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Internet Publishing and Broadcasting in the US August 2014

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High-speed growth: The internet’s advertising expenditures will increase, spurring growth

IBISWorld Industry Report 51913b

Internet Publishing and Broadcasting in the US
August 2014 Stephen Hoopes
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2 2 2 3

About this Industry
Industry Definition Main Activities Similar Industries Additional Resources

17 International Trade 18 Business Locations

34 Regulation & Policy 34 Industry Assistance

20 Competitive Landscape
20 Market Share Concentration 20 Key Success Factors 21 Cost Structure Benchmarks 23 Basis of Competition 24 Barriers to Entry 24 Industry Globalization

35 Key Statistics
35 Industry Data 35 Annual Change 35 Key Ratios

4 5
5 5 7 9

Industry at a Glance Industry Performance
Executive Summary Key External Drivers Current Performance Industry Outlook

36 Jargon & Glossary

26 Major Companies
26 Google Inc. 27 Facebook 28 Apple Computer, Inc.

11 Industry Life Cycle

13 Products & Markets
13 Supply Chain 13 Products & Services 15 Demand Determinants 16 Major Markets

31 Operating Conditions
31 Capital Intensity 32 Technology & Systems 33 Revenue Volatility

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

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About this Industry
Industry Definition
This industry includes organizations and individuals that offer nonphysical products such as news, music and video exclusively through the internet. Revenue in this industry is derived from the sale of advertising space or subscriptions to consumers. In addition, companies may derive revenue from intellectual property licensing and the sale of user information to third parties. This industry does not include search engines, internet service providers or publishers of offline content.

Main Activities

The primary activities of this industry are Online video sharing and broadcasting Internet-based radio broadcasting Online news publishing Social networking Online comic publishing E-book publishing Internet forum publishing Podcast publishing Online advertising

The major products and services in this industry are Advertising space IP licensing Subscriptions and sales User information sales

Similar Industries

51212 Movie & Video Distribution in the US Companies in this industry distribute movies and videos through offline channels. 51311 Radio Broadcasting in the US Companies in this industry broadcast music and other radio programs over radio waves, rather than over the internet. 51411 News Syndicates in the US Companies in this industry distribute news and other information for offline publication. 51711d Internet Service Providers in the US Companies in this industry provide internet access to consumers and businesses. 45411a E-Commerce & Online Auctions in the US Companies in this industry sell products and services over the internet. 51913a Search Engines in the US Companies in this industry direct a large portion of traffic on the internet and generate their revenue from advertising.

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About this Industry

Additional Resources

For additional information on this industry http://www.comscore.com/ comScore www.iab.net Interactive Advertising Bureau www.quantcast.com Quantcast

IBISWorld writes over 700 US industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com

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Industry at a Glance
Internet Publishing and Broadcasting in 2014 Key Statistics Snapshot
Revenue

$27.3bn 11.1%
Profit

Annual Growth 09-14

Annual Growth 14-19

$6.5bn
Market Share
Revenue vs. employment growth
25 20

Wages

$5.0bn
12 6

11.5% 38,415
Businesses

Total advertising expenditure

Google Inc. 27.0%
% change

Apple Computer, Inc. 13.2%

10 5 0

% change

Facebook 21.1%

15

0 −6 −12 −18

Year 06 Revenue
p. 26

−5

08

10

12

14

16

18

20

Year

08

10

12

14

16

18

20

Employment
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Products and services segmentation (2014)
User information sales IP licensing

Key External Drivers
Number of mobile internet connections Total advertising expenditure Demand from search engines Demand from television broadcasting Internet traffic volume
Subscriptions and sales

1.2%

2.3%

35.2%

Advertising space

61.3%

p. 5
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Industry Structure

Life Cycle Stage Revenue Volatility Capital Intensity Industry Assistance Concentration Level

Growth Low High None Medium

Regulation Level Technology Change Barriers to Entry Industry Globalization Competition Level

Light High Low Low High

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 35

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Industry Performance
Executive Summary
The Internet Publishing and Broadcasting industry has posted incredible growth over the five years to 2014, as industry operators have provided an increasingly popular medium for advertisements. The industry is characterized by intense competition amid a rapidly changing technological landscape. Smartphones and tablet computers have expanded the industry’s market reach, and the increasing availability of users’ personal information and browsing history has hastened the transition from mass media marketing to targeted advertising. IBISWorld

Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage determine the impact of any given ad on sales and scale back their online marketing campaigns as needed. Simultaneously, the growing number of mobile internet connections has expanded the amount of content and advertising that individuals are exposed to. Alternatively, the market for paid content has been more volatile. While Apple’s iTunes Store has earned healthy returns selling music and video over the internet, negotiations with content owners and consumers’ unwillingness to pay for intangible goods like digital content have impeded other operators. Younger generations have increasingly found ways to pirate internet content, damaging future growth prospects for the paid-content segment of the industry. Over the next five years, revenue is set to accelerate further as businesses continue to transition brand-building campaigns from traditional media to the internet. As a result, industry revenue is expected to grow at an annualized rate of 11.4% over the five years to 2019, reaching $46.9 billion. The internet’s growing share of advertising expenditure is expected to account for the majority of this growth. While major players like Facebook and Google are expected to capture a large portion of this revenue, smaller players will be able to take advantage of large advertising networks, like Google’s AdSense, to generate revenue with minimal investment.

Smartphones and tablet computers have expanded the industry’s market reach estimates that industry revenue will grow at an annualized rate of 11.1% over the five-year period, to $27.3 billion in 2014. This rate includes an anticipated 13.3% jump in 2014, as increased spending on internet advertising funnels money into the industry. Because most online content is available for free, revenue is typically generated through the sale of advertising space. Although advertising expenditures plunged during the recession, the industry remained relatively unscathed due to the flexibility and efficiency of online advertising. Businesses were able to

Key External Drivers

Number of mobile internet connections While the growth rate of fixed broadband connections has begun to taper off as the US market approaches saturation, the number of people accessing the internet via mobile connections has grown rapidly. Mobile platforms have presented another way for content publishers and broadcasters to sell advertising space, subscription-based content or games and

apps for a fee. The number of mobile internet connections is expected to increase in 2014, representing a potential opportunity for the industry. Total advertising expenditure Total advertising expenditure represents the sum of measured US advertising expenditure and an estimate of unobserved US advertising expenditure,

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Industry Performance

Key External Drivers continued

such as direct mail, sales promotions, catalogs and business publications. Advertising is the primary method of generating revenue for internet publishers. When advertisers increase their budgets, internet publishers generally benefit, especially because this industry captures a significant share of new advertising money. Total advertising expenditure is expected to increase in 2014. Demand from search engines Search engines direct traffic to internet publishers and broadcasters and provide advertising allocation services to this industry. Therefore, an increase in demand from search engines benefits the industry. The Search Engines industry is expected to grow in 2014. Demand from television broadcasting Internet publishers and broadcasters face competition from TV broadcasters for content and viewers. TV networks are typically able to secure advertising
Total advertising expenditure
12 6

contracts and revenue prior to broadcast, which allows them to invest more money in new content than most internet producers. TV broadcasting competes directly with internet publishing as an information and entertainment platform, as well as an advertising platform. While the Television Broadcasting industry is expected to decline in 2014, it is only anticipated to do so slowly, representing a potential threat to the industry. Internet traffic volume As overall internet traffic volume increases, the amount of internet-based advertising rises as well, aiding industry growth. As content has become more bandwidth-intensive (e.g. YouTube consumes more bandwidth than a news article, but may display the same number of advertisements), internet traffic has become less reliable as a surrogate for advertising volume. Nonetheless, this industry benefits from increasing internet users and traffic. Internet traffic volume is expected to increase in 2014.
Number of mobile internet connections
400 300

% change

−6 −12 −18

Millions

0

200 100 0 −100

Year

08

10

12

14

16

18

20

Year 06

08

10

12

14

16

18

20

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Industry Performance

Current Performance

Consumers’ ability to access the internet from almost anywhere has facilitated the Internet Publishing and Broadcasting industry’s remarkable advertising- and subscription-based revenue growth over the five years to 2014. While household broadband penetration is approaching saturation and growth is tapering off, mobile internet platforms have exploded in popularity; IBISWorld estimates that the number of mobile internet connections in the United States has increased at an astounding annualized rate of 36.8% over the past five years, to total 234.2 million in 2014. Aside from expanding the industry’s

market, smartphones and tablets have transformed the way content is created and displayed. Companies that develop mobile applications compete on the basis of usability, relevance and, increasingly, novelty. These new approaches, coupled with the low barriers to entry for web content providers, have expanded business opportunities for the Internet Publishing and Broadcasting industry. As a result, revenue for the industry has increased at an estimated annualized rate of 11.1% over the five-year period, to total $27.3 billion; in 2014 alone, revenue is expected to surge 13.3%.

