Mobisium – Page 47

Google breaks AdMob even by 2014- makes a $6B killing by 2020: Mobile Advertising

Telecom

hatankar

-

April 24, 2010

Google breaks AdMob even by 2014- makes a $6B killing by 2020: Mobile Advertising

Skeptics have doubted Google’s $750M acquisition of mobile advertising company Admob, which is its third largest acquisition in the history. TeleNow.net forecasts that Google would break this acquisition even by 2014 and make a killing of ~$6B by 2020. So when someone calls Google a “sugar daddy”, you know they are acting smart. Find the valuations in the spreadsheet attached.
AdMob has a current valuation of ~$6B based on 10-year projections and conservative estimates on the ad request data published by the company. Key assumptions are below. Feel free to use the spreadsheet to do your own sensitivity.
Key assumptions of the study:

1) AdMob Ad requests grew by 124% in 2009-2010; the US with ~50% share grew as much as 148%. Fill rate has been assumed at 55%. Fill rates should improve after Google acquisition. Yearly impression growth has been assumed as 110%, 100%, 100%, 80%, 60% and 40% thereon for years 2010, 2011, 2012, 2013, 2014 and so on respectively.
2) % of impressions from CPC has been assumed at 95% and those from eCPM has been assumed at 5% based on reports that AdMob’s ~80% of the revenue comes from CPC advertising
3) CPC rate has been assumed as 15 cents per click as a conservative estimate, in the beginning, reaching as low as 5 cents per click by 2015. Current CPC rates for mobile advertising in the US are in 20 cents range
4) eCPM rates which are 5% of the business have been currently assumed as $8 reaching as low as $5 by 2013. Current eCPM rates in the US are between $3-$25
5) AdMob gets 30% of the revenue share. Currently, AdMob advertises 60:40 split with 40% coming to AdMob. Contracts are more favorable for the bigger publisher and so the rate of 30%
6) The number of employees has been estimated based on Revenue per employee. AdMob currently has ~170 employees as per linked in and this indicates a rough revenue per employee of $450K per employee. Revenue per employee has been assumed currently at $550K, reaching $700K by 2013 as efficiencies kick in. Google currently has revenue per employee in $1M range, which should be the benchmark
7) Fully loaded cost per employee is currently assumed as $180K, which progressively reaches $120K by 2014 as operations are shifted to low-cost center
8) Technology costs have been assumed as 2% of revenue, a benchmark in the industry
9) Discount rate for future cash flows has been assumed as 15% to make conservative estimates on present values. The norm is ~10-11%
10) 10 Year NPV of cash flows stands at $6B with 5-year NPV of cash flow at $2B. Google breaks even by 2014. A killing by every means!

Attachment: Admob_valuation_ver2

Why is hosted unified communications for Small and Medium Enterprises, at least a $50B opportunity annually for AT&T and Verizon in United States?

Telecom

hatankar

-

April 11, 2010

0

Why is hosted unified communications for Small and Medium Enterprises, at least a $50B opportunity annually for AT&T and Verizon in United States?

The business case above shows that with adoption level of just 40-50% and with price points of just $60 / month /employee which includes a mobile handset, phone, software, voice and data plan the size of the market is substantially large at $50B-$70B annually.

Small and Medium size enterprises don’t have the luxury of a dedicated PBX system- IP or otherwise. Telecom operators such as AT&T and Verizon can offer a hosted unified communications solution which entails mobile and fixed-line convergence, instant messaging, presence, video and teleconferencing over PC and mobile phones and integration with mail exchange and messaging systems and offers a unique proposition to small and medium-size enterprises.
SME data as defined as companies up to 500 employees form a large part of US economy as indicated by 2007 data published by US census bureau. Many / most of them can’t afford a dedicated PBX system. Unified communications provides them not just fixed mobile convergence value but also a host of other features; access to which currently requires them to spend a significant amount– conferencing, instant messaging, presence etc.

Hosted unified communications offering to SME is indeed the answer to eroding telco ARPUs.

Mobile Social Networking Smart Pipe: How is fb2mobile by Maxis in Malaysia, the best attempt by an operator globally – Vodafone, Orange and AT&T – in mobile social networking

Telecom

hatankar

-

March 28, 2010

0

Mobile Social Networking Smart Pipe: How is fb2mobile by Maxis in Malaysia, the best attempt by an operator globally – Vodafone, Orange and AT&T – in mobile social networking

Operator Maxis in Malaysia is probably the only operator globally that has been able to successfully launch a product fb2mobile, that goes beyond being a bit pipe in mobile social networking. As compared with Vodafone 360 by Vodafone in the UK, Social Net by AT&T in the US, and messenger services by Orange in the UK, they have a superior offering that covers all the elements of messaging and keeps the price plans simple and easily comprehensible.

