J.P. Morgan 研究報告-Nothing but net 2014 global internet

www.jpmorganmarkets.com
Global Equity Research
09 January 2014
Nothing But Net
2014 Global Internet Investment Guide
US Internet
Doug Anmuth
AC
(1-212) 622-6571
douglas.anmuth@jpmorgan.com
Bloomberg JPMA ANMUTH <GO>
J.P. Morgan Securities LLC
Kaizad Gotla, CFA
AC
(1-212) 622-6436
kaizad.gotla@jpmorgan.com
Bo Nam
(1-212) 622-5032
bo.nam@jpmorgan.com
Diana R Kluger, CFA
(1-212) 622-4539
diana.r.kluger@jpmorgan.com
China Internet
Alex Yao
AC
(852) 2800 8535
alex.c.yao@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Korea Internet and Telco
Stanley Yang
AC
(82-2) 758-5712
stanley.yang@jpmorgan.com
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch
Japan Games, Internet, Leisure
Haruka Mori
AC
(81-3) 6736-8632
haruka.mori@jpmorgan.com
JPMorgan Securities Japan Co., Ltd.
Europe Media & Internet
Nicolas J Dubourg
AC
(44-20) 7134-5226
nicolas.j.dubourg@jpmorgan.com
J.P. Morgan Securities plc
CEEMEA Media & Telecoms
Alexei Gogolev
AC
(7-495) 967-1029
alexei.gogolev@jpmorgan.com
J.P. Morgan Bank International LLC
Latin American
Telecommunications / Media /
Technology
Andre Baggio, CFA
AC *
(55-11) 4950-3427
andre.baggio@jpmorgan.com
Banco J.P. Morgan S.A.
* Registered/qualified as a research analyst under NYSE/FINRA rules.
See page 321 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.

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09 January 2014
Doug Anmuth
(1-212) 622-6571
January 9, 2014
Dear Investors and Internet Followers,
2013 was a strong year for equity markets overall, and an even better year for Internet stocks. U.S. Internet
stocks in our coverage universe appreciated by a market cap-weighted average of 78% vs. the S&P 500 up 30%,
while global Internet names covered by J.P. Morgan increased 84% during the year. Broad-based strength was
evident across online subscription, advertising, and commerce models given the backdrop of powerful secular
trends and an improving macro environment.
We believe those underlying dynamics should continue in 2014, and mobile will become an even bigger driver
of Internet models. As we think back through some of the major shifts in the consumer Internet era, including the
move from dial-up to broadband and changes in how people consume content, none is more significant than the
adoption of mobile devices. comScore data suggests that U.S. mobile usage time initially surpassed that of the
desktop in mid-2013, and that directional trend should continue globally going forward. We think 2014 is a year
in which the gap tightens between mobile usage and mobile conversions and revenue, turning mobile into a
greater tailwind across our global Internet coverage universe.
The Internet sector is extremely dynamic and we believe innovation is stronger than ever driven by the combined
viral effects of social and mobile, along with the broad access to computing infrastructure in the cloud as
exemplified by Amazon’s AWS. Leading Internet platforms such as Google, Amazon, Facebook, Tencent, and
Apple continue to thrive, but we are also seeing powerful ecosystems created by LinkedIn and Twitter, along
with other social, commerce, and communications platforms. We are focused on a number of key trends in the
U.S. in 2014 including: 1) Mobile conversions and revenue tightening the gap with mobile usage; 2) Native and
News Feed advertising becoming the dominant format for mobile ad monetization; 3) Cross-device tracking and
attribution becoming critical for marketers and publishers alike; 4) Traditional media measurement tools to help
accelerate the shift of traditional media dollars online; 5) Advances in Last Mile eCommerce to drive online
penetration in key retail categories; 6) Cloud-based services gaining significant scale; and 7) Continued blurring
of the lines among online travel participants. On a global basis, many of the key themes outlined by our Internet
team in other geographies relate to mobile and how it is driving gaming, commerce, and advertising.
From an investment perspective, we recognize that most of our companies trade at materially higher levels than
they did a year ago, and we remain selective based on asset quality, growth, valuation, and other factors. But we
also believe it is still early in the mobile Internet—considerable share gain opportunities remain across our
global coverage universe and innovation will continue to drive disruptive technologies.
We hope our global outlook report is helpful in your investment process in 2014 and we look forward to working
with you in the year ahead.
Sincerely,
Doug Anmuth (U.S.) Alex Yao (China)
Stanley Yang (Korea) Haruka Mori (Japan)
Nicolas Dubourg (Europe) Alexei Gogolev (Russia) Andre Baggio (Latin America)

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09 January 2014
Doug Anmuth
(1-212) 622-6571
Table of Contents
Global Comp Sheet............................................................................ 6
Global Internet Top Picks................................................................... 8
U.S. Sector Outlook ....................................................................... 12
U.S. Internet Themes for 2014......................................................... 12
Revenue and Conversions to Tighten the Gap with Strong Mobile
Usage .............................................................................................. 12
Native Ads to Drive Mobile Ad Monetization..................................... 20
Cross-Device Advertising and Attribution Becoming Critical............. 22
Traditional Media Measurement Tools to Drive Traditional Media
Dollars Online .................................................................................. 25
Last Mile Drives Further Online/Offline Retail Convergence............. 28
Cloud-Based Services Gaining Scale............................................... 34
Blurring of the Lines in Online Travel ............................................... 37
U.S. Company Outlooks ................................................................ 39
Google............................................................................................. 39
Amazon.com.................................................................................... 44
Facebook......................................................................................... 49
eBay, Inc.......................................................................................... 54
Priceline.com ................................................................................... 59
Yahoo Inc......................................................................................... 63
Twitter, Inc. ...................................................................................... 65
LinkedIn Corp................................................................................... 70
Netflix Inc......................................................................................... 75
TripAdvisor, Inc................................................................................ 80
Expedia, Inc..................................................................................... 85
Groupon........................................................................................... 90
Pandora Media Inc........................................................................... 95
Yelp Inc.......................................................................................... 101
HomeAway Inc............................................................................... 105
Zynga Inc....................................................................................... 110
Criteo............................................................................................. 114
OpenTable Inc ............................................................................... 118
Bankrate Inc................................................................................... 122
Trulia Inc........................................................................................ 126
Chegg, Inc. .................................................................................... 130

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(1-212) 622-6571
QuinStreet, Inc............................................................................... 135
ReachLocal.................................................................................... 139
CafePress, Inc. .............................................................................. 143
LatAm Company Outlooks .......................................................... 147
MercadoLibre, Inc. ......................................................................... 147
China Sector Outlook .................................................................. 150
Early movers to approach return stage........................................... 151
Mobile game monetization to drive mobile traffic platforms’ earnings
growth in 2014 ............................................................................... 154
Large mobile platforms attempting to shape new eco-system and user
behavior......................................................................................... 158
Uncertainty in 2014 video outlook .................................................. 160
Continued growth of online-to-offline business; room for cooperation
with big mobile platforms................................................................ 163
Online travel remains highly competitive ........................................ 165
China Company Outlooks ........................................................... 167
Tencent.......................................................................................... 167
Qihoo 360 Technology Co. Ltd....................................................... 171
YY Inc ............................................................................................ 175
Baidu.com...................................................................................... 179
Sina Corp....................................................................................... 183
SouFun Holdings Ltd...................................................................... 187
Phoenix New Media Ltd ................................................................. 191
Vipshop.......................................................................................... 195
Forgame Holdings Ltd.................................................................... 199
Sohu.Com...................................................................................... 203
NetEase......................................................................................... 207
Youku Tudou Inc............................................................................ 211
Ctrip.com International, Ltd ............................................................ 215
Sungy Mobile Limited..................................................................... 219
Dangdang ...................................................................................... 223
Korea Sector Outlook .................................................................. 227
The paradigm shift from PC to mobile to accelerate in 2014 on the
world-fast LTE network upgrade .................................................... 228
Mobile game: Highly competitive + short product life cycle  Power
shift from developers to platforms .................................................. 229
Leading PC game developers to enjoy ‘The survival takes it all’ trend
on subdued competition................................................................. 231

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Doug Anmuth
(1-212) 622-6571
Paradigm shift into messaging apps............................................... 233
Naver’s social networking business goes global market................. 236
Korea Company Outlooks ........................................................... 237
Naver............................................................................................. 237
NCSoft........................................................................................... 240
Daum............................................................................................. 243
WeMade Entertainment ................................................................. 246
NHN Entertainment........................................................................ 250
Gamevil.......................................................................................... 253
Japan Sector Outlook.................................................................. 257
Smartphones Are Changing the World........................................... 258
E-commerce: Five factors likely to accelerate shift toward e-commerce
...................................................................................................... 262
Smartphone-driven growth creating good conditions for online
advertising ..................................................................................... 264
Japan Company Outlooks........................................................... 266
Yahoo Japan (4689)....................................................................... 266
ASKUL (2678)................................................................................ 270
Rakuten (4755).............................................................................. 274
Gurunavi (2440)............................................................................. 278
Kakaku.com (2371)........................................................................ 282
CyberAgent (4751)......................................................................... 286
DeNA (2432).................................................................................. 290
Gree (3632) ................................................................................... 293
Europe Sector Outlook................................................................ 296
W. European online usage: plenty still to come.............................. 299
Mobile: a major growth driver beginning to make its mark.............. 301
Online Advertising: structural shift to online still gaining speed....... 305
Russia Sector Outlook................................................................. 307
Russian Internet Themes............................................................... 308
Russia Company Outlooks.......................................................... 313
Mail.ru Group................................................................................. 313
Yandex........................................................................................... 317
The authors acknowledge the contribution to this report of Pranav Goel of
J.P. Morgan India Private Limited and Binbin Ding of J.P. Morgan Securities Asia
Pacific Limited.

