This excerpt is from our complimentary Q2 2012 Software Industry Financial Report which can be downloaded here: http://www.softwareequity.com/research_reports.aspx
In the Internet sector, we believe online retail spending and Internet advertising spending each quarter presage the financial performance and M&A activity of many public Internet companies. Buoyed by a continually growing number of shoppers, online retail sales continued to rise 17% in 1Q12 (the latest quarter for which data is available) according to comScore, achieving the highest growth rate since 2007. It was the tenth consecutive quarter of growth for online retail. Among online retail’s most popular categories in 1Q12 were digital content and subscriptions, computer software, consumer electronics, jewelry and watches and events tickets, each growing by at least 17% year-over-year.
The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) reported Internet advertising revenues soared to record levels in 1Q12, reaching $8.4 billion, a 15% year-over-year increase from 1Q11’s $7.3 billion.
The appropriate benchmarks in this arena, according to marketers and agencies, is the percentage of time digitally connected consumers spend on the Internet relative to their overall media consumption, and the spending on Internet advertising relative to total advertising spending. In May 2012, Mary Meeker of Kleiner Perkins showed the gap has closed dramatically: Internet consumption was 26% of total media consumption, and Internet advertisers grabbed a record 22% of all advertising dollars.