2011 internet sector outlook jpmorgan
TRANSCRIPT
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
1/78
North America Equity Research
January 2011
Nothing But Net
2011 Internet Sector Outlook
Internet, Media & Entertainment
Imran KhanAC
Senior Analyst
-
J.P. Morgan Securities LLC
See the end pages of thi s presentation for analyst certification and important disc losures.
. . organ oes an see s o o us ness w compan es covere n s researc repor s. s a resu , nves ors s ou e aware a e rm mayhave a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making theirinvestment decision.
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
2/78
Over the ToSociale wor s
Retail Travel Publishing
TV Movies NewsMedia
The Bottom Line:
1
Companies that dont embrace these trends could find themselves in danger by the end of the decade.
Source: J.P. Morgan.
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
3/78
2000 2010
1,320 1,258S&P 500 Index
,
97M 293MWireless Subscribers
. .
124M 240MInternet Users
a a ans n evenue
~$2B~$18B
US eCommerce
Amazon
.
(2 yrs old)
.
(F10 net rev)
Didnt Exist 500M+ Users
Google (Search)
Facebook (Social)
Founders working for PayPalMonetizing 100B views/yr
No Streaming Option~12M users streaming
YouTube
2
e x
Source: J.P. Morgan.
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
4/78
2015 or
2020 look
like?
3Source: Viacom.
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
5/78
.
Continued adoption of social media and its impact on existing businesses such as advertising,entertainment and eCommerce.
Increased smartphone penetration will further proliferate mobile web usage and app development andcould disrupt the way we shop, consume content and communicate.
Consumers embracing over the top video consumption. We think content owners, distributors and
own.
Monetization of mobile search is a critical factor for Googles growth.
r c mor ar re a ers mar e s are osses cou acce era e. ona y, we expec ma er a mar e
share shifts in countries such as China, where B&M brands are relatively weaker.
The online hotel business retains significant runway for international growth, and we expect an above-industr -avera e rowth rate in the se ment.
We expect more consolidation/M&A rather than share buybacks.
Despite its underperformance of the search market growth rate for most of the last ten years, we think.
We believe rapid internet and smartphone penetration growth will create many more exciting businessesoutside the US but we expect US companies to face major challenges in markets outside Western
Europe.
4
We expect a major effort by internet companies all over the world to woo local advertisers.
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
6/78
.
Continued adoption of social media and its impact on existing businesses such as advertising,entertainment and eCommerce.
Increased smartphone penetration will further proliferate mobile web usage and app development andcould disrupt the way we shop, consume content and communicate.
Consumers embracing over the top video consumption. We think content owners and advertisers must.
Monetization of mobile search is a critical factor for Googles growth.
US brick & mortar retailers market share losses could accelerate. Additionally, we expect material markets are s s n coun r es suc as na, w ere ran s are re a ve y wea er.
The online hotel business retains significant runway for international growth, and we expect an above-industry-average growth rate in the segment.
We expect more consolidation/M&A rather than share buybacks.
Despite its underperformance of the search market growth rate for most of the last ten years, we thinkdisplay should match search revenue growth in 2011.
We believe rapid internet and smartphone penetration growth will create many more exciting businessesoutside the US but we expect US companies to face major challenges in markets outside Western
Europe.
5
.
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
7/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
8/78
Facebook Reach Now Comparable to Yahoo!, Google
In 2H10, users are for the first time spending more minutes on Facebook than on Yahoo! sites
Facebooks Expanding User Reach FB Minutes Surpass Yahoo!s
Users as % of US Internet
79% 79%84% 81% 70%40%
60%
80%
100% % of All US In ternet Minutes
12%9% 10%
6%
8%
10%
12%
14%
0%
20%
Yahoo Google Facebook
Aug-Oct '09 Aug-Oct '10
4% 5%4%
0%
2%
Yahoo Google Facebook
Aug-Oct '09 Aug-Oct '10
35%
40%
The Tollbooth at the Center of theInternet
Source: comScore, J.P. Morgan estimates. Source: comScore, J.P. Morgan estimates.
More than Half of Facebook Users Visit Site Daily
8%
13% 13%29%
38%
0%
5%
10%
15%
20%
25%
30% Social Networking Sites (PrimarilyFacebook) Are Becoming the Next-
Generation Web Platform
7
At least once a
day
Almost every day 1-2x a week 1-2x a month Never, ,potentially game-changing opportunities
Source: J.P. Morgan consumer survey.
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
9/78
A Potential Threat to Googles Dominance?
~
ecosystem
Thus far, Google largely retaining its share, but Facebook gaining rapidly
We think Facebook Connect is helping drive this trend (see next slide)
Traffic to nytimes.com
25%25%
Traffic to Amazon Sites
15%
Traffic to eBay Sites
20.8% 20.4%
4.8%2.9%
0%
5%
10%
15%
20%
20.0% 19.6%
7.7%1.8%5%
10%
15%
20%
11.8% 11.4%
4.7%
2.6%5%
10%
Source: comScore.
Google, -2% Y/Y Facebook, +66%
Oct-09 Oct-10
Google, -2% Y/Y Facebook, +328%
Oct-09 Oct-10
0%
Google, -3% Facebook, +81%
Oct-09 Oct-10
8
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
10/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
11/78
Global digital gaming market was almost $16B in 2009 and is expected to reach$20B in 2010, according to Electronic Arts; we believe social games, which are a
subset of digital, are growing significantly faster than the segment as a whole
Digital gaming grew at ~36% CAGR since 2004 and now represents 41% of the,
Key social gaming companies: Zynga, Playfish, CrowdStar, Playdom et al
More Frequent Facebook Visitors Also Play Games More Often
38%
54% play games
Almost every day
Use FB: At least 1x/day
6%
20%
1-2x a month
1-2x a week
Source: J.P. Morgan December 2010 consumer survey.