Booming internet advertising

The sale of advertising space generates an estimated 61.3% of revenue for internet publishers and broadcasters. Therefore, trends in internet advertising play a substantial role in determining the industry’s performance. Total advertising expenditure increased moderately over the five-year period, rising at an estimated annualized rate of 4.5% off of a low base in 2009; however, the internet’s share of that spending has accelerated. In 2009, the internet attracted an estimated 9.8% of all advertising dollars spent in the United States; by 2014, that number has grown to an estimated 15.1%. Even so, dollar amounts do not paint the entire picture. A prime-time, 30-second advertisement on network television can cost upwards of $500,000; successful internet advertising campaigns can be run for less than that annually. Therefore, the increasing level of attention and time advertisers have devoted to internet advertising cannot be fully conveyed through advertising expenditures alone. One method of internet advertising that has been growing in popularity involves

Internet advertising play a substantial role in determining the industry’s performance the targeting of individual users based on their personal information and browsing history. Under this model, companies participate in ad-serving networks that match their advertisements with internet users most likely to be interested in their products. Google and Facebook currently dominate this market and become more dominant every day, as they continue to develop algorithms that aggregate and sort through vast amounts of data to match users with relevant advertisements. Meanwhile, companies like Yahoo and smaller advertising networks have languished, losing market share. The root of this failure has been the lack of a compelling product or service to drive advertisers, publishers and viewers to these advertising networks.

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Industry Performance

Mobile platforms spur growth

Smartphones and tablet devices with broadband internet connections have put content at consumers’ fingertips, whether they are at work, on the move or at home. This capability has significantly expanded the scope of the industry’s market and has presented opportunities for innovative companies. The usability and intuitiveness of mobile applications is a major competitive factor among mobile application publishers. Therefore, operators that develop and publish their content specifically with mobile devices in mind have been successful in this market. In today’s interconnected world, getting users to share articles, games and pictures on their social networks provides companies with unprecedented reach and market-targeting capabilities. As with traditional online content, operators generate a majority of revenue from mobile devices through the sale of advertising. According to the

Companies that develop mobile applications compete on usability, relevance and novelty latest available data from the Interactive Advertising Bureau, global mobile advertising revenue rose 110.0% in 2013, reaching a total of $7.1 billion. Companies may also charge users to download their applications. With respect to flourishing advertising revenue, industry operators have increased their employment numbers in order to hone in on the most effective ways to reach mobile-internet users. As a result, industry employment has increased at an annualized rate of 4.5% over the five-year period to reach 75,530 workers.

Content producers

In the paid-content realm, the most successful company has been Apple, which has leveraged the success of its iPod, iPhone and iPad devices to drive the adoption of iTunes as an integrated media player and digital music store. As a result, the company is one of few major paidcontent providers that have demonstrated consistent profitability. Other entities attempting to compete in this space have not been as successful. In the case of internet radio broadcaster Pandora, content acquisition costs as a share of revenue have consistently exceeded 50.0% over the five-year period, and the company continues to make the majority of its revenue from advertising, rather than subscriptions. Netflix, which temporarily separated its DVD rental-by-mail business from its online streaming business, was forced to capitulate and return to the current model because of customer outrage over the move. When paying for online

content, customers often expect additional benefits like organization and playback convenience. Without those added perks, it is difficult to convince consumers to adopt a new medium, especially amid competition from traditional outlets, ad-driven content and piracy, tempering industry revenue to a certain degree. Independent content producers like bloggers and YouTube video producers face a difficult environment. In today’s cluttered digital world, attracting and maintaining internet traffic is incredibly difficult. While there are exceptions, generating a consistent revenue stream typically involves providing a significant amount of daily content, updating it in real time and marketing aggressively on search engines and through social networks. These operations typically, at minimum, require a support staff and multiple computers and associated equipment. These producers must also

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Industry Performance

Content producers continued

share a large portion of any advertising revenue generated by their content with the advertising networks that place ads on their site. For example, Google, which operates the largest advertising network, returns 68.0% of the revenue that its content partners generate, keeping the remaining 32.0%. However, small, independent operators that produce successful sites are able to generate

revenue through large ad networks with relatively small up-front investment, largely explaining the 8.3% estimated annualized growth in industry companies over the five-year period, reaching 38,415 in 2014. Nonetheless, establishing a successful site is very difficult, and nonemployer publishers routinely enter the industry and fail to generate substantial revenue to turn a profit.

Industry Outlook

Over the five years to 2019, the Internet Publishing and Broadcasting industry is projected to grow rapidly as advertisers continue to shift resources toward internet and mobile platforms. This expected growth is largely a result of the influx of mobile internet connections expected to come into existence in the United States over the five-year period. In 2015, revenue is forecast to grow 7.4% as advertisers aggressively target internet users through social media and other content sites and applications. The internet content publishers that will most benefit from this increased advertising expenditure are the industry’s well-established major players and smaller players that develop specialized mobile applications or publish original content that pertains to a niche market. Medium-size operators will struggle to compete with the efficiency of major players’ advertising networks and

Industry revenue
25 20

% change

15 10 5 0

Year 06

−5

08

10

12

14

16

18

20

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will likely exit the industry or be absorbed by larger players looking to acquire patents or specific skill sets. Over the five years to 2019, industry revenue is anticipated to increase at an annualized rate of 11.4% to $46.9 billion.

Changing landscape

Over the next five years, the industry will continue to be dominated by large, horizontally integrated players and small, independent publishers, with very little in between. The more dominant major players like Google and Facebook become, the easier it is for them to maintain that dominance. For example, as Google’s AdSense network has increased in popularity, it has gained more members every year. Placing ads on

relevant sites becomes more efficient with more members, which further increases a network’s popularity. Similarly, as the number of Facebook users increases, the scope of Facebook advertising campaigns expands. Increasing advertising contracts translates into more revenue, which the firm can use to further develop its advertising platform or market itself to new users. These large firms are generally responsible for the anticipated 3.9%

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Industry Performance

Changing landscape continued

annualized increase in employment over the five years to 2019 to total 91,288 individuals. This self-perpetuating revenue cycle for larger players has been a boon for Google and Facebook and has made it very difficult for other mediumto-large firms to compete in the industry. Yahoo, for example, has experienced a consistent decline in its share of US advertising revenue over the past five years, and this trend is expected to continue over the five years to 2019. Meanwhile, small, independent publishers are expected to continue to enter the industry over the next five years. The number of enterprises is forecast to

increase at an annualized rate of 4.5% from 2014 to 2019, to reach 47,778 companies, which is indicative of the industry’s low barriers to entry. However, the long-term viability of these companies, the majority of which are nonemployers, hinges on their ability to attract internet traffic to their site. Google reimburses members of its AdSense network anywhere from $0.02 to $15.00 per click, depending on the type of advertisement. To succeed, small players must develop targeted, original content that holds the interest of internet users. Most of these small, new entrants will likely only generate modest revenue or exit the industry.

Mobile future

Mobile content (e.g. articles, games, photos and videos) has become commonplace due to broadband-enabled smartphone proliferation throughout the United States. As the number of global mobile internet connections surpasses fixed internet connections over the next five years, advertisers are expected to target this burgeoning market even more aggressively than in previous years. Content publishers that design mobile applications with advertising in mind will be able to cash in on this trend. Interacting with mobile users via text message and media-rich ads are two advertising trends that content providers are implementing into their apps and sites. Additionally, geolocation apps, which recognize a user’s location, may hold marketing potential in the future. According to a 2012 Pew Internet survey, 31.0% of respondents that own cell phones stated that they mostly go online using their device. Additionally, 45.0% of 18- to 29-year-old respondents stated that they do most of their online browsing on their mobile device. As these numbers continue to grow, internet publishing and broadcasting will be increasingly formatted for mobile content.

Industry growth will be largely a result of the influx of mobile internet connections
Industry profitability, measured by earnings before interest and taxes, is forecast to remain high over the five-year period, falling slightly from 24.0% of revenue in 2014 to 18.1% in 2019. Large players like Google and Facebook already have massive infrastructures in place and are focused on expanding their scope through new users and participants in their ad programs. Small players have incredibly limited operational expenses, ranging from a single computer and an internet connection to a small office and support staff. Significantly, profit may be pushed away from the top companies over the next five years. The relatively trivial costs associated with administering an advertising network, particularly one that has already been built and paid for, may put pressure on companies like Google to increase the reimbursement rate it pays some members of its ad network.

