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TeleSoft Partners EcoSystem Meeting. Paul Chamberlain Managing Director, Head of West Coast Technology Banking October 28, 2005. Google and Beyond:. Consumer Internet Trends. The New Group Therapy. “Hi. My name is Barry, and I Google two to three hundred times a day.”.
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TeleSoft Partners EcoSystem Meeting Paul Chamberlain Managing Director, Head of West Coast Technology Banking October 28, 2005
Google and Beyond: Consumer Internet Trends
The New Group Therapy “Hi. My name is Barry, and I Google two to three hundred times a day.”
Jail Cell Confessions “I should have used Skype instead of email.”
Agenda • Tech Market Snapshot • Morphing of the Internet • What’s Behind the Internet Scramble • What’s Ahead
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
Technology Sector Year-over-Year Revenue Growth % Internet Growth is Pulling-Up the Averages
P/E to Growth Internet and Consumer Software Internet Valuations Are Not Out of Line
A New Force To Be Reckoned With? Financial Buyer Activity in Technology Bn # of Deals: 12 11 16 17 23
Internet 1.0 Internet 2.0 Catalyst Information access Information relevancy Service Differentiation Online vs. offline Speed, relevancy, cost IT Objective Put big iron on Net Low cost scale out Disruption Any-to-any Speed, intelligence Winners Morphing of the Internet
$Bn $3,000 eCommerce Wireline Voice $300 Size of Market Video Enterprise Data Center Speed / Relevancy / Cost $100 Low Cost / VoIP Wireless Data Personalized /On-Demand Consumer Broadband Scalability / Reliability Data / Entertain Speed / Cost Big Changes Keep Coming
My, How Communications Have Changed! Up to 1995 2005 Mobile VoIP IM Email Blogs Web
Search Broadband Music • 8Bn global searches per month at Google • 180MM global subs • 60MM in Asia • 50MM in U.S. • 700MM iTunes downloads • 7MM iPods sold in Q3 Personalization Video Mobile • 40MM+ MyYahoo! users • 1Bn streaming video sessions at Yahoo! • Ringtones now a $3Bn revenue business Consumer Internet Data Points
And It Doesn’t Stop There craigslist
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
Commerce Commun-ication “Holy Trinity” Content Self-Reinforcing Internet Momentum Search Broadband
Mobile Broadband in Early Stages Global 2.5G/3G Penetration Subscribers (MM) % of Total Wireless Subscribers
International Markets Are Leading the Way Internet Users – 1 Billion Mobile Users – 2 Billion
Skype – Fastest Growing App Ever? Registered Users Revenue Split MM 54MM as of Sept. 2005 Months Since Inception
Internet As a Communications Hub % of Time Spent on Internet Communications 44%
What’s Ahead • Search keeps getting better for users and advertisers
The Power of Internet Ecosystems • “Incontrovertible leadership” • “Defied convention” • “Widening the gap competitively” • “Powerful momentum” • “Strong trajectory” • “Hitting on all cylinders” In Q3 Yahoo! generated $1.3Bn in gross ad revenue and PAID OUT $400 MM to partners like MSN, ESPN, WSJ, etc. In Q3 Google generated $1.6Bn in gross ad revenue and PAID OUT $530 MM to partners like AOL, AskJeeves, etc.
What’s Ahead • Search keeps getting better for users and advertisers • Ad-supported desktops? • Any content, anywhere • Moore’s law coming to networking?
A Gift to the Server and Networking Industries? CapEx Spending by Major Internet Players $MM + 30% + 87% + 34%
What Does It Mean for You? “Can you hang on a sec? I think I just took another picture of my ear.”
QUESTIONS?Paul ChamberlainManaging DirectorTechnology Investment Banking650-234-5603paul.chamberlain@morganstanley.com