The digital media IPO market in 2012 has been challenging compared to 2011. Several high profile consumer internet companies that went public in 2012, like Facebook, have underperformed and brought into question valuations of consumer internet companies. Many 2011 digital IPO companies have also struggled with changing business models as public companies. Enterprise marketing IPOs have performed relatively better based on company fundamentals. Overall M&A has been a risky strategic option for newly public digital companies.
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A Guide to the Digital Media Market - CVG Second Thursday, 2/12/13
1. A Guide to the Digital
Media Market
A Second Thursday Event
presented by
Crossroads Venture Group
February 12, 2013
University of Connecticut
Stamford
2. A Guide to the Digital Media Market
Moderator
Eric J. Dale
Partner
Robinson & Cole
Guest Speaker
Peg Jackson
Managing Director
Gridley & Company
3. DIGITAL CHALK TALK: Creating Value in Today’s
Increasingly Digital World
Crossroads Ventures Group
February 12, 2013
4. Agenda
I. Where Value is Being Created in Digital
II. Summary of IPO Performance
III. What’s Happening in Digital New York
IV. Quick Gridley Commercial
4
6. Tectonic Shifts Underlying Digital Continue
(Website)
2000 5%
2010 (eCRM, Website) 2015 (eCRM, Website,
Syndicated Channels,
Owned 7% Content)
media Owned 10%
media Owned
media
90% 80% 60%
Paid Media Paid Media Paid Media
(Advertising)
13% 30%
5% Earned Earned (PR, Blogging,
Earned media media Video Sharing, Wiki,
(PR, Twitter, Facebook, Bookmarking, Social
media
(PR, Word of Mouth) Blogs, video sharing) Networking, Crowdsourcing,
Co-Creation, Commenting etc.)
Growth of Social Growth of Mobile
1,005 10%
Gobal Social Network Users
% of Global Internet Traffic
(Millions)
373
1%
Source: Strategy Analytics. 2007 2012 Source: KPCB 2009 May 2012
6
7. Unprecedented Time for Enormous Value Creation
• Traditional industry leaders are highly vulnerable like never before
Open Source Open Architecture Cloud Computing New Business Models
• Innovation at record speeds – Approximately $130 Billion of value created in 3 years
Private Public
7
8. Computing Platform Shifting Underlies Much of the Value
Reallocation in Digital
• Windows loses 40% of
market in less than four
years
• Open Source grows to
1/3 of market
8
9. Volatility is Inevitable as Emerging Digital Leaders
Develop Their Business Models in the Public Eye
Company Year Founded Value T-1 Year Value Today Δ Value
2002 $6.2 Billion $12.6 Billion $6.4 Billion
2004 $73.0 Billion $58.2 Billion ($14.8 Billion)
2004 $561 Million $1.2 Billion $639 Million
2007 $6.0 Billion < $1.0 Billion ($5 Billion)
2007 $11.7 Billion $1.9 Billion ($9.8 Billion)
2008 $10.7 Billion $3.4 Billion ($7.33 Billion)
Total $108.2 Billion $78.3 Billion ($29.9 Billion)
Sources: Second Market and CapIQ as of January 4, 2013
9
10. Key Players Positioned to Attack Emerging Growth
Markets
Mobile
$500
$450 Commerce Advertising /
Market Cap ($ in billions)
$400 Marketing
$350
$300
$250
Payments Content
$200
$150
$100
Social
$50
$0
Newscorp
Microsoft
Yahoo
Facebook
Apple
Discover
eBay
Omnicom
WPP
AOL
NY Times
Visa
Time Warner
Alliance Data
Amazon
CBS
Publicis
Mastercard
Google
Oracle
IBM
IPG
Disney
Dentsu
Viacom
Salesforce
eCommerce led Services led Payments led Content led Platform driven Technology led
10
11. Social is Chewing Through Multiple Markets
Net Subscriber Adds for Cable TV Commerce
Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 • Developing models that tie social
0.0
connectivity into the path to purchase
(0.1)
Δ Subscribers (millions)
(0.2)
(0.3) Payments
(0.4) • Infrastructure underlying social commerce
(0.5) still primitive
(0.6)
(0.7)
Source: One Touch Intelligence.
