DNB Technology funds – the rise of internet television

One of the important trends we see within the technology, media and telecom sectors, and that will enter the mainstream over the next few years, is television delivered over the internet.

New giants in TV

Through their mobile computing platforms, both Google and Apple have demonstrated superior ability to deliver services in a user-friendly format. Something resembling a duopoly has emerged, and both players are able to take a substantial cut of sales carried out over their platforms. Both companies are selling TV boxes, and television sets with integrated software are expected to come to market shortly. If they manage to make their TV offering as compelling as their mobile platforms, traditional TV companies will be up against formidable competitors, competitors that can synchronize your user experience across computers, mobile phones, tablets, and TV.

In 2011, online advertising in the US amounted to about $30bn². TV ad spending was $60bn. At some point in the future, the distinction between online and television ad revenues will become irrelevant as the two distribution channels merge. The addressable market of Google and Apple will expand dramatically.

Know your customer

With TV and web content delivered over the Internet, the companies that control distribution will gain a much better understanding of how individuals use media and their interests. If you access media with your personal Apple or Google login, the companies can know the full range of your actions, including your search queries, the TV shows you watch, and when you change channels, they will know who you are, your purchase history and your credit card details.

While this adds another dimension to privacy concerns, it also makes it possible to tailor the entertainment menu and accompanying advertising to each individual consumer of media. Google has shown that if advertising can be made relevant, and preferably not too intrusive, consumers will accept a business model that uses their online activity to customize ads.

Fund holding: Google

We like Google because of the strength of its business portfolio, its prospects for growth and its pricing. It has a strong core business franchise, search advertising, it makes Android, the most popular smart phone platform, it is perhaps the best-positioned player to capture the rapid growth in mobile advertising, it owns YouTube, the number one internet video site and it is well positioned to grow in television. Last year US spending on online advertising grew about 20%, mobile advertising more than doubled. Google grows 20%³ per year and is priced conservatively at 11X forward PE.


Andreas Tandberg-Johansen is head of technology, media and telecom investing at DNB. He leads a team that has held together for more than 10 years and generated average annual returns of 18.9%¹ over the period. “We pick stocks based on fundamental analysis, and based on how overriding trends will impact companies’ business models.” 
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DNB Technology, performance diagram

» Fact Sheet - DNB Technology (LU0302296495)
» Fact Sheet - DNB TMT Absolute Return (LU0547714526)


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¹Source: emarketer.com
²Source: Bloomberg
³Source: DNB Nordic Technology, 31Jul2002 - 31Jul2012, annualized performance in EUR