% of users pl ayin g soci al games, by frequ ency of FB visits
10
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
12/78
.
Continued adoption of social media and its impact on existing businesses such as advertising,entertainment and eCommerce.
Increased smartphone penetration will further proliferate mobile web usage and app development, andcould disrupt the way we shop, consume content and communicate.
Consumers embracing over the top video consumption. We think content owners and advertisers must.
Monetization of mobile search is a critical factor for Googles growth.
US brick & mortar retailers market share losses could accelerate. Additionally, we expect material markets are s s n coun r es suc as na, w ere ran s are re a ve y wea er.
The online hotel business retains significant runway for international growth, and we expect an above-industry-average growth rate in the segment.
We expect more consolidation/M&A rather than share buybacks.
Despite its underperformance of the search market growth rate for most of the last ten years, we thinkdisplay should match search revenue growth in 2011.
We believe rapid internet and smartphone penetration growth will create many more exciting businessesoutside the US but we expect US companies to face major challenges in markets outside Western
Europe.
11
.
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
13/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
14/78
US Mobile Ad Spend Forecast
$2,549.5
(25%)
$2,036.8
(36%)$1,501.3
(36%)$1,102.4
(48%)$743.1$416.0
$1,500.0
$2,000.0
$2,500.0
$3,000.0
(30%)
$-
$500.0
, .
2009 2010 2011 2012 2013 2014
Source: emarketer, Sep 2010.
US Mobile Ad Spend Share by Format
20112012
2013
2014
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2009
2010
13
Source: emarketer, Sep 2010.
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
15/78
We estimate that there are approximately 233M mobile phone users in the US, and smartphones
are becoming an increasingly large proportion of the mix
Smart vs. Nonsmart Phone Penetration
Smartphone Users,
18%
Non-smartphone
Users, 82%
Source: Nielsen 2010 Media Industry Fact Sheet.
Smart hone users are 3x more likel to browse the mobile web and to use a mobile a and 2x as
likely to send photos or videos (comScore)
14
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
16/78
Opportunity Challenge
Search more searches less coverage
more targeted less transactional (eCommerce)
more product/place oriented application demand
News Sites reinstates the im ortance of a stron brand less s ace to ut ads
people download branded apps companies with lower brand recognition lesslikely to sell apps
Games more time spent multiple platform/device compatibility issues
hard to differentiate in crowded app market
Aggregators slow loading speed will make aggregatorsmore attractive to consumers
less coverage
time
aggregation
Video high demand for video content while
traveling
smaller screen
Coupons larger audience than print may be harder to track source for in-store use
can access for immediate demand
15
. . .
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
17/78
Device proliferation is driving ubiquityAlthough a Majority Dont Read Much,
Prices falling as devices get better
A niche market can sti ll be a big market
~ ea + oo s per ear
49%
40%
50%
60%
We think the moneys in content
Content means more than just books
eBook success could threaten traditional
20%
9% 7% 6%10%
0%
10%
20%
30
0-10 books/yr 11-15 16-20 21-25 26-30 31+
retail
eBooks Penetration of Trade Print Is Growing Exponentially
910
Source: J.P. Morgan Internet Team December 2010 Survey.
3%4%
6%
8%
0.5% 0.6%1
0%
2%
2006 2007 2008 2009 2010
16
Source: Association of American Publishers; J.P. Morgan estimates. Note: 2010 estimate based on Jan-Oct data.
eBooks as %of Trade Print
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
18/78
Amazon has marketedKindle aggressively, and
its brand awareness is up
to 76% 76%
45%
84%
20%
40%
60%
80%
0%
Kindle Nook iPad
Brand Awareness (Know the name & what it is)
Source: J.P. Morgan Internet Team December 2010 surveys.
15%
20%
25%
30% Compared to our mid-2009survey, significantly more
users said they either
7%
0%
5%
10%
Jul 2009 Dec 2010
% sa in the either own a Kindle or lan to bu one in the next 12 months
owned a Kindle or planned
to buy one in the next 12
months
Source: J.P. Morgan Internet Team July 2009 and December 2010 surveys.
17
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
19/78
.
When the iPad came out, many investors feared it would be the end of the Kindle
These fears appear to have been misplaced: Kindle has sold well in recent quarters
We think the price difference is one key factor: $139 for the lowest-priced Kindle vs.
$499 for the lowest-priced iPad Our survey suggests people are happy with both: ~40% of iPad owners also
reported owning a Kindle
Another 23% of iPad owners plan to buy a Kindle in the next 12 months
Not mutually exclusive: Many of the iPad owners in our survey also reported owning Kindle
23%
40%
Plan to buy Kindle next 12 months
Also own Kindle
14%
0% 20% 40%
Don't know / Not sure what Kindle is
Percentage among iPad Owners in our Survey
18
Source: J.P. Morgan Internet Team December 2010 survey conducted by a third-party vendor; 1,002 total survey respondents.
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
20/78
.
Continued adoption of social media and its impact on existing businesses such as advertising,entertainment and eCommerce.
Increased smartphone penetration will further proliferate mobile web usage and app development andcould disrupt the way we shop, consume content and communicate.
Consumers embracing over the top video consumption. We think content owners and advertisers must.
Monetization of mobile search is a critical factor for Googles growth.
US brick & mortar retailers market share losses could accelerate. Additionally, we expect material markets are s s n coun r es suc as na, w ere ran s are re a ve y wea er.
The online hotel business retains significant runway for international growth, and we expect an above-industry-average growth rate in the segment.