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Industry Performance
Life Cycle Stage

Industry value added is expected to increase at a faster rate than real GDP over the 10 years to 2019 Technological innovations favor industry growth The number of operators in the industry is increasing Companies are rapidly building and transitioning to internet advertising campaigns

% Growth in share of economy

20

Company consolidation; level of economic importance stable 15

Maturity

Quality Growth

High growth in economic importance; weaker companies close down; developed technology and markets

Key Features of a Growth Industry Revenue grows faster than the economy Many new companies enter the market Rapid technology & process change Growing customer acceptance of product Rapid introduction of products & brands

10

5

Car & Automobile Manufacturing

Internet Publishing and Broadcasting

E-Commerce Quantity Growth & Online Many new companies; Auctions

minor growth in economic importance; substantial technology change

0

Software Publishing Movie & Video Distribution

-5

Telecommunication Networking Equipment Manufacturing Decline

Shrinking economic importance

-10 -10

-5

0

5

10

15

20

% Growth in number of establishments
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Industry Performance

Industry Life Cycle This industry is Growing

Due to the growing number of internet advertising campaigns and the increased use of mobile devices, the Internet Publishing and Broadcasting industry is booming. Industry value added (IVA), which measures an industry’s contribution to the overall economy, is expected to increase at an annualized rate of 8.5% from 2009 to 2019. In contrast, US GDP is projected to grow at an annualized rate of 2.5% during the same period. Typically, an industry is considered to be in the growth phase of its life cycle when IVA growth exceeds that of the overall economy over a 10-year period. New companies are continually entering the market, while operators from other industries with abundant resources are investing heavily in this industry in an effort to capture some portion of its revenue growth. Over the 10 years to 2019, the number of industry enterprises is forecast to increase at an annualized rate of 6.3% to reach 47,778 companies. Beyond the revenue numbers, this industry’s increasing relevance as an arbiter of public opinion makes it even more attractive to

companies looking to control their public identity. As corporate profit rebounds and substantially exceeds prerecessionary values, corporations are increasingly funneling that profit into this industry in an effort to better define their brands. Such expenditures represent a major opportunity for players looking to capitalize on this growing market. The growth in the number of platforms from which consumers can access internet content, such as mobile phones and tablet computers, is also expanding opportunities for companies to capture new markets. With platform proliferation expected to continue, industry operators will continue to find untapped markets in which to compete. Although the industry’s major players wield a significant advantage in terms of public familiarity and spending power, advances in technology continue to allow smaller players to enter the industry and capture niche audiences. For example, the rapid proliferation of mobile phones and tablet computers has created a lucrative and highly fragmented market in the development of mobile applications.

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Products & Markets
Supply Chain
KEY BUYING INDUSTRIES
33611a 44-45 51791a 52 9901

Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations

Car & Automobile Manufacturing in the US The automotive industry is the third largest buyer of online advertising. Retail Trade in the US The retail trade is the largest buyer of online advertising. Telecommunications Resellers in the US The telecommunications industry is the fourth largest buyer of online advertising. Finance and Insurance in the US The financial services industry is the second largest buyer of online advertising. Consumers in the US The general public consumes the content produced by internet publishers and broadcasters.

KEY SELLING INDUSTRIES
33421 51121 51711d 51821 Telecommunication Networking Equipment Manufacturing in the US Larger firms build their own data centers with equipment purchased from this industry. Software Publishing in the US This industry provides software used by internet publishers to create and publish their content. Internet Service Providers in the US Internet publishers pay companies in this industry for internet access. Data Processing & Hosting Services in the US Companies in this industry provide website hosting services for internet publishers.

Products & Services

The Internet Publishing and Broadcasting industry is responsible for a dizzying array of products, some of which can be difficult to differentiate. However, the majority of industry revenue can be broken down into advertising and subscriptions, while intellectual property licensing and the rental or sale of user information provide relatively small portions of revenue. Ad-driven content The majority of industry operators deliver content to consumers at no cost. Therefore, the sale of advertising space is the primary method employed by web sites to monetize their existence. Indeed, the sale of advertising space accounts for an estimated 61.3% of industry revenue in 2014. Online advertising takes many forms. In the context of internet publishing, the most common forms are: the banner ad, a block of space usually adjacent to content; the in-text ad, where

certain words are automatically linked to a sponsoring website, usually one involved in the sale of whatever word is selected; the interstitial ad, which occupies the entire browser, usually for a certain period of time; the pop-up and pop-under ads, which open new windows containing advertising either in front of or behind the active browser window; and the wallpaper ad, which takes over the background of the hosting page, and is usually integrated with concurrent banner ads. The common trait among all advertisements is that they take advantage of the web’s most basic tool – the clickable hypertext link. Users are encouraged to click the ad in order to be brought to where they might buy something, or at least learn more about whatever is being advertised. Popular companies that garner their revenue from advertisements include the Huffington Post, Blogger, Wordpress and YouTube, among numerous others. The

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Products & Markets

Products & Services continued

Products and services segmentation (2014)
User information sales

1.2%

IP licensing

2.3%

Subscriptions and sales

35.2%

Advertising space

61.3%

Total $27.3bn majority of the progress in this product group has been made by firms that collect and interpret user data in order to more effectively target particular users as requested by the buyers of advertising space. This targeting allows advertisers to focus their ad dollars on users more likely to click-through (the industry benchmark for the effectiveness of an online ad). This segment is expected to continue to grow over the five years to 2019 thanks to the proliferation of websites that publish their own content and the ongoing transition to internet advertising that many companies are making. Paid content Paid content accounts for an estimated 35.2% of industry revenue and consists of digital media that requires a user to pay in exchange for access. Some firms, particularly old-media newspapers that have seen revenue decline, have embraced the “paywall” as a means of securing revenue. The New York Times, The Wall Street Journal and the Financial Times are all newspapers that offer limited or no access without a paid subscription. However, these firms fall outside the scope of the industry as they do not solely publish on the internet. The paywall strategy is less popular among

SOURCE: WWW.IBISWORLD.COM

internet-only firms; Salon.com is an example of a firm that has instituted a paywall, restricting certain content to paying customers. However, Salon.com also allowed viewers to circumvent the paywall by watching a 15-second full screen advertisement. The most crucial distinction to make in this category is whether the paid content is offered “a la carte” or by subscription. A la carte refers to content being purchased individually; the most popular implementation of this is Apple’s iTunes store, which commands an estimated 63.0% share of the digital music market. However, growing in popularity among consumers are subscription services, which generally offer unlimited access to a library of content for a specified period of time in exchange for payment. Hulu Plus, Pandora and Spotify are examples of providers of this sort of service. Over the five years to 2019, this segment’s share of revenue is expected to remain relatively constant as growth stays in line with overall industry growth. Intellectual property licensing and user information sales The Internet Publishing and Broadcasting industry generates an estimated 2.3% of total revenue from the licensing of rights

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Products & Markets

Products & Services continued

to use intellectual property. Generally, these licensing requests are between two companies in this industry and cover technologies that internet publishers would like to obtain without threat of lawsuit. Also generating a small portion of revenue for industry operators is the rental or sale of user information. According to Forbes, websites largely sell information, including things like demographic data and search histories, to data exchanges; these data exchanges

then resell the information to applicable advertisers. Companies in this industry have come under increased pressure about these activities. Facebook in particular has taken the brunt of this criticism; however, the company continues to state that it does not sell any user’s information and instead generates its revenue solely from advertising. In 2014, the rental or sale of user information is estimated to generate 1.2% of industry revenue.

Demand Determinants

Demand for the Internet Publishing and Broadcasting industry is largely determined by internet preferences and access and advertising activity. This industry has seen extraordinary growth since its inception because it offers a value proposition to its users: after an initial outlay for the computing hardware and network connection required to access the internet, an enormous wealth of information and entertainment is available free of charge. Faster internet connections have facilitated access to online content and increased demand. Over the past five years, consumers have taken to mobile computing devices with internet connections with even greater enthusiasm than they adopted broadband, dramatically increasing the amount of internet media to which they can be exposed. As that number expands, so does the demand for digital media published by this industry. Advertising expenditures generally grow in line with GDP. However, older industries with significant advertising expenditure are increasingly incorporating new media into their advertising strategies, which should cause demand for online advertising to

grow at a faster rate than demand for advertising in general. This trend is reflected in the exceptional growth of online ad revenue over the past five years. Demand for content that consumers explicitly pay to access is more difficult to quantify. While demand for internet video, music and other content is strong, consumers have increasingly turned to piracy as a convenient and free way of acquiring internet content. Absent significant and enforceable legal threats against piracy, demand for paid content shows dampened growth potential compared to the industry as a whole. Despite this, major player Apple has seen enormous success and increased demand from its iTunes Store over the past five years. However, while the iTunes Store has shown that consumers are willing to pay for convenience and quality control, it has not demonstrated that they are willing to pay much. Moreover, a great deal of the store’s success is due to the popularity of Apple’s devices like the iPod, iPhone and iPad. Successful examples of other paid content systems are rare. Most firms struggle to achieve profitability when confronted with the costs of licensing the content they offer.

