Internet advertising “soaring”, taking share, disrupting old school ad models

The IAB Internet Advertising Revenue Report issued this week (see the press release here) highlighted a record high level of online ads growing 23% over Q1 2010.  This is in stark contrast to last year’s growth of 7.5% providing clear evidence of acceleration in internet advertising.  Full year 2010 online ads grew 15%.  Online growth far exceeded ad growth of only 4% for offline advertising.  There is a sea change occurring in advertising with 10’s of $billions of ad spend becoming intertwined with online digital video and social media.  We remain focused on the winners.  Jeb Terry, Sr. May 27, 2011

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The SF Fed’s Tech Pulse still beating

The Tech Pulse, published monthly by the San Francisco Fed, remains in relatively strong growth posture albeit slower than in 2010.  (see the report here).  The year over year growth rate is 10.75%, over 5X faster than the economy at large.  While the growth rate has slowed somewhat, it remains well above the 6.5% median rate of growth seen since 2000.    Jeb Terry, Sr. May 27, 2011

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Untold Strength -the U.S. Consumer , retail sales up 10 months in a row, best since 90’s

There is lingering concern about strength of the U.S. consumer.  The retail sales numbers for April say she is doing fine.  The following chart comes courtesy of Brian Wesbury at First Trust (see his blog here).  He has some important observations.  “Consumer spending is rising for two main reasons. First, earnings are growing due to more jobs, more wages per hour, and more hours per worker. Second, due largely to debt reductions, consumers’ financial obligations (debt service plus other recurring payments like rent, car leases, homeowners’ insurance, and property taxes) are now the smallest share of disposable income since 1995. All of this bodes well for spending in the months to come.”  There you have it friends.  Jeb Terry, Sr. May 27, 2011

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Mobile data traffic will increase 39X from 2009 to 2014

Cisco presented the following chart at the Content Delivery Summit in NYC last week.  The outlook is there will be over 3.5 exabytes of mobile data traffic per month in 2014.  An exabyte refers to 1 billion gigabytes.  Cisco stated that 1 exabyte is equal to all the printed material in the world – Yikes!  The implications are there will have to be “the Mother of all wireless bandwidth build out” to accommodate the growth – and, expect lots of new apps, and advertising, and subscribed content, and location based services, and other mobile based businesses we haven’t thought of.  No wonder why we at Aberdeen spend so much time evaluating mobile related companies  -eh?   Jeb Terry, Sr. May 20, 2011

Source: Cisco

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Video traffic is surging and will serve to redefine the business models of all the players

Presentations made at the Content Delivery Summit in NY last week focused on the impact that escalating internet video traffic is having on the industry.  Cisco’s definitive outlook for internet traffic growth is displayed in the chart below.  They see traffic growing 500% from 2009 to 2014 at an annual rate of 36%.  This phenomenon is accelerated by the explosion in smartphone and tablet (iPad) adoption.  This trend aids a number of Aberdeen portfolio companies.  Jeb Terry, Sr. May 20, 2011

 

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Investor sentiment drops to levels associated with bottoms instead of tops

A recent post by Bespoke Investment Group (here) addressed the sharp drop in investor sentiment.  “Even though the S&P 500 remains near its highs of the bull market, nearly all the bullish sentiment that was built up during the rally has now been given back.  People like to say that the individual investor is always the last to get in and the first to get out.  This time at least, the individual is making a quick exit.  Will they be too early?”    As most of you know, when the bullish sentiment is low, the odds for a rising stock market is high.  Jeb Terry, Sr. May 19, 2011

Source: Bespoke Investment Group

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Some more history that “rhymes” – Gasoline may be set for a fall

A recent post by Lazlo Birinyi (here) had an excellent chart comparing the run up in gasoline prices in 2008 vs. this year.  If 2008 is a guide there could be a drop in store for gasoline.  Of course – I don’t want the price of gas to fall because of the kind of financial calamity we experienced in 2008.  The point I take away is that gas, like commodities are prone to do, had a speculative rise and is now settling back down to price levels more determined by supply and demand.  Should gas prices continue to moderate we will likely see improved consumer sentiment.  Jeb Terry, Sr. May 16, 2011

Source: Birinyi Associates, Inc.

Aberdeen Investment Management – a guide service for micro-cap technology investment.

Nearly U.S. 100 Million Households will be Online By ’16, Mobile Ads To Grow 60% this year.

A recent article on Mediapost.com (here) highlighted elements of the most recent forecast by Magna Global (Interpublic Group).  Nearly 100 million households will be online by 2016 and 98.5% of them will have broadband access.  That will be up from 84.7 million households as of 2010 with 90% having broadband access.  Of great interest to me was the updated forecast from January.  Magna Global now estimates that total U.S. advertising sales will increase only 1.8% in 2011 vs. 3.2% last year. BUT . . . online media spending will grow by 18.7% this year – well up from the earlier forecast for 11.6%.  The show stopper forecast is for mobile advertising to grow by 60.1%.  Aberdeen has multiple exposures to online media spending in general and mobile advertising in particular.

Aberdeen Investment Management – a guide service for micro-cap technology investment.

The persistent rise in commodity prices has not been accompanied by rising wages – No big increase in wages means No big increase in inflation.

A recent post by Mark Perry on his Carpe Diem blog did an excellent job pointing out an obvious and verifiable fact . . . You don’t have escalating inflation “unless and until” you have escalating wages.  Here is part of his commentary and an accompanying chart.

 “It would be historically unprecedented to start experiencing rising inflation in 2011 with stagnant wages, and unless and until we start seeing rising wages we might not see higher inflation this year”.

Sat April 16, 2011        http://mjperry.blogspot.com

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The sharp rise in oil prices since February was triggered by Middle Eastern unrest, fueled by speculation and unfounded on real supply and demand factors . . . I expect more price weakness.

It is quite clear that the recent 32% increase in oil prices started coincidentally with the breakout of civil war in Libya in mid-February following the Egyptian revolution in January.  The price of West Texas Intermediate Crude has dropped 14.6% since peaking in late April.  The jump in prices has triggered increasing gasoline prices and fears of inflation.  As can be seen in the second chart of the amount of actual barrels of crude being held in inventory (its excludes the oil in the Strategic Petroleum Reserve), the price increase was clearly not supported by a shortage of crude oil supplies.  In fact, crude oil inventory is near a record high level if the measure from the critical Cushing, OK interchange is valid.  The logical conclusion is that the price increase was more of a speculative affair and consequently may be short lived.  Speculative driven moves go up fast and come down faster.  The implications of a continued drop in oil prices are reduced inflation fears, improved consumer spending and available money flows for more productive investment.   Jeb Terry, Sr. May 8, 2011

Source: Dian Chu, EconMatters as appeared on Investment Postcards from Cape Town

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