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Horizon Partners Q3 2013 Newsletter

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Horizon Partners Q3 2013 Newsletter

  1. 1. Quarterly Market Update: Q3 2013 Digital Media & Internet
  2. 2. Contact Us Sandy Kory Managing Director 650.776.8806 skory@horizonpartners.com Executive Summary (3) II. Sector Trends (4) III. Mike Firmage Managing Director 650.861.9090 mfirmage@horizonpartners.com I. M&A Overview (9) IV. Market Performance (16) V. IPO Overview (21) VI. Deals Outlook (27) Allen Carey Associate 440.554.2129 acarey@horizonpartners.com Farooq Abbasi Associate 708.228.7582 fabbasi@horizonpartners.com 1 1821 Union Street San Francisco, CA 94123
  3. 3. Digital Media & Internet Industry Landscape Marketing Technology Automation/Analytics/SaaS E N T E R P R I S E Digital Media B2C Social Networking Comparison Shopping Diversified Gaming 2 Online Media Traditional Media C O N S U M E R
  4. 4. Executive Summary Sector Trends  Developments in online commerce, big data, mobile apps , social engagement, content marketing and video are redefining consumers’ online engagement and hence, creating new ways for businesses to connect with their audiences  Marketers are perceiving content marketing as a vehicle for long-lasting consumer engagement and effective digital targeting. Content marketers are using a multitude of platforms to engage target audiences; number of channels used has increased by 50% over the last year  Companies offering content solutions that help consumers navigate the marketplace are partnering with technology companies to deliver innovative offerings that enhance the users’ digital experience  As cloud services become the center of competition in many IT market segments, SaaS continues to be a hot sector, yielding high trading multiples 2013’Q3 Digital Media & Internet M&A Activity  2013’Q3 was the busiest 3rd quarter in the last 5 years as deal volumes registered an uptick with 632 deals. Aggregate deal values stood at $13.4 bn in 2013’Q3, up 86.8% over the same quarter last year  In the mid-market space, deal volume was flat in 2013’Q3 compared to the previous quarter, and up 64% over the same quarter last year. YTD’2013 saw average deal sizes trending upward, with 17 upper mid-market transactions (>$500 mn deal value), the highest in the last 5 years  2013’Q3 deals priced at an average EV/Revenue multiple of 3.6x, up from 2.9x in the previous quarter and higher than the 20-quarter average of 3.2x  North America attracted 51% of the global M&A activity; Asia/Pacific, Europe and Latin America exhibited strong increase in dealflow Market Performance & IPO Activity  S&P Software outperformed the broader NASDAQ and S&P500 indices; this is indicative of an upbeat sector performance. CBOE Volatility Index (VIX) fell to 14.7%, below the one-year average. Strength in investors’ confidence and interest in the sector continues to stimulate primary market activity   3 The last two quarters were the busiest quarters for IPOs since the Facebook public offering. Gross offerings stood at $2 bn in 2013’Q3, nearly 2x the offerings’ amount in the previous quarter In 2013’Q3, IPOs exhibited an impressive performance, registering strong one-day and one-week gains, trending above the five-year averages. The pipeline is strong with announced IPOs totalling >$2 bn YTD