We expect more consolidation/M&A rather than share buybacks.
Despite its underperformance of the search market growth rate for most of the last ten years, we think
display should match search revenue growth in 2011.
We believe rapid internet and smartphone penetration growth will create many more exciting businessesoutside the US but we expect US companies to face major challenges in markets outside Western
Europe.
19
.
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
21/78
-
Approximately 12M Netflix subscribers are taking advantage of streaming services
analyst to be sold in 2011), we think consumers appetite to view content in a broader range of ways is
growing rapidly
We think members of the younger generation are more willing and more open to consuming content fromalternative sources and on alternative devices
Our survey suggests as many as a quarter of pay TV subscribers would consider cutting the cord, andmost of them would do so even at the loss of live sports. Those who are already using Netflix Watch
The success of Netflix is attracting additional entrants into the space
20
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
22/78
More than 25% would consider Over the Top Including 16% of those who are currentlysatisfied with pay TV lineup & pricing
Would you consider switching from Cable to Broadband Video?
75%
Among users who subscribe to a cable/satellite TV package
Source: J.P. Morgan consumer survey.
72%
25%
50%
0%
Yes No
63% of these would consider it even if i t meant losing access to live sport ing events
Source: J.P. Morgan consumer survey.
21
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
23/78
Netflix Watch Instantly subscribers are more likely to consider dropping their cablepackages
Those who use Watch Instantly are more likely to considerswitching away from Cable
50%
75%
Source: J.P. Morgan consumer survey.
33%42% 47%
67% 58% 53%25%
Not a NFLX subscriber Never used streaming/tried once Stream at least 1-2x/month
Would consider dropping pay TV / don't have pay TV Would not considerSource: J.P. Morgan consumer survey.
Netflix subscribers are more likely to also be premium pay TV subscribers
(And premium pay TV subscribers are more likely to be Netflix subscribers)
22
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
24/78
Online Video Advertising Market to Grow in 2011,
Viewing online videos has become the norm
Online Video Viewer Trends
thousands
20,000,000
30,000,000
, ,
165,000
170,000
175,000
180,000
,
0
, ,
Oct-
2009
Nov-
2009
Dec-
2009
Jan-
2010
Feb-
2010
Mar-
2010
Apr-
2010
May-
2010
Jun-
2010
Jul-
2010
Aug-
2010
Sep-
2010
Oct-
2010
155,000
160,000
Content ualit is im rovin
Source: comScore data oa nque ewers eos
Source: comScore data.
Ad formats are diverse; performance measures are limited but improving
Brand advertisers are increasingly adopting the model
23
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
25/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
26/78
Al though Google has seen its desktop strength extend to the mobile device, the
15%
Searches coming from Mobile
question is: Can Google narrow this gap?
3%Revenue Coming from Mobile
Devices
0% 2% 4% 6% 8% 10% 12% 14% 16%
Source: J.P. Mor an estimates.
Note: 3% gross revenue includes AdMob and mobile display revenue.
25
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
27/78
.
Continued adoption of social media and its impact on existing businesses such as advertising,entertainment and eCommerce.
Increased smartphone penetration will further proliferate mobile web usage and app development andcould disrupt the way we shop, consume content and communicate.
Consumers embracing over the top video consumption. We think content owners and advertisers must.
Monetization of mobile search is a critical factor for Googles growth.
US brick & mortar retailers market share losses could accelerate. Additionally, we expect material markets are s s n coun r es suc as na, w ere ran s are re a ve y wea er.
The online hotel business retains significant runway for international growth, and we expect an above-industry-average growth rate in the segment.
We expect more consolidation/M&A rather than share buybacks.
Despite its underperformance of the search market growth rate for most of the last ten years, we think
display should match search revenue growth in 2011.
We believe rapid internet and smartphone penetration growth will create many more exciting businessesoutside the US but we expect US companies to face major challenges in markets outside Western
Europe.
26
.
C E i R b d S l M k t Shift
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
28/78
eCommerce: Economic Rebound + Secular Market Shift =
Retail moving online less quickly than eCommerce penetration lags online advertisingadvertising
Amazon cont inues to gain market share;size is an entry barrier 4.8% 5.1% 5.4% 6.0%
6.4%8.2%
10.5%
3.6%3.9%
13.7%
5%
10%
15%
Mobile eCommerce could further hurt brick-and-mortar retailers
Inventory management
1.4% 1.8% 2.1%2.5%
3.4%2.9%
0%
2002 2003 2004 2005 2006 2007 2008 2009
eCommerce as % of all US retail Online as % of all US Advertising
Brick-and-mortar bankruptcies
Catalysts for international growth
Source: US Census Bureau, Magna Global, J.P. Morgan estimates.
Improvement of shipping infrastructure
Improved payment systems
Better fraud protection
Internet sales tax; in our view, probably theheadline risk
As eCommerce matures, private labels could
27
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
29/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
30/78
Online Shopping Gaining Penetration
30%
40%
Question: How many times do you purchase items online per month?
20%
34%28%
13% 2% 1%3% 2%12%
36% 32%
15%
0%
10%
20%
' - - - +
Source: J.P. Morgan Internet User surveys, 2007 and 2010.
online
once/month 2007 2010
Higher-income Users Shop Online More Frequently
Question: How many times do you purchase items online, per month?
19%
41%
27%
35% 36%
16%
27%
34%
23%
20
30%
40%
50%
3% 1%2% 2%6% 6% 5%
0%
10%
Don't Shop
online
Buy less than
once/month
1-2x/month 3-6x/month 7-9x/month 10x+/month
29
Source: J.P. Morgan Internet User survey, 2010.