Operators globally have been trying to go beyond a bit pipe approach and thereby trying to compete with over the top players such as Facebook and Twitter. TeleNow.net conducted a study wherein it compared the mobile social networking offerings by four operators, Maxis, Vodafone, AT&T and Orange and realized that different operators have taken a different approach towards offering mobile social networking services to its subscribers and fb2mobile offering by Maxis is the best. The key highlights of the study are:

1) fb2mobile by Maxis has a comprehensive offering wherein it provides updates and uploads through messaging to Facebook and Twitter
2) Vodafone tries to create its own social network, an unsuccessful attempt that many operators have tried in the past. Vodafone 360 doesn’t offer upload through messaging and its entire approach revolves around the subscriber address book. A subscriber can back up and synchronize its address book with social networking sites and there’s no integration to update status or upload photographs in Facebook or Twitter. An incomplete offering by every means.
3) AT&T has probably taken the right approach by offering mobile application through its offering Social Net, that provides updates to Facebook and Twitter. However, the biggest challenge with mobile client application is really the compatibility of application clients with numerous types of handsets. An uphill task indeed. The Social Net, a page in Facebook has mostly dissatisfied customers
4) Orange has taken the instant message route and needless to add there is little that qualifies as mobile social networking
5) Above all what fb2mobile does the best is its simple pricing which is very clearly explained on its website. Ironical, that its untrue for the other social networking offerings compared in the study

The conclusion is that fb2mobile is ranked above Vodafone 360, Social Net and Messenger offering by Orange and is the best attempt by an operator to being a smart pipe in mobile social networking.

Why are Facebook users increasingly older?

Telecom

hatankar

-

March 22, 2010

0

Why are Facebook users increasingly older?

The conclusion is that though new Facebook users are increasingly older in developed economies, it is because the penetration amongst younger age groups is already very high. Marketers now have a larger audience across age segments, on the Facebook; who they can target and engage.

The buzz is that Facebook users are now increasingly older. While this defies common belief that Facebooking is primarily youth-driven, it also begs the question that should marketers focus more on older segments. To explore the details Telenow.net conducted a study.

As a part of the stud,y TeleNow.net selected 5 countries across 5 continents – US, Italy, Ghana, India and Australia and looked at the population in groups of 5 years segments as provided by United Nations. Then we looked at facebook users in each of these segments and computed the facebook users as a % of the population for each of these segments. TeleNow.net concluded that:

1) In developed economies, US, Italy and Australia the penetration of facebook amongst age groups 15-19 and 20-24 was > 80% with penetration reaching as high as ~100% for 15-19 age groups in Australia and Italy. So understandably any growth in these countries in the number of facebook users has to come from older age groups

2) In the developing economies of Ghana and India % of facebook was between 0-5% for age groups 15-19 and 20-24. In these countries, access to the internet is limiting the penetration of social networking across all age segments. However, there is still a strong possibility of growth in a number of facebook users to come from younger age segments as the penetration is still low. It is at best inconclusive as to who will drive growth in future.

The conclusion is that though new facebook users are increasingly older in developed economies, it is because the penetration amongst younger age groups is already very high in these economies. Marketers now have a larger audience across age segments on the facebook who they can target to engage.

Social Networking over mobile phones in APAC in 2010

Telecom

hatankar

-

February 23, 2010

0

Social Networking over mobile phones in APAC in 2010

Social networking over mobile phones has seen increasing adoption in the US and western countries where it has reached up to 20-25% for certain age segments.
The growth has not been so high in APAC till now but will see a steady increase in 2010 when all the players – operator, OTT players, device manufacturers – expect to identify business models to monetize social networking over mobile phones. The size of the market is significant wherein an operator in a country like Singapore can expect to reach 4-5 million USD in revenues in next 3-4 years with a penetration of ~30-40% of the potential market and with a nominal subscription fee of ~2-3 USD.

Most of the smartphones to be launched in 2010 come equipped with features like social networking address book synchronization, clients, and message and media file update for the most popular social networking sites. OTT players, however, will still find it difficult to reach the critical mass due to low mobile internet penetration and still relatively lower smartphone penetration in a few countries. In countries like Singapore where mobile internet penetration is above 10% and smartphone penetration is high, reach due to mobile internet penetration is still small ( less than 400K subscribers overall). OTT players will find it difficult to monetize their reach purely on advertising and will have to depend on the operator.

Operators, on the other hand, don’t have a clear strategy to target this market. Some have made the mistake of attempting to create their own social network and others wish to pioneer strategies in partnership with VOIP telephony players like Skype and fring.

Co-opetition is perhaps the best way forward wherein an operator partners with social networking sites and is their aggregator. Interactions are facilitated by SMS/MMS. Being an aggregator provides the operator with the opportunity to safe keep subscriber address book and media as a trusted service provider and it helps social networking sites increase their reach and explore business models to monetize.

However, even if operator launches plans that make access to social networking sites over the mobile phone through their aggregator site as free with certain free SMS/MMS, the biggest challenge is the price of the plan. The plans should be affordable to the most active age segment of 18-24 years old which is dependant on their parents for a monthly allowance. Operator strategy will be to optimize reach and profitability for the target segment of 15 to 40 years old.

Advertising based models are yet to prove their mettle even in the internet social networking and with current advertising rates, it is hard to expect significant revenues either to the operator or to the OTT players in the next few years.

2010 will see operators launch their own bundled or standalone social networking services in partnership with social networking sites, that will drive increased adoption of social networking over mobile phones. With the expected size of the market, perhaps fb2mobile and XL funbook have little at stake.