Download - TeleSoft Partners EcoSystem Meeting
TeleSoft Partners EcoSystem Meeting
Paul ChamberlainManaging Director, Head of West Coast Technology BankingOctober 28, 2005
Google and Beyond:
Consumer Internet Trends
3
The New Group Therapy
“Hi. My name is Barry, and I Google two to three hundred times a day.”
4
Jail Cell Confessions
“I should have used Skype instead of email.”
5
Agenda
Tech Market Snapshot
Morphing of the Internet
What’s Behind the Internet Scramble
What’s Ahead
6
Tech Market Snapshot
Virtually all public tech companies (ex-Internet) are “growth-
challenged”— not capital-constrained
Overall tech growth rates are expected to improve but still trail
Internet considerably
Internet valuations are consistent with high growth leaders
in other tech sectors
Financial sponsor activity at an all-time high but only limited
investment to date in Internet
7
Internet Growth is Pulling-Up the Averages
Technology Sector Year-over-Year Revenue Growth
%
14
11
14
34
12
16
28
67
1 1
5
8
20
7 7
3
11
68
19
0
5
10
15
20
25
30
35
40
Overall Tech Hardware TelecomEquip.
Semi-conductors
IT Services EnterpriseSoftware
Internet &ConsumerSoftware2004 2005E 2006E
8
Internet Valuations Are Not Out of Line
0.0
0.5
1.0
1.5
2.0
2.5
Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005
Internet and Consumer Software Enterprise SoftwareHardware IT ServicesSemiconductors Telecom Equipment
P/E to Growth
Internet and Consumer
Software
9
A New Force To Be Reckoned With?
$26
$6
$2$1$1
$1.5
$0
$5
$10
$15
$20
$25
$30
2001 2002 2003 2004 2005 YTD
# of Deals: 12 11 16 17 23
Financial Buyer Activity in TechnologyBn
10
Morphing of the Internet
Catalyst
Service Differentiation
IT Objective
Disruption
Winners
Internet 1.0 Internet 2.0
Information access
Online vs. offline
Put big iron on Net
Any-to-any
Information relevancy
Speed, relevancy, cost
Low cost scale out
Speed, intelligence
11
Big Changes Keep Coming
eCommerce
Speed / Relevancy /
Cost
Wireline Voice
Low Cost / VoIP
Video
Personalized /On-Demand
Scalability / Reliability
Enterprise Data Center
Wireless Data
Data / Entertain
Speed / Cost
Consumer Broadband
$Bn
$3,000
$300
$100
Siz
e o
f M
ark
et
12
My, How Communications Have Changed!2005
Mobile
VoIP
IM
Blogs
Web
Up to 1995
13
Consumer Internet Data Points
Search
• 8Bn global searches per month at Google
Broadband
• 180MM global subs
– 60MM in Asia– 50MM in U.S.
Music
• 700MM iTunes downloads
• 7MM iPods sold in Q3
Personalization
• 40MM+ MyYahoo! users
Video
• 1Bn streaming video sessions at Yahoo!
Mobile
• Ringtones now a $3Bn revenue business
14
Internet Deal Mania?
Date Event Value What’s Behind It?
9/14/05 Google Follow-on $4Bn Cost of entry for new markets?
8/10/05 Yahoo!/Alibaba $4Bn “Outsource” strategy for Japan worked well – why not China?
9/12/05 eBay/Skype $4Bn Beefing-up its “viral network” credentials
8/5/05 Baidu IPO $4Bn “Investors” who missed Google from $85-$340
15
And It Doesn’t Stop There
craigslist
16
What’s Behind the Internet Scramble
Internet (Narrowband) Internet (Broadband)
Search 1.0 Search 2.0
PC-centric Mobile-centric
International North America
Free email Free calling
Browsing Communications
Massive shifts in spending in existing markets and new market growth
17
Self-Reinforcing Internet Momentum
Search
Broadband
CommerceCommun-
ication
Content
“Holy Trinity”
18
Mobile Broadband in Early Stages
Global 2.5G/3G Penetration
0
200
400
600
800
1000
1200
1400
1600
2005E 2006E 2007E 2008E 2009E0%
10%
20%
30%
40%
50%
60%
2.5G Subscribers 3G Subscribers %2.5G Penetration %3G Penetration
Su
bs
cri
be
rs (
MM
)
% o
f T
ota
l W
ire
les
s S
ub
sc
rib
ers
19
International Markets Are Leading the Way
ROW12%
Europe24%
Asia Pacific36%
North America23%
South America5%
Internet Users – 1 Billion
ROW18%
Europe19%
Asia Pacific41%
North America11%
South America11%
Mobile Users – 2 Billion
20
Skype – Fastest Growing App Ever?
Registered Users
Asia27%
Other12%
US13%
Europe48%
Revenue Split
0
10
20
30
40
50
60
1 3 5 7 9 11 13 15 17 19 21 23 25
MM
Months Since Inception
54MM as of Sept. 2005
21
Internet As a Communications Hub
% of Time Spent on Internet
3%
10%
43%
4%
19%21%
0%
10%
20%
30%
40%
50%
60%
Email IM Voice Browsing Chat Search
Communications
44%
22
What’s Ahead
Search keeps getting better for users and advertisers
23
In Q3 Yahoo! generated
$1.3Bn in gross ad revenue
and PAID OUT $400 MM to
partners like MSN, ESPN,
WSJ, etc.
“Incontrovertible leadership”
“Defied convention”
“Widening the gap
competitively”
The Power of Internet Ecosystems
“Powerful momentum”
“Strong trajectory”
“Hitting on all cylinders”
In Q3 Google generated
$1.6Bn in gross ad revenue
and PAID OUT $530 MM to
partners like AOL, AskJeeves,
etc.
24
What’s Ahead
Search keeps getting better for users and advertisers
Ad-supported desktops?
Any content, anywhere
Moore’s law coming to networking?
25
A Gift to the Server and Networking Industries?
$2,305
$1,773
$947
$705
0
500
1,000
1,500
2,000
2,500
2003A 2004A 2005E 2006E
CapEx Spending by Major Internet Players
$MM
+ 34%
+ 87%
+ 30%
26
What Does It Mean for You?
“Can you hang on a sec? I think I just took another picture of my ear.”
27
If It Can Work for Arjun…
QUESTIONS?
Paul ChamberlainManaging DirectorTechnology Investment [email protected]