$0-$49K $50K-$99K $100K+
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
31/78
.
Continued adoption of social media and its impact on existing businesses such as advertising,entertainment and eCommerce.
Increased smartphone penetration will further proliferate mobile web usage and app development andcould disrupt the way we shop, consume content and communicate.
Consumers embracing over the top video consumption. We think content owners and advertisers must.
Monetization of mobile search is a critical factor for Googles growth.
US brick & mortar retailers market share losses could accelerate. Additionally, we expect material markets are s s n coun r es suc as na, w ere ran s are re a ve y wea er.
The online hotel business retains significant runway for international growth, and we expect an above-industry-average growth rate in the segment.
We expect more consolidation/M&A rather than share buybacks.
Despite its underperformance of the search market growth rate for most of the last ten years, we think
display should match search revenue growth in 2011.
We believe rapid internet and smartphone penetration growth will create many more exciting businessesoutside the US but we expect US companies to face major challenges in markets outside Western
Europe.
30
.
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
32/78
.
Corporate travel becomes a bit of a,
headwind
OTAs gain market share from suppl iers
Hotels will l ikel be the most romisinExpedia,
Traveloc
ity, 22%
Expedia
raveoc
ity, 19%
growth opportunity
Priceline dominates domestic marketshare gains
riceline,
9%
Orbitz,
44%riceline,
11%
Orbitz,
Source: PhoCusWright US Online Travel Overview, Tenth Edition.
US Travel Market Forecast$ in Millions
2005 2006 2007 2008 2009 2010E 2011E 2012E
Total Travel Spend 233,000.0 256,000.0 269,000.0 274,000.0 233,000.0 256,300.0 269,115.0 282,570.8% online 28.3% 31.3% 32.7% 34.7% 38.6% 38.0% 40.0% 42.0%
Source: J.P. Morgan estimates, PhoCusWright, eMarketer, TIA.org, Jupiter and IPK International.
Online Leisure/Unmanaged Biz Travel Spend 66,000.0 80,000.0 88,000.0 95,000.0 90,000.0 97,394.0 107,646.0 118,679.7
Total Travel Spend Growth 9.9% 5.1% 1.9% -15.0% 10.0% 5.0% 5.0%Online Travel Spend Growth 21.2% 10.0% 8.0% -5.3% 8.2% 10.5% 10.3%
31
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
33/78
.
International markets benefit from online penetration
European Travel Market Share by Channel European Online Leisure/Unmanaged Business
Priceline passes Expedia in European market share
Euros in Billions
175.5 148.9 146.7150
200
250
300Euros in Billions
45.9 42.339.6
20.518.630
40
50
65.3 66.4 73.40
50
100
2008 2009 2010
Online Leisure/Unmanaged Business Offline/Business
.11.813.4 12.1
4.43.1
5.2
010
20
Germany UK France Spain Italy Scandinavia
Total Market Online Leisure/Unmanaged Business
Source: PhoCusWright European Online Travel Overview, Sixth Edi tion. Source: PhoCusWright European Online Travel Overview, Sixth Edit ion
Europe Travel Market ForecastEuros in Millions
2006 2007 2008 2009 2010E 2011E 2012E
Total Travel Spend 228,800.0 240,800.0 240,800.0 215,300.0 220,682.5 231,716.6 243,302.5% online 21.2% 24.8% 27.1% 30.8% 33.3% 35.0% 36.0%Online Leisure/Unmanaged Biz Travel Spend 48,500.0 59,800.0 65,300.0 66,400.0 73,487.3 81,100.8 87,588.9
Total Travel Spend Growth 5.2% 0.0% -10.6% 2.5% 5.0% 5.0%
32
Source: J.P. Morgan estimates, PhoCusWright, eMarketer, TIA.org, Jupiter and IPK International.
n ne rave pen row . . . . . .
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
34/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
35/78
Priceline Air and Hotel Volume Growth Hotel growth more robust at all three
14%
30%
16%
3% 4%44%
56% 60% 57%48% 54%
-3%
half, with Priceline especially strong.
Expedia Air and Hotel Volume Growth 2Q'09 3Q'09 4Q'09 1Q'10 2Q'10 3Q'10
Air (Tickets) Hotel (Nights)
Source: Company reports.
Orbitz Air and Hotel Revenue Growth
9%
13%27%
32%
22%
10%
26% 27% 23% 18%12% 14%
6%
' ' ' ' ' '
-24%
-10% -12%-26%
13%10%
-33%
8%5%
Air (Tickets) Hotel (Nights)
Source: Company reports.
-31%
2Q'09 3Q'09 4Q'09 1Q'10 2Q'10 3Q'10
Air (Rev) Hotel (Rev)
Source: Company reports.
34
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
36/78
.
Continued adoption of social media and its impact on existing businesses such as advertising,entertainment and eCommerce.
Increased smartphone penetration will further proliferate mobile web usage and app development andcould disrupt the way we shop, consume content and communicate.
Consumers embracing over the top video consumption. We think content owners and advertisers must.
Monetization of mobile search is a critical factor for Googles growth.
US brick & mortar retailers market share losses could accelerate. Additionally, we expect material markets are s s n coun r es suc as na, w ere ran s are re a ve y wea er.
The online hotel business retains significant runway for international growth, and we expect an above-industry-average growth rate in the segment.
We expect more consolidation/M&A rather than share buybacks.
Despite its underperformance of the search market growth rate for most of the last ten years, we think
display should match search revenue growth in 2011.
We believe rapid internet and smartphone penetration growth will create many more exciting businessesoutside the US but we expect US companies to face major challenges in markets outside Western
Europe.
35
.