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Products & Markets

Major Markets

Major market segmentation (2014)

Automotive advertisers Financial services advertisers

7.4%

Telecom advertisers

5.5%

8.0%

35.2%
Consumers

Retail advertisers

12.9%

Total $27.3bn

Other advertisers

31.0%

SOURCE: WWW.IBISWORLD.COM

As a predominately advertising-driven industry, the market for internet publishing and broadcasting is most efficiently described by two major groups: consumers who pay for content and advertisers who buy ad space. Consumers Consumers that pay for online content represent an estimated 35.2% of industry revenue in 2014. While most content on the internet is freely distributed and ad-supported, a recent survey by the Pew Internet and American Life Project stated that 65.0% of internet users reported paying to access or download some kind of online digital content. Music was the most popular paid product, with 33.0% of respondents claiming to have paid for music online. Of those who have paid for online products, 66.0% use only one payment method, and users in general tend to prefer subscription models rather than paying for individual products. The average monthly expenditure for paid content is estimated at $10 per user. While consumers are becoming more comfortable with online commerce, those paying for online content are typically older users. Over the five years to 2019, this market as a percentage of revenue is expected to remain relatively constant;

however, online piracy, particularly among younger generations, will remain a key threat to revenue for the paid content market. Retail advertisers The largest buyer of internet advertising is the retail sector, accounting for an estimated 12.9% of industry revenue in 2014. A large proportion of such advertising comes from online retailers who are able to directly track the efficiency with which ad views are converted into clicks and then into sales; therefore, these companies derive the most value from internet-based advertising. The share of advertising revenue from this sector has expanded over the past five years, as consumers have become more comfortable making purchases online. Financial services advertisers The financial services sector includes investment banks, commercial banks and insurance agencies, among other institutions; companies like State Farm, Progressive and Bank of America are all included. The financial services sector’s internet advertising expenditure constitutes an estimated 8.0% of industry revenue in 2014. The significant amount

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Products & Markets

Major Markets continued

spent by the sector is due to the utility that the internet offers in facilitating financial services. Websites are very effective as vehicles for the display and transmission of financial data and orders. As a result, the internet is the primary way individual consumers buy and sell stocks and obtain car insurance quotes. Automotive advertisers Automotive advertisers account for an estimated 7.4% of industry revenue in 2014. Companies have moved their advertising revenue away from old media and toward the internet, particularly over the past five years. Individuals are increasingly turning to the internet to determine the brand of automobile to purchase; as a result, car companies are advertising online in order to more effectively reach their potential customer base. Telecom advertisers The fourth largest online advertiser is the telecom sector, comprising an estimated 5.5% of total industry revenue in 2014 but trending downward. According to comScore’s Ad Metrix service, AT&T and Verizon are both among the top 10 US online display advertisers. Given that

almost all internet users are implicitly buyers of some form of network connectivity, advertisers see reason to target internet users with connectivity products. The downward trend in telecom’s portion of overall internet ad revenue is more a reflection of a growing market already saturated with telecom advertising than an indication of decreasing expenditures by the sector. Other advertisers There are a number of other economic sectors that contribute to industry advertising revenue. Leisure travel companies generate an estimated 4.9% of industry revenue and largely consist of internet-based travel-service providers. The consumer packaged goods industry accounts for an estimated 4.3% of industry revenue and derives similar utility from online advertising as the retail sector. The computing products sector generates an estimated 3.7% of industry revenue, as individuals that use the internet are necessarily users of computing products. Other advertising sectors and estimates of their revenue share include pharmaceutical and healthcare with 3.1%, media with 3.1% and entertainment with 2.5%.

International Trade

This industry is not involved in the international trade of any goods or services. However, internet publishing and broadcasting is a global enterprise and US sites frequently attract visitors from other countries. Furthermore, the three major

players in the industry will generate an estimated average of 58.9% of their total revenue from foreign countries in 2014. For more information on the industry’s international trends, please refer to the Industry Globalization section of this report.

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Products & Markets
Business Locations 2014

West
AK
0.2

New England Great Lakes MidAtlantic
MI
1.4

ME
0.3

WA
3.8

OR
1.9

Rocky Mountains ID
0.3 0.4

MT

ND
0.2

MN

SD
0.2

Plains
IA
0.4

1.4

1 2 3 NY 11.5 5 4 6 7 8

WI
0.7

PA
2.3

WY
0.1

West NV
1.9

NE
0.6

IL
3.7

IN
0.8

OH
1.8

9

UT
1.8

CO
3.2

KS
0.4

MO
1.1

KY
0.6

WV VA 2.4
0.1

NC
2.1

CA
23.0

OK AZ
1.5 0.5

AR
0.4

Southeast
1.1

TN

SC
0.6

NM
0.4

Southwest
TX
4.9

MS
0.2

AL
0.4

GA
2.8

LA
0.4

FL
7.5

West

HI
0.2

Additional States (as marked on map) 1 VT
0.2 1.1

Establishments (%) Less than 3% 3% to less than 10% 10% to less than 20% 20% or more
SOURCE: WWW.IBISWORLD.COM

2 NH
0.5

3 MA
3.4

4 RI
0.3

5 CT

6 NJ
2.4

7 DE
0.4

8 MD
1.3

9 DC
0.9

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Products & Markets

Business Locations

While the internet can be accessed increasingly from any geographical location, large firms tend to be sited in desirable urban environments with significant outputs of college graduates and attractive living standards. Silicon Valley and the San Francisco bay area in general feature the largest concentration of businesses in the industry due to the proximity of large, high-quality learning institutions like Stanford and UC Berkeley and the overall high quality of life in the area. Notably, all three major players in the industry are headquartered in California, which represents an estimated 23.0% of all industry establishments but a significantly larger share of revenue. The West region as a whole accounts for an estimated 31.0% of industry establishments. Other popular locations include major urban centers like New York City, Chicago, Boston and Los Angeles, as well as smaller cities with younger populations, large universities and high quality of life scores (e.g. Austin and Portland). Datacenters for large operations will also take into account other geographic concerns, such as the risk of natural disasters or the impact of climate on cooling costs. In that vein, Facebook recently built a new datacenter in Oregon because it felt that the naturally occurring low humidity would allow the company to use evaporative cooling rather than the traditional chilledair approach to cool its servers. Other concerns involved in the selection of sites for datacenters include the cost of real estate and the proximity to large peering

Distribution of establishments vs. population
40 30 20 10 0 Great Lakes Mid-Atlantic New England Rocky Mountains Southwest West Southeast Plains

%

Establishments Population
SOURCE: WWW.IBISWORLD.COM

exchanges where the backbones (i.e. the principal connections) of the internet meet. Independent entrepreneurs looking to produce their own content for the internet can establish themselves anywhere. However, these operators generally establish themselves near a hub for whatever industry they cover or wish to be a part of. For example, a fashion blogger may establish themselves near New York City. Besides the West region, which has already been mentioned, other regions and their share of establishments include: the Mid-Atlantic (18.8%), the Southeast (18.6%), the Great Lakes (8.4%), the Southwest (7.3%), New England (5.8%), the Rocky Mountains (5.8%) and the Plains (4.3%).

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Competitive Landscape
Market Share Concentration
Level The Internet Publishing and Broadcasting industry operates with a medium level of market share concentration. In 2014, the four largest companies control an estimated 65.0% of industry revenue. Acquisitions are a routine feature of this industry, but they rarely have a significant impact on concentration. Major companies like Google or Facebook typically purchase smaller firms to acquire a particular patent or skill set in the hopes of improving their existing offerings or to safeguard against patent lawsuits pertaining to intellectual property. While the industry’s largest player, Google, has seen sharp growth in market share over the past five years, Google’s business model actually facilitates the entry of small operators into the industry. Small- to medium-sized players are able to use Google’s AdSense network to generate revenue without having to market themselves to advertisers or develop

Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization advertising contracts. Bandwidth-intensive sites and sites that receive an enormous amount of traffic, like Facebook and YouTube, necessitate a massive amount of computing resources and support staff and are typically only within the realm of possibility for large industry operators. However, sites that publish textual content (e.g. blogs, newspapers and educational resources) require very few resources and support staff. As a result, it is relatively easy to enter the industry as a small player but substantially more difficult to compete with the likes of Google, Apple and Facebook. Therefore, the industry is evolving into one shaped by large, well-established players and small, independent publishers, with very few medium-sized companies in between. Consequently, IBISWorld expects industry concentration to increase only slightly over the five years to 2019, as the growth of the largest players is offset by the entrance of many smaller firms.

Concentration in this industry is Medium

Key Success Factors IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:

Developing a clear niche Websites live and die by the loyalty of their fans and their ability to keep consumers interested in the site. Successful websites cultivate a unique culture and continuously appeal to their user base. Word of mouth recommendations Word of mouth recommendations are an invaluable way to build up a website’s user base. Websites that can successfully get users to talk to their friends about the site, especially through social networks like Facebook, tend to grow faster. Attracting advertisers Advertising is the main source of industry revenue. Unless a website can convince

users to pay subscription fees or sell merchandise, websites must attract advertisers to keep operating. Protection of intellectual property/ copyrighting of output The ease with which digital media can be duplicated and redistributed means firms selling content must contend with the threat of piracy. Access to highly skilled workforce The low barriers to entry and hypermobility of consumers for this industry force competitors to compete viciously on the quality of their products. Quality among these firms is driven primarily by the caliber of talent employed.