Monthly Active Facebook Users Worldwide AdTech/Mkt
1000 • Facebook alone represents about 1/3 of total
impression volume
800
• Facebook recently announced plan to extend
Users (millions)
600
data outside of its properties for ad targeting
400
Content
200
• Scalable business historically limited to
0 gaming
December 2004 October 2012
Source: Facebook S-1
11
13. Can We Take Mobile Seriously Yet?
Commerce
Desktops+Notebooks • Certain retailers seeing 30%+ of transactions
originating from mobile form factors
Q2:13E: Projected Inflection Point
Smartphones + Tablet Installed Base >
AdTech/Mkt
Total PCs Installed Base
• Very young category
• Integration of marketing and payments
Content
• Scalable business historically limited to
gaming
Payments
• Industry titans chasing opportunity to
2009 2010 2011 2012E 2013E 2014E
reimagine mobile payments, especially in-
2015E
store
Note: Notebook PCs include Netbooks. Assumes the following lifecycles: Desktop PCs – 5 years: Notebook PCs – 4 years; Smartphones – 2 years; Tablets – 2.5 years.
Source: Morgan Stanley Research, 2012.
13
15. POS – A Major Battleground in Mobile
Market Research / Account Marketing
Data Analytics
Digital Commerce
Consumer
Payments
eReceipts
15
16. Keys to Value Creation in the Digital Economy
Durable and extensible Ability to evolve
Enduring brand
platforms quickly
Technical barrier or consumer lock-in
16
17. Digital Bellwethers – Apple vs. Google
Stock Price Performance Market Cap ($ billions)
250% % Price Δ
Apple Google
YTD 39.7% 3.5%
200% 1-Year 50.9% 12.3% $528
3-Year 176.7% 14.6%
5-Year #NAME? #NAME?
150%
100%
$220
50%
0%
Apple Google
(50%)
(100%)
Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12
Apple Google S&P 500
17
18. Digital Bellwethers – Apple vs. Google
• Aggressive acquirer to maintain mindshare in key • Took advantage of unfocused
sectors
consumer electronics players in
• Intelligently consolidated capabilities across mobile to build a platform
adtech stack company
• Remained true to its closed
environment philosophy
• Acquired its way into largest growth markets –
mobile and payment • Remained relatively agnostic to
application
− Used M&A as a tool to fill
• Took a long term bet on online video, just starting
to realize value today holes in building platform
services
• Considerable resources to experiment in new
areas
− $45bn in cash • Considerable firepower to adapt
• Has aggressively invested as core search business − $120bn in cash
matures
18
20. Commerce Leaders – Amazon vs. eBay
• Saw mobile and local services • Very selective but strategic
early and made smart about owning key commerce
acquisitions across the path to assets
purchase
• Recognized opportunity to
“facilitate” commerce and
acquired GSI Commerce
• Most notable acquisitions
• Grew Paypal into a payments
platform that is portable to intended to maintain high
mobile and offline barrier through brand and price
• Aggressively moving into
• Made considerable investments
against its “partner” strategy as hardware and offline as mobile
core eBay commerce business emerges as an important
stagnated facilitator of commerce
20
22. Digital Content Leaders - Yahoo vs. AOL
• Aggressive acquirers in technology early, but fragmentation of content and adtech difficult
to counteract
• Rebirth of both companies with new management teams
• Jury still out on sustainability of models
− Yahoo – “Productizing” around mobile platform
− AOL – Assembling a stable to top tier content brand
• Large stock moves to date driven by one-time events Didn’t participate in
shift to mobile
Notable M&A Deals Outside of Publishing
2005 2006 2007 2008 2009 2010 2011 2012
22
24. Current State of Digital IPO Market
• Challenging market for digital/internet IPOs this year
− Facebook performance brought into question consumer internet valuations
− Platform dependencies exasperated downward pressure
• M&A very risky strategic tool for newly public companies today
− New digital companies having to compete for scarce assets against much
larger competitors
− Lack of financial fundamentals in most targets today brings new levels of risk
to shareholders
• Numerous consumer internet companies required to change business model
while being public
− Zynga, Groupon, DemandMedia
• Enterprise marketing remains relatively healthy
− Performance dictated by company fundamentals
24
25. Digital IPOs in 2012 vs. 2011
2012YTD U.S. Digital IPOs 2011 U.S. Digital IPOs
($ in millions) Offer Current Performance ($ in millions) Offer Current Performance
Date Company Size Market Value Since IPO Date Company Size Market Value Since IPO
Oct 11 Workday, Inc. $732.6 #NAME? #NAME? Dec 15 Zynga, Inc. $1,000.0 #NAME? #NAME?