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09 January 2014
Doug Anmuth
(1-212) 622-6571
Global Comp Sheet
Figure 1: Global Internet Comp Sheet – Sorted by Region
Price Date Mkt Cap 13-15 15 13-15 Covering
Company Ticker 1/6/2014 USD 2014 2015 EPS Y/Y PEG 2014 2015 2014 2015 2014 2015 Rev Ratings Analyst
U.S.
Google Inc GOOG $1,117.32 384,210 21.0x 17.2x 22% 0.8 12.0x 9.5x 16.8x 12.8x 5.4x 4.3x 19% OW Doug Anmuth
Amazon.com Inc AMZN $393.63 182,251 78.2x 60.3x 34% 1.8 25.5x 19.6x 34.9x 25.6x 1.8x 1.4x 22% N Doug Anmuth
Facebook Inc FB $57.20 146,495 47.1x 34.4x 40% 0.9 20.3x 15.1x 36.3x 25.9x 11.9x 8.9x 38% OW Doug Anmuth
eBay Inc EBAY $51.78 68,084 17.1x 15.1x 13% 1.1 9.2x 7.5x 11.1x 9.5x 3.0x 2.4x 14% OW Doug Anmuth
priceline.com Inc PCLN $1,139.53 60,150 22.1x 17.9x 25% 0.7 15.9x 12.2x 19.3x 14.8x 6.3x 4.9x 22% OW Doug Anmuth
Twitter Inc TWTR $66.29 50,588 NM NM NM NM 514.3x 196.1x NM NM 45.7x 30.9x 62% N Doug Anmuth
Yahoo! Inc YHOO $39.93 42,896 NA NA NA NA NA NA NA NA NA NA NA NR Doug Anmuth
LinkedIn Corp LNKD $203.92 24,261 96.4x 55.5x 54% 1.0 41.3x 29.8x 319.7x 40.3x 10.7x 8.1x 37% OW Doug Anmuth
Netflix Inc NFLX $359.57 22,083 80.3x 46.8x 113% 0.4 37.0x 23.1x 104.8x 32.0x 4.0x 3.3x 20% OW Doug Anmuth
TripAdvisor Inc TRIP $80.38 11,997 36.8x 29.4x 27% 1.1 23.8x 18.9x 33.0x 25.5x 9.9x 8.0x 24% N Doug Anmuth
Expedia Inc EXPE $68.96 9,528 18.6x 15.1x 22% 0.7 7.9x 6.0x 8.8x 7.2x 1.6x 1.2x 10% N Doug Anmuth
Groupon Inc GRPN $11.89 8,298 44.2x 25.8x 107% 0.2 23.2x 17.7x 19.6x 6.5x 2.3x 2.0x 16% N Doug Anmuth
Pandora Media Inc P $31.49 6,809 103.3x 43.5x 298% 0.1 85.8x 32.4x 93.8x 38.2x 6.5x 4.6x 43% OW Doug Anmuth
Yelp Inc YELP $71.72 5,131 84.9x 62.8x 311% 0.2 69.1x 40.2x 82.2x 59.8x 13.8x 9.5x 51% OW Kaizad Gotla
HomeAway Inc AWAY $40.92 3,663 49.6x 40.6x 26% 1.5 25.1x 20.2x 25.0x 21.6x 7.6x 6.3x 20% OW Doug Anmuth
Zynga Inc ZNGA $4.04 3,523 NM NM NM NM 158.7x 124.9x 30.1x NM 3.0x 3.2x -6% N Doug Anmuth
Criteo SA CRTO $32.71 2,094 89.1x 44.4x 77% 0.6 25.4x 15.6x 254.0x 49.2x 5.1x 4.1x 35% OW Doug Anmuth
OpenTable Inc OPEN $79.55 1,942 34.3x 29.5x 17% 1.8 17.7x 14.7x 26.1x 21.5x 7.7x 6.5x 18% N Kaizad Gotla
Bankrate Inc RATE $16.64 1,665 20.9x 18.0x 33% 0.5 10.9x 9.0x 18.5x NM 3.2x 2.7x 13% N Doug Anmuth
Trulia Inc TRLA $36.83 1,416 40.5x 42.4x 15% 2.9 24.8x 15.6x 29.2x 21.5x 5.2x 3.9x 54% OW Doug Anmuth
Chegg Inc CHGG $8.26 746 NM 18.9x NM NM 141.7x 11.9x 58.8x 14.4x 1.9x 1.5x 25% OW Doug Anmuth
QuinStreet Inc QNST $8.76 379 22.0x 14.3x -43% -0.3 9.0x 7.6x 22.7x 9.6x 1.1x 1.1x 3% N Doug Anmuth
ReachLocal Inc RLOC $12.73 369 26.1x 15.1x 44% 0.3 6.5x 3.5x 8.0x NM 0.4x 0.3x 13% OW Doug Anmuth
CafePress Inc PRSS $6.33 111 13.7x 9.6x 200% 0.0 3.9x 2.7x 12.2x 5.9x 0.3x 0.2x 10% N Doug Anmuth
China
Tencent Holdings Ltd 700 HK HKD 495.60 124,193 227.0x 170.5x 40% 4.3 21.5x 15.3x 28.5x 20.9x 8.5x 6.3x 36% OW Alex Yao
Baidu Inc BIDU US $176.63 61,925 22.8x 17.3x 41% 0.4 17.5x 12.2x 23.9x 12.7x 7.5x 5.3x 36% OW Alex Yao
Qihoo 360 Technology Co., Ltd QIHU US $80.10 10,520 35.3x 24.1x 57% 0.4 29.9x 18.5x 47.3x 25.1x 8.9x 6.0x 54% OW Alex Yao
NetEase Inc NTES US $78.03 10,180 13.0x 11.3x 11% 1.0 11.1x 9.5x 13.1x 11.3x 5.4x 4.8x 10% N Alex Yao
Ctrip.com International Ltd CTRP US $44.43 7,420 23.9x 18.7x 24% 0.8 30.2x 21.1x 27.4x 21.1x 5.9x 4.5x 28% N Alex Yao
SouFun Holdings Ltd SFUN US $83.98 6,873 21.2x 17.7x 19% 0.9 15.6x 12.6x 20.5x 15.5x 8.3x 6.6x 21% OW Alex Yao
Sina Corp SINA US $84.35 6,153 37.0x 28.9x 61% 0.5 36.2x 24.0x 54.5x 33.9x 6.3x 4.9x 29% OW Alex Yao
Youku Tudou Inc YOKU US $33.92 5,645 242.3x 50.6x NM NM 36.5x 21.2x 38.9x 22.7x 8.1x 5.9x 39% N Alex Yao
Vipshop Holdings Ltd VIPS US $82.28 4,722 35.8x 24.3x 73% 0.3 29.1x 18.3x 26.6x 26.7x 1.5x 1.0x 62% OW Alex Yao
YY Inc YY US $57.34 3,384 25.3x 19.7x 40% 0.5 24.5x 16.8x 23.1x 17.4x 6.6x 4.5x 49% OW Alex Yao
Sohu.com Inc SOHU US $73.94 2,883 30.1x 29.9x 32% 0.9 6.6x 5.5x 8.4x 12.6x 1.2x 0.9x 18% N Alex Yao
Forgame Holdings Ltd 484 HK HKD 55.90 940 93.2x 72.9x -12% -5.9 6.7x 4.2x 8.0x 5.2x 2.3x 1.5x 32% OW Alex Yao
Phoenix New Media Ltd FENG US $9.81 779 13.8x 10.5x 28% 0.4 9.7x 6.3x 11.5x 7.7x 1.8x 1.4x 24% OW Alex Yao
Sungy Mobile Ltd GOMO US $20.18 759 27.3x 17.1x 27% 0.6 30.3x 15.8x 25.2x 14.3x 7.7x 4.8x 52% N Alex Yao
E-commerce China Dangdang Inc DANG US $9.00 742 NM 45.0x NM NM 76.1x 17.4x NM 14.0x 0.5x 0.4x 18% UW Alex Yao
Korea (in KRW)
Naver 035420 KS KRW 699,000 19,563 35.5x 22.8x 53% 0.4 22.7x 14.1x 40.9x 24.0x 6.8x 5.2x 28% OW Stanley Yang
NCSoft 036570 KS KRW 234,000 4,362 15.2x 13.7x 43% 0.3 10.1x 8.6x 16.6x 13.4x 4.2x 3.6x 16% OW Stanley Yang
NHN Ent. 181710 KS KRW 91,700 1,308 14.1x 14.5x -8% -1.9 7.3x 7.4x 16.3x 16.6x 1.7x 1.6x 3% UW Stanley Yang
Daum 035720 KS KRW 84,700 1,068 14.5x 13.2x 10% 1.4 5.7x 4.8x 11.3x 9.2x 1.3x 1.1x 10% N Stanley Yang
Wemade 112040 KS KRW 32,000 500 13.7x 9.7x 49% 0.2 7.5x 5.0x 14.9x 8.7x 1.6x 1.3x 12% N Stanley Yang
Gamevil 063080 KS KRW 44,600 270 15.6x 14.1x 10% 1.4 11.2x 9.9x 18.9x 15.7x 2.3x 2.0x 17% UW Stanley Yang
Japan (in Yen)
Yahoo! Japan 4689 ¥592.00 32,672 26.2x 22.6x 11% 2.1 12.2x 10.6x 23.1x 19.0x 6.7x 5.9x 9% OW Haruka Mori
Rakuten 4755 ¥1,586.00 20,133 31.8x 25.1x 28% 0.9 13.9x 11.3x 54.1x 38.6x 3.6x 3.2x 10% N Haruka Mori
Kakaku 2371 ¥1,830.00 3,982 33.0x 26.0x 31% 0.8 18.9x 15.3x 33.5x 25.5x 10.6x 8.9x 20% N Haruka Mori
NEXON 3659 ¥941.00 3,965 10.4x 10.2x 2% 6.2 4.0x 3.3x 5.5x 4.6x 1.8x 1.5x 4% N Haruka Mori
DeNA 2432 ¥2,151.00 3,113 10.2x 9.9x 2% 5.8 3.3x 2.8x 5.7x 4.7x 1.1x 0.9x 3% OW Haruka Mori
CyberAgent 4751 ¥4,400.00 2,669 23.3x 21.7x 12% 1.8 8.6x 7.8x 17.6x 16.1x 1.2x 1.0x 6% N Haruka Mori
GREE 3632 ¥1,033.00 2,415 11.7x 11.5x 14% 0.8 4.5x 4.0x 7.4x 6.5x 1.4x 1.2x 3% N Haruka Mori
ASKUL 2678 ¥3,020.00 1,572 34.1x 23.7x 52% 0.5 11.0x 8.7x 32.0x 23.7x 0.5x 0.4x 18% OW Haruka Mori
Gurunavi 2440 ¥3,135.00 782 25.5x 18.5x 38% 0.5 8.6x 7.1x 19.5x 15.5x 2.1x 1.8x 10% OW Haruka Mori
Europe
Schibsted SCH NO £417.00 7,226 50.2x 35.3x 52% 0.7 20.9x 17.6x 46.7x 37.7x 3.0x 2.8x 4% N Nicolas Dubourg
Axel Springer SPR GR £47.35 3,429 19.0x 16.9x 1% 18.2 9.8x 8.9x 12.4x 14.6x 1.7x 1.6x -3% N Nicolas Dubourg
Rightmove RMV LN £2,805.00 1,693 28.4x 23.5x 22% 1.1 21.7x 17.7x 29.0x 23.0x 16.4x 13.5x 17% OW Nicolas Dubourg
CTS Eventim EVD GY € 39.30 1,384 21.9x 19.2x 14% 1.3 12.1x 10.4x 15.3x 12.9x 2.9x 2.6x 5% OW Nicolas Dubourg
Ubisoft UBI FP € 10.04 743 15.5x 8.1x NM NM 1.9x 1.5x 161.3x 11.4x 0.7x 0.6x 20% N Nicolas Dubourg
Money Supermarket MONY LN £189.30 625 15.6x 14.3x 11% 1.3 11.5x 10.3x 16.1x 14.3x 4.2x 3.8x 8% N Nicolas Dubourg
Gameloft GFT FP € 7.93 501 18.6x 12.8x 48% 0.3 8.9x 5.9x 13.9x 9.3x 2.1x 1.6x 17% OW Nicolas Dubourg
Perform PER LN £224.80 360 21.9x 17.2x 19% 0.9 12.9x 10.2x 28.4x 21.9x 2.3x 2.0x 14% N Nicolas Dubourg
XING O1BC GY £79.31 325 31.4x 25.7x 29% 0.9 12.4x 10.1x 22.1x 18.7x 3.9x 3.4x 11% UW Nicolas Dubourg
Latin America
MercadoLibre, Inc MELI $101.49 4,481 32.0x 26.3x 25% 1.1 20.1x 15.6x 30.2x 22.7x 7.2x 5.7x 22% N Andrew Baggio
Russia
Yandex YNDX $42.91 13,982 28.4x 22.7x 19% 1.2 18.4x 14.9x NM NM 8.2x 6.6x 26% OW Alexi Gogolev
Mail.ru MAIL LI $42.64 8,916 21.9x 18.3x 22% 0.8 14.7x 12.3x 17.2x 14.6x 8.0x 6.7x 21% OW Alexi Gogolev
EV/RevenueEV/EBITDAP/E EV/FCF
Source: Company reports, Bloomberg and J.P. Morgan estimates.

