Abbreviated Contents

Economy + Internet Trends, October 20, 2009

• Economy + Internet Trends Outline
• Financial Market + Economy Update / Dashboard
• Stock Market = Often a Leading Indicator of Economic Growth Russia +181% vs. 36-Month Low / India +109% / China +72% / USA (S&P500) +59%
• Credit Spreads Narrowing = Easier to Borrow Money But Borrowing Cost Still High vs. ‘Normal’
• Stock Market Volatility Implies Relatively Stable Outlook Volatility Index (VIX) Has Returned Near ‘Normal’
• S&P500 Positive Earnings Estimate Revisions Rising After Largest Cuts in 20 Years (in C2008 / CQ1:09)
• Technology Sector Shining Relative to Others 19% of S&P500 Market Capitalization vs. 15% in 2008
• Intel as Proxy For Technology Spending CQ3:09 Revenue (+17% Q/Q) = Highest CQ3 Sequential Growth in 30+ Years
• Global Technology Revenue Estimates Imply Recovery…So Far, a 2001 Redux
• Technology IPO Market 2x Deal Volume…4x Dollar Volume YTD vs. 2008
• Financial Market + Economy Update / Dashboard
• Domestic GDP + Consumption Trends Becoming Less Bad
• Global GDP Growth Forecasts Have Turned Positive…Led by China / India
• Advertising Spending Should Grow in 2010E Based on Regression Analysis
• Retail Sales + eCommerce Growth Troughed in CQ1:09
• Consumer Confidence Rising But Still Well Below ‘Normal’
• Manufacturing Returning to ‘Normal’
• Risk Low Manufacturing Capacity Utilization Implies Weak Demand
• Risk New Home Sales Off Historic Lows But Way Below ‘Normal’
• Risk Consumer Credit Card Defaults Rising
• Risk Residential Mortgage Defaults at All-Time Highs & Rising
• Risk Commercial Mortgage Defaults Rising
• Risk Unemployment High & Rising – USA at 10% in 9/09 vs. 6% Y/Y
• Risk Unemployment Peak = Typically Key for Sustainable Economic Turn
• Risk Debt Levels at Historic Levels & Rising, USA Government Leading Charge
• Risk USA Income Statement = Expenses Exceed Revenue Entitlement Expenses (Social Security + Medicare…) Going Lots Higher
• Web 2.0 Summits 6 Years of Internet Trends for John & Tim
• 8 Key Mobile Internet Themes
• Key Theme # 1 Mobile Internet Usage Is and Will Be Bigger than Most Think
• Mobile Internet Next Major Computing Cycle
• New Computing Cycles Supported by 10x More Devices Opportunities for Semiconductor / Hardware / Software / Services
• Mobile Internet Outpaces Desktop Internet Adoption iPhone + iTouch Users = 8x AOL Users 8 Quarters After Launch
• Real-Time Wireless Remote Controls Everywhere Number / Types of Cloud-Based Mobile Connected Devices Growing Rapidly
• Global 3G Subscribers – Wireless Broadband 2010E Inflection Point, Penetration >20%
• Location-Based Services Key to Mobile Internet ‘Secret Sauce’
• Key Theme # 2 Apple Mobile Share Should Surprise on Upside Near Term
• Momentum Favors Apple iPhone + iTouch Ecosystem Fastest Hardware User Growth in Consumer Tech History
• Mobile Internet Usage Likely a Leading Indicator of Smartphone Shipments iPhone / Android Usage Share Much Higher than Shipment Share
• Key Theme #3 Next Generation Platforms (Social Networking + Mobile) are Driving Unprecedented Change in Communications + Commerce
• Facebook Largest Share Gainer of Online Usage Over Past 3 Years
• Powerful New Publishing / Distribution Platforms
• New Communications Platforms Facebook = Unified Communication + Multimedia Repository in Your Pocket
• Mobile Social Networking in Japan ~3x Greater (and Rising) than Desktop Social Networking per Mixi
• Apple Unshackled Mobile Developers from Carrier Walled Gardens Leveraged 100MM+ iTunes Users Trained to Purchase Digital Goods Apple’s Way
• ‘Walled Gardens’ Collapsed Nearly Overnight UK Mobile Users Fleeing From Carrier Portal Sites
• Facebook + Apple iPhone / iTouch Driving Independent / Overlapping Innovation in Social Networking + Mobile Platforms
• Key Theme # 4 Mobile in Japan + Desktop Internet Provide Roadmaps for Mobile Growth + Monetization
• Japan’s Mobile Internet Revenue Mix Shows Growth Potential for eCommerce, Paid Services + Advertising
• Mobile Commerce Ramping Rapidly in Japan 18% of Rakuten’s CQ1 eCommerce Revenue Derived from Mobile
• While Vendors / Advertisers Tend to ‘Pay’ on Desktop Internet (via Advertising + eCommerce)…
• …Users Tend to ‘Pay’ on Mobile Internet (via Premium Services)
• Key Theme # 5 3G Adoption / Trends Vary by Geography
• 3G Penetration Inflection Points Vary by Region W. Europe + N. America = 2007–2008, ROW = 2010-2012E
• Key Theme # 6 Carriers in USA / W. Europe Face Surging Network Demand But Uncertain Economics.
• Heavy Mobile Data Users Likely to Triple to 1B+ by 2013E
• AT&T 50x Mobile Data Traffic Increase in Past 3 Years
• Wi-Fi = Material Portion of USA iPhone Traffic, per AdMob Wi-Fi Providing Some Relief to Challenged 3G Networks
• Key Theme # 7 Regulators Can Help Advance / Slow Mobile Internet Evolution
• Key Theme # 8 Mobile-Related Share Shifts Will Create / Destroy Material Shareholder Wealth
• Mobile Internet Likely to Follow Timing & Development Patterns of Desktop Internet Market
• Technology Cycles - Wealth Creation / Destruction New Companies Often Win Big in New Cycles
• Appendix USA Income Statement, F2000 – F2009E
• Disclosure Section