magna global emerging media forecast june 2007

8/14/2019 MAGNA Global Emerging Media Forecast June 2007

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Emerging Media Forec ast

June 2007


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2

EMERGING MEDIA IN CONTEXT

Traditional Medium Equivalent / Ad-Supported Revenue Driver

Radio/Music

InformationSeeking

Commerc e /Shopp ing

IndividualorC

orporate

BehaviorDriver

TV Online/ Print Out-of-Home MarketingServices

OtherMarketing

UGCProduction

Content-on-Demand

Soc ia l ContentConsumption

Nic he ContentConsumption

New Plac e

Consumption

AssetManagement

Game Playing

Venture c apital ac tivity reflec ts expec tations of change

Source: MAGNA Global


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3 Source: MAGNA Global, US Census, Veronis Suhler, OPA


But Traditional med ia dominates by wide margin

0

50,000100,000

150,000

200,000

250,000300,000

350,000

400,000

450,000500,000

2002 2003 2004 2005 2006

TV

Radio

ConsumerInternet

Newspapers

Consumer

MagazinesSearch

Millionso

fPerson-HoursPerYear

2.9bn

36.6bn

53.7bn

57.0bn

292.5bn

466.5bn

Total US Population: Hours Spent With Media


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And young audiences are not abandoning traditional med ia

Young Audiences' TV Viewing Trends

15.0

17.0

19.0

21.0

23.0

25.0

27.0

29.0

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07H

oursofView

ingPerWeek P2-5

P6-11

P12-17

P18-34

Source: MAGNA Global analysis of Nielsen Media Research data


5/305


Packagers (networks, publishers) continue to drive industry

MediaPackagers

Producers DistributorsCreators

ConsumersAdvertisers

$

$$ $

$

Devices /

Access Points$

Source: MAG NA Globa l

$

Industry Structures Held Together By Regulations,Economic Efficiency and Copyright Law


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So a lthough emerging media = emerging opportunities

look beyond early adop ters

Change is c onstra ined for most med ia

Business model issues

Limits to market appea l

Diffic ulty to c hange behavior Negative utility with more c hoic e


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SEARCH

Media sea rch tools have existed in many forms


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SEARCH

Three players have come to dom inate online sea rc h


9/309 Source: MAGNA Global, US Census, IAB

SEARCH

E-c ommerce is a key driver of search spend ing When d oes sea rc h bec ome too la rge a share o f revenue?

Search Spending as % of E-Commerce Sales

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%8.0%

1Q00A

2Q00A

3Q00A

4Q00A

1Q01A

2Q01A

3Q01A

4Q01A

1Q02A

2Q02A

3Q02A

4Q02A

1Q03A

2Q03A

3Q03A

4Q03A

1Q04A

2Q04A

3Q04A

4Q04A

1Q05A

2Q05A

3Q05A

4Q05A

1Q06A

2Q06A

3Q06A

4Q06A

1Q07A


10/3010 Source: MAGNA Global, US Census, Veronis Suhler

SEARCH

And search spend reflec ts effec tiveness for SMEs and dot-c oms

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

2002 2003 2004 2005 2006

Search

Newspapers

ConsumerMagazinesConsumerInternetTV

Radio

Advertising Dollars Spent Per Hour of Media Consumption

$0.07

$0.30

$0.90

$0.34

$2.44

$0.12


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SEARCH

Paid search to exc eed $11 billion in 2008 Led by more searc hes per person and better monetiza tion

Paid Search

$6,799.0

$8,770.7

$11,094.9

$0.0

$2,000.0

$4,000.0

$6,000.0

$8,000.0

$10,000.0

$12,000.0

2006A 2007E 2008E

(Inmillion

s)

+29.0% +26.5%

Annual

Growth

Source: MAGNA Global, IAB/PWC


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EMERGING OUT-OF-HOME

Platforms inc lude c inema, digital b illboards and retail networks


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EMERGING OUT-OF-HOME

More d igita l b illboa rds and new dig ita l networks drive growth But most ac tivity rema ins a t the loc a l level