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Competitive Landscape

Cost Structure Benchmarks

The cost structures of firms in this industry vary significantly depending on company size and operational scale. Large operators typically own and operate their datacenters, which consist of servers and associated hardware, increasing operational costs. On the other hand, smaller firms typically rent server space from hosting companies or even from some of the larger players in the industry. Additionally, the type of content published impacts cost structure. Video-intensive sites require significantly more bandwidth and are inherently more expensive to run than a site that just publishes text. Profit Industry profit is expected to increase over the five-year period, with earnings before interest and taxes growing from an estimated 15.2% of revenue in 2009 to 24.0% in 2014. The commoditization of computing resources and bandwidth continues to reduce costs for industry participants. A bandwidth and processorintensive video-sharing site is now within the reach of small-scale or even individual operators. Moreover, the success of shared computing clusters known as “clouds” over the past few years has diminished the plateaus associated with expansion and have resulted in a more constant relationship between processing power and cost. As a result, companies have shifted their expenditures away from the outright acquisition of computing resources and toward the renting of externally managed computing resources. A decrease in wages as a share of revenue, coupled with increasing year-on-year revenue levels, has served to increase industry profitability further. Over the next five years, the industry’s average profit margin is anticipated to remain high, declining slightly to 18.1% of revenue in 2019. Purchases Purchases in this industry account are anticipated to account for 20.8% of total

revenue in 2014. Providers of copyrighted materials, such as videos, music and photos, must pay royalties to the owners of that material. For firms like Pandora (music), such costs can represent more than half of revenue. For example, according to the latest available data, content acquisition represented 53.2% of Pandora’s total revenue in the first half of 2014. Larger firms such as Google and Facebook often purchase intellectual property from other firms to add a software platform or service. For example, in 2012, Facebook bought the rights to 650 patents from Microsoft (which bought them from AOL) for $550.0 million. Purchases in this industry may also take the form of traffic acquisition costs, which are fees larger firms like Google pay smaller firms that participate in their advertising program. Wages and depreciation Labor is the second largest factor of production because the industry requires a highly skilled workforce. However, the average wage in this industry has trended downward as more young workers emerge from school possessing highly in-demand computer programming and web design skills. Wage expenses are further diluted by the entrance of more marketers and writers into a field that formerly employed more workers in fields like IT, database management and software development. While a major player like Google still requires a large number of highly skilled employees to develop the algorithms used in its advertising programs, most small players now employ only marketing and writing staff and outsource the hosting and design of their sites to third parties. In 2014, wage costs are estimated to account for 18.2% of revenue and an average employee in the industry makes slightly less than $66,000 a year. Wages as a share of revenue is expected to continue to decrease over the five years to 2019.

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Competitive Landscape

Cost Structure Benchmarks continued

Given the industry’s high level of capital intensity, depreciation is a significant expense for operators. The industry’s largest operators require a substantial amount of investment in datacenters and computing hardware to operate. Major players in the industry, such as Facebook, estimate the useful lives of network equipment to be between three to four years and the useful lives of computer software and office equipment to be between two to five years. Due to this relatively quick depreciation of assets, depreciation expenses are generally very high for the industry’s largest firms. Therefore, depreciation is estimated to account for 7.8% of industry revenue in 2014. Marketing Marketing is a very significant expense in this industry and is estimated to account for 6.5% of industry revenue in 2014. Firms Sector vs. Industry Costs
Average Costs of all Industries in sector (2014) 100

in this industry generate a majority of revenue through advertising. Accordingly, these firms place a premium on driving traffic to their sites in order to make themselves a more attractive platform from which to advertise. Smaller firms typically market themselves through social media platforms by linking their sites to other, more popular sites or by bidding on popular keywords that individuals search for on search engines. Larger firms like Google and Facebook aggressively market themselves to advertisers as well as content providers. Marketing costs are expected to increase over the five years to 2019 as social media marketing continues to increase in prominence and firms continue to hire employees whose sole job it is to market their site. Other Other expenses include rent and utilities, which are often extensive for firms

Industry Costs (2014)

11.2 20.9

24.0 18.2

80

Percentage of revenue

60

■ Profit ■ Wages ■ Purchases ■ Depreciation ■ Marketing ■ Rent & Utilities ■ Other

25.9 7.1 7.0 4.8 23.1

20.8 7.8 6.5 3.2 19.5
SOURCE: WWW.IBISWORLD.COM

40

20

0

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Competitive Landscape

Cost Structure Benchmarks continued

running datacenters, research and development, selling and administration costs and legal expenses. In addition, costs associated with mergers and acquisitions are also expected to account

for a small share of industry revenue in 2014. These costs are expected to remain relatively constant over the five-year period, as they tend to increase at the same pace as revenue.

Basis of Competition
Level & Trend

Competition in this industry is High and the trend is Increasing

Internal competition Internally, internet publishers compete for the attention of users by offering original content, attractive web design and website user-friendliness. The main sources of traffic for websites are search engines and social networks, with social networks becoming increasingly important. Search engines direct users to websites that are closely related to the keyword entered by the user. Social networks allow users to share websites, videos and other content with friends in their network. The popularity of any individual website or service often has significant impact on the advertising rates the website is able to charge. Social networking sites, such as Facebook, have exploded in popularity during the past five years by combining exclusive content (non-members cannot view profiles or pictures) with socializing. Notably, major players in this industry facilitate competition among smaller players. For example, Google’s AdSense network provides small websites with the ability to generate revenue from advertisements. Without Google’s efficient and extensive advertising capabilities, most of these sites would lack the capability and the reach to generate sufficient advertising revenue.

External competition Externally, this industry competes for the leisure time of consumers. In this respect, the industry primarily competes against other forms of entertainment including “old media” like radio broadcasting, television broadcasting, newspaper publishers and periodical publishers. The major advantage of publishing content on the internet is that information can be updated in real time. Unlike print forms of newspapers and magazines, online versions contain information that is current and routinely updated throughout the day. Internet broadcasters are also able to compete on diversity of content. While television broadcasters are increasingly offering on-demand services and a diverse range of programming, none of them can come close to the multitude of videos uploaded to YouTube every day; according to YouTube, 100 hours of video are uploaded to the site every minute. Due to the rapid proliferation of smartphones, external competitors are increasingly publishing their content on the internet or through mobile apps to target consumers that access internet content through their mobile phones.

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Competitive Landscape

Barriers to Entry
Level & Trend

Barriers to Entry in this industry are Low and Steady

The Internet Publishing and Broadcasting industry has low barriers to entry, but extremely high barriers to success. New entrants can launch a website with just the code for the site and cash for hosting and internet access fees. Regulation is extremely light and does not inhibit new entrants. The most significant barrier to entry is the development of the code or software to build the website, which can range from the very simple to the exceedingly complex. A wide variety of vendors offer services that allow a website developer to create websites from existing templates or toolsets (e.g. Wordpress, Blogger, Blogspot and Tumblr). For many website categories, availability of content is a major barrier to entry. For example, movie studios and other content owners monitor video streaming websites, so their content is not given away for free. To host content owned by third-parties, video streaming websites need to work out distribution or licensing arrangements with each content owner, which may be costly and time consuming. Because of these constraints, most of the content hosted on video streaming websites consists of amateur uploads. Even for amateur uploads, the popularity of a given website within its category can act as a barrier to success. Users are more likely to upload their content to popular websites where the content is likely to be seen by more people; if users use little known websites, most of their traffic will have to come

Barriers to Entry checklist
Competition Concentration Life Cycle Stage Capital Intensity Technology Change Regulation & Policy Industry Assistance

Level High Medium Growth High High Light None
SOURCE: WWW.IBISWORLD.COM

from sending links on social networks or through e-mail. For most operators in the industry, the amount of traffic on a website determines the amount of revenue it generates. Thus, acquiring a suitable portion of internet traffic presents a significant barrier to success in this industry. However, the largest barriers to success are encountered by firms that desire to compete with Google, Facebook and Apple. A tremendous amount of capital expenditure is required, including datacenters and servers. Additionally, the popularity of entrenched companies in this industry is unquestionable, and so a new entrant with a desire to compete with the industry’s largest players must clearly provide a better alternative to the content already delivered in the industry or focus on a niche not already served. In order to do this, new entrants may find it necessary to purchase a substantial amount of intellectual property and will need to attract a large pool of highly skilled labor.

Industry Globalization
Level & Trend

Globalization in this industry is Low and the trend is Steady

The Internet Publishing and Broadcasting industry has a low level of globalization. Most firms in the industry, including the major players, are domestically owned and no products or services are traded across borders. However, the borders of traditional nation-states are irrelevant to the

internet as users from different countries can easily access and enjoy content from anywhere in the world (unless there are licensing constraints). Google earns an estimated 57.7% of its total revenue abroad and 84.5% of Facebook’s monthly active users access the site from outside of the United States. Google achieves its

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Competitive Landscape

Industry Globalization continued

excellent international penetration by striving for localized results and routinely hiring native speakers to improve the relevancy of their searches. In 2010, Google pulled its operations out of

mainland China due to privacy concerns and security breaches relating to Chinese censorship; for the time being, Google serves mainland China from servers based in Hong Kong.

