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Market analysis

Most tracked Internet companies ended Q1 2015 with a year-over-year revenue growth of more than 20%, but sequentially revenue stayed the same. Compared to the previous quarter, net income slightly declined for all tracked companies in Q1 2015, likely due to the end of the holiday season in 2014.

Smart cities represent a great revenue opportunity for technology and services providers (TSPs). It is forecasted that 1.1 billion connected devices will be used by smart cities in 2015, rising to 9.7 billion by 2020. Smart homes and smart commercial buildings will represent 45% of the total connected devices in use in 2015 and this is forecasted to increase to 80% in 2020.1

The market for the Internet of Things, which includes everything from Nest thermostats, to dishwashers, to heart monitors—is expected to grow 19% in 2015. The digital signage market is projected to be a major driver of growth and is expected to grow from US$6bn in 2013 to US$27.5bn in 2018, representing a 35.7% five-year compound annual growth rate (CAGR). While certain segments of the consumer market are seeing some IoT infiltration and companies are starting to collect data based on sensors, there are still a number of contentious security and privacy issues that need to be worked out. In the United States, the hottest market is expected to be in connected vehicles, with nearly 35% year-over-year growth anticipated in 2015.2

LinkedIn announced that it has agreed to acquire online professional development company,, for roughly US$1.5bn in stock and cash. is a subscription service platform providing access to online courses taught by industry experts. LinkedIn reported revenue of US$638mn in Q1 2015, a 35% increase compared to US$473mn in Q1 2014. Net loss for Q1 2015 was US$43mn, compared to net loss of US$13mn from the first quarter in 2014. Revenue from the US totaled US$389mn, growing 0.3% sequentially against US$388mn in Q4 2014 and 37% year over year against US$285mn in Q1 2014. As a percentage of total revenue, US revenue stood at 61%, marginally higher than the 60% achieved in both the previous quarter and the first quarter of the previous year. Revenue from the international market totaled US$248mn, dipping 2.7% sequentially against US$255mn in Q4 2014 and growing 32% year on year against US$188mn in Q1 2014.

In Q1 2015, Yelp acquired Eat24, a US food delivery business, giving Yelp more contact points with restaurants. Users will now have the ability to order their food and have it brought to them wherever they are. Yelp delivered topline growth of 55% year over year as local businesses increasingly adopted performance-based advertising, and in the first quarter, cost-per-click advertisers represented approximately 40% of local advertising revenue, an increase from 32% in the fourth quarter of 2014. With 92% growth in adjusted EBITDA year over year, it is expected to grow its business through the rest of the year. Net loss in the first quarter of 2015 was US$(1.3)mn, compared to a net loss of US$(2.6)mn, or $(0.04) per share, in the first quarter of 2014.

Netflix acquired a record 4.9 million new members globally in Q1 2015, compared to the 4.0 million of the first quarter of 2014, bringing the total global streaming membership to 62.3 million. In the US, the company gained 2.3 million new members, well above the expected 1.8 million due to both acquiring and retaining more members than forecasted. Internationally, Netflix acquired 2.6 million members in Q1 2015. The strong growth in the US was due to improved content, including the launch of the third season of House of Cards and new shows Unbreakable Kimmy Schmidt and Bloodline. In Q1 2015, higher-than-forecasted net adds and US revenue, coupled with lower-than-forecasted content spending, resulted in a US contribution margin of 31.7%. In 2015, the company forecasts improved margins because they expect a greater share of global and original content costs will be absorbed by growth in international territories.

  1. Gartner, April 2015
  2., March 2015

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