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
37/78
, ,healthy in 2011 as market conditions continue to improve
Cash generation remains solid:
The companies in our coverage universe, along with Microsoft and Apple, havenearly $150B gross cash on the balance sheet
Additionally, we believe the internet companies we cover retain significant room for leverage
Acquisitions driven by:
Technology: buy rather than build
Traffic: buy rather than develop virally
In our coverage universe, we believe the most attractive companies on these metrics areMercadoLibre and Netflix
36
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
38/78
.
Continued adoption of social media and its impact on existing businesses such as advertising,entertainment and eCommerce.
Increased smartphone penetration will further proliferate mobile web usage and app development andcould disrupt the way we shop, consume content and communicate.
Consumers embracing over the top video consumption. We think content owners and advertisers must.
Monetization of mobile search is a critical factor for Googles growth.
US brick & mortar retailers market share losses could accelerate. Additionally, we expect material markets are s s n coun r es suc as na, w ere ran s are re a ve y wea er.
The online hotel business retains significant runway for international growth, and we expect an above-industry-average growth rate in the segment.
We expect more consolidation/M&A rather than share buybacks.
Despite its underperformance of the search market growth rate for most of the last ten years, we think
display should match search revenue growth in 2011.
We believe rapid internet and smartphone penetration growth will create many more exciting businessesoutside the US but we expect US companies to face major challenges in markets outside Western
Europe.
37
.
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
39/78
Consumers are seeking ubiquity
Ad Spend vs. Time Spent in 2003 and 2009
52%
40 %
50 %
60 %
31% 28%
39%
40%
50%
7%
27%
14%
23 %
8%
24%
3%
0%
10 %
20 %
30 %
Print R adio T V Online
12%16%
9%13%
0%
10%
20%
30%
Print R adio T V O nline
Our thesis on newspaper market share declines plays out
Source: SRI Knowledge Networks, Universal McCann 6/03, IAB 3/04 and Yahoo! 2010 Analyst Day presentation.
T im e S pe nt A d S pe nd T i m e S p en t A d S p en d
Newspaper Ad Spend Continues to Decline
44.9 46.7 47.4 46.6 42.2
34.7
24.8 22.9
1.9% 3.9% 1.5%
-1.7%-9.4% -7.8%-10.0%
0.0%
10.0%
30.0
40.0
50.0
-17.7%
-28.6%
-40.0%
-30.0%
-20.0%
2003 2004 2005 2006 2007 2008 2009 2010
0.0
10.0
20.0
38Source: NAA.org, J.P. Morgan estimates.
Newspaper ad spend % change
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
40/78
While content consumption is growing, it is increasingly diff icult to reach TV viewers
TV Viewership Alternatives Grow
8:38Analog to digital
transitionNetflix launches
online streaming"Can Netflix kill premium cable
TV?" - Journal Enterprise
7:12
7:40
8:09
YouTube
launchedDVD formatlaunched
VOD
launchedHulu
"Bye-bye TV? YouTube debuts
live streaming" - Fortune
6:14
6:43
Hour:Min
Launch of HBO
Channel
Pay-per-view
launched
Blu-Ray Disc
launched
First TiVo DVR
HD television
launched
VHS
launched
launched
"Hulu Is An H-Bomb
Ready To Destroy
The TV Industry"-
5:16
5:45launched
Launch of DTHservice
Netflix
launched"TiVo May Be Disaster' forTV Industry" - Bloomberg
Source: Nielsen Media Research and J.P. Morgan.
4:19
:
1949 - 1950 1954 - 1955 1959 - 1960 1964 - 1965 1969 - 1970 1974 - 1975 1979 - 1980 1984 - 1985 1989 - 1990 1994 - 1995 1999 - 2000 2004 - 2005 2009 - 2010
TV Season
39
Thus, Cable and Internet advertis ing are gaining share
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
41/78
2011 wil l likely be a year of innovation
Interactive brand sponsorships, which yield better content integration
Folding in purchase data for better targeting of branded ads
-
Time-based ads which leverage user engagement
Creative ad formats with real-time updating for better targeting
Challenges
Internet users have faced a large influx of inventory
Monetizing non-premium inventory
Current resurgence of interest in premium display advertising to
continue in 2011E as brand advertisers shift spend online
40
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
42/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
43/78
J.P. Morgans International Graphical Advertising Revenue Forecast
Units as indicated
International 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 09-'14 CAGRInternet Population (M) 817 903 988 1,072 1,158 1,251 1,326 1,406 1,476 6.6%Pages Viewed / User / Day 37 38 39 40 41 43 45 46 48 3.8%Total Pages Viewed (B) 10,934 12,378 13,925 15,470 17,172 19,439 21,577 23,735 25,634 10.6%
RPM (per 1,000 pages) $0.73 $0.80 $0.82 $0.79 $0.82 $0.83 $0.83 $0.84 $0.85 1.5%
Source: J.P. Morgan estimates, company reports, comScore, Nielsen//NetRatings, IDC, IWS and IAB.
Int 'l Graphical Forecast ($M) 7,982 9,902 11,418 12,222 14,081 16,134 17,909 19,937 21,789 12.3%Y/Y Growth 28% 24% 15% 7% 15% 15% 11% 11% 9%
We expect the international graphical ad market to grow at a 12.3% CAGR from 2009 to 2014
42
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
44/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
45/78
Advert isers likely to explore new search avenue
Domestic Explicit Core Search Market Share Apr -10 May-10 Jun-10 Jul -10 Aug-10 Sep-10 Oct-10
Google Sites 66.0% 66.4% 66.2% 65.8% 65.4% 66.1% 66.3%
Yahoo! Sites 16.9% 16.6% 16.7% 17.1% 17.4% 16.7% 16.5%
Source: ComScore data and J.P. Morgan estimates.