Oct 10 Shutterstock, Inc. 76.5 #NAME? #NAME? Dec 12 Jive Software, Inc. 161.3 #NAME? #NAME?
Oct 02 LifeLock, Inc. 141.3 #NAME? #NAME? Nov 16 Angie's List, Inc. 114.3 #NAME? #NAME?
Sep 19 Trulia, Inc. 102.0 #NAME? #NAME? Nov 03 Groupon, Inc. 700.0 #NAME? #NAME?
Aug 01 Eloqua, Inc. 92.0 #NAME? #NAME? Aug 10 Carbonite, Inc. 71.9 #NAME? #NAME?
Jul 25 E2open, Inc. 70.3 #NAME? #NAME? Jul 19 Zillow, Inc. 79.6 #NAME? #NAME?
Jul 19 Kayak Software 91.0 #NAME? #NAME? Jun 28 HomeAway, Inc. 248.4 #NAME? #NAME?
May 17 Facebook, Inc. 16,006.9 #NAME? #NAME? Jun 16 Bankrate, Inc. 336.8 #NAME? #NAME?
Mar 28 CafePress Inc. 85.5 #NAME? #NAME? Jun 14 Pandora Media, Inc. 234.9 #NAME? #NAME?
Mar 28 Millennial Media Inc. 132.6 #NAME? #NAME? May 25 The Active Network, Inc. 165.0 #NAME? #NAME?
Mar 22 Vipshop 71.5 #NAME? #NAME? May 18 LinkedIn Corporation 352.8 #NAME? #NAME?
Mar 21 ExactTarget, Inc. 161.5 #NAME? #NAME? May 10 FriendFinder Networks Inc. 50.0 #NAME? #NAME?
Mar 21 Vantiv, Inc. 500.0 #NAME? #NAME? Apr 20 Responsys, Inc. 79.4 #NAME? #NAME?
Mar 14 Demandware, Inc. 88.0 #NAME? #NAME? Apr 13 Zipcar, Inc. 200.5 #NAME? #NAME?
Mar 01 Yelp, Inc. 107.3 #NAME? #NAME? Jan 25 Demand Media, Inc. 174.0 #NAME? #NAME?
Feb 23 Bazaarvoice, Inc. 113.8 #NAME? #NAME? Mean #NAME?
Feb 17 Brightcove, Inc. 55.0 #NAME? #NAME? Median #NAME?
Feb 09 Synacor, Inc. 34.1 #NAME? #NAME?
Mean #NAME?
Median #NAME?
