|Nothing But Net: 2010 Internet Investment Guide|
Click here for the full Note and disclosures.
This morning we are publishing our 328 page 2010 Internet Industry outlook. Here are some key industry themes:
* We expect Display advertising to recover: After a very difficult year, domestic display ad should grow nearly 11% in F'10. We think with 17% of Display ad market share, Y! will be a key beneficiary of this development.
* Search revenue should accelerate due to cyclical CPC growth and International growth. We are modeling the overall global search market to grow 17.8% in 2010. Our Google 2010 net revenue and pro forma EPS estimates are $21B and $26.91, respectively.
* eCommerce is at an inflection point; we think Amazon will be the key winner. We expect US eCommerce to grow ~12%, aided by 1) brick-and-mortar bankruptcies, 2) limited selection at offline retailers, 3) improved fulfillment capacity by online sites, and 4) growth in alternative payments.
* We still see significant international penetration growth opportunity for online travel. We continue to like PCLN.
* Social Networking is becoming a new platform and gateway: Facebook accounts for almost 5% of all time spent on the web. We see a significant monetization opportunity.
* M&A should pick up. Large cap internet and media companies along with Microsoft are expected to generate more than $46B in FCF in 2010. We expect a healthy M&A environment as the economy stabilizes.
Downgrade: We are downgrading MELI this AM on valuation.
We are also introducing 2011 estimates; please see the full report for our detailed estimates.