Love her or hate her, it's hard to ignore Morgan Stanley's Mary Meeker.
This week, she posted a massive, 147 slide deck entitled "Economy + Internet Trends".
Despite the massive size of the deck, it's worth taking 30 minutes or so to walk through. She looks at the impact of the current economic environment on Content and Internet companies. Whether you agree with her analysis, there's plenty of data there for you to chew on.
The first 20 or so slides provide some interesting views into how the economy got here; nothing new but some useful charts and perspectives on what's similar and what's different from past recessions. The economy has pushed ecommerce growth to negative (starting Q3, 2008) after consistent 20% annual growth rates from 2001-2007. The technology sector's five flat or down sequential quarters matches 2001, but the outlook this time is worse.
Key spending sectors of the S&P500 have taken a huge hit - financial services, industrials, consumer discretionary, materials, information technology, telecom and energy. Even utilities, health care and consumer staples stocks are down 30-40% from their pre-recession peak.
Then she digs into the slides that are of greatest interest to those of us in the content and technology space. The trends she highlights include:
Online advertising: ad spend is closely tied to GDP growth. On top of that, right now we're in a very difficult period as the disruption caused by social media, video and VOIP is not yet translating into significant revenues Online CPMs are a fraction of offline CPMs. Meanwhile, doing a regression analysis, she shows how a flat GDP in 2009 could lead to a 4% drop in ad spend.
One bright note is that in difficult times, consumers spend more time, rather than less, on the Internet. It's "a cheap/efficient/transparent thrill!" as she describes it. The Internet is becoming a necessity. Broadband Internet was the last thing to be cut in consumer survey (even after personal care, toiletries & cosmetics).
At the same time, undermonetized social media, video and VOIP creates an opportunity for marketers to capitalize on low CPMs.
Looking ahead five years, Meeker projects the online consumption mix will be what she describes as consumer-enhanced professional content: anchored with first class professional content; augmented with first class user-generated content that's ranked/reviewed/'edited', supplemented by all-comers user-generated content that's ranked/reviewed, all presented in a holistic/widgeted way.
Or, as she describes it, a "clean combo of WSJ.com+bbc.co.uk + digg + techmeme + youtube + nytimes.com + allthingsd.com + facebook + twitter"
Meeker drills in to online advertising, noting that Google's share has increased from less than 50% in Q4 2005 to 67% in Q4 of 2008. Search advertising continues to show growth and is taking budget from other forms of advertising, most notably print magazines, direct mail and newspapers.
There is still a huge advertising opportunity - today, online advertising spend is $288 per home vs. $818 per home for newspapers. While CPM's and CPC's may be under near-term price pressure, if targeting/ROI continues to improve (as she believes they should), there should be long-term upside.
Meeker remains bullish on the ecommerce space. While some items, such as computer equipment, event tickets, books, music and videos have seen huge adoption rates on the Web, overall US online ecommerce penetration remains only around 4-6%, though it continues to rise.
Amazon should continue to show growth as it has become the web's most effective commerce search engine and continues to provide new technologies for its users, such as the Kindle and mobile apps for research and purchasing.
Another strong trend for Meeker is the positive growth in mobile. New mobile products, from iPhones to the Kindle to Netbooks are driving incredible growth. The enablers for this growth are:
1. broadband and wireless infrastructure; the cloud
2. Hardware: small, fast and cheap storage, touch screens, GPS and more
3. Software - browser-based tools, widgets
4. Communications tools - messaging, social media, cameras, VOIP
5. Digital content - music, video, news, search, shopping, weather, maps and more
She notes that Google Voice provides Unified Communication for consumers - one phone # + VOIP + Voicemail Transcription + SMS. That's a pretty big game changer.
We are undergoing the greatest media transformation in history and Meeker asks "Where is the great creative" to drive it?
In closing, she reiterates her believe that companies with cogent business models that provide consumer value (Amazon, iTunes, etc) should survive and even thrive in this economy, noting "consumers need value more than they've needed it in a long time".
The full presentation is posted at http://www.docstoc.com/docs/5045631/Meeker-Tech-09.
Thanks, Paul Kedrosky, for the heads up on this.