25
26. Social Consumer IPOs
Stock Price Performance Commentary
60%
40%
• Doubled down with M&A and investment
20% in an unsustainable model
0% • Negative publicity was too hard to
overcome
(20%)
(40%)
• Dismal M&A strategy; paid $180mm for
OMGPOP, wrote it off shortly thereafter
(60%)
• Realization of platform risk and consumer
(80%) behavior shift in a short period of time
(100%)
IPO 30 60 90 120 150 180 210 240
Offer days days days days days days days days
Price
• Jury is out on quality of long term business
Groupon Zynga Facebook revenue growth model
• Company aggressively experimenting
26
27. Lead Gen / Content IPOs
Stock Price Performance Commentary
80%
60%
• Had successfully built a content business
around high value verticals such as finance
40%
and insurance
20% • Disappointing recent quarter as company
makes adjustments to its revenue model
0%
(20%)
(40%)
• Content farm = Unsustainable business
model
(60%)
• Pivoting towards AOL strategy
(80%)
IPO 60 120 180 240 300 360 420
Offer days days days days days days days
Price
Bankrate Demand Media Kayak • Successful exit three months after IPO
27
28. Marketing Automation IPOs
Stock Price Performance Commentary
140%
120%
• Has struggled to counter pricing issues at
100%
large enterprise end of the market
80%
60%
40%
• Successfully transitioned business away
20%
from traditional email marketing
0%
• Growing at north of 40%
(20%)
(40%)
(60%) • Successfully created B2B marketing
IPO 60 days 120 180 240 300 360 automation category
Offer days days days days days
Price
Responsys ExactTarget Eloqua
28
29. Exciting Value Creators for 2013
SOCIAL
Broad Interest Networks
• Enterprise & Social
integrating within
Platforms develop broader suites
• Emergence of Niche
Enterprise Tools
Networks
Single channel management tools
Niche Networks
Context based environments
29
30. Exciting Value Creators for 2013
eCOMMERCE
Retailing Online
• Evolution of new consumer
models
Creation of online only businesses
• “Convergence” a major area
of investment among
Niche Commerce
commerce leaders and VCs
Development of new business models
Convergence
Tight integration offline and online
30
31. Exciting Value Creators for 2013
MARKETING SERVICES
Email Marketing
• Data driven capabilities fuel
nearly all M&A and investments
Primitive digital capabilities in Mktg Services
• Currently in an integration
phase – putting all of the pieces
New Channels together
Development of leading single channel solutions
Multi-Channel/Mktg.
Automation
Data based models to drive higher ROI
31
33. A Word About the New York Scene
• New York now consistently #2 tech hub behind SF Bay Area
− $5.6 billion invested in Digital NY companies since 2006
− ~200 Digital NY companies have raised $5 million+ of outside
capital
− ~150 investors focused on Digital NY
• Leading digital/internet companies moving into area
− Twitter opens office in late 2011
– eBay building an innovation center in the City
• NY has distinct competencies that are attracting talent
– Wall Street
– Madison Avenue
– Retail
33
34. NY’s Emergence as a Tech Hub
• New York City has become a true digital media innovation center
Q3 2012 Internet VC Funding by Top Cities Q3 2012 Internet VC Deals by Top Cities
Total of Top Cities = $1,853 million Total of Top Cities = 175
Total Including Others = $2,672 million Total Including Others = 372
San Francisco, 69
Others
31%
San Francisco
31% Bay Area
Palo Alto, 13
Bay Area 98
San Mateo, 9
$1,171M Sunnyvale, 6
Palo Alto Los Altos, 1