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Major Companies
Google Inc. | Facebook Apple Computer, Inc. | Other Companies Major players
(Market share)

Facebook 21.1%

38.7%
Other Apple Computer, Inc. 13.2% Google Inc. 27.0%
SOURCE: WWW.IBISWORLD.COM

Player Performance Google Inc. Market share: 27.0%
Industry Brand Names YouTube.com Blogger.com Google AdSense Google AdWords Android DoubleClick

Headquartered in Mountain View, CA, Google is an enormous entity in the world of internet publishing, employing 52,069 full-time employees as of June 2014 (latest available data). An estimated 38.9% of these employees are involved in research and development, while 32.2% are in sales and marketing roles. In addition, 13.7% of employees are in general and administrative roles, while the remaining 15.2% are in operations. Although primarily known for its search engine, Google owns a number of subsidiaries in the United States, including Android, a mobile phone operating system software publisher; YouTube, a video-sharing website; and Motorola Mobile, a wireless telecommunications operator. The company operates as an internet publisher through YouTube, as well as its social media platform Google+ and its blogging website Blogger. Google offers these services to users free of charge and generates revenue through selling advertising space. An estimated 90.0% of Google’s revenue will be generated from advertising sales in 2014 with 42.3% of this advertising revenue coming from sales to customers in the United States. Additionally, total company revenue is forecast to reach $72.0 billion in 2014. Google’s revenue in this industry is derived from its AdWords and AdSense programs. AdWords is an automated service through which advertisers bid against one another to place their ads next to content on Google sites and sites of members of Google’s network. Third-

party sites are admitted to Google’s network through the AdSense program. With AdSense, Google places relevant ads generated from AdWords on independent websites and shares revenue with the operators of these sites. Currently, content publishers that participate in the AdSense program receive 68.0% of the amount Google collects from advertisers. As a result, Google helps generate revenue for many other companies in this industry. These payments related to AdSense arrangements, referred to as traffic acquisition costs, reached 20.8% of Google’s total revenue in the first half of 2014. Financial performance Over the five years to 2014, Google’s industry-relevant revenue is forecast to grow at an annualized rate of 17.2% to reach $7.4 billion. Google has enjoyed phenomenal growth primarily due to its successful advertising strategy. The speed and usability of the company’s search engine and the depth of its network of content providers presents an attractive advertising platform for companies looking to target specific demographics and markets. Furthermore, by admitting independent websites into its AdSense network, Google is able to generate revenue from even the smallest of websites. Google has consistently established itself as the leading innovator in internet advertising; in 2012, the company introduced Google Customer Surveys, a varying market research question that consumers are required to

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Major Companies

Player Performance continued

answer prior to viewing certain online content, such as articles or videos. Advertisers pay Google to run these surveys, and Google pays content

providers $0.05 per response. Going forward, sites like YouTube, which gets an estimated four billion views per day, and Google+.

Google Inc. (US content advertising) – financial performance*
Year 2009 2010 2011 2012 2013 2014
*Estimates

Revenue ($ million) 3,334.8 4,272.1 5,059.6 6,720.9 6,959.7 7,381.6

(% change) 5.0 28.1 18.4 32.8 3.6 6.1

Operating Income ($ million) 1,172.0 1,512.5 1,567.3 1,709.2 1,624.7 1,661.4

(% change) 21.3 29.1 3.6 9.1 -4.9 2.3

SOURCE: ANNUAL REPORT AND IBISWORLD

Player Performance Facebook Market share: 21.1%

Facebook is the world’s largest social network, with an estimated 1.3 billion monthly, active users. Headquartered in Menlo Park, CA, Facebook employs 7,185 individuals. Similar to Google, Facebook offers its services for free and generates revenue through advertising sales. The company completed an initial public offering (IPO) in May 2012, which raised a reported $16.0 billion. On Facebook, users can share and send videos, pictures and messages; participate in groups; and play games. The company generates revenue through the sale of advertisements and payments from publishers of applications (apps) and games that the company hosts on its site. Users can add money to their Facebook account via credit card and use this money to buy apps and games. Facebook also generates money from advertisements by displaying sponsored stories on its site and by generating specific advertisements based on users “liking” a certain product on their profiles. In 2014, an estimated 44.1% of Facebook’s revenue will be generated within the United States.

According to the latest available data, in 2013, Facebook generated $6.81 in advertising revenue per user worldwide, representing a 28.0% increase from 2012. However, following the company’s IPO, Facebook has come under increasing pressure to prove the merits of its advertising program. The company has stated that, with an extensive user base generating an estimated 3.2 billion “likes” per day, it is well positioned to deliver relevant, successful advertisements. Critics of Facebook’s advertising program have argued that there are no proven results of Facebook ads actually working. They argue that Facebook (unlike Google, where users search for products they have an interest in buying) attracts users simply looking to connect with friends, and that Facebook ads are largely ignored. Financial performance Over the five years to 2014, Facebook’s industry-specific revenue is forecast to increase at an annualized rate of 64.2% to $5.7 billion. In 2010 and 2011, the

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Major Companies

Player Performance continued

company’s industry-specific revenue grew at spectacular rates of 154.1% and 69.0%, respectively. While the future of the company’s advertising program is an area of contention, its past performance speaks for itself. The company’s rapid expansion of its user base and site

features spurred significant growth in advertising revenue every year during the five-year period. Facebook’s CFO has stated that the company will continue to spend heavily on mobile apps, even if such spending negatively impacts shortterm profitability.

Facebook (US content advertising) – financial performance*
Year 2009 2010 2011 2012 2013 2014
*Estimates

Revenue ($ million) 481.4 1,223.0 2,067.0 2,578.0 3,613.0 5,749.4

(% change) 185.7 154.1 69.0 24.7 40.1 59.1

Operating Income ($ million) 162.3 639.4 978.1 272.5 1,286.9 3,261.9

(% change) N/C 294.0 53.0 -72.1 372.3 153.5

SOURCE: ANNUAL REPORT AND IBISWORLD

Player Performance Apple Computer, Inc. Market share: 13.2%
Industry Brand Names iTunes iPod iPhone iPad

Based in Cupertino, CA, Apple is a technology giant that manufactures and markets computers, tablets, portable media players and smartphones. The company also publishes and distributes software, including its proprietary operating system, and owns the iTunes Store. According to the latest available data, as of September 2013, Apple employed 80,300 full-time equivalent employees, 42,800 of whom work in Apple’s retail segment. In fiscal 2014, total company revenue is anticipated to reach $180.2 billion. Apple generally manages its business on a geographic basis; therefore, its operating segments are net sales from the Americas, Europe, Japan, the Asia-Pacific region and its retail stores, which are not included in the results of the purely geographical segments. However, Apple does breakdown its revenue on a product basis, and sales from its other musicrelated products and services, which

includes the iTunes Store, are applicable to this industry. In fiscal 2014, an estimated 5.5% of Apple’s total revenue is expected to be generated from this segment, 36.7% of which will be derived in the United States. In Apple’s iTunes Store, users can download and manage a large range of music, movies, television shows, podcasts, apps and games. Apple’s strategy with iTunes relies on two general principles: standardized pricing and association with premium products. By setting most music prices at $1.29 per song, Apple has attracted many users who prefer the simplicity of a standardized price. Furthermore, by offering the latest available movies and books through the iTunes store, Apple is able to compete with other video-content providers like Netflix. The iTunes Store’s success has been compounded by the success of Apple’s hardware products, particularly the iPod and the iPhone. All

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Major Companies

Player Performance continued

of these devices are designed to work specifically with iTunes, making the iTunes store visible and convenient to owners of these products. Financial performance Over the five years to fiscal 2014, revenue from Apple’s US music-related products and services is expected to grow at an annualized rate of 15.1% to $3.6 billion. This growth has been primarily driven by increases in revenue from the iTunes store. As Apple products have proliferated throughout the United

States, the iTunes Store has increased in prominence and convenience. Users can download a song on one Apple device and have it updated on all of their Apple devices, or download an eBook before boarding a plane. Content providers prefer to target the largest market possible; thus, as the iTunes user base has increased, so too has the amount of content the store offers, reinforcing the store’s attractiveness to consumers who prefer a diverse selection. This selfperpetuating cycle is expected to continue to drive revenue growth in the future.

