INTERNET TRENDS STANFORD BASES12/3/2012Mary MeekerOutline1) Basic Stats Internet Growth Remains Robust, Rapid Mobile Adoption Still in Early Stages2) Re-Imagination of Nearly Everything3) Asset-Light Generation From Hand to Cloud Google indicated during Q3:12 earnings call that its mobile revenue (from advertising and apps / content) run rate is $8B+, up from $2.5B mobile ad revenue run rate in Q3:11.$0$5$10$15$20$2520082009201020112012EMobile Ad + Apps Spending ($B)Mobile AppsMobile AdvertisingGlobal Mobile App + Advertising Revenue, 2008 vs. 2012E$19B$0.7BMobile Monetization Growing Rapidly (67% Apps, 33% Ads)17Mobiles + Tablets = 24% of Online Shopping on Black Friday in 2012 (vs. 6% Two Years Ago), iOS 4x than Android2010201120120%5%10%15%20%25% Share of All Internet Shopping TrafficiPhoneiPadAndroidKindle and NookGalaxy TabOther% of USA Black Friday Internet Shopping Traffic From Mobile + Tablet Devices, 2010 2012Note: Black Friday (11/23/12) is the day following Thanksgiving Day in USA, traditionally the beginning of the Christmas shopping season. On this day, most major retailers open early and offer promotional sales to kick off the holiday shopping season. Source: IBM Digital Analytics Benchmark186%14%24%7%15%43%26%10%25%11%42%22%1%0%10%20%30%40%50%PrintRadioTVInternetMobile% of Total Media Consumption Time or Advertising SpendingTime SpentAd Spend% of Time Spent in Media vs. % of Advertising Spending, USA 2011$20B+ Opportunity in USAMaterial Upside for Mobile Ad Spend vs. Mobile UsageNote: *Internet (excl. mobile) advertising reached $30B in USA in 2011 per IAB, Mobile advertising reached $1.6B per IAB. Print includes newspaper and magazine. $20B opportunity calculated assuming Internet and Mobile ad spend share equal their respective time spent share. Source: Time spent and ad spend share data eMarketer, 12/11, Internet and mobile ad dollar spent amount per IAB.Internet Ad = $30B*Mobile Ad = $1.6B*19RE-IMAGINATION OF NEARLY EVERYTHING POWERED BY NEW DEVICES + CONNECTIVITY + UI + BEAUTY WHERE WE ARE NOW20We hope to rewire the way people spread and consume informationWe think a more open and connected world will help create a stronger economy with more authentic businesses that build better products and services.-Mark Zuckerberg, Founder / CEO, FacebookLetter to Potential Shareholders, May 2012Re-Imagination of a Big Idea21Re-Imagination of Computing DevicesTHEN (Desktops / Notebooks)NOW (Tablets / Smartphones)22Re-Imagination of User InterfacesTHEN (Keyboard + Mice = Graphical User Interface)NOW (Touch + Voice + Gesture = Natural User Interface)2324Global Market Share of Personal Computing Platforms by Operating System Shipments, 1975 2012EOtherTRS-80AndroidCommodoreAtariAmigaAppleWinTel0%10%20%30%40%50%60%70%80%90%100%1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011Market Share of Personal Computing Platforms by Operating Systems (%)Source: Asymco.com (as of 2011), Public Filings, Morgan Stanley Research, Gartner for 2012E data. 2012E data as of Q3:12.Re-Imagination of Computing Operating Systems - iOS + Android = 45% Share vs. 35% for Windows1983 Wintel - 25%1998 2005 Wintel 96%2012E Wintel 35%Global Smartphone + Tablet Shipments Exceeded PCs in Q4:10Global Unit Shipments of Desktop PCs + Notebook PCs vs. Smartphones + Tablets, 2005-2015ENote: Notebook PCs include Netbooks. Source: Katy Huberty, Ehud Gelblum, Morgan Stanley Research. Data and Estimates as of 9/12.02004006008001,0001,2001,4001,6001,80020052006200720082009201020112012E2013E2014E2015EGlobal Unit Shipments (MMs)Desktop PCsNotebook PCsSmartphonesQ4:10: Inflection Point Smartphones + Tablets Total PCsTablets25Global Smartphone + Tablet Installed Base Should Exceed PC Installed Base in Q2:13EGlobal Installed Base of Desktop PCs + Notebook PCs vs. Smartphones + Tablets, 2009-2015ENote: Notebook PCs include Netbooks. Assumes the following lifecycles: Desktop PCs 5 years; Notebooks PCs 4 years; Smartphones 2 years; Tablets 2.5 years. Source: Katy Huberty, Ehud Gelblum, Morgan Stanley Research. Data and Estimates as of 9/12.05001,0001,5002,0002,5003,0002009201020112012E2013E2014E2015EGlobal Installed Base (MMs)Desktop PCsNotebook PCsSmartphonesQ2:13E: Projected Inflection Point Smartphones + Tablet Installed Base Total PCs Installed BaseTablets26Re-Imagination of ConnectivityTHENNOW27125 Years In, Landlines Were Surpassed by Mobiles in 200201,0002,0003,0004,0005,00019941996199820002002200420062008Global Installed Base (MMs)Fixed Telephone LinesMobile SubscriptionsGlobal Fixed Telephone Lines vs. Mobile Subscriptions, 1994 - 2009Source: International Telecommunications Union. 2002 Mobiles Landlines2006 Landlines Peaked at 1.3B28Re-Imagination of KnowledgeTHEN (Print Copies / Updated Annually)NOW (Accessible Everywhere / Updated Real-Time / Everyone Can Contribute)29244 Years In, Encyclopedia Britannica Went Out of Pr