3% Others, 197
Los Angeles San Mateo New York, 52
5% 3%
Boston Los Altos Sunnyvale
7% 2% Boston, 16
New York 5%
13%
Los Angeles, 9
−Source: CB Insights “Venture Capital Activity Report”
34
35. The Past Six Years Have Shaped Much of NY’s
Digital Media and Technology Landscape
• Notable events in NY since 2007:
Development of brand
names across broad set of
verticals
/
/ ($275 million)
($3.1 billion) Closes deal and ($315 announces
Mayor Bloomberg million) acquisition of
announces HQ move leads
/ to NY in September Raises series A
Opens a starts up city-funded
Googleplex in New business incubator in tech VC funding announces
($680 million) round
York City programs and deal quantity acquisition of
April December June September For $183
July January February million
2007 2007 2007 2008 2009 2011 2011 March
2012
January September November September June June
August December
2007
2007 2007 2008 2009 2010 2011 2012
Raises series
Mayor Bloomberg offers
A round
Raises series A $100 million and land to
Acquires develop a top announces
is founded round announces spin-offs of: Announces
engineering school to acquisition of
October 2007 For $125 million acquisition of
encourage tech
comes to New York development, to bring
New York City to the
forefront of innovation. for $745 million
Raises Series B Raises series Raises Series A for $30 billion
round A round round announces
acquisition of
announces
acquisition of
Raises series A round ($524 million)
35
36. NY Ecosystem Has Very Different Roots and Growth
Opportunities Than Silicon Valley
Internet Services Wall Street
Leadership
Talent
Operational Engineering
Efficiencies Talent
Data Services Advertising
Key Creative
Customers Talent
Strategic Strategic
Acquirers Business Partnerships
Fashion Media
Development
36
37. −NY Area Private Digital Companies by Sector
−Digital −Digital
Content Marketing −eCommerce −Mobile −Social
−FashionStake
−SpotO
n
−Electric Sheep
− Note: More companies illustrated on the following sector breakdown pages
37
38. −“The Locals” - Digital Focused VC/PE Firms
Headquartered in NY Area (72)
−Seed −30 −Early Stage −33 −Growth −23 −Buyout −7
Equity
−(<$2M) −($1M-$10M)
−($10M-$50M)
−Upstage
−Ventures
−Note: Firms may be active in more than one category. Source: Capital IQ, TechCrunch, public filings, and press releases
38
40. −Top 25 Private Digital NY Sale Transactions
January 2007 – December 2012 (Disclosed deals / rumored pricing available)
−(Enterprise
Value in $MM)
−$1,000
−$800
−$400
−$200
−$0
−200 −2008 −2009 −2010 −2011 −2012
7
−Source: Capital IQ, TechCrunch, public filings, and press releases
40
41. Private Digital NY Sale Transactions >$100 million
Since January 2010 (Disclosed deals / rumored pricing available)
Transaction
Date Acquirer / Target Value ($MM)
6/4/2012 salesforce.com, inc Buddy Media, Inc. $745
6/16/2011 (NYSE:CRM)
DG FastChannel MediaMind 524
6/3/2010 The Hearst Technologies Inc.
iCrossing, Inc. 425
6/13/2011 Corporation
Google AdMeld 400*
2/6/2011 AOL Huffington Post 315
1/19/2011 Affinion Web Loyalty 296
8/26/2012 IAC Search & About.com, Inc. 300
11/1/2011 Media, Inc.
Yahoo! Inc. interclick, inc. 264
2/3/2010 (NasdaqGS:YHOO) HotJobs.com, Ltd.
Monster 225
1/25/2010 Worldwide, Inc.
Dentsu Innovation 200*
3/21/2012 Zynga, Inc. InternactiveInc.
OMGPOP, 183
11/12/2012 (NasdaqGS:ZNGA) Ziff Davis Media
j2 Global, Inc. 165
9/8/2011 (NasdaqGS:JCOM) Inc. Survey, LLC
Google Inc. Zagat 151
6/17/2010 (NasdaqGS:GOOG) Register.com, Inc.
Web.com Group, 135
Inc.
