Morgan Stanley’s Meeker Sees Online Ad Boom – BusinessWeek

November 16, 2010

Morgan Stanley’s Meeker Sees Online Ad Boom

Dot-com “Queen of the Net” Mary Meeker will tell today’s Web 2.0 Summit that Internet advertising will reach $50 billion and mobile commerce will outpace traditional e-commerce

By Olga Kharif

(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.

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