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09 January 2014
Doug Anmuth
(1-212) 622-6571
Figure 2: Global Internet Comp Sheet – Sorted by Market Cap
Price Date Mkt Cap 13-15 15 13-15 Covering
Company Ticker 1/6/2014 USD 2014 2015 EPS Y/Y PEG 2014 2015 2014 2015 2014 2015 Rev Ratings Analyst
> $50B
Google Inc GOOG $1,117.32 384,210 21.0x 17.2x 22% 0.8 12.0x 9.5x 16.8x 12.8x 5.4x 4.3x 19% OW Doug Anmuth
Amazon.com Inc AMZN $393.63 182,251 78.2x 60.3x 34% 1.8 25.5x 19.6x 34.9x 25.6x 1.8x 1.4x 22% N Doug Anmuth
Facebook Inc FB $57.20 146,495 47.1x 34.4x 40% 0.9 20.3x 15.1x 36.3x 25.9x 11.9x 8.9x 38% OW Doug Anmuth
Tencent Holdings Ltd 700 HK HKD 495.60 124,193 227.0x 170.5x 40% 4.3 21.5x 15.3x 28.5x 20.9x 8.5x 6.3x 36% OW Alex Yao
eBay Inc EBAY $51.78 68,084 17.1x 15.1x 13% 1.1 9.2x 7.5x 11.1x 9.5x 3.0x 2.4x 14% OW Doug Anmuth
Baidu Inc BIDU US $176.63 61,925 22.8x 17.3x 41% 0.4 17.5x 12.2x 23.9x 12.7x 7.5x 5.3x 36% OW Alex Yao
priceline.com Inc PCLN $1,139.53 60,150 22.1x 17.9x 25% 0.7 15.9x 12.2x 19.3x 14.8x 6.3x 4.9x 22% OW Doug Anmuth
Twitter Inc TWTR $66.29 50,588 NM NM NM NM 514.3x 196.1x NM NM 45.7x 30.9x 62% N Doug Anmuth
$10B - $49B
Yahoo! Inc YHOO $39.93 42,896 NA NA NA NA NA NA NA NA NA NA NA NR Doug Anmuth
Yahoo! Japan 4689 ¥592.00 32,672 26.2x 22.6x 11% 2.1 12.2x 10.6x 23.1x 19.0x 6.7x 5.9x 9% OW Haruka Mori
LinkedIn Corp LNKD $203.92 24,261 96.4x 55.5x 54% 1.0 41.3x 29.8x 319.7x 40.3x 10.7x 8.1x 37% OW Doug Anmuth
Netflix Inc NFLX $359.57 22,083 80.3x 46.8x 113% 0.4 37.0x 23.1x 104.8x 32.0x 4.0x 3.3x 20% OW Doug Anmuth
Rakuten 4755 ¥1,586.00 20,133 31.8x 25.1x 28% 0.9 13.9x 11.3x 54.1x 38.6x 3.6x 3.2x 10% N Haruka Mori
Naver 035420 KS KRW 699,000 19,563 35.5x 22.8x 53% 0.4 22.7x 14.1x 40.9x 24.0x 6.8x 5.2x 28% OW Stanley Yang
Yandex YNDX $42.91 13,982 28.4x 22.7x 19% 1.2 18.4x 14.9x NM NM 8.2x 6.6x 26% OW Alexi Gogolev
TripAdvisor Inc TRIP $80.38 11,997 36.8x 29.4x 27% 1.1 23.8x 18.9x 33.0x 25.5x 9.9x 8.0x 24% N Doug Anmuth
Qihoo 360 Technology Co., Ltd QIHU US $80.10 10,520 35.3x 24.1x 57% 0.4 29.9x 18.5x 47.3x 25.1x 8.9x 6.0x 54% OW Alex Yao
NetEase Inc NTES US $78.03 10,180 13.0x 11.3x 11% 1.0 11.1x 9.5x 13.1x 11.3x 5.4x 4.8x 10% N Alex Yao
$2B - $10B
Expedia Inc EXPE $68.96 9,528 18.6x 15.1x 22% 0.7 7.9x 6.0x 8.8x 7.2x 1.6x 1.2x 10% N Doug Anmuth
Mail.ru MAIL LI $42.64 8,916 21.9x 18.3x 22% 0.8 14.7x 12.3x 17.2x 14.6x 8.0x 6.7x 21% OW Alexi Gogolev
Groupon Inc GRPN $11.89 8,298 44.2x 25.8x 107% 0.2 23.2x 17.7x 19.6x 6.5x 2.3x 2.0x 16% N Doug Anmuth
Ctrip.com International Ltd CTRP US $44.43 7,420 23.9x 18.7x 24% 0.8 30.2x 21.1x 27.4x 21.1x 5.9x 4.5x 28% N Alex Yao
Schibsted SCH NO NOK 417.00 7,226 50.2x 35.3x 52% 0.7 20.9x 17.6x 46.7x 37.7x 3.0x 2.8x 4% N Nicolas Dubourg
Pandora Media Inc P $31.49 6,809 103.3x 43.5x 298% 0.1 85.8x 32.4x 93.8x 38.2x 6.5x 4.6x 43% OW Doug Anmuth
SouFun Holdings Ltd SFUN US $83.98 6,873 21.2x 17.7x 19% 0.9 15.6x 12.6x 20.5x 15.5x 8.3x 6.6x 21% OW Alex Yao
Sina Corp SINA US $84.35 6,153 37.0x 28.9x 61% 0.5 36.2x 24.0x 54.5x 33.9x 6.3x 4.9x 29% OW Alex Yao
Youku Tudou Inc YOKU US $33.92 5,645 242.3x 50.6x NM NM 36.5x 21.2x 38.9x 22.7x 8.1x 5.9x 39% N Alex Yao
Yelp Inc YELP $71.72 5,131 84.9x 62.8x 311% 0.2 69.1x 40.2x 82.2x 59.8x 13.8x 9.5x 51% OW Kaizad Gotla
Vipshop Holdings Ltd VIPS US $82.28 4,722 35.8x 24.3x 73% 0.3 29.1x 18.3x 26.6x 26.7x 1.5x 1.0x 62% OW Alex Yao
MercadoLibre, Inc MELI $101.49 4,481 32.0x 26.3x 25% 1.1 20.1x 15.6x 30.2x 22.7x 7.2x 5.7x 22% N Andrew Baggio
NCSoft 036570 KS KRW 234,000 4,362 15.2x 13.7x 43% 0.3 10.1x 8.6x 16.6x 13.4x 4.2x 3.6x 16% OW Stanley Yang
Kakaku 2371 ¥1,830.00 3,982 33.0x 26.0x 31% 0.8 18.9x 15.3x 33.5x 25.5x 10.6x 8.9x 20% N Haruka Mori
NEXON 3659 ¥941.00 3,965 10.4x 10.2x 2% 6.2 4.0x 3.3x 5.5x 4.6x 1.8x 1.5x 4% N Haruka Mori
HomeAway Inc AWAY $40.92 3,663 49.6x 40.6x 26% 1.5 25.1x 20.2x 25.0x 21.6x 7.6x 6.3x 20% OW Doug Anmuth
Zynga Inc ZNGA $4.04 3,523 NM NM NM NM 158.7x 124.9x 30.1x NM 3.0x 3.2x -6% N Doug Anmuth
Axel Springer SPR GR € 47.35 3,429 19.0x 16.9x 1% 18.2 9.8x 8.9x 12.4x 14.6x 1.7x 1.6x -3% N Nicolas Dubourg
YY Inc YY US $57.34 3,384 25.3x 19.7x 40% 0.5 24.5x 16.8x 23.1x 17.4x 6.6x 4.5x 49% OW Alex Yao
DeNA 2432 ¥2,151.00 3,113 10.2x 9.9x 2% 5.8 3.3x 2.8x 5.7x 4.7x 1.1x 0.9x 3% OW Haruka Mori
Sohu.com Inc SOHU US $73.94 2,883 30.1x 29.9x 32% 0.9 6.6x 5.5x 8.4x 12.6x 1.2x 0.9x 18% N Alex Yao
CyberAgent 4751 ¥4,400.00 2,669 23.3x 21.7x 12% 1.8 8.6x 7.8x 17.6x 16.1x 1.2x 1.0x 6% N Haruka Mori
GREE 3632 ¥1,033.00 2,415 11.7x 11.5x 14% 0.8 4.5x 4.0x 7.4x 6.5x 1.4x 1.2x 3% N Haruka Mori
Criteo SA CRTO $32.71 2,094 89.1x 44.4x 77% 0.6 25.4x 15.6x 254.0x 49.2x 5.1x 4.1x 35% OW Doug Anmuth
< $2B
OpenTable Inc OPEN $79.55 1,942 34.3x 29.5x 17% 1.8 17.7x 14.7x 26.1x 21.5x 7.7x 6.5x 18% N Kaizad Gotla
Bankrate Inc RATE $16.64 1,665 20.9x 18.0x 33% 0.5 10.9x 9.0x 18.5x NM 3.2x 2.7x 13% N Doug Anmuth
Rightmove RMV LN £2,805.00 1,693 28.4x 23.5x 22% 1.1 21.7x 17.7x 29.0x 23.0x 16.4x 13.5x 17% OW Nicolas Dubourg
ASKUL 2678 ¥3,020.00 1,572 34.1x 23.7x 52% 0.5 11.0x 8.7x 32.0x 23.7x 0.5x 0.4x 18% OW Haruka Mori
Trulia Inc TRLA $36.83 1,416 40.5x 42.4x 15% 2.9 24.8x 15.6x 29.2x 21.5x 5.2x 3.9x 54% OW Doug Anmuth
CTS Eventim EVD GY € 39.30 1,384 21.9x 19.2x 14% 1.3 12.1x 10.4x 15.3x 12.9x 2.9x 2.6x 5% OW Nicolas Dubourg
NHN Ent. 181710 KS KRW 91,700 1,308 14.1x 14.5x -8% -1.9 7.3x 7.4x 16.3x 16.6x 1.7x 1.6x 3% UW Stanley Yang
Daum 035720 KS KRW 84,700 1,068 14.5x 13.2x 10% 1.4 5.7x 4.8x 11.3x 9.2x 1.3x 1.1x 10% N Stanley Yang
Forgame Holdings Ltd 484 HK HKD 55.90 940 93.2x 72.9x -12% -5.9 6.7x 4.2x 8.0x 5.2x 2.3x 1.5x 32% OW Alex Yao
Phoenix New Media Ltd FENG US $9.81 779 13.8x 10.5x 28% 0.4 9.7x 6.3x 11.5x 7.7x 1.8x 1.4x 24% OW Alex Yao
Gurunavi 2440 ¥3,135.00 782 25.5x 18.5x 38% 0.5 8.6x 7.1x 19.5x 15.5x 2.1x 1.8x 10% OW Haruka Mori
Sungy Mobile Ltd GOMO US $20.18 759 27.3x 17.1x 27% 0.6 30.3x 15.8x 25.2x 14.3x 7.7x 4.8x 52% N Alex Yao
E-commerce China Dangdang Inc DANG US $9.00 742 NM 45.0x NM NM 76.1x 17.4x NM 14.0x 0.5x 0.4x 18% UW Alex Yao
Chegg Inc CHGG $8.26 746 NM 18.9x NM NM 141.7x 11.9x 58.8x 14.4x 1.9x 1.5x 25% OW Doug Anmuth
Ubisoft UBI FP € 10.04 743 15.5x 8.1x NM NM 1.9x 1.5x 161.3x 11.4x 0.7x 0.6x 20% N Nicolas Dubourg
Money Supermarket MONY LN £189.30 625 15.6x 14.3x 11% 1.3 11.5x 10.3x 16.1x 14.3x 4.2x 3.8x 8% N Nicolas Dubourg
Gameloft GFT FP € 7.93 501 18.6x 12.8x 48% 0.3 8.9x 5.9x 13.9x 9.3x 2.1x 1.6x 17% OW Nicolas Dubourg
Wemade 112040 KS KRW 32,000 500 13.7x 9.7x 49% 0.2 7.5x 5.0x 14.9x 8.7x 1.6x 1.3x 12% N Stanley Yang
QuinStreet Inc QNST $8.76 379 22.0x 14.3x -43% -0.3 9.0x 7.6x 22.7x 9.6x 1.1x 1.1x 3% N Doug Anmuth
ReachLocal Inc RLOC $12.73 369 26.1x 15.1x 44% 0.3 6.5x 3.5x 8.0x NM 0.4x 0.3x 13% OW Doug Anmuth
Perform PER LN £224.80 360 21.9x 17.2x 19% 0.9 12.9x 10.2x 28.4x 21.9x 2.3x 2.0x 14% N Nicolas Dubourg
XING O1BC GY € 79.31 325 31.4x 25.7x 29% 0.9 12.4x 10.1x 22.1x 18.7x 3.9x 3.4x 11% UW Nicolas Dubourg
Gamevil 063080 KS KRW 44,600 270 15.6x 14.1x 10% 1.4 11.2x 9.9x 18.9x 15.7x 2.3x 2.0x 17% UW Stanley Yang
CafePress Inc PRSS $6.33 111 13.7x 9.6x 200% 0.0 3.9x 2.7x 12.2x 5.9x 0.3x 0.2x 10% N Doug Anmuth
EV/FCF EV/RevenueEV/EBITDAP/E
Source: Company reports, Bloomberg and J.P. Morgan estimates.