Emerging Out-of-Home Advertising

$1,090.5

$1,371.8

$1,711.0

$0.0

$200.0$400.0

$600.0

$800.0

$1,000.0$1,200.0

$1,400.0

$1,600.0

$1,800.0

2006A 2007E 2008E

(Inmillions

)

+25.8% +24.7%

Annual

Growth


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14

SOCIAL NETWORKING

Soc ial sites emerged in late 90s as potential substitutes for portals But post-Geoc ities, emphasis has been on soc ia l c onnec tivity


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SOCIAL NETWORKING

Growth is mostly share gains from other publishers Histo ric a lly monetized as residua l internet tra ffic

Social Networking and Total Internet Page Views

0

100,000

200,000

300,000400,000

500,000

600,000

700,000

Jan-06

Feb-06

Mar-06

Apr-06

May-06

Jun-06

Jul-06

Aug-06

Sep-06

Oct-06

Nov-06

Dec-06

Jan-07

Feb-07

Mar-07

Apr-07

May-07

PageV

iews

Social Networking: + 98.6%

Total Internet: + 2.6%

Source: MAGNA Global analysis of Comscore data


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SOCIAL NETWORKING

Soc ial Network growth slowing, but will exceed $1 billion in 2008 Dolla rs d riven by volume of inventory and better monetiza tion

Source: MAGNA Global

Social Network Advertising

$276.0

$685.0

$1,020.0

$0.0

$200.0

$400.0

$600.0

$800.0

$1,000.0

$1,200.0

2006A 2007E 2008E

(Inmillions

)

+148.2% +48.9%

Annual

Growth


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17

ONLINE VIDEO

Source: MAGNA G lobal, RIAA

6,000

8,000

10,000

12,000

14,000

16,000

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Revenues($000s)

TotalDigitalSales

RetailSales

Manufacturers' Shipments of Recorded Music

Napster Launched(June 1999)

BitTorrent, Kazaa,

Grokster, etc. activeiTunes Launch

(March 2003)

New media can dramatically a ffec t an industry Music industry often c ited as c ase stud y for the video industry


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18

ONLINE VIDEO

Sourc e: M cKinsey, NAA , Mo nster Wo rldwide

New media can dramatically a ffec t an industry and c lassified advertising p rovides another example


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19

No

Yes for some some ofthe time or no formost most of the time

Yes for some most o f

the time o r yes for a llsome o f the time

Ofte n for mostpe op le und er mostcircumstances

Yes for a ll peo p leund er virtua lly a llcircumstances

ONLINE VIDEO

Genera l Print YP Rad io TV

Suffic ient Rang eof Content

SufficientTec hnic a l Qua lity

EquipmentSubstitution

SufficientCustomer Service

Effic ientNavigation

Cheaper toSubstitute

IncreasedConvenience

SUMMARY

Limited TV contentava ilab le tod a y

Internet c an t d eliver

high res video w ell

IPTV: no STB integratio n

Qo Sis c ritic a l for video

Hard to naviga te to findaudio/video

Online ba ndwidth=morec ost than free me d ia

Print and rad io are

typica lly p ortable

Print is ta c tile

Prospec ts for onlinemed ia sub stitution limitedby drawbac ks relative to

trad itiona l med ia

But TV wont be impac ted as other media (yet!)



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20

ONLINE VIDEO

Conventional TV popularity: 90x vs. Online in 2011? Yes, if last year s online growth ra tes persist

Source: M AGNA G loba l, Acc ustrea m

145.8x

119.8x

99.2x82.7x

69.4x 58.6x

0.0x

20.0x

40.0x

60.0x80.0x

100.0x

120.0x

140.0x

160.0x180.0x

200.0x

25% 30% 35% 40% 45% 50%Different Scenarios:

Assumed 5-Year Compounded Annual Growth Rate of Online Video

Popu

lari

tyFac

toro

fConventio

na

l

TV

in2011

2006 Growth Rate Was 38.8%

Above Trend

Below Trend


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21

ONLINE VIDEO

Online video spend growing >50% annua lly, but


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22

ADVANCED TV

Advanc ed TV (VOD, RFIs, iTV) has been slow to emerge User experienc e rema ins poor

Content is bette r, but limited

Ad vertising infrastruc ture still under c onstruc tion!