  5. 5. II. SECTOR TRENDS
  6. 6. Digital Trends Reshaping the Way Businesses Engage with Consumers New ways in which consumers engage online and businesses connect with them 31% growth in worldwide smartphone usage  Digital media publishers are increasing focus on optimizing website content and advertisements for mobile devices 14x time spent online via mobile compared to desktop  Marketing analytics solutions are being increasingly used to extract insights from digital information – documents, Tweets, posts, pictures and video 100 hours of video/minute added on YouTube each day  Online businesses and marketers are looking for innovative ways to engage with customers through mobile apps Consumer 5 mn photos added on Instagram each day Engagement… …Is Driving Online Media Trends 102 bn app downloads in 2013 (up 60% from 2012) 2 bn user count crossed on Facebook 45% consumers searching for local products use mobile first Source: Edison Research; Centre for Media Research; Kleiner, Perkins, Caufield and Byers 5  Consumers frequently use digital word of mouth to make decisions; Social media and review sites become important for marketers  91% of in-house marketers use content marketing; Focus is shifting to the integrated use of multiple online platforms  Video content is increasingly becoming an important medium of communication with target audiences  New ways to access information: trend is emerging in wearable devices, such as Google Glass and Jawbone
  7. 7. Technology Companies Forming Partnerships to Enhance Consumers’ Experiences Select indicative partnerships  Allows Yelp’s site visitors to directly use Booker’s booking capabilities  Allows consumers to pay at ShopKeep POS merchants using PayPal  Integrate Square mobile payments for Angie’s List service providers  Partnership to enable users to book home services directly on Yelp  Allows Facebook users to book restaurant reservations online  Amex rewards and discounts tie-up with Foursquare checkins  Allows consumers to pay at Revel POS merchants using LevelUp  Content providers that help consumers navigate the marketplace are looking for innovative ways to provide a better user experience  Partnerships with emerging cloud-based technologies like Square, Reachlocal, LevelUp, among others allow technology companies to automate customer acquisition and monetization Source: Street Fight Insights 6
  8. 8. Content Marketing – Capitalizing on Engagement Content rises in priority  % of respondents (marketing solution providers) citing the following digital themes as one of their top 3 priorities Content Marketing 36% 21% 38% 37% Mobile Optimisation 37% Social Media Engagement Targeting & Personalization* Conversion Rate Optimisation 54% 33% 32% 22% Social Media Analytics 22% Brand Building/Viral Marketing 21% Content Optimisation 21% Marketing Automation Connected TV* 29% 39% 29% 2012 2013 2012 27% 32%  2013 While social media engagement still ranks highly with 37% of respondents, it saw a meaningful drop from 54% in 2012. Social media was a top priority for marketers a year ago – a promising but unproven channel; it has apparently lost some of that luster in 2013 29% 12% 6% 9% Video Marketing “The most important opportunity is content, as this pervades all the digital media that we are using to reach our audiences” 18% 3% Source: Adobe & Econsultancy’s Digital Marketing Trends Survey 7 % of respondents citing content marketing as one of the top 3 digital priorities 33% Integrating Online and Offline Data Content marketing emerged as a key focus area for marketing solution providers with a jump to 36% from only 21% a year ago. A similar result was observed for in-house marketers: *Newly added survey options – Adobe’s Digital Marketing Trends Survey Responder