8
09 January 2014
Doug Anmuth
(1-212) 622-6571
Global Internet Top Picks
U.S.
Facebook: Overweight, $62 PT. Facebook remains a top pick into 2014 as we
believe it is still early in monetizing the company’s base of 1.2B users globally.
Facebook’s mobile advertising should surpass desktop in 4Q13 and we expect
mobile to account for 63% of total ad revenue in 2014. We believe advertiser
demand and ads quality should more than offset slower increases in ad load, thereby
driving higher relevancy and click-through rates and ultimately greater quality over
time. We think Instagram and auto-play video ads could also drive upside to our and
Street estimates. We note that our 2014 PF EPS estimate for Facebook is currently
7% above consensus and our 2015 estimate is 12% ahead.
Google: Overweight, $1,305 PT. We believe Google’s strong position in both
mobile and video should drive continued share gains in online advertising, and
Google remains focused on product innovation and disruptive technologies. As users
become more comfortable and savvy transacting through mobile devices and Google
delivers more efficient and better-targeted ads through initiatives such as Estimated
Total Conversions and Enhanced Campaigns, we expect mobile to become a bigger
tailwind for the company in upcoming quarters. We are also increasingly optimistic
on YouTube now that the company is utilizing Nielsen’s Online Campaign Ratings
(OCR) tags. Our ad industry discussions suggest that TV ad buyers would like to
spend more money online and we believe familiar measurement methodology
through OCR will help to accelerate this shift. We remain optimistic on Google
growing traction with PLAs into 2014 and the potential for Network Sites to rebound
from a heavily self-inflicted slowdown in 2013. We expect Google to continue to
deliver strong growth off a large base and we believe the combination of growth and
stability in the business model, still-reasonable valuation (17.2x 2015E PF EPS), and
significant cash on the balance sheet (~15% of the market cap) help make Google a
strong play in 2014.
LinkedIn: Overweight, $275 PT. We believe LinkedIn is well positioned to benefit
from the secular shift toward enterprise hiring, expanded field sales efforts, and new
products. We would be buyers of the recent weakness in LinkedIn as we remain
optimistic on Talent Solutions growth driven by deeper enterprise penetration, a
pricing increase impacting half of all subscribers in 2014, and potential for
stabilization in international markets. We also expect accelerating Marketing
Solutions growth in 2014 as LinkedIn laps tougher comps after 1Q and Sponsored
Updates should benefit from significant dollars moving toward Newsfeed and Native
ads. It remains early for Sales Navigator, but we believe the product will be extended
more towards corporates this year. We believe LinkedIn remains focused on product
innovation and engagement and we would take advantage of recent weakness in the
shares.
Pandora: Overweight, $35 PT. Pandora is our top SMid-cap pick as we continue to
view the stock as a compelling pure play on mobile and believe the company is at an
inflection point on monetization. We highlight recent listener metrics and app
download trends, which represent solid continued growth in hours, users, and market
share despite a heightened competitive environment. We also highlight recent
updates to Pandora’s auto strategy, including achieving 4M unique native auto

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09 January 2014
Doug Anmuth
(1-212) 622-6571
activations and introducing in-car targeted advertising. We believe Pandora’s
monetization and profitability will improve going forward as: 1) Pandora’s 8.6%
market share of total US radio should continue to ramp; 2) radio buy-side platform
integration should remove friction from the buying process and attract more ad
spend; 3) increased audience segmentation and auto-focused campaigns should help
support increasing CPMs; 4) Pandora continues to build out its local sales force (now
in 29 of top 40 markets); and 5) cost-control policies including the limit to mobile
skips should help curb content costs in place of the 40-hour mobile cap, enabling
greater leverage in content acquisition.
China
Tencent: Overweight, HK$580 PT. We maintain our Overweight rating on Tencent
with a Dec-14 PT of HK$580. We believe Tencent is a dominant leader in China’s
gaming market and it is expected to capture a 48% market share in China’s total
gaming market in 2014. On PC side, we expect Tencent’s revenue growth to be
driven by continued high-quality hit content (e.g., Blade & Soul and Asura) over the
next 2-3 years. On mobile side, Tencent is well positioned across the entire mobile
games value chain including development, publishing and distribution. Such
positioning allows Tencent to capture a significant portion of value created in
China’s mobile gaming market. We estimate Tencent will generate RMB8.2bn
mobile gaming revenue in 2014. In the long run, we expect Tencent will obtain more
market share in mobile gaming market than in PC gaming market, given its stronger
mobile distribution power, Weixin’s high-end user base and fast game genre
expansion on mobile.
Qihoo: Overweight, US$98 PT. We maintain our Overweight rting on Qihoo with a
Dec-14 PT of US$98. We view Qihoo as one of the key beneficiaries in the fast-
growing mobile gaming market in China over the next two years, due to its wide
exposure to mobile users (over 400m monthly active users on mobile) and strong
distribution power on mobile (over 45m daily average distribution volume from 360
Mobile Assistant). We estimate Qihoo will capture 12% of China’s mobile gaming
market in 2014. Qihoo should generate RMB1.8bn revenue from such a market
share. Meanwhile, we expect Qihoo to quickly ramp up monetization of its search
traffic in 2014, which is currently significantly under-monetized (1.6% revenue share
vs. over 20% traffic share).
YY: Overweight, US$67 PT. We maintain our Overweight rating on YY with a
Dec-14 PT of US$67. YY has established a large social-oriented user base on the
back of its technology strengths in rich-media-based group communications on a
real-time basis. Such an advantage is highly scalable to other internet activities which
require online group voice/video communications, e.g., online recruiting and online
education. Meanwhile, with sizable organic traffic, YY is able to cross-sell other
internet content/services (e.g., online gaming) to users. We expect YY’s growth in
2014 to be primarily driven by 1) continued strong growth of YY Music, 2) PC game
licensing, and 3) mobile games development and publishing.

10
09 January 2014
Doug Anmuth
(1-212) 622-6571
Korea
Naver: Overweight, W770,000 PT. Internet traffic is highly concentrated in the
dominant portal, Naver, in Korea. We are positive on the potential monetization
upside of Naver’s mobile ad business. We also believe the potential monetization
upside of Naver’s global social networking business has yet to be fully captured by
the market due to the time lag between subscriber growth and monetization.
NCsoft: Overweight, W300,000 PT. We like the company’s leading global position
in the captive hardcore MMORPG market on significantly subdued competition (a
few survivors take all). The upcoming launches of GW2 in China and Wild Star in
the US/EU are expected to serve as additional share price catalysts, in addition to
B&S’s current strong traction in China.
Japan
Yahoo Japan: Overweight, ¥600 PT. Following the shift to an advertising income
model, we expect the stock to gradually start pricing in the medium-term potential
for e-commerce as investors confirm that growth in the number of store openings
boosts product numbers, increases customer pulling power, and expands sales value.
However, we expect smartphone advertising and YDN to drive stable growth for
core advertising sales for the foreseeable future, and think the stock is very attractive
from a risk/reward perspective.
Askul: Overweight, ¥3,700 PT. While valuations look demanding and the share
price appears to have risen on investor expectations, we think LOHACO will
gradually start to benefit from Yahoo Japan’s initiatives (which will step up from
early 2014) as faster growth in e-commerce provides a tailwind. Specifically, we note
1) benefits in terms of attracting customers, 2) the use of big data, and 3) growth in
logistics volumes. We focus on this stock because we think it could be major
beneficiary of Yahoo Japan’s new e-commerce strategy.
Europe
Gameloft: Overweight, €9.50 PT. We are Overweight on Gameloft with target price
of €9.50. Gameloft is one of the leading developers of games for digital platforms
such as mobile phones, smartphones and tablets and, in our view, an ideal play on
soaring mobile device sales along with freemium games across the globe. The future
for the online game industry looks bright: the number of smartphone subscriptions is
set to triple to 5.6bn by 2019, with APAC reaching 4.7bn. Within mobile use,
gaming is the 3rd most popular activity (6h per month, source: Ericsson mobility
report, November). And Gameloft is likely to be a key beneficiary due to 1)
unparalleled mobile exposure: games on smartphones and tablets made up 69% of
Gameloft’s revenues in Q313 (mobile 98% of Q2 in total), 2) great geographical
exposure: LatAm and APAC already made up 36% of revenues in Q3, 3) focus on
freemium: sales of virtual goods and advertising within games accounted for 80% of
Gameloft’s Q3 smartphone revenues, offering access to gamers at lower price points
and recurring revenues from a given game, 4) limited single-game risk: no game
contributes over 10% of revenues, so Gameloft is not dependent on one hit. On our
estimates, +17% revenues CAGR’13-’15 translates into +37% EBITDA CAGR even
as, we assume c.60% of adj. operating costs are fixed (i.e. growing at c.7% p.a. to
FY15), with the remainder growing in line with sales. Gameloft stopped hiring in
August 2012 (having significantly built up its game developing capacity) and
signaled that up to 80% of costs are fixed. H113 results/FY13 guidance then

11
09 January 2014
Doug Anmuth
(1-212) 622-6571
confirmed operating leverage is kicking in. Gameloft may further boost profitability
as it reduces its annual slate to 15-20 games by 2014 (vs. FY13’s 22) and focuses on
evolving successful games. Gameloft shares are trading on 12.8x 2013E
EV/EBITDA which we see as attractive given Gameloft’s 13E-15E EBITDA CAGR
of +37%. We leave our estimates unchanged and our EBIT estimate is +10% ahead
of BBG consensus in ‘14.
Moneysupermarket: Overweight, 211p PT. We are OW the leader in UK online
price comparison (from N) as i) ST uncertainty is reduced (Q3 results and FY13
guidance have shown some stabilization/recovery since the flat y/y revenues of July),
ii) the Money vertical (c.30% of revs revs’12) will no longer suffer from tough
comparables from Q413/Q114 and iii) the structural growth opportunity remains:
more customers could switch providers and do so online: switches/new purchases
still make up only 26%/13%/16% of yearly market volumes in the key home
insurance, cards and energy verticals and only 55%/56%/32% of those purchases
occur online, vs. 44%/81% for motor insurance. The next catalyst will be the Q4 post
close update on January 14. Energy is providing a case study to support the structural
growth view: prospects for Energy price comparison websites have boomed with i)
recent increases in UK Energy prices, which have prompted 900k households to
switch providers in Oct/Nov’13 and ii) the end of doorstep-selling in 2012, which
leaves more space for online sales. We now see Energy contributing £20m to MONY
revenues in FY13 (c.9% of group revenues, vs. £8-9m in FY12), rising progressively
thereafter. Our MONY Energy revenue estimate for 2016 is consistent with i) 5.6m
Energy customers switching providers overall in the UK (no change vs. 2012), ii)
50% doing so online (vs. 32% for Energy in 2012 and 55% for Home Insurance), iii)
MONY taking a 16% market share of online switches (more than the c.9% we
estimate for 2012 but less than MONY’s apparent share in October’13), at JPMe
c.£60 fee per switch. We also see increasing mobile adoption favouring MONY.
MONY is the market leader in the financial price comparison market (>40% share of
visits) and we expect their app to be the leader. Mobile users have only a few apps
they use on a regular base: this creates significant barriers to entry and increases
market share. Our EPS estimates are in line/+5% ahead of BBG. Our Dec-14E PT is
DCF-based (WACC of 9%, g 2%) and is 211p. MONY trades at 12.9x
EV/EBITDA’13 for 9% EBITDA CAGR’13-’15 but also a highly competitive 6.3%
Equity FCF yield ’14 & 4.1% dividend yield ’14. Our Bull case offers a DCF value
of 236p and 28% upside.
Russia
Yandex: Overweight, $50 PT. Yandex is the leading advertising platform in Russia
with over 300K+ advertisers in 1H13, accounting for c57% of the Russia online ad
market. Yandex is also #1 internet destination, with c55 mn unique monthly visitors.
Yandex is leveraging its platform and has become #1 comparison shopping
destination, used by 40% of Russian online shoppers (Source: AKAR). Yandex in
Turkey: while its search market share remains in the low-single digits, the company
plans to start to monetize its product. We continue to prefer Yandex among the
Russian TMT space and see the stock as an attractive long-term play on Russian
consumption and internet roll-out. We believe the name deserves a premium
valuation due to strong fundamentals, well-regarded corporate governance and high
share liquidity. Any announcement on dividend could well extend the share price
rally.