Advertising Infrastruc ture Components

Unduplic a ted / unique rea c h

Uniform tec hnolog ic a l standards

Estab lishment of c rea tive formats

Smooth b uying proc ess

Provision o f robust user da ta

High-qua lity servic e / p roduc t standards


C


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ADVANCED TV

VOD is largest component, followed by RFIs and other iTV VOD likely genera tes $85mm in 2007, $105mm in 2008

Advanced TV Advertising

$107.0

$140.0

$178.0

$0.0

$20.0$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

$180.0

$200.0

2006A 2007E 2008E

(Inmillions)

+30.8% +27.1%

Annual

Growth


MOBILE


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MOBILE

Mobile (WAP, video, SMS, LBS) attrac ts great interest, few $ today Infrastruc ture issues potentia lly simila r to adva nc ed TV

Consumer p roposition is being defined

Long-term opportunity to use mob ile devic es for CRM

Ma ny new produc ts c ompelling, but sc a le rema ins too sma ll formost na tiona l advertisers g iven their b roader ob jec tives


MOBILE


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25

MOBILE

Growth driven in nea r-term by introduc tion of new supply Ca rriers op ening up dec ks and new mob ile ad models

Mobile Advertising

$55.0

$105.0

$194.0

$0.0

$20.0$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

$180.0

$200.0

2006A 2007E 2008E

(Inmillions)

+90.9% +84.8%

Annual

Growth


GAMING


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GAMING

Gaming growth like ly slower than for other new media Many advertisers rema in interested , but few invest

Game-Related Advertising

$187.2

$216.9

$238.6

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

2006A 2007E 2008E

(Inmillions)

+15.9% +10.0%

Annual

Growth


SUMMARY


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SUMMARY

Annua l emerging media g rowth = ~ 30% in 2007 and 2008


EMERGING MEDIA AD EXPENDITURES (in millions) 2006A 2007E 2008E

Search $6,799.1 $8,770.9 $11,095.1 Annual Growth ------ 29.0% 26.5%

Emerging Out-of-Home 1,090.5 1,371.8 1,711.0 Annual Growth ------ 25.8% 24.7%

Social Networking 276.0 685.0 1,020.0 Annual Growth ------ 148.2% 48.9%

Online Video 235.0 365.5 560.0 Annual Growth ------ 55.5% 53.2%

Advanced TV 107.0 140.0 178.0 Annual Growth ------ 30.8% 27.1%

Mobile Marketing 55.0 105.0 194.0 Annual Growth ------ 90.9% 84.8%

Gaming 187.2 216.9 238.6 Annual Growth ------ 15.9% 10.0%

Total $8,749.8 $11,655.1 $14,996.7 Annual Growth ------ 33.2% 28.7%

Less Estimated Duplication (Search via Social Networking) 0.0 (135.0) (250.0)Total Emerging Media $8,749.8 $11,520.4 $14,747.0 Annual Growth ------ 31.7% 28.0%

APPENDIX


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28

APPENDIX

Emerging med ia services and devices forec asts


0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

%

ofUSH

ouseholds

US Digital Cable, Satellite andTelcoTV Households

US DVR Subscriptions

US VOD Households

US Broadband Households

US Satellite RadioSubscriptions

US HD Subscriptions

US Digital TV Shipments

US Mobile PhoneSubscriptions

NOTES ABOUT METHODOLOGY


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NOTES ABOUT METHODOLOGY

Estima tes and forec asts reflec t d a ta for the United Sta tes only

Genera l me thod ology involves deriving bottoms-up estima tes and forec asts for ea c hsupp lier of med ia in ea c h emerg ing med ia sec tor

Estima tes and forec asts inc lude med ia expe nd itures (or approximate a lloc a tions) only,and exc lude market ing servic es and related ac tivities suc h as p roduc tion of c rea tive

assets


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Contac t: Brian Wieser, CFATel: 917-542-7008 Email: brian.wieser@magnaglob al.com

magna global emerging media forecast june 2007

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