GGV Q4 2011 Mobile Internet Discussion

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C O N F I D E N T I A L 1 C O N F I D E N T I A L © 2 0 1 1 G G V C A P I T A L Q4 CEO Dinner 2011 A Discussion on the “Mobile Internet” December 1 st , 2011 @ggvcapital

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GGV Capital Q4 2011 CEO Dinner Mobile Web discussion document

Transcript of GGV Q4 2011 Mobile Internet Discussion

Page 1: GGV Q4 2011 Mobile Internet Discussion

C O N F I D E N T I A L 1

C O N F I D E N T I A L © 2 0 1 1 G G V C A P I T A L

Q4 CEO Dinner 2011 A Discussion on the “Mobile Internet”December 1st, 2011

@ggvcapital

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A Massive Shift Underway…

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“First Inning” Driven By Games and Social

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Where the Time is Being Spent

• Significant time spent on “existing” brand names from the PC web, with notable exceptions in games and mCommerce

Top Free iOS Apps by Category (9/2011)

Social• Facebook• Twitter• Skype• LinkedIn• FB Messenger

News• CNN• Fox• ABC• Yahoo News• CNN Int’l

Entertainment• Crackle• Netflix• Redbox• IMDb• HBO GO• Hulu+

Top 10 Most Used Android Apps (7/2011)

Android Market

Google Maps

Gmail

Facebook

Google Search

YouTube

Adv Tak Killer Free

Angry Birds

QuickOffice Pro

Pandora Radio

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iOS / Android Comparison

iOS Android

Sales to date (all devices, oct 2011)

265m 200m

Daily new sales/activations (nov 2011)

~400k ~550k

US Smartphone Share(aug 2011)

27.7% 43.7%

UK Oct S.Ph. Sales 42.8% 35%

Tablet Sales 80%+ <15%

Device configs 7 1000s

# of Apps >500k >300k

% of Free Apps 37% 60%

Downloads (cum, Q32011)

18Bn 6Bn

Share of monetization ‘10

$1.7Bn $102Mn

Devices• Apple has larger ecosystem, but has not

matched the growth of android lately.• Key drivers of this blockage for apple have been

carrier exclusivity (now solved), pent up demand for new models, and consumers’ price sensitivity.

iPhone 4S, Tablets• iOS has always held strong in tablets and is

expected to continue• The iPhone 4S and low cost 4, 3GSs have

turned around sales leaderboards for now; wait to see if it lasts

Monetization and Other Android Issues• Developers find it cumbersome to work with

android• many device configs, OS versions

• Despite strong device sales, android users are not monetizing very well:• piracy (53% devs say it’s a big problem)• malware• crapware (crowding out good apps)• Low WTP of users• Poor payment systems)

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US Install Base

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Mobile Device/OS IP Wars: The BasicsEvent Impact

March 2006: NTP settle with RIMM to pay $612m for infringement. This distraction is largely credited with the slowing down of innovation at RIMM and the missing of the smartphone movement.

April 2010: HTC signs licensing deal with MSFT. It will pay a per phone royalty. $5/phone is rumored.

This was a defensive move that proved very smart as MSFT has gone after samsung in a big way.

June 2011: Apple settles with Nokia to pay ongoing royalty. Shows that the two agree android is enemy #1. And that even apple can be humbled in this war.

July 2011: Nortel Patents Sale to Rockstar Bidco for $4.5Bn

6k patents spanning mobile, search and social. AAPL, MSFT, RIMM (770m), ERIC (340m), SNE, EMC. Google bid $900m, but pulled : “no value if all would have access.” Disputes over whether GOOG was bullied.

Allows all who are not winning from Android to go to OEMs and extract a per device licensing fee, which may make Android unprofitable for OEMs and push other OS options. MSFT reportedly demanding $15/phone from Samsung.

July 2011: Google buys 1030 IBM patents Unknown. Specifics not disclosed.

Aug 2011: Google buys MMI for $12.5Bn Largely understood to be a way to beef up the patent portfolio for defensive purposes.

Ongoing: Apple and HTC sue each other for infringement-july: apple wins in ITC first round vs HTC-Aug: HTC counter sues with 3 infringement claims-Aug Apple gets Samsung tablets banned in EU, Australia requests sales figures. Japan in process.

Apple showing that it intends to flex muscle and trying to slow adoption of android if possible. Result of an ITC finding can block imports to the US, which can be devastating.Counter-suits goal is likely for cross-licensing.

Sep 2011: Google gives HTC access to patents to counter sue apple. Google posturing that it will not allow it’s OEMs or its OS to be bullied out of the game.

Q4 2011: Apple and Samsung face off in Germany, NZ, AUS over right to sell 10” tablets. Varied results.

Note: Nortel patents said to span “wireless, wireless 4G, data networking, optical, voice, internet, service provider, semiconductors and other patent portfolios. The extensive patent portfolio touches nearly every aspect of telecommunications and additional markets as well, including Internet search and social networking.”

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Global Market: Center of Gravity is Changing Fast

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China is leading the Change

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China By The Numbers

900m wireless subscribers

350m mobile internetusers

250m new devicesper year

100m Smartphone sales in 2011

250m Weibo (twitter) users

812m QQ (chat) users

200m Tudou monthly actives

120m Combined fans of top 10 weibo users

19% 2011 smartphone penetration

39% Users who click on mobile ads

32% Users who’ve made a mobile purchase

10Minimum number of SNS sites with >100m users

46% Netizens who access internet ONLY via mobile

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Where the Money Is (Revenue / 2014)

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Sector $$MMadvertising 33 (+ 200)apps general 160.2Enterprise apps 30b2b mdm 48.2backend/platform 138.7devices 253digital media 92gaming 85.2network equipment 33.5pymts/commerce 185.3sms 24.4voice/data service 56.1

Grand Total 1139

Many unfunded players here

Where the Investment $’s Have Gone

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$1.1Bn Invested Since 2010Q1, 70% in the Last 9 Mos.

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Financing Highly Correlated with Rise of Smartphones

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Where Do We Go From Here?

• Continued rise / impact of Android

• Importance of iOS / the App Store / etc.

• Geolocation

• China / Brazil / India

• Security / Identity

• iPad / tablet cannibalizing PC + Internet browser

• Monetization