12
North America Equity Research
09 January 2014
Doug Anmuth
(1-212) 622-6571
U.S. Internet Themes for 2014
Revenue and Conversions to Tighten the
Gap with Strong Mobile Usage
“The trend has been that mobile was winning…it’s now won.”
– Eric Schmidt, Google Chairman
In 2014, global mobile usage should continue to take share from desktop—having
already crossed 50% of total online usage in the U.S. in 2013—and given continuing
growth in smartphone and tablet subscribers worldwide. However, the monetization
and commerce associated with that usage has lagged, and we think that 2014 can be a
year of catch-up as users become savvier and more comfortable with devices, apps
continue to improve in functionality and UI, and more sites become mobile-
optimized. Importantly, advertising spend on mobile devices is expected to continue
growing as a portion of internet spend, which is, of course, also growing.
MagnaGlobal expects global mobile advertising revenue will reach $15.9B in 2014,
up 31% Y/Y, representing 12.4% of total online ad spend, relative to 10.7% of
estimated total spend for 2013. We expect to see key stakeholders’ success
increasingly impacted by their ability to take advantage of the mobile shift, including
companies with an online advertising-driven business model, and retailers and
eCommerce operators. The discussion below includes: 1) how far along we are in the
mobile usage transition; 2) how users engage differently with mobile sites and apps
relative to engagement and conversion patterns on desktop; and 3) which companies
are best positioned to benefit most or are already closing the gap between mobile
usage and mobile revenue.
Nearing Mobile Usage Inflection Point
Mobile usage accelerating while penetration continues to grow, but given
saturation levels in certain markets, growth may decelerate
Current J.P. Morgan estimates put global smartphone shipments at 971M for 2014,
and while growth continues, it may decelerate given increasing global penetration as
high as 60s-70s (%) in countries including UAE, South Korea, Saudi Arabia,
Singapore, and Norway. While smartphone penetration is above 50% in most
developed countries, according to Google’s Our Mobile Planet research, developing
countries still have significant room to grow smartphone users with India’s
penetration at only 13%. Additionally, J.P. Morgan estimates put global tablet
shipments at 221M in 2013 and are expected to reach 277M in 2014, and 318M in
2015. Despite smartphone and tablet growth reaching more mature levels over the
coming years, we believe the monetization associated with those users will grow
much faster, as mobile revenue still pales in comparison to mobile usage.
We believe that global mobile internet usage is still at a very early growth stage and
as traffic per user increases, the way in which users engage with mobile applications
and sites will evolve and impact the companies most levered to mobile engagement,
including Facebook, Twitter, Pandora, Google, and others. In 2013 we saw many
companies—notably Twitter—increase focus on adapting their local services to

13
09 January 2014
Doug Anmuth
(1-212) 622-6571
capitalize on opportunities to engage with developing market consumers, and we
expect this trend to become more prominent in 2014.
Twitter is working to optimize its platform for developing markets where lower-end
smartphones (such as $70-100 Android phones) and feature phones with SMS can
leverage the Twitter platform. We believe this represents a significant expansion
opportunity. Twitter plans to partner with mobile operators in developing markets to
help them market data plans to their subscribers using Twitter, or using Twitter as a
lead-in by offering Twitter for free for a limited time to increase signups for mobile
data plans.
Figure 3: Smartphone Market Shipment Estimates
Millions of Smarphones
299
473
680
971
1,088
0
200
400
600
800
1,000
1,200
2010A 2011A 2012A 2013E 2014E
Smartphone market (mn)
Source: J.P. Morgan estimates.
Figure 4: Smartphone Penetration
Installed base as % of population
7%
12%
19%
27%
35%
41%
46%
0%
10%
20%
30%
40%
50%
2010A 2011A 2012A 2013E 2014E 2015E 2016E
smartphone penetration
Source: J.P. Morgan estimates.

14
09 January 2014
Doug Anmuth
(1-212) 622-6571
Figure 5: Global Mobile Data Traffic Estimates
Petabytes per month
0
2,000
4,000
6,000
8,000
10,000
12,000
2010 2011 2012 2013 2014 2015 2016 2017
Petabytes per month
Source: Cisco VNI, 2013, A.T. Kearney Analysis, GSMA.
Mobile vs. Desktop Engagement Patterns
Global inflection point: when global mobile usage will surpass desktop
According to comScore, 2013 was the year in which mobile usage in the U.S. first
surpassed desktop (Figure 6). Global usage is also trending towards mobile, but
remains skewed towards desktop at roughly 78% (Figure 7). We expect the mix shift
towards mobile will continue throughout 2014, creating challenges for companies
that have been slow to optimize their mobile presence, and creating significant
opportunities for those that have led the way in mobile-first product and strategy
development. On average, online sites see approximately 49% of their traffic coming
from mobile devices as of November, up from 36% a year ago.
Figure 6: U.S. Time Spent Online Mobile vs. Desktop
Time Spent
20%
30%
40%
50%
60%
70%
Mobile Minutes % of Total Internet Time Spent
Desktop Minutes % of Total Internet Time Spent
Source: comScore, as of November 2013.

15
09 January 2014
Doug Anmuth
(1-212) 622-6571
Figure 7: U.S. Global Mobile vs. Desktop
% of Page Views
0%
20%
40%
60%
80%
100%
Desktop Mobile
Source: Statcounter.
Closing the Revenue and Conversion Gap with Usage
eCommerce traffic and sales increasingly impacted by Mobile
Retail is undoubtedly becoming more mobile, forcing traditional retailers to create
effective mobile presences to protect against losing share to eCommerce peers. Even
considering occasions when the retail transactions occur in-store, the consumer
shopping experience often starts long before that, and likely involves online searches
often on mobile devices. According to a survey by Nielson and xAd/Telmetrics, 46%
of respondents rely exclusively on smartphones or tablets in conducting online
research across a range of purchase categories. The study also found that 60% of
smartphone users and 53% of tablet users completed purchases related to their
mobile search, and importantly, 74% of smartphone users are completing
transactions offline. It’s important to note some differences in mCommerce behavior
between smartphone and tablet users. According to MarketLive research,
smartphones are driving more traffic to U.S. Apparel and Accessories Retail sites
(smartphones represent 28.4% of total online traffic vs. 12.5% from tablet), but
tablets are responsible for more than 3x the revenue (smartphone users generated
3.9% of total eCommerce revenue vs. 14.4% from tablet users). These trends provide
significant opportunities for mobile-optimized online advertisers, including
Facebook, Google, Twitter, and Pandora, to help retailers with a brick-and-mortar
presence not only survive, but take advantage of the growing impact mobile is having
on retail. It also blurs the line between online and offline commerce, as seen in
eBay’s efforts to drive physical sales for a number of retailers including Best Buy
and Target.
Facebook is making headway in offline attribution, and recently announced increased
functionality to help retailers close the loop from placing ads to tracking which users
viewed a sponsored post and purchased a product. Retailers will be able to track
effectiveness of campaigns given the customer data they already have—including
customer emails and phone numbers—cross-referenced with the data users share
with Facebook.
We note that many traditional retailers have been challenged as they try to adapt a
desktop-optimized online presence to fit a smaller screen. Those that have been most
successful are those that are executing under a mobile-first strategy and we believe

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09 January 2014
Doug Anmuth
(1-212) 622-6571
2014 will be another year of mobile-first product roll-outs and mobile-optimized
online presence. We highlight Groupon as an eCommerce company driven by mobile
given 60M+ cumulative app downloads and 50%+ of North American transactions
occurring on mobile.
Holiday spending in 2013 paints a telling picture of the trends we expect to continue
into 2014 regarding eCommerce and mCommerce. Cyber Monday mobile traffic
grew 58% Y/Y in 2013 according to IBM, and accounted for 30% of total traffic.
While traffic is important, we think what is even more important is the fact that 16%
of the day’s sales were sourced from mobile/tablet. comScore’s estimates put the
mobile portion a little lower at ~11%, but still material, and growing quickly.
comScore estimates that mCommerce contributed $5.8B (+26% Y/Y) or roughly
11% to 3Q eCommerce revenue of $53.2B, while desktop contributed $47.5B, up
13% over last year’s figure.
Figure 8: Gap Between U.S. Time vs. Dollars Spent on mCommerce, eCommerce, and Total Retail
% of Minutes
42%
51%
11%
16%
0.6% 1.0%
0%
20%
40%
60%
2012 2013
Retail: Mobile Minutes as % of total Online Minutes (Nov-12 and Nov-13)
Retail: mCommerce as % of total eCommerce Sales (including tablet)
Retail: mCommerce as % of total Retail Sales
Source: comScore total minutes in Nov-12 & Nov-13 U.S. on iPhone + Android as a % of iPhone, Android, and Desktop; eMarketer
estimates for 2012 and 2014 mCommerce and eCommerce, total Retail sales from census.gov, includes Retail & Food ex Auto.
Mobile Advertising Revenue
In the U.S., companies are seeing increased mobile traffic, and are making progress
in mobile monetization, but a significant gap remains between internet time spent on
mobile and advertising revenue generated on mobile for many companies. We expect
mobile paid search and mobile display advertising revenue to continue to gain share
in 2014 as companies accelerate efforts to close the mobile monetization gap and the
mobile experience improves for users.
Mobile already accounts for ~27% of search engine traffic, according to RKG, and
while the revenue gap is closing at an accelerating pace, digital search dollars are still
largely spent on desktop. eMarketer estimates that in 2010, only 2.1% of U.S. digital
search dollars were spent on mobile, but that number has risen to 22.1% this year and
may rise to 59.6% by 2017, representing $15.3B in mobile search spend. Within
mobile, search attracts slightly more ad dollars than display—search represents
51.5% of the estimated $8.5B in mobile ad spend for 2013 in the U.S. while display
represents 44.8% of the total, according to the same eMarketer study. However,
search may be losing share over time to display, given the growth of mobile-friendly
ad formats such as News Feed Ads, Sponsored Updates, and Promoted Tweets from
Facebook, LinkedIn, Twitter, and others.

17
09 January 2014
Doug Anmuth
(1-212) 622-6571
We believe Pandora is a compelling pure-play mobile advertising company for which
usage is ~80% mobile. In 3QFY14, 73% of the company’s advertising revenue came
from mobile. Given that the company’s product is an audio experience, the business
model lends itself well to mobile advertising, where the user interaction with an ad is
no different on desktop and mobile. Audio ads are interruptive and Pandora’s
targetability is high given user-reported information. We believe that Pandora is at an
inflection point on monetization driven by its market share gains, buy-side platform
integration, and expanding sales efforts.
Facebook has also emerged as a leader in monetizing mobile usage; increasing the ad
load in the News Feed has been an important driver of the company’s ad revenue
growth in 2013, but we believe that users, engagement, and ad quality/pricing have
also been significant monetization drivers and will be more important drivers of
mobile advertising growth in 2014. Facebook indicated that it expects slowing
growth in ad load (i.e., % of News Feed stories that are ads) going forward and that
future monetization gains are likely to be driven by ad-quality improvements. The
company also indicated that mobile ad load increased modestly from 2Q to 3Q while
desktop News Feed ad load increased to a somewhat greater extent. We note that
Facebook’s 3Q Mobile revenue grew 34% Q/Q despite relatively modest ad load
increases, suggesting users, usage, and ad-quality improvements can continue to
drive strong revenue growth going forward. We believe managing ad load is
important to maintaining the user experience for the long term and we think higher
ad prices can be driven by continued increases in News Feed ad demand and quality,
along with FBX in the Mobile News Feed and auto-play video ads.
The figure below demonstrates the gap between total online time spent in the U.S. on
mobile devices (excluding tablet) relative to the approximate portion of online and
total advertising revenue allocated to mobile advertising in 2012 and 2013.
Importantly, while monetization improved this year, the gap between mobile time
spent and mobile advertising spend has widened as mobile usage growth has been
relatively faster. We expect companies to make more progress on closing the gap in
2014, aided by increased targetability, including further adoption of Google’s
Enhanced Campaigns device bid adjuster, and expanded and enhanced ad formats
focused on increasing mobile advertising ROI.

18
09 January 2014
Doug Anmuth
(1-212) 622-6571
Figure 9: Gap Between U.S. Time and Advertising Spend
49%
19%
13%
3%
0%
20%
40%
60%
2013
Nov 2013 % of total Internet timespent on mobile
2013 mobile time spent as % of total Media
3Q13 approx % of Online Advertising revenue from mobile
2013 mobile ad revenue as % of total ad revenue
37%
13%
9%
2%
0%
20%
40%
60%
2012
Nov 2012 % of total Internet timespent on mobile
2012 mobile time spent as % of total Media
3Q12 approx % of Online Advertising revenue from mobile
2012 mobile ad revenue as % of totalad revenue
Source: comScore total minutes in U.S. on iPhone + Android as a % of iPhone, Android, and Desktop; MagnaGlobal U.S. mobile
advertising revenue estimates for 2012 and 2013 as a % of total U.S. advertising revenue.
Mobile ads still need to close the conversion gap with desktop, and videos
significantly help
One major driver that will help increase monetization opportunities in 2014 for online
advertising companies is closing the conversion gap between mobile and desktop.
According to a study by BrightEdge released this August, mobile conversions lag those
of desktop and tablet on average by ~2/3. However, the study also found some
industries generate better mobile conversion rates than others, including travel and
hospitality, which converts only 30% less frequently than desktop, and ecommerce,
which converts 40% less. Importantly, videos help drive mobile conversions higher
than desktop. We note that innovative ad formats and increased targetability are key
levers online ad companies can pull to help further this cause.
With the introduction of Enhanced Campaigns on Google, clients may be able to boost
mobile advertising efficiency by narrowing the target of their campaigns. Advertisers
can now target device, time of day, and location for campaigns by utilizing
adjustments across these three factors. We believe the enhanced targetability will drive
greater overall ROI and ad spend over time. Google has noted positive advertiser
feedback on Enhanced Campaigns since launch this summer. The company says it is
seeing more frequent bids on mobile keywords, though many advertisers are still
adjusting their campaigns. We think the company’s announcement of cross-device
measurement tools (i.e., the impact of mobile ads on desktop activity and vice versa)
could positively impact advertisers’ mobile ROI calculations and eventual mobile
search ad spend.
Narrowing the gap between mobile usage and mobile revenue
During 2013, many companies for which usage has been quickly shifting towards
mobile have made progress in closing the mobile revenue gap and we expect that trend
to accelerate in 2014.