  9. 9. Marketing Technologies Driven by Content Marketers’ Multi-Platform Focus Content marketers use a multitude of platforms to engage target audiences 100% 87% 83% 78% 80% Average Number of Channels Used by a Content Marketer 77% 71% 70% 70% 69% 61% 2010-11 Avg. 2012 59% 60% 50% 44% 38% Digital Media Source: Content Marketing Institute B2B Marketers’ Survey 2013 Traditional Print 34% 20% 11% Filings Print Newsletters 26% Digital Magazines 26% Mobile Apps 27% Licensed Content 28% Podcasts 29% Virtual Conference 31% Games 0% 35% 32% Books Mobile Content Branded Content Tools Infographics Microsites Research Reports Webinars/Webcasts White Papers In-person Events Articles on Other Websites Videos Case Studies Blogs 20% eNewsletters 30% Articles on Own Website 33% Print Magazines 38% eBooks 40% 40% 10% 8 12 8 70% Social Media % of B2B Marketers claiming to use a channel for marketing 90%
  10. 10. III. M&A OVERVIEW
  11. 11. Momentum Building in Digital Media & Internet M&A Activity Deal volumes register an uptick in the latest quarter $25 608 567 $20 700 647 517 513 535 510 584 581 603 632 583 567 555 577 600 529 480 500 449 415 414 $15 357 353 371 400 300 $10 19.9 13.7 $5 11.5 7.8 3.3 4.2 3.5 6.1 3.6 7.7 8.7 7.3 8.4 7.2 6.9 100 6.8 4.9 4.2 2.8 $0 0 08'Q1 08'Q2 08'Q3 08'Q4 09'Q1 09'Q2 09'Q3 09'Q4 10'Q1 Deal Value in $ bn (LHS) 10'Q2 10'Q3 10'Q4 11'Q1 Deal Volume (RHS) 11'Q2 11'Q3 11'Q4 12'Q1 12'Q2 12'Q3 12'Q4 13'Q1 13'Q2 13'Q3 Average Annual Deal Value  2013'Q3 saw deal volume in the Digital Media & Internet space up 9.5% Q/Q, and up 8.4% over the same quarter last year  In terms of the number of deals, 2013'Q3 was the second busiest quarter in the last 5 years, and the busiest 3rd quarter in the last 5 years  Aggregate deal values were relatively flat from the prior quarter and up 86.8% over 2012’Q3  The average deal raised $84 mn, maintaining the uptrend over the 20-quarter (5-year) average of $54 mn Source: Capital-IQ; Note: Deals refer to announced deals not cancelled till date 10 200 10.6 9.8 7.1 13.4
  12. 12. Mid-Market Deal Volume Stabilizes; Ticket Size Continues To Rise Mid-market deal activity off the year’s highs, but remains on an uptrend $7.0 30 28 $6.0 27 25 24 23 $5.0 25 23 20 18 18 16 $4.0 16 12 $3.0 8 $1.0 2.8 2.2 2.2 1.3 2.2 15 11 10 4.3 3.8 3.8 3.6 2.4 18 13 11 8 $2.0 18 14 14 12 20 18 2.6 5 1.8 1.3 3.7 0.8 2.9 2.4 2.0 1.9 1.6 3.3 2.8 2.5 $0.0 0 08'Q1 08'Q2 08'Q3 08'Q4 09'Q1 09'Q2 09'Q3 09'Q4 10'Q1 Deal Value in $ bn (LHS) 10'Q2 10'Q3 10'Q4 11'Q1 11'Q2 11'Q3 Deal Volume (RHS) 11'Q4 12'Q1 12'Q2 12'Q3 12'Q4 13'Q1 13'Q2 13'Q3 Average Annual Deal Value  2013’Q3 deal volume in the mid-market Digital Media & Internet space was flat compared to the prior quarter and up 64% over 2012’Q3  Aggregate mid-market deal value was down 11% from the prior quarter and up 219% over 2012’Q3  The average mid-market deal raised $161 mn, higher than the 20-quarter (5-year) average of $147 mn Source: Capital-IQ; Note: Deals in range $50-$500 mn are considered Mid Market Deals; Deal statistics refer to deals with disclosed values only 11
