reduce their expenses (YouTube and Hulu

instead of cinema; social networks instead of clubs and restaurants).

On the other hand, we see the decline of local broadband penetration on further months. It gives a chance for mobile Internet.

Internet advertising We predict no decline, but the growth wouldn’t be so impressive

as it used to be before. The hardest hit ad category – financing advertising – contributes

only about 4% of global ad expenditure.

So why Internet advertising should not decline hardly? Huge TV-, Outdoor and Print ad budgets would be redistributed

to the benefit of Internet (depends on the market) Context and search ads will expand.

Portals/ Media-holdings

The point depends of: Degree of your revenue stability and diversification. Amount of your venture initiatives.

Internet could be your driving force

What analytics says:

People will stop to buy; People will stop to get fun and go to cinema; People will stop to eat; People will need no sex…..

Are they right?

So what to do?

Be realistic. Adapt quickly. Make cuts. Became cash-flow positive ASAP.

GET REAL!

Believe me!

Any questions about video and mobile? :)

mick@rbc.ru