TV ad budgets starting to move online in 2010

Citi Research analyst Mark Mahaney talks about growth areas across the Internet this year

If you haven't caught Cit Research analyst  Mark Mahaney's report on the Internet growth drivers, check out my interview with him. 

In this segment, of my three-part interview with Mark, we talk about the three areas that should drive Internet growth in 2010.

See first segment: Net giants predicted to go on buying spree.

See second segment: Public markets are craving Internet IPOs

One area of growth is potentially in online video, as TV ad budgets move online. TV is one of the largest advertising spend categories (Citi estimates that it's around $58 billion last year), and until recently, it was left relatively unscathed by the Internet, said Mark.

At the Citi Entertainment, Media and Technology Conference in January, Hulu's CEO Jason Kilar said that he can charge comparable-to-higher CPMs than traditional TV because Hulu allows users to pick the advertisements they want to see, and he can offer targeted ads based on behavior.

Mark also sees growth in micro-transactions. What he's learning is that consuemrs are willing to pay for content and are willing to transact multiple times. Zynga, Mark notes, has a revenue run-rate of $400 million this year. Tencent in China is on track to generate $500 million in small app and non-gaming revenue.

The Apple's App Store has almost 135,000 apps and generates about half a billion in monthly gross revenue, of which Apple gets 30%, Mark noted.

Mark also sees growth in smart phones. According to CIRA handset analyst, Jim Suva, SmartPhone unit sales grew about 33% last year, compared to an 18% annual decline in non-smart phone sales.

Watch Mark give more details about his predictions for 2010.

If you want Mark's report, go to his Vator profile. You can download it from there.