Apple Computer Inc. (US music-related products and services operations) – financial performance*
Year** 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
*Estimates, **Year-end September SOURCE: ANNUAL REPORT

Revenue ($ million) 1,785.5 1,858.4 2,234.9 3,136.0 3,421.0 3,606.5

(% change) 21.1 4.1 20.3 40.3 9.1 5.4

Operating Income ($ million) 488.6 523.8 697.6 1,106.9 980.8 1,040.4

(% change) 49.2 7.2 33.2 58.7 -11.4 6.1

Other Companies

The Internet Publishing and Broadcasting industry includes an estimated 38,415 enterprises in 2014. The majority of these companies each generate significantly less than 5.0% of industry revenue. Among these remaining companies, Hulu (a division of Comcast) represents a rising force in the industry, while Yahoo represents a once-prominent operator in decline.

Hulu

Estimated market share: 3.7% Hulu is a website that offers streaming video of TV shows and movies from NBC,

Fox, ABC and other television networks and content producers. Hulu is a joint venture of NBC Universal (formerly a division of General Electric, now a division of Comcast), Fox Entertainment Group (a division of 21st Century Fox) and ABC (a division of The Walt Disney Company). Hulu generates revenue through short video ads shown during shows. The content provider receives 50.0% to 70.0% of the revenue from these ads, depending on the specific agreement. In late 2010, Hulu began offering a premium service (Hulu Plus) that gives subscribers increased access to

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Major Companies

Other Companies continued

the website’s content. The availability of a given episode of a TV show hosted on Hulu is strongly controlled by the content owner, frequently resulting in nonsequential episodes being available. Hulu’s content providers have been reluctant to fully support the website (e.g. by allowing sequential episodes to be viewed) for fear of taking away revenue from their cable television business. In 2014, Hulu’s US revenue is estimated to reach $1.0 billion.

$225.0 million, which Yahoo originally purchased for $436.0 million, and the outsourcing of its struggling personals and real estate services. Yahoo’s industryrelevant revenue is projected to reach $643.3 million in 2014.

Zynga

Yahoo! Inc.

Estimated market share: 2.4% Yahoo was, for a time, one of the largest and most iconic companies in the internet space. One of the earliest and most visible dot-coms, Yahoo’s overall company revenue has been on the decline over the five-year period. Headquartered in Sunnyvale, CA, Yahoo operates as a digital media company. The operator offers services such as Flickr, a photosharing site, and Yahoo Answers, a forum where users can ask and answer each other’s questions. Critics of the company have pointed to the success of Google and the company’s overly ambitious approach as the reasons for declining revenue. Services such as YouTube, Google Maps and Gmail have all taken away revenue from Yahoo’s versions of the same applications. Additionally, critics claim that by trying to provide too many services, the company failed to gain a prominent position in any one market. Recent company setbacks include the 2010 sale of HotJobs to Monster for

Estimated market share: 1.2% Zynga produces social games designed to be played by Facebook users or on mobile phones. Its games, including FarmVille and CityVille, had an estimated 1.5 million monthly unique players during the first half of 2014 (latest available data), down from 1.8 million in 2013. Zynga games generate revenue by asking players to pay for special in-game currency or opportunities and through partnerships with businesses that ask players to take surveys, accept credit card offers or buy services in exchange for those same rewards. The company grew rapidly early on, but has stated that it faces difficulty holding on to 28.0 million daily active users; company revenue fell from $1.3 billion in 2012 to $873.3 million in 2013, according to the latest available data. The acquisition of mobilegaming applications, such as Words with Friends and Draw Something (developed by Omgpop), have succeeded in expanding the company’s user base. Revenue growth in the future will depend on the further expansion of this base, but this is not anticipated to occur in 2014. In 2014, Zynga’s industry-relevant revenue is estimated to reach $337.8 million, representing a 35.0% decline from 2013.

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Operating Conditions
Capital Intensity
Level The Internet Publishing and Broadcasting industry operates with a high level of capital intensity. IBISWorld estimates that for every $1.00 spent on wages in 2014, the industry will allocate $0.43 in capital investment. The industry’s level of capital intensity has grown substantially over the five-year period, as the industry allocated $0.29 in capital expenditure per dollar in wages in 2009. Because operators in this industry offer such a diverse range of products, capital intensity can vary significantly among firms. A small firm with a simple content website can operate with little capital expenditure, while a firm like Facebook requires massive investment in datacenters and computing hardware in

Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance

Capital units per labor unit 0.5 0.4 0.3 0.2 0.1 0.0 Economy Information Internet Publishing and Broadcasting

Capital intensity

The level of capital intensity is High

Dotted line shows a high level of capital intensity
SOURCE: WWW.IBISWORLD.COM

order to maintain its operations. As larger companies implement new product features, computing infrastructure costs,

Tools of the Trade: Growth Strategies for Success
New Age Economy Recreation, Personal Services, Health and Education. Firms benefit from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labor skills are key to product differentiation. Investment Economy Information, Communications, Mining, Finance and Real Estate. To increase revenue firms need superior debt management, a stable macroeconomic environment and a sound investment plan.

Capital Intensive

Labor Intensive

E-Commerce & Online Auctions Software Publishing

Internet Publishing and Broadcasting
Car & Automobile Manufacturing
Old Economy

Traditional Service Economy Wholesale and Retail. Reliant on labor rather than capital to sell goods. Functions cannot be outsourced therefore firms must use new technology or improve staff training to increase revenue growth.

Telecommunication Networking Equipment Manufacturing Movie & Video Distribution

Agriculture and Manufacturing. Traded goods can be produced using cheap labor abroad. To expand firms must merge or acquire others to exploit economies of scale, or specialize in niche, high-value products.
SOURCE: WWW.IBISWORLD.COM

Change in Share of the Economy

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Operating Conditions

Capital Intensity continued

including servers and storage capabilities, continue to rise. Outlays by large players on giant data centers skew the industry-wide level of capital intensity upwards from where the median industry participant operates. Notably, the more capital intensive the industry’s major players are, the easier it is for smaller firms to spend less on capital. For example, the more

sophisticated Google’s advertising platform becomes, the easier it is for smaller operations to generate advertising revenue on these sites, rather through their own sales efforts. These operations, which may be as simple as one person operating a website on their home computer, can generate significant revenue depending on the popularity of the site.

Technology & Systems
Level

The level of Technology Change is High

While the software behind the storage and distribution of web content has largely matured, technological advances in the industry are centered on changing how consumers access content and how advertisers target consumers. Mobile devices One of the most significant technological trends shaping the industry involves the proliferation of smartphones, tablet computers and cellular data networks. This “mobile revolution” has expanded the opportunities that advertisers and content providers have to reach consumers: consumers are now able to access content from a multitude of locations and devices. Google and Apple, the two main distributors of mobile apps, recently changed the way they rank apps to factor active usage rather than just the number of downloads. This has spurred many app publishers to run campaigns aimed at building brand loyalty and re-use of their products. After all, the number of users of a content or gaming app ultimately determines the revenue that app generates. Content publishers are also focused on enhancing user experience. As internet content has proliferated, consumers are increasingly choosing their content providers based on the userfriendliness of their product. This is especially important with mobile devices where users interact with a much smaller interface than a computer. Developments

in mobile app usability include implementing stylish interfaces, limiting the amount of text on a screen and using intuitive touch gesture technology. The advent of HTML5, the fifth version of the language used for structuring content on the World Wide Web, is very significant for the industry. The technology gives programmers greater control over the pages they create and lightens the impact of media-rich applications on mobile devices. For example, by embedding videos with code rather than plugins (e.g. Adobe Flash Player), video applications will demand less battery and memory space from mobile devices. Most significantly, HTML5 is multi-platform, allowing publishers to reach consumers on both Apple’s iOS operating system and Google’s Android system. Advertising While the industry is focused on publishing and broadcasting content, the majority of internet publishing firms generate revenue through the sale of advertising. For advertising networks, the most promising technological changes are those involving the use of deep analytics built upon massive databases of user information to more effectively determine which ads are most valuable to users. Facebook and Google are the two major drivers of internet advertising technology in the industry.

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Operating Conditions

Technology & Systems continued

Facebook’s advertising strategy is centered on the basic principle of advertising through word of mouth. The firm has embedded a “like” button on the page of almost every content provider on the internet. When a Facebook user clicks this button, ads appear on their friends pages, and so on. In a social network with an estimated 1.3 billion monthly active users, each connected to an average of 130 friends, this advertising strategy has attracted major brands that run multimillion-dollar campaigns. Notably, recent turmoil leading up to and following Facebook’s initial public offering has made the effectiveness of advertising on Facebook an object of

contention. Please see the Major Companies section for more information. Google’s AdSense technology analyzes keywords, word frequency and the link structure of the web to match ads to individual content pages instantaneously. When an individual internet publisher joins Google’s AdSense network, they embed a small, custom HTML code on their page that generates a request to the AdSense service whenever the page is viewed. The AdSense program then matches a relevant advertisement to the content on that site. For example, a user reading an article on a sports team may be presented with an advertisement offering tickets to an upcoming game.