Source: Capital IQ, TechCrunch, public filings, and press releases. *rumored value
41
43. Focused Digital Expertise Underlies
Gridley’s Investment Banking Services
Advertising /
Content
Marketing
Social eCommerce
Comprehensive Investment
Banking Services
• Private Company Sales
SaaS • Private Company Equity Enterprise
Financing
• Public Company Buyside
Point-of-Sale Mobile
Payments
43
44. Strategic Thought Leadership is Well Known
Industry Frequent Annual Gridley Hosted
Quarterly Publications
Guides Industry Speaker Events
• 2012 Business Insider:
IGNITION
• DFJ Gotham Annual Investors
Meeting
• IAB Marketplace: Mobile
• Women’s Mobile Network
• Highly respected
newsletter about industry • 2011 Business Insider: • January Conference
trends and corporate IGNITION
finance / M&A activity • OMMA Display
• Market Research Council
Luncheon
• Capital RoundTable
• SIIA Midmarket Growth
Conference
• In-depth review of the
digital NY ecosystem, • OMMA Mobile
including recent startups • Summer Networking
• Digital Hollywood NYC:
and the firms investing in Media Disruption Event & Golf Outing
them
• ad:tech NYC 2010
44
45. Selected Recent Gridley Transactions
Gridley clients include industry leaders and premier emerging growth companies
Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed $20,500,000
Digital Agency
Acquired by Acquired by Acquired by Acquired by Acquired by Acquired by Acquired by Acquired by
Pending SAS GfK Channel Intelligence, Inc. Minicom Digital Signage Oversee.net TeleTech Holdings The Dolan Company
Advisor Advisor Advisor Advisor Advisor Advisor Advisor Advisor
Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed $20,000,000 $367,000,000
Acquired by Acquired Acquired Acquired by Acquired Acquired Investment by Acquired by
WPP Group plc FetchBack Inc. M3 Mobile Marketing MDC Partners Inc. Pepperjam Silverlign Group Inc. TZP Group LLC Roper Industries, Inc.
Advisor Advisor Advisor Advisor Advisor Advisor Placement Agent Advisor
$157,000,000 Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed $113,189,337 $17,450,000
Email Business of Ad Serving Business of PrePay Intelligent Network
Solutions Business Unit of
Acquired Acquired by Acquired by Sold to Sold to Sold to Secondary Offering Acquired by
e-Dialog, Inc. WPP Group plc Quest Software One to One Interactive, Inc. Aegis plc Parthenon Capital LLC Verisign
Advisor Advisor Advisor Advisor Advisor Advisor Co-Manager Issued Fairness Opinion
Undisclosed Undisclosed $138,000,000 Undisclosed $58,000,000 Undisclosed $55,200,000 Undisclosed
Advisory Communications Marketing One to One, Inc.
Systems, Inc. (ACS) d/b/a
d/b/a
Acquired by Acquired by Acquired Acquired by Acquired Acquired by Acquired by
Schulman, Ronca, & Valassis Follow-On Offering Carlson Marketing Group
ISIS Equity Partners, Inc. Modem Media, Inc. Performics, Inc. ARAG Group
Bucuvalas, Inc.
. Communications, Inc.
Advisor Advisor Advisor Advisor Advisor Advisor Co-Manager Advisor
45
46. QUESTIONS?
Peg Jackson Linda Gridley Pratik Patel
Managing Director President & CEO Director
212-400-9709 212-400-9710 212-400-9712
peg.jackson@gridleyco.com linda.gridley@gridleyco.com pratik.patel@gridleyco.com
Gridley & Company LLC
10 East 53rd Street, 24th Floor
New York, NY 10022
212.400.9720 tel
212.400.9717 fax
Twitter: @gridleyco
www.gridleyco.com
47. A Guide to the Digital Media Light
Marketing at the Speed of Market
Upcoming CVG Events and Closing Remarks
Liddy Karter
Executive Director, Crossroads Venture Group
Managing Partner, Enhanced Capital Partners
48. THANK YOU CVG SPONSORS
B Round
A Round
Venture Capital Sponsors Professional Service Firms
50. Upcoming Events
Boardroom Series Second Thursday
7:30 AM – 9:00 AM 4:30 PM – 7:00 PM
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New Haven
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Hartford
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