  13. 13. Larger Deals Boost Average Transaction Sizes Rise in high-value deals… Leading to higher average transaction sizes Deal Values ($ bn) YTD’13, $73.1 mn 85 3.8 3.2 3.8 8.0 3.5 6.9 2.1 5.8 7.1 3.3 7.7 23.2 20.2 13.7 11.5 6.9 YTD'08 YTD'09 Deals (>=$500 mn) 5.6 YTD'10 YTD'11 Deals (~$50-$500 mn) YTD'12 75 Average Deal Size ($ mn) 9.9 Deals (<=$50 mn) 7 YTD’12, $53.1 mn 55 YTD’08, $42.2 mn 45 YTD’09, $43.4 mn 35 35 13 70 17 YTD’10, $36.2 mn * Bubble Size reflects Deal Value (Disclosed deals > $50 mn) 25 13 46 65 YTD'13 Deal Volume 7 YTD’11, $71.8 mn 45 55 65 75 Deal Volume (Deals >$50 mn) 85 95 52 50 49  YTD’2013 saw deal sizes climbing up, with 17 deals in the midto-large market space, the highest in the last 5 years  Big ticket deals (>$500 mn) raised $20.2 bn in YTD’2013, up 47% over the same period last year  6 The average deal raised $73.1 mn in YTD’2013, higher than any comparable period in the last 5 years 38 465 400 432 401 297 YTD'08 YTD'09 Deals (<=$50 mn) YTD'10 YTD'11 Deals (~$50-$500 mn) YTD'12 Deals (>=$500 mn) Source: Capital-IQ; Note: Deal statistics refer to deals with disclosed values only 12 364 YTD'13
  14. 14. M&A Activity Marked by Higher Purchase Multiples Acquisition multiples higher than the five-year average $368 $213 $146 $100 $38 $29 $46 $120 $104 $40 $36 $104 $72 $29 $51 5.3x 3.8x 3.5x 2.9x 2.3x 08'Q2 08'Q3 2.2x 08'Q4 2.1x 09'Q1 09'Q2 1.9x 09'Q3 09'Q4 2.2x 10'Q1 2.8x 10'Q2 EV/Revenues (LHS) 10'Q3 3.2x 10'Q4 $39 2.8x 2.6x 11'Q1 $32 $24 $64 $47 $62 5.6x 5.0x 3.4x 08'Q1 $108 $68 11'Q2 11'Q3 11'Q4 3.3x 12'Q1 3.8x 12'Q2 3.5x 12'Q3 3.3x 12'Q4 3.6x 2.9x 2.9x 13'Q1 13'Q2 13'Q3 Average Target LTM Revenues (RHS)  2013'Q3 M&A deals exhibited an average acquisition EV/Revenue multiple higher than that of the previous quarter and above the 20-quarter average of 3.2x  The average revenue size of the acquired company shot up to $368 mn, nearly a 5x increase compared to the previous quarter. Average size was boosted by EBay's acquisition of Bureau of Trade ($15 bn company), and Blackberry’s deal with ScrOOn ($10 bn company)  The quarter witnessed average target stock premiums (from 1-week prior to announcement) of 25% Source: Capital-IQ; Note: Multiples based on non-cancelled deals with reported multiples only 13
  15. 15. 2013’Q3 Announced Transactions Select List Date Announced Target Acquirer Deal Value ($ mn) Target Rev. ($ mn) EV/REV. Announced 1050.0 441.3 2.1x Announced 147.0 NA NA Sep 30 The Active Network, Inc. Sep 30 Leshi Internet Information and Technology Dongyang Huaer Entertainment Media Co Ltd. Corporation Sep 30 FastConnect SAS Bull Société Anonyme Closed NA NA NA Sep 30 AdStack, Inc. TellApart, Inc. Closed NA NA NA Sep 30 Find A Grave, Inc. Ancestry.com LLC Closed NA NA NA Sep 30 pepperbill GmbH Sky & Sand GmbH Closed NA NA NA Sep 30 Lainetar Oy Innofactor Plc Closed NA NA NA Sep 30 Choose Energy, LLC Power2Switch LLC Closed NA NA NA Sep 30 My New Financial Advisor, Inc. Invested.in Inc. Effective NA NA NA Sep 30 ScrOOn SA BlackBerry Limited Closed NA NA NA Sep 30 Funshion Networks Co., Ltd. Bestv New Media Co., Ltd. Closed NA NA NA Sep 27 Think Design Media Inc., Certain