Revenue Volatility
Level

The level of Volatility is Low

IBISWorld estimates that industry revenue volatility, or the average absolute change in revenue, is 2.3%, corresponding to a low level of revenue volatility over the five years to 2014. Because the majority of firms’ revenue is dependent on advertising revenue, the industry is susceptible to trends and changes in advertising expenditure. However, while most industries that rely on advertising spending were hit hard during the economic downturn, the
A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment. When a firm makes poor investment decisions it may face underutilized capacity if demand suddenly falls, or capacity constraints if it rises quickly.

Internet Publishing and Broadcasting industry fared considerably better. This performance can largely be attributed to the convenience of the pay-as-you-go model of most internet advertising and the growing level of internet use among the US populace. Firms advertising online, particularly with Google, are able to bid on each keyword and accurately track the effect of such advertising. Thus, cash-strapped firms in the recession were either

Volatility vs Growth
1000

Hazardous

Rollercoaster

Revenue volatility* (%)

100 10 1 0.1

Internet Publishing and Broadcasting
Stagnant
–30 –10 10 30 50

Blue Chip
70

Five year annualized revenue growth (%)
* Axis is in logarithmic scale
SOURCE: WWW.IBISWORLD.COM

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Operating Conditions

Revenue Volatility continued

reluctant to cut effective advertising or were able to scale back online advertising expenditures without cutting them all together. Revenue volatility is also affected by the transition of most traditional media to the internet.

IBISWorld expects revenue volatility to remain relatively low over the five years to 2019 as the demand for content through the internet, particularly through mobile devices, contributes strong and steady growth for the industry.

Regulation & Policy
Level & Trend

The level of Regulation is Light and the trend is Steady

Internet publishers and broadcasters are subject to few regulations. However, copyright and intellectual property (IP) laws are perennial issues that can significantly interfere with businesses in this industry. Legal precedents for copyrights and IP as they relate to the internet are still evolving. On the one hand, there is precedent for stringent copyrights for techniques and patented features based on the software industry, but there is also a significant question of the limitations of “fair use” exemptions. Since 2010, Paul Allen, one of the cofounders of Microsoft, has pursued lawsuits against major internet companies based on alleged IP violations relating to technologies developed by his (now defunct) think tank, Interval Research. The results of Paul Allen’s litigation moves will likely take years to sort out decisively, but the resolution is expected to clarify and solidify the boundaries of copyright and IP law for this industry.

Another piece of regulation that influences the industry is the Digital Millennium Copyright Act (DMCA). A lawsuit filed by Viacom against Google alleged that Google’s YouTube service had engaged in “brazen” and “massive” copyright infringement by allowing its users to upload videos of content created by Viacom-owned properties like MTV and Comedy Central. Google was granted a motion for summary judgment on the grounds that it was protected by the “Safe Harbor” provision of the DMCA, as it had not intentionally engaged in copyright infringement and complied with a mass take-down notice issued by Viacom. While a complete analysis of the law exceeds the scope of this publication, any firm that offers users the ability to upload and share content should be familiar with the act. In addition, since 2001, industry operators have been subject to the Patriot Act, which requires websites to keep traffic data on hand for a specified period of time for the purposes of security investigations.

Industry Assistance
Level & Trend

The level of Industry Assistance is None and the trend is Steady

Firms in this industry do not receive explicit assistance from any level of government in the United States. However, municipalities are often keen to attract the sort of jobs attached to the major industry players, and will often

offer tax incentives in order to bring new offices or datacenters to their cities. A number of industry trade organizations provide news, ongoing education and advice to firms in this industry, including the Online Publishers Association.

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Key Statistics
Industry Data
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sector Rank Economy Rank Industry Revenue Value Added Establish($m) ($m) ments 10,579.8 5,508.5 21,201 12,916.4 6,498.9 27,059 15,390.9 7,273.1 29,557 15,281.7 7,290.3 30,538 16,117.6 8,025.4 32,441 17,800.2 9,178.5 34,786 19,609.2 10,228.5 37,214 21,275.5 10,382.7 39,236 24,095.4 11,304.1 40,856 27,289.3 13,638.3 42,168 29,317.2 11,972.0 43,989 33,665.3 15,095.5 45,802 37,730.0 16,474.9 47,231 43,461.8 18,806.4 48,166 46,915.8 18,113.7 48,696 19/89 13/89 5/89 338/1283 216/1283 183/1282 Enterprises Employment 17,278 42,651 21,438 49,987 23,316 55,586 24,064 57,371 25,826 60,481 27,794 63,093 30,354 68,273 33,453 70,465 36,437 72,346 38,415 75,530 40,920 79,397 42,234 84,327 44,856 86,124 46,704 89,674 47,778 91,288 3/89 17/89 167/1282 420/1283 Exports ---------------N/A N/A Imports ---------------N/A N/A Wages ($m) 3,671.0 4,140.7 4,163.8 4,260.5 4,324.5 4,513.3 4,612.2 4,814.6 4,894.6 4,965.8 5,274.2 5,549.0 5,658.9 5,848.4 5,971.2 20/89 312/1283 Domestic Internet traffic vol. Demand (Exabytes per month) N/A 2.1 N/A 3.3 N/A 5.2 N/A 7.6 N/A 10.8 N/A 20.0 N/A 28.0 N/A 41.3 N/A 51.2 N/A 64.6 N/A 80.0 N/A 95.0 N/A 115.4 N/A 131.6 N/A 156.5 N/A N/A N/A N/A

Annual Change
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sector Rank Economy Rank Revenue (%) 22.1 19.2 -0.7 5.5 10.4 10.2 8.5 13.3 13.3 7.4 14.8 12.1 15.2 7.9 10/89 37/1283

Industry EstablishValue Added ments (%) (%) 18.0 27.6 11.9 9.2 0.2 3.3 10.1 6.2 14.4 7.2 11.4 7.0 1.5 5.4 8.9 4.1 20.6 3.2 -12.2 4.3 26.1 4.1 9.1 3.1 14.2 2.0 -3.7 1.1 7/89 32/89 23/1283 287/1282

Enterprises Employment (%) (%) 24.1 17.2 8.8 11.2 3.2 3.2 7.3 5.4 7.6 4.3 9.2 8.2 10.2 3.2 8.9 2.7 5.4 4.4 6.5 5.1 3.2 6.2 6.2 2.1 4.1 4.1 2.3 1.8 19/89 23/89 97/1282 199/1283

Exports (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Imports (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Wages (%) 12.8 0.6 2.3 1.5 4.4 2.2 4.4 1.7 1.5 6.2 5.2 2.0 3.3 2.1 53/89 711/1283

Domestic Demand (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Internet traffic volume (%) 57.1 57.6 46.2 42.1 85.2 40.0 47.5 24.0 26.2 23.8 18.8 21.5 14.0 18.9 N/A N/A

Key Ratios
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Sector Rank Economy Rank IVA/Revenue (%) 52.07 50.32 47.26 47.71 49.79 51.56 52.16 48.80 46.91 49.98 40.84 44.84 43.67 43.27 38.61 26/89 256/1283

Imports/ Demand (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Exports/ Revenue (%) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Revenue per Employee ($’000) 248.06 258.40 276.88 266.37 266.49 282.13 287.22 301.93 333.06 361.30 369.25 399.22 438.09 484.66 513.93 41/89 472/1283

Wages/Revenue (%) 34.70 32.06 27.05 27.88 26.83 25.36 23.52 22.63 20.31 18.20 17.99 16.48 15.00 13.46 12.73 58/89 643/1283

Employees per Est. 2.01 1.85 1.88 1.88 1.86 1.81 1.83 1.80 1.77 1.79 1.80 1.84 1.82 1.86 1.87 84/89 1169/1282

Average Wage ($) 86,070.67 82,835.54 74,907.35 74,262.26 71,501.79 71,534.08 67,555.26 68,326.12 67,655.43 65,746.06 66,428.20 65,803.36 65,706.42 65,218.46 65,410.57 58/89 321/1283

Share of the Economy (%) 0.04 0.04 0.05 0.05 0.06 0.06 0.07 0.07 0.07 0.08 0.07 0.09 0.09 0.10 0.10 13/89 216/1283

Figures are inflation-adjusted 2014 dollars. Rank refers to 2014 data.

SOURCE: WWW.IBISWORLD.COM

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Jargon & Glossary

Industry Jargon

BROADBAND A one-way internet connection at speeds in excess of 200 Kbps. DATACENTER A facility in which computer and storage systems are housed. OLD MEDIA Traditional means of communication, such as cable TV, radio and newspapers, that existed before the internet.

SOCIAL NETWORK A category of website that is primarily used for communication and sharing with other members. TRAFFIC ACQUISITION COSTS Payments made to online firms that direct traffic to their websites.

IBISWorld Glossary

BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry. CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor. CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator. DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports. EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry. ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control. ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise. EXPORTS Total value of industry goods and services sold by US companies to customers abroad. IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.

INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%. INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded. INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation. INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%. LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services. NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals. PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.

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Jargon & Glossary

IBISWorld Glossary continued

VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.

WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.

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