Mary Meeker, Morgan Stanley's expert on the Internet & Consumer Software industry, joined fellow thought and business leaders and entrepreneurs at the third annual Web 2.0 summit this fall to discuss emerging issues and trends defining the future of the Internet economy.

The theme of this year's conference was "Disruption and Opportunity," focusing on the services, applications, and businesses reshaping the global Internet landscape today and creating opportunities for Internet leaders and entrepreneurs alike.

Meeker's presentation, entitled "The State of Internet, Part III," focused on the premise that the world's information is increasingly becoming organized and monetized, with search / branded advertising becoming more sophisticated and media continuing to migrate online, video being the latest example.

View the presentation in its entirety.

Additional key themes included:

It's tough to succeed. In public markets, approximately 2% of technology companies have created 100% of net wealth. On average, 2 technology 'ten-baggers' - defined as stocks that rise 1,000% - go public each year. Today, the market value of the top 5 global Internet market leaders (Google, Yahoo!, eBay, Yahoo! Japan, Amazon) is 46% higher than the Nasdaq peak in March 2000, owing primarily to Google's success and stock appreciation.

The Internet continues to go global. By 2007, Meeker expects that North America will make up only 20% of global Internet usage. Additionally, she predicts strong future gains coming from China, Russia and India in terms of overall technology, media, and telecommunications products and services.

Meeker remains upbeat about the five-year outlook for U.S. online advertising. Meeker projects a 20% five-year CAGR revenue growth, with above-average growth rates of 25% for search and rich media. Internet advertising spending per household could move from $177 in 2005E to $362 in 2010E (comparable to 2005E radio advertising spending per household, but still far from $980 for newspapers). Internet's share of U.S. advertising revenue could rise from 7% in 2005E to 13% by 2010E.

Online video is gaining momentum. Today, close to 60% of Internet traffic may be peer-to-peer file sharing of unmonetized video. Looking ahead, the ramp in tagging (for search), partnerships, monetization, and recent moves by the likes of ABC / CBS / FOX / NBA / Sony / Warner / Universal / Google / Yahoo! should drive industry growth, in her view. Challenges (especially related to copyright and infrastructure stress) are significant, but over time, consumer demand should rule and content creators should benefit. The key riddle relates to what percentage of content used on the Web three years from now will be amateur, professional, semi-professional, or a combination.

Watch where the global younger generation goes. User-generated content properties, such as Wikipedia, MySpace, and YouTube, have moved to the top of the pack, owing to their focus on community and personalization. Watch out for emerging companies such as Orkut, Facebook, and Hi5 in social networking and YouTube, Brightcove, Bolt, and Heavy.com in video.

Longer term, monetization should grow faster than usage, which should grow faster than users. Global Internet thesis calls for 10-15% user growth, 20-30% usage growth, and 30%+ monetization growth. Recent, very rapid usage growth of online video, voice, and user-generated content, combined with a high probability of continued innovation, bodes well for continued strong usage growth. Ongoing improvements in monetization should be driven by improved targeting / personalization / usability, in her view.