Citigroup Internet analyst Mark Mahaney
describes himself as one of those people who publish lots of PDF reports full of crap. His opener at the MediaPost Search Insider Summit on Thursday received plenty of laughs, but was followed by 20
minutes of insightful commentary.
Mahaney talked about the recession's impact on Internet commerce, as well as travel, advertising and search spend and shared data on the influence on
mobile search and shopping behavior of smartphones, which today make up about 20% of all mobile phones in consumer hands.
Mahaney told attendees the recession prompted the pickup in
search, accelerating the online shift. The recession moved a larger than expected percentage of offline sales online. Consumers became more price-sensitive, and did more comparison shopping.
Once consumers ventured online, they realized some prices were less than for the same items found in the brick-and-mortar stores. This allowed retailers with physical stores to carry less inventory
this holiday season, avoiding getting stuck with excess. He also reminded us that this year, Circuit City and Linens & Things, among others, met their demise.
In my recent Search Blog post
titled "The Obsolescence of Brick-and-Mortar," I state that within five years, Web sites will replace
brick-and-mortar stores. The remainder of the article talks about a shift for some items, not all.
Mahaney says U.S. online advertising will rise between 3% and 5% this year, and jump to
between 15% to 20% in 2010. Search will be around that, too, next year. On average this year, Internet stocks rose 125%, such as Amazon, basically because they underperformed so much in 2008,
according to Mahaney.
Overall, retail will likely come in flat this year. "Retail sales in 2010 should be up 15%, and I'm wondering if that number is too low," he said.
Mahaney
pointed to Priceline as one of the most sophisticated buyers of online advertising. Booking.com, Priceline's European brand, does well, too.
(Just wanted to remind you here that many people
pooh-poohed the thought of the travel industry moving bookings online. It didn't completely extinguish in-store travel agents, but they have become more difficult to find. Plus, airlines provide
discounts for booking online.)
Mahaney also noted the opportunity in mobile search advertising, a trend also forecast by industry statistics: Google disclosed last quarter it saw about a
30% sequential increase in mobile searches. Mobile searches across the Internet are growing in the triple digits this year. It will take between two and three years, but queries per smartphone will
surpass those on the PC.
Mahaney said that Fandango expects to sell 10% of tickets via mobile this year. A restaurant he covers says between 2% and 3% of reservations are being made on its
iPhone app.
"I know you're getting tired of mobile, but don't get tired of it just as we hit the inflection point," Mahaney said. "There is a material impact starting to show up that will
be beneficial. It won't cannibalize PC desktop search. It will have a material impact on basic search activity and on paid search and organic search opportunities."