19
09 January 2014
Doug Anmuth
(1-212) 622-6571
We note that Pandora and Facebook are companies that stand out in achieving superior
mobile monetization, making significant progress in closing the gap. These companies
have been able to generate increased mobile advertising demand from higher-quality
advertisers. Given the data these companies possess and innovation in mobile ad
formats, they have benefited from a mix of pricing and volume increases. For example,
Pandora’s video and audio ads command premium pricing to mobile display ads with
CPMs in the $15-$25, $8-$12, and $5-$7 range, respectively. We expect these
companies to continue to make progress towards mobile monetization and usage
equality in 2014. We also highlight companies with significant potential to close larger
monetization gaps, including Google. We believe Google has the targetability data,
engagement, and ad tech innovation including Enhanced Campaigns to make material
progress in closing its monetization gap in 2014.

20
09 January 2014
Doug Anmuth
(1-212) 622-6571
Native Ads to Drive Mobile Ad Monetization
We believe native ads are quickly becoming the de facto ad format on mobile and
increasingly moving into desktop. Native ads are ads embedded in a NewsFeed or
stream and in many cases closely resemble organic content, making them much more
likely to get clicked on compared to historical banner display ads. According to
MAGNA Global, mobile advertising, both display and search, is estimated to be
$15.9B in 2014 and forecasted to grow to $20 billion in 2015 and $37 billion by 2018,
on par with display. We think there is a significant shift to move advertising dollars
toward native and news feed advertising, especially on mobile devices, which we
believe will soon account for the majority of Internet usage time. We believe a
growing interest in mobile advertising from brand advertisers coupled with improving
mobile ad formats suited for smaller screen sizes should help to bridge the gap between
time spent on mobile and mobile marketing spend. We believe companies that reach
scale in users and rapidly improve mobile monetization will likely take share.
While the majority of Facebook and Twitter ad revenue is now generated through
native or feed ads, we believe other publishers such as LinkedIn and Yahoo! are also
increasingly shifting inventory to the format. According to a June 2013 survey from
the Online Publishers Association (OPA) and Radar Research, nearly three-quarters of
surveyed publishers in the US said that they already offered native advertising while
another 17% said they were considering offering it in 2013. We believe native or feed
ads perform well on mobile due to smaller screen sizes, which make it more difficult to
serve larger traditional display ads. We think feed ads are also more engaging given
they are embedded with the rest of the organic content on a page.
Figure 10: U.S. Publishers that Offer Native Advertising on Their Sites
Yes, currently, 73%
No, 10%
Considering offering
one this year, 17%
Source: eMarketer, June 2013.
We think native ads also have significantly higher click-through rates than traditional
display ads, which leads to higher pricing over time. For instance, native ads may have
represented ~5-10% of Facebook’s impressions in 2013, but accounted for more than
60% of revenue per our estimates, suggesting advertisers are witnessing strong
performance from the ad format. We believe scale is very important on mobile and
time spent is even more highly concentrated on mobile than desktop, with Facebook
accounting for over 20% of all time spent on mobile vs. ~10-15% on desktop.

21
09 January 2014
Doug Anmuth
(1-212) 622-6571
Overall, we believe Twitter is in a similar position in monetization as Facebook was a
bit more than a year ago when it had just turned on news feed ads across both desktop
and mobile. That is to say the basic products are there and still being developed, and
we believe it is early in building advertiser demand in the platform. However, we are
clearly bullish on the shift of dollars toward news feed ads, particularly on mobile
devices, and we expect Twitter to realize significant ARPU gains over time.
Twitter offers advertisers some basic re-targeting and programmatic capabilities today,
though the company does not offer advertisers the ability to bid on individual
impressions in real-time. We believe the addition of Twitter ad inventory on the
MoPub Marketplace (i.e., MoPub’s ad exchange) should significantly accelerate
Twitter’s efforts in RTB and drive higher monetization and ad pricing over time. We
expect strong demand for Twitter’s RTB products from direct response advertisers but
also from brand advertisers over time, and we note Facebook continues to witness
strong demand for FBX (Facebook Exchange) ads both in the Desktop News Feed as
well as its Desktop Right Rail, and we expect FBX to soon move to mobile.
Twitter launched Promoted Tweets in the Timeline in April 2010. This was an early
form of news feed advertising that was soon adopted by other companies. Facebook
launched Sponsored Stories in the News Feed in January 2012 for the desktop and in
March 2012 for mobile devices.
We believe LinkedIn is also making good progress with its Sponsored Content native
ads. More than 1,000 advertisers are running Sponsored Updates, a single-digit
percentage of LinkedIn advertisers on any given day. We believe the Sponsored
Update ad load is running at around a mid-single-digit percentage of total pieces of
content in the newsfeed. Also, similar to what can been seen at Facebook, Sponsored
Updates have higher click-through rates, particularly on mobile, which currently
accounts for 2/3 of LinkedIn’s Sponsored Updates revenue. LinkedIn noted that
sponsored jobs in the feed have performed particularly well. We believe Sponsored
Updates eCPMs are already higher than for LinkedIn’s traditional display ads and
pricing should increase more as advertiser demand in the platform begins to build.

22
09 January 2014
Doug Anmuth
(1-212) 622-6571
Cross-Device Advertising and Attribution
Becoming Critical
We expect online advertising to continue to see solid growth in 2014, driven by
increasing consumer consumption of digital media through a proliferation of connected
devices and rising allocations of ad budgets online. Consumers have greater
touchpoints to digital media through the rapid adoption of mobile devices and tablets
and higher engagement trends through social media. As consumer behavior and time
spent online rapidly shift towards mobile, we expect advertising dollars to follow. We
are projecting Internet advertising in the US to grow to $52B in 2014 (+18.3% Y/Y),
with a majority of the growth driven by mobile. We project mobile online advertising
(Search and Display) to grow 70% Y/Y to $13.4B in 2014. We are projecting total
online advertising will be nearly 28% of U.S. ad spending in 2014.
Figure 11: J.P. Morgan U.S. Online Advertising Forecast, 2007 – 2016E
2007A 2008A 2009A 2010A* 2011A 2012A 2013E 2014E 2015E 2016E
Display Advertising
Banner Ads $4,517 $4,901 $5,076 $5,963 $6,823 $7,757 $8,184 $8,593 $8,936 $9,205
Y/Y growth 23% 9% 4% 17% 14% 14% 6% 5% 4% 3%
Rich Media $1,675 $1,618 $1,541 $1,536 $1,301 $1,097 $1,317 $1,448 $1,535 $1,597
Y/Y growth 65% -3% -5% 0% -15% -16% 20% 10% 6% 4%
Digital Video $324 $734 $997 $1,406 $1,809 $2,304 $2,834 $3,344 $3,879 $4,422
Y/Y growth 155% 127% 36% 41% 29% 27% 23% 18% 16% 14%
Sponsorship $636 $387 $383 $729 $1,111 $845 $743 $758 $773 $789
Y/Y growth 14% -39% -1% 90% 52% -24% -12% 2% 2% 2%
Total Display (Desktop) $7,152 $7,640 $7,997 $9,635 $11,044 $12,003 $13,078 $14,143 $15,124 $16,012
Y/Y growth 33% 7% 5% 20% 15% 9% 9% 8% 7% 6%
% of total 34% 33% 35% 37% 35% 33% 30% 27% 25% 23%
% of total growth 41% 22% -45% 25% 20% 15% 13% 12% 10%
Search (Desktop) $8,810 $10,528 $10,651 $11,666 $14,757 $16,915 $18,268 $19,546 $20,719 $21,755
Y/Y growth 30% 20% 1% 10% 26% 14.6% 8% 7% 6% 5%
% of total 42% 45% 47% 45% 47% 46% 42% 38% 34% 31%
% of total growth 46% 77% -16% 54% 45% 18% 16% 14% 12%
Mobile N/A* N/A* N/A* $651 $1,587 $3,346 $7,897 $13,426 $19,467 $26,280
Y/Y growth N/A 144% 111% 136% 70% 45% 35%
% of total 3% 5% 9% 18% 26% 32% 38%
% of total growth 16% 36% 62% 69% 73% 77%
Classifieds/ Auctions $3,271 $3,187 $2,262 $2,604 $2,571 $2,414 $2,655 $2,708 $2,735 $2,763
Y/Y growth 7% -3% -29% 15% -1% -6% 10% 2% 1% 1%
% of total 15% 14% 10% 10% 8% 7% 6% 5% 5% 4%
% of total growth 5% -4% 118% -1% -3% 3% 1% 0% 0%
Lead Generation/ E-mail $1,972 $2,093 $1,752 $1,484 $1,777 $1,902 $2,054 $2,177 $2,286 $2,377
Y/Y growth 20% 6% -16% -15% 20% 7% 8% 6% 5% 4%
% of total 9% 9% 8% 6% 6% 5% 5% 4% 4% 3%
% of total growth 7% 5% 43% 5% 3% 2% 2% 1% 1%
* Note: Breakout of Mobile Advertising begins in 2010
Total Online Advertising $21,206 $23,448 $22,661 $26,041 $31,736 $36,572 $43,949 $52,001 $60,332 $69,188
%Y/Y growth 25.6% 10.6% -3.4% 14.9% 21.9% 15.2% 20.2% 18.3% 16.0% 14.7%
Total US Advertising $206,396 $194,781 $163,274 $170,639 $173,433 $178,221 $177,520 $184,890 $186,928 $196,579
%Y/Y growth 0.5% -5.6% -16.2% 4.5% 1.6% 2.8% -0.4% 4.2% 1.1% 5.2%
Online as % of Total 10.3% 12.0% 13.9% 15.3% 18.3% 20.5% 24.8% 28.1% 32.3% 35.2%
Y/Y change 2.1% 1.8% 1.8% 1.4% 3.0% 2.2% 4.2% 3.4% 4.2% 2.9%
Source: J.P. Morgan estimates; Interactive Advertising Bureau (IAB); PricewaterhouseCoopers (PwC); Magna Global Research.

23
09 January 2014
Doug Anmuth
(1-212) 622-6571
Advertising continues to shift online and, as people spend more time on various
devices at different times of the day at different locations, advertisers are looking for
ways to reach consumers at multiple touchpoints throughout the day. We believe there
is less of an emphasis on desktop vs. mobile and a greater focus on the right context.
There is less separation of usage times across various devices, as seen in the figure
below. A typical Internet user is on several devices simultaneously throughout the day
and now second or even third screen experiences are fairly constant. We believe it is
critical for advertisers to use new tools to target their advertising effectively and they
need to be able to track/measure behavior across devices as users are on multiple
devices throughout the day. Several of the largest online advertisers have already
begun shifting their products in this direction, particularly the companies for which
users are and can be logged in across various devices and services. As shown in
Figure 12 below, mobile phone and tablet activity spikes in the evening hours.
Figure 12: Share of Daily Traffic by Device
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
12:00AM 4:00AM 8:00AM 12:00 PM 4:00 PM 8:00 PM
ShareofDailyDeviceTraffic
Tablet Mobile Computer
Source: comScore.
Google launches Estimated Cross-Device Conversions
In November 2013, Google launched Estimated Cross-Device Conversions (ECDC) in
AdWords as a part of the new Estimated Total Conversions (ETC) product. Other
products to come in the ETC series will include phone calls and in-store visits. ECDC
is aimed at providing advertisers with data to reflect the impact of an advertiser’s
campaigns across various devices. This is a natural progression of Google’s holistic
perspective of online advertising that is highlighted in Enhanced Campaigns. Enhanced
Campaigns allow advertisers to reach users on all devices through a single AdWords
campaign where the context of the user is of greater focus rather than just looking at
which device they are using. Through ETC products, Google is creating analytics tools
to measure conversions that start with an AdWords click that leads to a transaction
completed on any device, on the phone, or in-store.
Google estimates ECDC based on aggregate data from users who are signed into the
Google accounts across multiple devices, which is used to create an anonymous and
aggregate estimate for the number of cross-device conversions attributed to AdWords.