Microsoft Sites 10.8% 10.8% 11.0% 11.0% 11.1% 11.2% 11.5%Ask Network 3.8% 3.8% 3.8% 3.8% 3.8% 3.7% 3.6%AOL LLC 2.5% 2.4% 2.4% 2.3% 2.3% 2.3% 2.1%
International Explicit Core Search Market Share
Alibaba.com , 1.1Tencent, 0.7
Conduit.com, 1.1
e ay, .
Baidu.com, 7.9
Facebook, 2.3
Ask Network, 1.2
Yahoo! Sites, 7.6
Microsoft Sites, 3.5
44
, .
Source: comScore qSearch data. % of total worldwide searches
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
46/78
We expect mobi le search usage to be the main driver of query volume growth
We expect higher levels of RPS in 2011 to be driven by stabil ization in advertisersbudgets, which should lead to higher keyword bids
J.P. Morgans US Search Advertising Revenue Forecast
Units as indicated
United States 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E09-'14CAGR
.Queries / Month / User 47 57 68 78 87 95 104 112 120 8.9%
Number of Queries (M) 114,896 144,080 177,938 208,188 236,293 264,648 293,759 323,135 348,986 10.9%RPS (per 1,000 searches) $74.86 $81.65 $81.59 $70.32 $70.14 $70.73 $71.64 $71.64 $72.22 0.5%% Coverage 62.8% 63.5% 62.0% 61.6% 61.2% 61.2% 61.5% 61.5% 62.0% 0.1%% Clickthrough Rate 26.2% 27.3% 28.0% 25.3% 25.4% 25.4% 25.6% 25.6% 25.6% 0.2%$ Revenue / Click $0.46 $0.47 $0.47 $0.45 $0.45 $0.46 $0.46 $0.46 $0.46 0.2%
Source: J.P. Morgan estimates, company reports, comScore, Nielsen//NetRatings, IDC and IWS.
US Search Forecast ($M) 8,602 11,764 14,518 14,639 16,573 18,718 21,044 23,148 25,203 11.5%Y/Y Growth 47% 37% 23% 1% 13% 13% 12% 10% 9%
45
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
47/78
J.P. Morgans International Search Advertising Revenue Forecast
Units as indicated
International 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E09-'14CAGR
Internet Population (M) 817 903 988 1,072 1,158 1,251 1,326 1,406 1,476 6.6%Queries / Month / User 33 41 49 57 63 69 77 85 93 10.5%Number of Queries (M) 326,900 441,315 582,536 728,170 873,804 1,039,827 1,226,996 1,435,585 1,650,923 17.8%
per , searc es . . . . . . . . . .% Coverage 37.2% 38.3% 38.5% 38.5% 39.0% 39.0% 41.0% 41.0% 42.0% 1.8%% Clickthrough Rate 17.2% 18.4% 19.1% 19.5% 19.8% 19.8% 19.5% 19.8% 19.8% 0.3%$ Revenue / Click 0.30 0.33 0.35 0.31 0.31 0.32 0.33 0.33 0.33 1.3%
Int' l Search Forecas t ($M) 6,233 10,235 14,993 16,947 20,580 25,695 31,882 38,458 45,306 21.7%Y/Y Growth 90% 64% 46% 13% 21% 25% 24% 21% 18%
. . , , , , , .
We are now modeling F11 paid search revenue growth of 25% Y/Y, to $25.7B
e expec e n erna ona searc a mar e o grow a a . rom2009 to 2014
We think the largest driver will be query growth. While we expect the US to
experience query growth of 12% Y/Y in 2011, we believe international markets will
46
We Estimate the Global Search Advertising Market
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
48/78
. ,
We continue to see personalized search and vertical search as hot topics
J.P. Morgans Global Search Advertising Revenue Forecast
Units as indicated
Global 2006 2007 2008 2009E 2010E 2011E 2012E 2013E 2014E
-CAGR
Internet Population (M) 1,020 1,113 1,205 1,295 1,385 1,482 1,561 1,645 1,719 5.8%Queries / Month / User 36 44 53 60 67 73 81 89 97 10.0%Number of Queries (M) 441,796 585,395 760,474 936,358 1,110,097 1,304,475 1,520,755 1,758,721 1,999,909 16.4%RPS (per 1,000
. . . . . . . . . .% Coverage 43.9% 44.5% 44.0% 43.6% 43.7% 43.5% 45.0% 44.8% 45.5% 0.8%% Clickthrough Rate 20.6% 21.5% 22.0% 21.3% 21.5% 21.4% 21.1% 21.3% 21.2% -0.1%$ Revenue / Click $0.37 $0.39 $0.40 $0.36 $0.36 $0.37 $0.37 $0.37 $0.37 0.2%
Global SearchForecast ($M) 14,835 21,999 29,511 31,586 37,153 44,413 52,925 61,606 70,509 17.4%
Y/Y Growth 63% 48% 34% 7% 18% 20% 19% 16% 14%Source: J.P. Morgan estimates, company reports, comScore, Nielsen//NetRatings, IDC, IWS.
47
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
49/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
50/78
.
Continued adoption of social media and its impact on existing businesses such as advertising,entertainment and eCommerce.
Increased smartphone penetration will further proliferate mobile web usage and app development andcould disrupt the way we shop, consume content and communicate.
Consumers embracing over the top video consumption. We think content owners and advertisers must
.
Monetization of mobile search is a critical factor for Googles growth.
US brick & mortar retailers market share losses could accelerate. Additionally, we expect material markets are s s n coun r es suc as na, w ere ran s are re a ve y wea er.
