The Internet & Native Advertising A Wall Street Perspective

Transcription

1 The Internet & Native Advertising A Wall Street Perspective Ron Josey Sr. Analyst, Internet Sector JMP Securities rjosey@jmpsecurities.com But First -- What Gets Us Excited About The Internet? 6 Key Drivers 1. MOBILE Fundamentally changing Internet usage & monetization 2. ONLINE ADV Newer ad formats are accelerating growth 3. SOCIAL Empowering the consumer; changing the paradigm 4. VERTICAL MARKETPLACES Win / Win / Win 5. MOBILE PAYMENTS Smartphones replacing wallets 6. SAME DAY DELIVERY Expands a retailer s reach 2 1

2 Mobile: Time Spent On Apps Now Exceeds Desktop! Source: comscore 3 Resulting In Incremental Internet Usage Billion Min nutes 1,200 1, Time Spent on Digital Media By Platform % growth in total minutes online, led by 360% growth from Smartphones Source: comscore, JMP Securities June 2010 US Desktop Smartphone Tablet June 2013 US 4 2

3 Consumers Are Adopting The Mobile Web Company Facebook Yelp Zillow AOL Select Mobile Stats / Commentary Mobile Ad Revs: $1.3 billion (59% of total revenue); 1 billion mobile MAUs 61 million mobile monthly unique visitors, +52% Y/Y, ~46% total; 60% of searches from mobile 2/3 of traffic from mobile; Mobile visits +100% Y/Y; 460M homes viewed on mobile Mobile usage: +80% Y/Y; Mobile ad revs: 100+% Y/Y; 50% of clients req. x-screen campaigns Priceline.com $8B in gross mobile transactions on Booking.com in 2013, up from $1B in 2011 Google ebay Amazon.com Expedia Yahoo ~40% of YouTube's videos viewed from mobile 61.3% of total customer adds from mobile representing 6.5 million new customers 50+% of Amazon holiday shoppers used mobile 125M cumulative mobile app downloads; 20+% of transactions from mobile 430 million mobile monthly unique visitors, +30% Y/Y; Tumblr mobile monthly users +71% Y/Y Source: Company reports 5 And We Are Living In An Increasingly Connected World Tesla PayPal s Android Wear Model S Beacon FitBit Nike Plus Disney s MyMagic+ Source: Motorola, Tesla, ebay, FitBit, Disney, Nike 6 3

4 Creating Significant Advertising Opportunities We Project U.S. Internet Ads To Reach ~$50B in 2014 Source: JMP Securities 7 Driven by Mobile, Video, Social, & Native Mobile Digital Video Search Rich Media Banner Ads Classifieds / Auctions Mobile and Video are the fastest growing advertising areas and Native Ads (as well as Social) are embedded in them throughout Lead Generation/ Sponsorship -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% U.S. Online Advertising Spend Three-Year CAGR ( ) Source: JMP Securities 8 4

5 Yet The Market Is Still Catching Up To Mobile 45.0% 42.2% 2013 Consumer Time Vs. Ad Spend 40.0% 38.4% 35.0% 30.0% 25.0% 20.0% 24.8% 21.5% 20.9% 20.0% 15.0% 10.0% 5.0% 4.5% 12.2% 9.9% 5.4% 0.0% Source: emarketer TV Digital (ex-mobile) Print Radio Mobile Spend Time 9 So what is Native Advertising? Native Ads are naturally embedded into a sites content stream and while clearly marked as an advertisement, they are found to be more impactful than traditional banner ads. Said another way -- Native Ads are: Naturally embedded within content Are targeted and contextually relevant ads Deliver higher conversion rates And are perfectly suited for social and mobile environments 10 5

6 Mobile Native Ad examples Facebook Twitter Google Source: Facebook, Twitter, Google 11 Yahoo! s New Splash Ads & Pinterest s Promoted Pins Yahoo! Splash Ad Pinterest Promoted Pins Source: Pinterest, Yahoo! 12 6

7 What Internet Leaders are Saying About Native Ads News Feed ads have significantly higher engagement We want to get to a state where the ad content is getting as good as the organic content - Facebook I firmly believe that native advertising can be every bit as good as the content itself Showing native ads on mobile can actually increase revenue per page view [vs. traditional display ads] - Yahoo! CEO Marissa Mayer folks who engaged with promoted Tweets, brand favorability was 30% higher, purchase intent was 50% higher you can reply, favorite, retweet a promoted Tweet ads perform better when they are content first -Twitter Source: Company reports 13 What Does The Data Say? 14 7

8 Native Ads Have Higher Conversion Rates Source: Yahoo! 15 Native Ads are More Engaging... Source: Sharethrough, IPG Media labs,

9 More Social Source: Sharethrough, IPG Media labs, % of Brands and 34% of Agencies are using Native Ad formats Source: Hexagram and Spada,

10 With Awareness The Top Objective for Native Ads Source: Sharethrough and emarketer, September Effective Ad Formats Impact On Results 20 10

11 2Q13: Facebook s Inflection Point Thanks To Native & Mobile Stock followed suit ck Price FB Stoc FB ad revenue growth significantly reaccelerates Creating an inflection point in the stock Source: Thomson Reuters and JMP Securities 21 Mobile Adoption Rewarded With Growth Company Data Current Valuation 2014E Revenue Growth Market Cap EV/Rev 2015 EV/EBITDA 2015 TTM Stock Return Facebook $12.0B 52.7% $167.6B 9.6x 15.6x +154% Twitter $1.3B 190.9% $23.7B 16.1x 70.0x +44% Yahoo! $4.5B 2.7% $35.8B 0.6x 1.9x +35% AOL $1.8B -0.4% $3.3B 1.1x 5.6x +8.6% S&P % Source: Thomson Reuters and JMP Securities 22 11

12 THANK YOU 2014 JMP Securities LLC Ron Josey Sr. Analyst, Internet Sector JMP Securities Google Inc (GOOG) Facebook, Inc (FB) JMP Research Disclosures Amazon.com, Inc (AMZN) Priceline.com Inc (PCLN) ebay Inc (EBAY) Yahoo! Inc (YHOO) Expedia, Inc (EXPE) Yelp (YELP) Zillow, Inc (Z) JMP Securities was manager or co-manager of a public offering of securities for the Company in the past 12 months, and received compensation for doing so. AOL Inc (AOL) TrueCar, Inc (TRUE) JMP Securities was manager or co-manager of a public offering of securities for the Company in the past 12 months, and received compensation for doing 24 12