Assets Ubiquity Broadcasting Corporation (OTCBB:UBIQ) Closed 2.4 NA NA Sep 26 Braintree Payment Solutions, LLC PayPal, Inc. Announced 800.0 NA NA Sep 25 Meetic S.A. Match.com, L.L.C. Announced 73.8 223.9 2.4x Sep 23 VINtek, Inc. Dealertrack Technologies, Inc. Closed 53.4 NA NA Sep 09 MoPub, Inc. Twitter, Inc. Closed 350.0 NA NA Sep 05 Grapple Mobile Limited Monitise Create Limited Closed 59.7 NA NA Sep 04 Renesas Mobile Europe Oy and LTE-Related Assets Broadcom Corp. Closed 164.0 NA NA Sep 04 OB10 Ltd. Tungsten Corporation Plc Announced 154.9 NA NA Aug 30 Cumulus Media Inc., 53 Radio Stations Townsquare Media LLC Announced 238.0 NA NA Aug 23 Omnitracs, Inc. Vista Equity Partners Announced 800.0 NA NA Source: Capital-IQ 14 Vista Equity Partners Status
  16. 16. 2013’Q3 Announced Transactions Select List Date Announced Target Acquirer Status Deal Value ($ mn) Target Rev. ($ mn) EV/REV. Announced 186.8 53.4 3.5x Aug 19 Arsys Internet S.L. 1&1 Internet AG Aug 19 e-conomic international a/s HgCapital; HgCapital Trust plc Closed 120.6 NA NA Aug 19 Locu, Inc. The Go Daddy Group, Inc. Closed 70.0 NA NA Aug 19 NMD Interactive, Inc. Zillow, Inc. Closed 50.0 NA NA Aug 17 ShopRunner, Inc. Alibaba Group Holding Limited Effective 75.0 NA NA Aug 13 Jumptap, Inc. Millennial Media Inc. (NYSE:MM) Announced 261.3 63.6 4.1x Aug 12 Digital Generation, Inc., TV Business And Advertising Distribution Business Unit Extreme Reach, Inc. Announced 490.0 NA NA Aug 07 Adap.tv, Inc. AOL Inc. Closed 405.0 NA NA Aug 05 Adam Internet Holdings Pty Ltd iiNet Ltd. Closed 53.4 NA NA Aug 01 Monoprice, Inc. Blucora, Inc. Closed 180.0 131.1 1.4x Jul 26 Activision Blizzard, Inc. Leonard Green & Partners, L.P.; Davis Selected Advisers LP; Tencent Holdings Ltd. Closed 2338.8 4984.0 2.1x Jul 22 Fortress Paradise Limited China Public Procurement Limited Announced 773.4 NA NA Jul 19 Host Europe WVS Limited Cinven Limited Closed 668.0 NA NA Jul 18 LOEN Entertainment, Inc. Star Invest Holdings Limited Closed 236.3 175.0 2.1x Jul 17 Cineplex Digital Networks Cineplex Inc. Closed 112.3 24.9 4.5x Jul 17 Quest Resource Management Group, LLC Earth911 Inc. Closed 77.0 131.0 1.2x Jul 15 91 Wireless Websoft Limited Baidu, Inc. Closed 1847.9 45.2 40.9x Jul 15 Cupid plc, Casual Dating Businesses Grendall Investment Limited Announced 65.0 NA NA Jul 10 Voxeo Corporation Aspect Software, Inc. Closed 145.0 NA NA Jul 03 Opta Sportsdata Limited Perform Group plc. Effective 61.1 16.5 3.7x Jul 01 Digital Insight Corporation Thoma Bravo, LLC Closed 1025.0 305.0 3.4x Source: Capital-IQ 15
  17. 17. IV. MARKET PERFORMANCE
  18. 18. Upbeat Market Performance S&P Software outperforms; Low volatility signals higher investor confidence S&P Software outperformed the broader NASDAQ and S&P500 indices Index Returns Last 3-month Last 6-month LTM S&P 500 8.4% 32.9% 10.5% 14.8% 40.5% S&P 500 Software Industry Index 140 8.2% NASDAQ Composite 150 7.7% 15.0% 43.2% 130 120 110 100 90 11/12 12/12 01/13 02/13 03/13 S&P 500 04/13 05/13 NASDAQ Composite 06/13 07/13 S&P Select Software 08/13 09/13 10/13 11/13 Low volatility signals higher investor confidence Volatility trading in a narrow range below 1-year average; Investor confidence expected to lead to increased capital market activity 24.0% 22.0% 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 11/12 Source: Bloomberg 17 12/12 01/13 02/13 03/13 04/13 05/13 CBOE Volatility Index 06/13 Average Volatility 07/13 08/13 09/13 10/13 11/13