The online hotel business retains significant runway for international growth, and we expect an above-industry-average growth rate in the segment.
We expect more consolidation/M&A rather than share buybacks.
Despite its underperformance of the search market growth rate for most of the last ten years, we think
display should match search revenue growth in 2011.
We believe rapid internet and smartphone penetration growth will create many more exciting businessesoutside the US but we expect US companies to face major challenges in markets outside Western
Europe.
49
.
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
51/78
Companies outside the US and Western Europe are generating robust revenue growth and creating
2008-2010E Revenue CAGR and Market Cap for Select Internet Companies
50%
16% 18%28%
39%
60%68%
25%
Source: J.P. Morgan estimates (MELI, Mail.ru), company reports, Bloomberg consensus for others; market cap based on 12/30/10 pricing.
0%
Yahoo! Japan Daum Group MercadoLibre Mail.ru Baidu Tencent
50
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
52/78
.
Continued adoption of social media and its impact on existing businesses such as advertising,entertainment and eCommerce.
Increased smartphone penetration will further proliferate mobile web usage and app development andcould disrupt the way we shop, consume content and communicate.
Consumers embracing over the top video consumption. We think content owners and advertisers must
.
Monetization of mobile search is a critical factor for Googles growth.
US brick & mortar retailers market share losses could accelerate. Additionally, we expect material markets are s s n coun r es suc as na, w ere ran s are re a ve y wea er.
The online hotel business retains significant runway for international growth, and we expect an above-industry-average growth rate in the segment.
We expect more consolidation/M&A rather than share buybacks.
Despite its underperformance of the search market growth rate for most of the last ten years, we think
display should match search revenue growth in 2011.
We believe rapid internet and smartphone penetration growth will create many more exciting businessesoutside the US but we expect US companies to face major challenges in markets outside Western
Europe.
51
.
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
53/78
US Local Advertising Spend by Medium in 2010ELocal online advertising is a small % of the
Magazines, 2%
Yellow Pages, 14%TV, 24%
Out-of-home, 6%overall market
In US, local advertising is an ~$82B
industry, with only ~15% of the total
Radio, 14%
Pure- la Internet,
,according to Veronis Suhler Stevenson
SMBs: Spenders of local advertising
Source: comScore data.
7%,
Traditional media sources
Pure-play internet players
Rapid changes in the advertis ing landscapecreate customer acquisition challenges
52
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
54/78
Amazon
Priceline
MercadoLibre
ReachLocal
Other Overweight -rated U.S. internet stocks are Netflix, Google, Yahoo!, Shutterfly, QuinStreet,
MediaMind
Additionall J.P. Mor ans China internet anal st Dick Weis to icks are Tencent and NetEase
53
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
55/78
The Bull Case: The Bear Case:
Positioned to take advantage of seculargrowth in eCommerce
Huge scale provides competitive advantage
Brick-and-mortar incumbents increasinglyaggressive in eCommerce space
Barriers to entry may be low
Still underpenetrated in many categories, esp.in Intl ramp-up can take years, and thus
operating margins should improve
Because online shoppers are so price-sensitive, margin expansion opportunities will
remain muted
row n ver ca s suc as ppare s ou
help gross margins
Prime is a customer retention tool that otherswill find difficult to re licate rofitabl
n a rap y evo v ng space, r s o one a se
step being quite costly
At scale, hard to maintain explosive growthrates indefinitel will multi le contract if
Fulfillment by Amazon enables continuedshare gains in third-party
growth slows?
within books; could threaten traditional
booksellers.
54
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
56/78
The Bull Case: The Bear Case:
International offers a secular growthopportunity: 80% of the companys gross
profit dollars come from the international
business, which we think is more sustainable
Company generates significant amount ofprofit in the Euro and other FX denominations.
Thus, volatility in the currency market could
adversely impact the share price.
and will experience an above-average growth
rate
Modest take rate increases as emerging
Domestic growth pressured by competitionfrom other OTAs and suppliers
Increasing competition in the international
Continued ADR recovery
Domestic market share gains, aided by the
markets
.
Margins should expand as the companycontinues to benefit from improved advertising
efficiency
55
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
57/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
58/78
The Bull Case: The Bear Case:
We think local will be a key area of growth inthe next two years
Expansion into additional markets (in 45 cities
Rapid buildout and rapid growth leaveminimal room for error in execution
In an evolving space, competition can come
IMC sales force (nearly 700 now) can keepgrowing, is a key barrier to entry
,sites have gone from almost zero to billion-
dollar revenue run rates
Sales-driven model may limit room for marginro uc expans on prov es cross-se
opportunities, which will raise IMC productivity
As sales force matures, productivity benefitfrom a reater resence of ex erienced IMCs
expansion
Growing size of Upperclassman IMC forceshould help margins, as Underclassman
training expenses should grow less quickly
We see 40% revenue growth in F11E and38% in F12E, with improving profitability
57
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
59/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
60/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
61/78
The Bull Case: The Bear Case:
Tech & Clearance should remain an attractivevertical (23%E Y/Y growth in F11)
Finance segment to benefit from increased
Overall recruitment market remains tough
Continental Europe and the Middle East stillshowing signs of weakness
Energy vertical has a lot of potential (weexpect energy revenues to reach $13M by the
end of 2011)
Fairly competitive business
EBITDA margins of 40+% in 2011E
60
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
62/78
The Bull Case: The Bear Case:
PayPal is a one-of-a-kind brand in onlinepayments and has established itself as the
one likely winner in the space
PayPal is a lower-margin business thanMarketplaces, and the latter still generates
most of the revenue
, ,gaming all present incremental growthopportunities for PayPal TPV
Marketplaces should benefit from continued
other sites innovate more quickly; burdened
by need to maintain certain features to retain
near-monopoly in auctions
growth in eCommerce
Auctions business is stable, but fixed-pricebusiness can grow faster as company
Search on eBay site remains an area of
concern
Secular shift is to a multichannel environment ,
deals, etc.)