24
09 January 2014
Doug Anmuth
(1-212) 622-6571
ECDC uses last paid click attribution so that the conversions are attributed to the ad
that was last clicked before the transaction, lead submission, or other call to action was
placed. Google currently calculates ECDC for conversion paths that start from a
Google search but the company is looking for ways to capture cross-device
conversions from display and other search networks. In early tests, Google reported
that the entertainment vertical saw the largest increase of conversions at 12%, travel
and technology at 8%, retail at 7%, and local at 2%. Going forward, we expect Google
to continue to add additional tools for other conversion types such as phone calls and
in-store visits. Early checks with SEMs suggest some advertisers using ECDC are
seeing an increase in conversions as high as 33%.
Facebook expected to further enable cross-device targeting
Facebook is another online platform where users are signed in across multiple devices.
Though not yet available, Facebook Exchange (FBX) ads will soon become available
in the mobile News Feed, we believe. As a reminder, FBX enables real-time bidding
driven by advertisers’ cookie-based data rather than simply targeting through broad
demographics or interests. We believe the incorporation of FBX ads into Facebook’s
mobile News Feed will be material. For example, if a user visits an online travel site at
work on a desktop but leaves before the check-out process, that OTA can re-target the
same user on Facebook with additional messages or offers when they check their
mobile app later at home.
Facebook also offers Custom Audiences, a product that allows advertisers to upload
customer information gathered from their offline customers such as emails, user IDs,
or phone numbers and target them on Facebook. We are encouraged that Facebook’s
ability to leverage third-party data through the Facebook Exchange (FBX) and Custom
Audiences can drive improvements in yield. Third-party data through FBX and
Custom Audiences pushes Facebook further down the purchase funnel, driving higher
ROI and ad spend. We look for further investments and advertiser tools to further
enable these actions in 2014.
Twitter launches retargeting with Tailored Audiences
Twitter rolled out Tailored Audiences (TA) globally in November 2013. TA enables ad
retargeting on Twitter’s platform using user behavior on other websites. Since the beta
test began in July, Twitter has reported seeing strong results. HubSpot reported seeing
a 45% lift in engagement rates, Krossover saw a 74% decrease in cost per customer
acquisition (CPA), and New Relic saw 195% higher conversion rates. Ad partners that
are helping Twitter with TA include Adara, AdRoll, BlueKai, Chango, DataXu,
Dstillery, Lotame, Quantcast, ValueClick, and [x+1]. We believe retargeting will be an
effective tool for Twitter’s advertisers given the platform’s advantage on mobile
devices and we look for more dynamic cross-device ad targeting tools to come.

25
09 January 2014
Doug Anmuth
(1-212) 622-6571
Traditional Media Measurement Tools to
Drive Traditional Media Dollars Online
We think 2014 is going to be a breakthrough year for traditional media measurement
shifting online given YouTube adoption of Nielsen OCR, Nielsen’s likely
measurement of Internet radio, and social audience measurement with key partners
including Twitter and Facebook. Fragmentation of consumer time and attention across
channels, devices, operating systems, and time periods is driving the multi-channel
measurement trends and creating a growing need among advertisers and content
creators for consistent measurement across mediums. Consumers are more frequently
engaging with brands in multiple physical and digital formats before making a
purchase decision and brands need help connecting the dots between online and offline
touch-points. Additionally, advertisers such as Google, Twitter, and Facebook are
working with traditional measurement leaders because they seek objective, third-party
sources for complex cross-channel ROI and conversion metrics. Importantly, we think
multi-channel measurement trends will accelerate the secular shift of dollars from
traditional media including TV and radio towards digital. (Note: Nielsen Holdings is
covered by J.P. Morgan’s Business, Information and Education Services analyst
Andrew Steinerman.)
Nielsen OCR measurement of YouTube could drive material change in TV buyer
behavior
This November, Google announced that it was letting Nielsen place measurement tags
on ads running on YouTube, after resisting the idea of OCR measurement for some
time as the company continues to build its own measurement options. Google realizes
that its clients want meaningful measurement and brand-friendly metrics, and it now
believes that partnering with industry leaders like Nielsen and comScore to offer
objective credentialed third-party measurement will enhance advertiser demand. We
believe OCR measurement of YouTube will be impactful in increasing the site’s
advertising revenue throughout 2014. According to Google’s latest YouTube Insights
research from October 2013—which quotes data provided by Nielsen—more
consumers already watch YouTube than cable networks and 63% of campaigns
targeting 18-34 year olds would benefit from a shift to YouTube from TV given
increased potential reach. In fact, YouTube commands higher reach than any major
cable network among males 18-24, 18-34, 18-49, and females 18-49 and 25-54.
Nielson OCR tags should accelerate the shift of TV dollars online.

26
09 January 2014
Doug Anmuth
(1-212) 622-6571
Figure 13: YouTube’s Reach, as Measured by Nielsen
% Reach
48%
Reach of
YouTube
CMDY TBSC FX MTV SPK TNT AMC ESPN AEN
Males 18-34
48%
Reach of
YouTube
CMDY TBSC FX MTV SPK ESPN USA AMC TNT
Males 18-24
47%
Reach of
YouTube
TBSC FX CMDY TNT ESPN SPK DISC AEN AMC
Males 18-49
47%
TBSC FX TNT Reach of
YouTube
CMDY DISC ESPN AEN AMC HIST
Males 25-54
51%
Reach of
YouTube
TBSC FX AEN TNT LIF TLC FAM E! MTV
Females 25-54
49%
Reach of
YouTube
TBSC FX MTV FAM AEN E! TLC TNT DSNY
Females 18-49
46%
MTV TBSC Reach of
YouTube
FX FAM E! TLC DSNY AEN CMDY
Females 18-34
40%
MTV FAM FX TBSC E! Reach of
YouTube
NICK TLC CMDY AEN
Females 18-24
Source: Nielsen, August 2013, Google Insights, J.P. Morgan estimates.
Social audience measurement enhancing TV ratings potential
Twitter and Nielsen launched an exclusive partnership called Nielsen Twitter TV
Rating in October. This partnership will help measure the reach of Tweets across TV
programming and we believe it will help demonstrate the value of Twitter as an ad
platform, especially for TV advertisers. Nielsen is the first partner to receive Twitter’s
reach data and has already published several reports and studies demonstrating
Twitter’s relationship with TV. As of 2Q13, Nielsen recorded a 38% increase in
Tweets about TV to 263M from 190M in 2Q12 and a 24% increase in Twitter TV
authors to 19M vs. 15M in 2Q12. On average, the audience viewing Tweets is 50x
greater than the number of authors Tweeting. This means for every 1,000 users
Tweeting about a program, over 50,000 users are seeing those Tweets.
The relationship between Twitter and TV is also impacting the way we watch TV.
Nielsen has found that Twitter drives tune-ins to new programming, but a growing
number of people are also Tweeting more about shows they are already watching in
real-time. According to Paul Donato, Nielsen’s Chief Research Officer, a spike in TV
ratings can increase the volume of Tweets, and a spike in Tweets can lead to an
increase in tune-ins. Nielsen reported in August 2013 that Tweets influenced TV
ratings of 29% of episodes measured, and TV ratings drove higher Tweet volume for
48% of the episodes measured. We believe the relationship between Twitter and TV
will continue to grow, along with the proliferation of mobile devices as a second
screen.

27
09 January 2014
Doug Anmuth
(1-212) 622-6571
In November, Twitter announced the expansion of its TV targeting suite called
TV Conversation targeting. Now available to advertisers in the U.S. and UK, TV
Conversation targeting enables networks and brands to connect with Twitter users that
are already engaging in conversations or status updates regarding TV programming.
Early partners in this new product include Betfair, Dominos, and British Sky
Broadcasting. Twitter plans to roll out this new targeting feature to Brazil, Canada,
France, and Spain in the near future.
Facebook is also working with Nielsen on TV measurement efforts and has been for
years. The companies have partnered—in a privacy-protected way—to provide
performance data to advertisers through Nielsen OCR. The large user base and
reliability of age and gender data that have helped Facebook attract its own advertisers
has also helped Nielsen enhance its OCR product and we expect continued partnership
to drive improvements in multi-channel measurement. Over time, the relationship is
expanding with a newer focus on helping to improve video-viewing measurement on
mobile.
Expect streaming audio measurement to similarly impact radio advertising
Just as we are seeing a shift in digital video measurement with YouTube, we expect
streaming music providers including Pandora to gravitate towards partnerships with
traditional measurement providers. Nielsen already took the first step in transforming
audio measurement this fall when it completed its acquisition of Arbitron, a leading
radio ratings company. Nielsen noted at its Investor Day this past December that it is
deeply engaged in developing the technology to measure streaming radio and it is
working to fully integrate Nielsen Audio. Further, measuring streaming radio is in line
with the company’s mission to measure all media consumption and it realizes that
digital audio measurement is key to the future of radio advertising. We believe Nielsen
can move quickly in its streaming music measurement goals by leveraging what the
company already does in digital video measurement. Still, Nielsen may have work to
do in encouraging common digital audio metrics within the radio industry, which could
take some time.
Over the last 1-2 years, as a part of Pandora’s multi-stage process to compete on an
even playing field with traditional broadcast radio, the company has: 1) secured
measurement of its service by Triton Digital; 2) become integrated into the two largest
radio buy-side ad platforms, which represent ~80% of the roughly $15B annual
broadcast radio ad spend opportunity; 3) continued to grow its U.S. radio market share
to 8.6%; 4) expanded its local sales force of experienced local radio ad sales
professionals; and 5) started to enhance targeting capabilities by cross-referencing
user-provided and third-party demographic data. One of the few points of friction that
still remains for some potential advertising clients—likely some of the more traditional
local radio ad buyers—is that Pandora has not yet been measured by Arbitron (now
Nielson Audio), the leader in U.S. radio ratings. While Triton measurements are
already displayed in a format that is comparable to Nielson Audio’s AQH method, we
believe that a true apples-to-apples comparison by a single measurement provider and
leader in its field may push some remaining advertisers over the hurdle in embracing
Pandora as a compelling advertising medium. We expect to see increased advertiser
demand when Nielsen Audio commences its anticipated streaming radio measurement,
and are confident that Pandora’s ability to deliver attractive ROIs will be a driver of
advertising sell-through rate and pricing over time.

