Tech Investing

Morgan Stanley's Meeker Sees Online Ad Boom


(Bloomberg) — Mary Meeker will predict a $50 billion online advertising boom in an address at the annual Web 2.0 Summit in San Francisco today. The Morgan Stanley analyst will say as well that mobile commerce may gain market share faster than traditional online retailing.

Meeker, 51, is back in demand. She was called "Queen of the Net" by Barron's in 1998, only to see her star dim as technology stocks plunged and regulators said securities firms used biased research to lure banking business. These days, investors are scouring her research anew for would-be Web winners.

"We are trying to invest in the kinds of companies she'll mention in her reports," investor Marc Andreessen said in an interview.

Andreessen's venture firm, Andreessen Horowitz LLC, has bought stakes in Meeker-favored companies including Skype Technologies SA and Zynga Game Network Inc.

"She is becoming Mary Meeker 2.0," said Bing Gordon, a partner at venture capital firm Kleiner Perkins Caufield & Byers. Gordon said Meeker's research helped persuade his firm to "do more mobile, bigger and faster." In March, Kleiner Perkins said it will double its iFund to $200 million. The investment pool backs startups that create applications for Apple Inc.'s handheld devices, such as the iPhone and the iPad.

Bloomberg LP, the parent company of Bloomberg News, is an investor in Andreessen Horowitz.

Meeker gained renown in the 1990s for predictions on Internet growth and her bullish calls on Web companies, including EBay Inc., Amazon.com Inc. and America Online Inc.

Tech Bust

Then came the dot-com bust in 2000. The Nasdaq lost 78 percent of its value in less than three years. In 2001, Fortune published a story titled, "Where Mary Meeker Went Wrong." In 2003, after the U.S. Securities and Exchange Commission accused Morgan Stanley and other financial services firms of skewed analysis, the companies settled for $1.4 billion.

Meeker fared better than analysts such as Henry Blodget, formerly of Merrill Lynch & Co., who was fined and banned for life from the securities industry; the SEC didn't accuse Meeker of wrongdoing. Still, then-New York Attorney General Eliot Spitzer, who led the probe by state and federal authorities, said Morgan Stanley failed to supervise its analysts, including Meeker, and said the company inadequately managed conflicts of interest between its research and investment-banking divisions.

"She may have a second act, which is never an easy thing to do on Wall Street," said Tom Taulli, an independent researcher on initial public offerings. "But she is going to have to prove herself. And it's very difficult: You are associated with that brand."

Digging for Data

Meeker says the brickbats flung her way haven't altered the way she carries out research. She said Morgan Stanley's "The Internet Report" in 1995 contended that most companies fail.

"To be a successful analyst, one has to dig deep for data," Meeker said in an interview. The report "was thoughtful about the growth of the Internet, yet cautious about investments."

Meeker, a managing director who leads Morgan Stanley's technology research, spends much of her time these days thinking about the Web in the iPhone age. In 2012, smartphone shipments will exceed those of personal computers, she contends.

"It's the fastest-ramping technology transformation the world has ever seen," Meeker said. "I've been of the view for years that the mobile Internet was the next big thing."

U.S. consumers spend 28 percent of their media time online, yet only 13 percent of ad spending goes to the Internet. That creates a $50 billion online advertising "global opportunity," according to a draft of Meeker's Web 2.0 presentation.

Mobile Commerce

Another prediction: Mobile commerce may grab retail spending share "much faster" than traditional e-commerce, she says. That's because wireless connections enable impulse purchases, and location-based services let merchants deliver coupons and offers to users when they're most likely to spend.

Some of Meeker's current thinking was outlined in her Mobile Internet Report, a 424-page tome published last year, the culmination of four years of research.

Yuri Milner, chairman of Russian Internet company Mail.ru Group Ltd., calls it "the best of what's been written in this field." Mail.ru raised $912 million this month on the London Stock Exchange with Morgan Stanley among the arrangers.

Meeker, an Indiana native who graduated from DePauw University and earned an MBA from Cornell University, says she draws on personal experience, as well as data analysis and company research, to form her views.

Scottish 'Epiphany'

She says she had an "epiphany" last year after a three- hour hike on the coast of Scotland, near St. Andrews. A friend who accompanied her on the hike used a Research In Motion Ltd. BlackBerry to snap photos and had posted them to Facebook by the time Meeker returned to her lodging.

"We could get to a point where a very material portion of content on the Internet is created on Facebook with mobile devices," said Meeker, who spends much of her time in New York, and has a home in Woodside, in California's Silicon Valley.

Another realization came during a recent plane ride between Washington and New York. In an informal survey of fellow first- class passengers, Meeker found four iPad tablet computers, including her own, and surmised that business users are adopting the iPad more quickly than she had expected. Besides the iPad, Meeker also boasts a Macintosh, two PCs that run Microsoft Corp.'s Windows operating system, an iPhone, an Amazon Kindle e- reader, and several iPod music players.

Executives of companies covered by Meeker say her research is as probing now as it was more than a decade ago.

3 a.m. Calls

Ken Goldman was chief financial officer of Excite At Home Corp., a Redwood City, California-based Internet-service provider Meeker covered. He recalls receiving phone calls at home at midnight from Meeker in New York, where it was 3 a.m.

"I used to dread those calls, actually," he said. "It was never a 10-minute call; it lasted 45 minutes to an hour."

Goldman now is CFO of security software maker Fortinet Inc., which went public last year with Morgan Stanley as an underwriter.

This year marks the seventh-straight year Meeker is speaking at the Web 2.0 conference. She packs a lot into her 10- minute presentation, said John Battelle, executive producer of the Web 2.0 Summit. Last year, she plowed through 75 slides in the time most presenters to cover a dozen, he said.

"The funny thing about Mary is, every year, she tries to deliver more slides in the same amount of time," Battelle said. "She may have mellowed a little bit over the years, but not much."


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