Uniquely well-positioned to facilitate small-
volume cross-border trade
offsets secular gains from eCommerce growth
PayPal take rates may decline as larger
merchants are a bigger piece of the pie
61
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
63/78
The Bull Case: The Bear Case:
International growth should remain healthy,aided by increased penetration in the APAC
region (we are modeling F11 Intl gross
bookings growth of 18% Y/Y)
Potential increased competition frombooking.com in the US
Role of GDSs: Possible renegotiation of direct
Continued expansion of TripAdvisor
G&A leverage and operational efficienciesshould help margins
Increase selling and marketing spend couldcreate margin pressure
Healthy FCF generation
62
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
64/78
The Bull Case: The Bear Case:
Strong search revenue growth: 1% netrevenue growth in Googles search revenue
generates an estimated $0.35 EPS for the
company
Increasing competition from social networkingsites emerging as a big threat to Googles
traffic, and mobile applications which let users
bypass search
Display offers a strong incrementalopportunity: we think the overall display
business will contribute an incremental $1.2B,
Increased government scrutiny with regard tofuture acquisitions and business practices
Growth of non-text display products could,
Mobile will drive search usage: over the past2 years, search queries from mobile havegrown 5x at an accelerating pace
create margin pressure as the display
business margins are significantly lower thanthe companys overall margins
Improved international online and ad spendpenetration
63
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
65/78
The Bull Case: The Bear Case:
Match business (25% of revenue and 71% ofOIBA) will be the largest driver of the stock
ServiceMagic should continue to see healthy
Market remains competitive for Ask.com, aslarge search players continue to make
innovations to the space
,likely stabilize as investment levels becomesteadier in 2011
Distributed and proprietary toolbars and
development expenses could create
headwinds
Remain cautious on the long-term outlook ofdestination websites driving query growth the toolbar business
64
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
66/78
The Bull Case: The Bear Case:
Publisher-neutral platform is appealing tocustomers
Highly scalable business model: uses low
Largest competitors are parts of largeadvertising players such as Google and
Microsoft
offers a strong margin expansion opportunity
Platform customers to comprise over half oftotal revenue by the end of 2011E
adversely affect the stock price, as roughly
70% of revenue comes from international
markets
As the revenue grows, the company shouldsee leverage from sales and marketing and
R&D
Limited visibility into advertisers budgets
creates challenges
65
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
67/78
The Bull Case: The Bear Case:
~60M installed base of NFLX-ready devicesthat reach the TV is a multiple of any other
competitor
Extremely competitive space, with virtually allother players possessing deep pockets
If studios refuse to play ball, model could be
second-to-none recommendation engine,
crucial for monetizing long tail of catalog
Spent over $1B on Marketing since 06 to
If content costs go up too much, margins maynot improve
establish premium consumer brand; high
customer satisfaction
Streaming carries lower fulfillment cost, fixed
w even ua y ecome a ec n ng
business, with deleverage on costs
International opportunity very uncertain ossible investments wont a off
and for more investment in content
International opportunity could be a positive
catalyst
Valuation leaves minimal room for error
66
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
68/78
The Bull Case: The Bear Case:
International growth will be aided by a strongperformance from ebookers (we are modeling
15% intl gross bookings growth in F11)
Continued challenges in reaching the brandidentity and inventory scale of Expedia and
Priceline
hotel business
Upcoming migration of HotelClub to the globaltechnology platform
investment phase
American Airlines dispute and renegotiatingthe role of GDSs
67
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
69/78
The Bull Case: The Bear Case:
Financial services vertical represents a largemarket opportunity (5x size of education
market)
Regulatory changes in the education sectorcould create headwinds
Acquisitions represent a large portion of the
as the company laps the reduction of spend
from DeVry
Other verticals a longer-term catalyst
identify and complete strategic acquisitions, or
successfully integrate acquisitions it does
make, it could adversely affect the business
(including home services, medical and B2B)
20% EBITDA margin is sustainable
Third-party publishers drive the majority of
QNSTs traffic, yet QNST has only limitedoversight and control over their operations
68
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
70/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
71/78
The Bull Case: The Bear Case:
Current share price does not reflect the fullasset value: we see at least ~$7.4B
($5.51/share) in value from Yahoo! Japan and
Alibaba (does not include the private assets of
Display business facing increasingcompetition, especially from Google and
social networking sites
Alibaba Group, such as TaoBao)
Search comps will be easier once Yahoo! lapsthe discontinuation of paid inclusion
Uplift in RPS from the Microsoft search
alliance
Continued margin expansion, part of which
70
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
72/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
73/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
74/78
Other Companies Recommended in This Presentation (and priced as of market close on
NetEase (NTES/$36.76/Overweight), Tencent (0700.HK/HK$168.90/Overweight)
73
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
75/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
76/78
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
77/78
General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates
and/or subsidiaries (collectively J P Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMS and/or its affiliates and
-
8/13/2019 2011 Internet Sector Outlook JPMorgan
78/78
and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMS and/or its affiliates and
the analysts involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the securities discussed, unless otherwise stated.Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future
. .
into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to
particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMS
distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries
based on company specific developments or announcements, market conditions or any other publicly available information. Clients should contact analysts and execute
transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.
Other Disclosures last revised January 1, 2011.
Copyright 2011 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistribut ed without the written
consent of J.P. Morgan.
77