Internet sector trends remain positive—mobile devices and the Internet of Things are driving up the time spent online. However, differences remain in how each company is adapting to a growing mobile environment. Within online advertising there is a strong momentum in native or newsfeed advertising, particularly on mobile devices, with Facebook and LinkedIn as the primary beneficiaries. Traditional desktop display advertising is under greater pressure due to the shift towards newsfeed advertising along with programmatic audience-based buying.
The Internet plays an increasingly central role in the modern world, not only at the level of infrastructure, but also in culture, society and business. The Internet of Things (defined as the network of physical objects that contain embedded technology to communicate and interact with their internal states or the external environment) extends that role to encompass an increasingly diverse range of devices and communication streams, many of which will be essentially machine-to-machine communications, rather than involving a person at either endpoint.
Opportunities arising from the Internet of Things over the long term are generally agreed to be huge. Manufacturing opportunities, deployment, activation and ongoing management of millions of devices, and the analytical opportunities arising from massive streams of potentially real-time information, all represent huge untapped business opportunities.1
The global Internet audience continues to grow rapidly. At the beginning of the year there were 2bn broadband Internet users (including fixed and wireless) worldwide. This large base of users encourages businesses to innovate new online services. The sales of entertainment, event tickets, travel, apparel and consumer electronics are growing rapidly. The most powerful trends on the Internet include access via wireless devices, migration of entertainment to the Web and cloud-based software-as-a-service.2
Overall eCommerce growth remains strong, driven by continued secular penetration and mobile devices, which increase the ease of purchasing. This will benefit eBay and Amazon. Late Q3’13 and Q4’13 are typically strong periods of stock performance for eCommerce and both companies have lagged the broader Internet group YTD since the end of June. Performance for both was also impacted in part by many new regional players entering the eCommerce domain since the end of June.3
Amazon’s sales increased 24% in Q3’13 YoY. Changes in currency exchange rates impacted net sales by US$(332)mn and US$(348)mn for Q3’13 and Q3’12 respectively. North American sales grew 31% in Q3’13 and 29% for the first nine months of 2013, compared to the comparable periods last year. Increased unit sales were the major factor in revenue growth, driven largely by the company’s continued efforts to reduce prices for customers, including shipping offers. International sales grew 15% in Q3’13 YoY.
Yelp Inc. reported a total net revenue increase of US$24.8mn, or 68% YoY. Local advertising revenue increased US$22.7mn, or 80%, due to a significant increase in advertisement purchases by local businesses. Yelp had recently expanded their sales force to reach more local businesses. Advertising revenue also increased to US$1.0mn, or 17%, due to an increase in the average spend per advertiser, driven by increased advertising impressions. In addition, other services revenue increased by US$1.1mn, or 55%, mostly due to an increase in revenue from the sale of Yelp Deals and remnant advertising inventory as well as added partnership arrangements.
LinkedIn’s revenue for Q3’13 was US$393mn, an increase of 56% YoY. Net loss for the third quarter was US$3.4mn (due to stock-based compensation charges) compared to net income of US$2.3mn in Q3’12. LinkedIn membership surpassed 259mn, an increase of 38% YoY, and members engaged across desktop and mobile devices with mobile devices contributing 50% of revenue. Though 66% of users are now outside the U.S., only 38% of revenue is international.