28
09 January 2014
Doug Anmuth
(1-212) 622-6571
Last Mile Drives Further Online/Offline
Retail Convergence
After ~18 years, eCommerce in the US is ~10% of US retail (ex-autos and food
establishments) and while categories such as books and consumer electronics are now
highly penetrated online, we believe several large categories remain relatively
underpenetrated by eCommerce, primarily due to consumer need for immediacy and
somewhat prohibitive shipping costs. Advances in the Last Mile could accelerate this
penetration.
Figure 14: JPM US eCommerce Model
$ in millions
2011A 2012A 1Q13A 2Q13A 3Q13A 4Q13E 2013E 1Q14E 2Q14E 3Q14E 4Q14E 2014E 2015E
Total Retail Spend 4,647,648 4,354,610 1,055,907 1,138,866 1,136,583 1,214,254 4,545,610 1,108,702 1,195,809 1,193,412 1,274,966 4,772,890 4,963,806
Y/Y Growth 7.9% -6.3% 2.6% 4.5% 5.4% 5.0% 4.4% 5.0% 5.0% 5.0% 5.0% 5.0% 4.0%
Q/Q Growth -8.7% 7.9% -0.2% 6.8% -8.7% 7.9% -0.2% 6.8%
Motor vehicle and parts dealers 826,299 887,171 225,224 250,120 250,701
Gasoline stations 526,196 548,775 130,777 141,629 142,912
Food services and drinking places 493,501 530,335 132,210 141,777 138,774
Adj. Retail Spend (ex autos, gas, and food) 2,801,652 2,388,329 567,696 605,340 604,196 703,493 2,480,725 592,107 630,764 628,968 731,633 2,583,472 2,686,811
Y/Y Growth 5.8% -14.8% 2.0% 3.8% 5.0% 4.5% 3.9% 4.3% 4.2% 4.1% 4.0% 4.1% 4.0%
Q/Q Growth -15.7% 6.6% -0.2% 16.4% -15.8% 6.5% -0.3% 16.3%
% of Total Retail 60.3% 54.8% 53.8% 53.2% 53.2% 57.9% 54.6% 53.4% 52.7% 52.7% 57.4% 54.1% 54.1%
E-commerce Spend 194,691 225,609 58,132 60,176 61,417 83,244 262,969 67,433 69,503 70,937 96,147 304,020 346,542
Y/Y Growth 15.2% 15.9% 15.6% 18.3% 17.3% 15.5% 16.6% 16.0% 15.5% 15.5% 15.5% 15.6% 14.0%
Q/Q Growth -19.3% 3.5% 2.1% 35.5% -19.0% 3.1% 2.1% 35.5%
E-commerce as % of Adjusted Retail 6.9% 9.4% 10.2% 9.9% 10.2% 11.8% 10.6% 11.4% 11.0% 11.3% 13.1% 11.8% 12.9%
Y/Y Chg (bp) 57 bp 250 bp 120 bp 121 bp 107 bp 113 bp 115 bp 115 bp 108 bp 111 bp 131 bp 117 bp 113 bp
Source: US Department of Commerce and J.P. Morgan estimates.
We believe the lines between online and offline retail are rapidly blurring, driven
by improvements in mobile, offline product discoverability, the supply chain, and
shipping. While online retail has historically thrived in part due to selection,
convenience, and sometimes pricing advantages, offline retail has held immediacy of
product advantage over online retailers.
However, we believe online and offline retail models are converging. According to
the US Census, 75% of all retail spending occurs 15 miles from home. As a result,
pure-play online retailers such as Amazon are increasingly looking to penetrate more
immediate or time-sensitive categories such as consumables (perishable and non-
perishable) by building distribution centers closer to the consumer and by improving
shipping efficiencies. On the other hand, offline retailers that have an eCommerce
presence are increasingly looking to leverage their local store locations to provide ship-
to-store and ship-from-store availability of products through investments and
innovations in eCommerce technologies that offer greater discoverability of local store
inventory through an online interface (mobile or desktop). We refer to this
convergence of online and offline retail as the War for the Last Mile.
We expect commerce convergence to follow a multi-year timeline as various
categories shift more online and successive generations become more comfortable
buying products like perishables and apparel online. We think additional
innovations and efficiencies in supply chain/shipping likely also need to occur in order
for high-shipping-cost items to move online.

29
09 January 2014
Doug Anmuth
(1-212) 622-6571
Figure 15: Large Online Local Opportunity in Retail
Source: US Census Bureau, Forrester Research
We believe improvements in discoverability of local store inventory as well as
same-day shipping could significantly accelerate the growth of eCommerce in
categories that were once considered more immune to online penetration. In
Table 1 below, we look at 2012 US retail sales (excluding autos, parts, food services,
and drinking places) in order to determine the size and categories of businesses
potentially affected by Last Mile eCommerce. We believe last Mile eCommerce could
influence ~$2T in US retail sales (nearly 60% of total retail) over the long term, with
General Merchandise ($631B), Grocery ($568B in 2012), Health & Personal ($275B),
Electronics ($99B), and Office Supplies ($38B) representing some of the primary
categories affected.
~40% of
retail is
online-
influenced
75% of
retail is
local
Large
online local
opportunity

30
09 January 2014
Doug Anmuth
(1-212) 622-6571
Table 1: Industries with Highest Potential for Immediacy Demand
Type of Business $ in millions Immediacy? (Y/N) % of Total
Furniture and home furnishings stores $95,628 N 2.8%
Electronics and appliance stores $99,190 Y 2.9%
Building mat. and garden equip. and supplies dealers $294,224
Building mat. and supplies dealers $248,499 N 7.2%
Paint and wallpaper stores $9,107 Y 0.3%
Hardware stores $21,869 Y 0.6%
Food and beverage stores $634,304
Grocery stores $568,177 Y 16.4%
Beer, wine, and liquor stores $44,987 Y
Health and personal care stores $274,867 Y 7.9%
Gasoline stations $546,913 N 15.8%
Clothing and clothing access. stores $239,224 Y 6.9%
Sporting goods, hobby, book, and music stores $90,107 Y 2.6%
General merchandise stores $631,808
Department stores (excl.L.D) $182,800 Y 5.3%
Other general merchandise stores $449,008 Y 12.9%
Miscellaneous store retailers $122,211
Office supplies, stationery, and gift stores $38,063 Y 1.1%
Used merchandise stores $14,144 Y 0.4%
Nonstore retailers $439,709 N 12.7%
Potential Last Mile Sales $2,031,543 58.6%
Retail sales (excl. autos and parts dealers, food
and drinking places) $3,468,185
Source: J.P. Morgan estimates, U.S. Department of Commerce.
As mentioned earlier, the majority of retail spend occurs close to home and with 40%
of retail influenced by online, it’s clear why online and offline commerce models are
converging, creating a new battleground for commerce. We think mobile has been a
significant accelerator of this trend, but there are other factors as well.
Sales Taxes Loophole Ending
 While we recognize that tax is only one part of the reason that a consumer may
shop online (whether it is a Prime membership, the convenience, or better product
prices), the ongoing tax changes by states are worth noting. As the tax headwind
erodes, traditional retailers have been addressing multi-channel strategies and
product and shipping pricing gaps to further level the playing field. The focus on
taxes seems to be shifting to a competition in same-day delivery, with WMT the
best-positioned retailer to compete with 4,000+ locations in the U.S. AMZN has
reached tax agreements with many states in an effort to push out tax collection a bit
further and also build more warehouses closer to consumers and major metros.
 In late 2012, California, Texas, and Pennsylvania began collecting sales taxes from
online retailers. In 2013, Massachusetts, Connecticut, New Jersey, Virginia and
Arizona also began collecting sales tax at different points throughout the year, but
all by November 1st
in time for the holiday season.

31
09 January 2014
Doug Anmuth
(1-212) 622-6571
Figure 16: AMZN/Online Sales Tax by State
9.4%
8.9%
8.4%
8.2%
8.2%
8.0%
8.0%
7.9%
7.1%
7.0%
7.0%
6.4%
6.4%
6.3%
6.0%
5.9%
5.0%
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%
Tennessee
Washington
New York
California
Arizona
Kansas
Texas
Nevada
South Carolina
Indiana
New Jersey
Pennsylvania
Connecticut
Massachusetts
Kentucky
North Dakota
Virginia
Pre-2013 2013 Post-2013
Source: Sales Tax Clearinghouse.
 Since many offline retail coverage companies have large exposure to California and
Texas, 2012 was a watershed year for reducing the online tax headwind. California
and Texas both began collecting taxes in 2012, which benefitted COST and VSI the
most given their 44.1% and 37.1% respective exposures to states that collected
sales tax in 2012 or earlier. Last year SPLS and BBBY stood to benefit the most
with 18.4% and 18.0% of their store base, respectively, in states that began
collecting online sales tax.
 In summary, traditional retail companies had ~22% of their stores in states that
currently collect online sales tax. More states (VA, MA, CT, and AZ) began
collection of sales tax in 2013, which increased the average percentage of
J.P. Morgan coverage retailers’ store bases in states that collect online sales tax to
31%. The Marketplace Fairness Act passed mid-year in the Senate, but may face
tougher opposition in the House. The bill would give 45 states and D.C. the ability
to enforce collection of sales taxes on online purchases. By the end of 2013, 13
states will collect sales tax from AMZN and other online retailers, and at least four
other states have announced agreements with AMZN to begin collecting sales tax
in 2014 or later.

32
09 January 2014
Doug Anmuth
(1-212) 622-6571
Figure 17: Percentage of Each Company’s Stores in States Collecting Sales Tax from AMZN According to Effective Date, Ranked by 2013
36.1%
32.5%
37.1%
25.2%
23.0%
44.1%
24.2%
36.9%
32.1%
34.1%
34.4%
34.4%
28.6%
17.7%
26.7%
32.4%
11.5%
26.4%
33.1%
35.4%
34.4%
18.4%
18.0%
14.8%
14.6%
13.9%
13.2%
12.5%
12.1%
11.7%
11.5%
11.3%
11.3%
10.6%
10.2%
9.4%
8.8%
8.7%
8.5%
6.0%
4.1%
3.9%
10.7%
12.7%
10.4%
11.7%
10.0%
7.3%
8.9%
9.3%
8.7%
8.2%
8.6%
8.6%
12.2%
12.7%
6.0%
11.1%
18.8%
10.1%
12.8%
8.9%
8.8%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
SPLS BBBY VSI DKS PETM COST HD RSH GNC TGT BBY BBY LOW AAP OMX AZO HGG WMT TSCO ORLY ODP
Taxable States (as of Dec 31st, 2012) Future Taxable States (after Dec 31st, 2013) Future Taxable States (after Dec 31st, 2013)
Source: Sales Tax Clearinghouse (STC).
Amazon Continues to Shrink Distance to Its Customers
Amazon continues to invest in its fulfillment center footprint even in North America
where the company has been operating for several years. Table 2 below highlights the
growth in Amazon’s North America and international fulfillment/warehouse square
footage over time.
Table 2: Amazon's Fulfillment Center Buildout
Square feet, in 000's
2005 2006 2007 2008 2009 2010 2011 2012
Fulfillment and Warehouse Ops
North America 7,560 8,434 8,905 11,973 11,848 15,761 26,364 35,600
Y/Y Change 12% 6% 34% -1% 33% 67% 35%
International 2,620 3,419 4,729 5,321 5,739 10,339 17,690 30,783
Y/Y Change 30% 38% 13% 8% 80% 71% 74%
Total 10,180 11,853 13,634 17,294 17,587 26,100 44,054 66,383
Y/Y Change 16% 15% 27% 2% 48% 69% 51%
Source: Company reports.
While growth in overall demand (first-party and third-party FBA) has driven some of
the fulfillment center growth, we also believe the company is building fulfillment
centers closer to its retail customers. We think the roll-out of sales taxes in several
states (such as California) has driven some of this build-out as Amazon no longer
needs to optimize its fulfillment center footprint to minimize consumption or state
sales taxes. We also think that the company is witnessing good leverage in shipping
costs as a result of building fulfillment centers closer to customers and note that
shipping loss as a % of revenue has declined 6% Y/Y in 1Q13.

33
09 January 2014
Doug Anmuth
(1-212) 622-6571
Offline Retailers Increasingly Leveraging Store Locations for eCommerce
Fulfillment
We think offline retailers are increasingly leveraging their store assets to fulfill
eCommerce transactions by offering ship-to-store and ship-from-store availability. For
example, 40% of Best Buy’s online sales are picked up in stores and over 50% of
Lowe’s online sales are picked up in stores. Figure 18 below demonstrates some of the
key eCommerce capabilities—such as ship to/from store and Buy Online Pick Up in
Store (BOPUS)—currently available through several offline retailers. As shown in the
figure, 11/18 offline retailers offered Buy Online, Pick Up in Store, while 7/18 offered
Ship to Store availability. 4/18 stores offered ship to store availability, though we think
this number is likely to grow over time, driven by offline retail investments in
technology and greater consumer awareness. As eCommerce becomes an increasingly
important channel for offline retailers, we expect physical stores to play a more crucial
role in driving eCommerce sales and the last mile of delivery. We think online
marketplaces such as eBay, Google, and Groupon are also enabling offline retailers
with technology and online marketing solutions, which help surface offline retail
inventory to online shoppers, helping level the playing field with pure-play online
retailers such as Amazon.
Figure 18: Capabilities by Retailer
W
alm
art
Target
Hom
e
Depot
Lowe's
Staples
BestBuy
OfficeDepot
Bed
Bath
&
Beyond
Dick'sSporting
Goods
Radioshack
OfficeM
ax
Hhgregg
G
NC
Costco
PetSm
art
Vitam
in
ShoppeW
illiam
s
Sonom
a
TractorSupply
BOPUS*                  
Ship to store                  
Ship from store                  
QR Codes                  
Mobile Site                  
Mobile App                  
Extended online SKUs                  
Testing mobile checkout                  
Free shipping** available                  
Wifi available in stores                  
Testing same-day delivery                  
Price match Amazon.com                  
Prepaid returns of online purchases by mail                  
Free returns of online purchases in store                  
Product/industry research on website                  
Online sales included in comp?                  
Total 14 13 11 11 11 10 10 9 9 9 8 7 7 7 7 6 5 3
*BOPUS: Buy online, pick up in store; includes reserve online, pick up in store
**with minimum purchase, cutomer loyalty program, through ShopRunner, or promotional free shipping
 :Only BBBY has free ship all the time on all items; launched in July 2012
DKS only has free returns on shoes
Source: Company data.

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