  19. 19. Trading Comparables – Digital Media Comparables Market data Company Name Operational Data % of 52 Share Price Market Week High Cap. 3,436 Trading Multiples Revenues 2yr Rev. LTM EBITDA EV/Revenues EV/EBITDA EV LTM CAGR (%) Margin (%) LTM CY+1 LTM CY+1 3,374 2,240 0.4% 18.6% 1.5x 1.5x 8.1x 7.2x All values are in $ mn, except share price and per share data Digital Media AOL 44.66 95.1% Yahoo 36.30 99.0% 36,824 35,092 4,760 -4.2% 24.9% 7.4x 7.9x 29.6x 23.3x Google 1034.07 98.6% 345,470 297,871 57,386 26.7% 30.7% 5.2x 5.0x 16.9x 13.8x Trulia 37.50 71.1% 1,399 1,363 115 NA -2.6% 11.9x 9.5x NM NM TripAdvisor 87.27 96.5% 12,398 12,342 901 20.4% 36.3% 13.7x 13.2x 37.7x 32.9x Shutterstock 73.24 96.2% 2,564 2,368 217 NA 20.6% 10.9x 10.1x NM 46.5x LinkedIn 220.61 85.7% 26,342 24,070 1,385 78.2% 12.1% 17.4x 15.8x NM NM Bankrate 18.94 81.8% 1,922 2,027 428 5.1% 21.8% 4.7x 4.5x 21.7x 17.3x Demand Media 5.24 53.0% 470 414 401 13.0% 15.8% 1.0x 1.0x 6.6x 4.8x Facebook 46.70 85.2% 114,640 105,887 6,871 NA 47.5% 15.4x 13.9x 32.4x 23.5x Gannett 26.46 93.6% 6,030 7,442 5,312 0.0% 20.0% 1.4x 1.4x 7.0x 7.2x IAC/InterActiveCorp 56.25 96.2% 4,685 4,583 3,064 26.5% 17.6% 1.5x 1.5x 8.5x 7.8x WebMD Health 38.75 94.8% 1,742 1,665 502 -6.7% 12.2% 3.3x 3.2x 27.1x 13.9x Yelp 63.93 84.8% 4,444 4,343 203 66.2% -0.3% 21.3x 18.9x NM NM Zillow 74.98 72.8% 2,920 2,555 174 76.5% -5.5% 14.7x 13.1x NM NM j2 Global 46.72 83.1% 2,142 2,079 485 23.8% 41.7% 4.3x 4.0x 10.3x 9.1x RetailMeNot 31.13 78.8% 1,574 1,481 182 NA 34.9% 8.1x 7.4x 23.3x 19.4x Netflix 348.50 89.6% 20,651 20,016 4,145 19.0% 5.1% 4.8x 4.6x NM NM Mean 8.3x 7.6x 19.1x 17.4x Median 6.3x 6.2x 19.3x 13.9x Min 1.0x 1.0x 6.6x 4.8x Max 21.3x 18.9x 37.7x 46.5x Source: Capital-IQ; Note: All values as of November 21, 2013 18
  20. 20. Trading Comparables – Marketing Technology Comparables Market data Company Name Operational Data % of 52 Share Price Market Week High Cap. 28,109 Trading Multiples Revenues 2yr Rev. LTM EBITDA EV/Revenues EV/EBITDA EV LTM CAGR (%) Margin (%) LTM CY+1 LTM CY+1 26,465 4,167 1.2% 23.3% 6.4x 6.5x 27.3x 22.1x All values are in $ mn, except share price and per share data Marketing Technology Adobe Systems 56.23 97.0% Constant Contact 27.03 91.0% 829 722 277 16.4% 8.5% 2.6x 2.5x 30.8x 15.7x Demandware 55.83 85.7% 1,785 1,675 95 36.9% -15.8% 17.7x 16.5x NM NM Bazaarvoice 7.38 64.2% 551 476 176 45.1% -17.8% 2.7x 2.7x NM NM Brightcove 13.91 85.6% 400 366 104 34.9% -5.6% 3.5x 3.4x NM NM Jive Software 10.56 57.1% 731 624 139 41.5% -38.9% 4.5x 4.3x NM NM ValueClick 21.21 65.8% 1,416 1,556 684 19.1% 32.7% 2.3x 2.7x 6.9x 7.0x Web.com 27.85 82.6% 1,327 1,910 473 70.1% 19.2% 4.0x 3.6x 21.0x 12.4x Responsys 16.26 89.2% 836 728 194 23.0% 6.9% 3.7x 3.6x NM 30.2x Rocket Fuel 48.15 70.2% 1,580 1,482 195 NA -7.7% 7.6x 6.4x NM NM Salesforce.com 54.44 93.3% 32,446 34,200 3,760 34.1% 0.2% 9.1x 8.4x NM NM LivePerson 11.65 76.7% 631 553 173 17.1% 5.4% 3.2x 3.1x NM 27.6x Marketo 29.46 74.0% 1,119 986 85 NA -42.7% 11.7x 10.4x NM NM OpenTable 84.00 96.0% 1,955 1,852 181 16.5% 31.3% 10.2x 9.8x 32.7x 22.8x 1,159.11 99.6% 59,611 55,333 6,443 25.4% 37.4% 8.6x 8.2x 22.9x 21.1x 12.71 73.1% 353 268 502 18.8% 1.9% 0.5x 0.5x 27.9x 9.3x Mean 6.1x 5.8x 24.2x 18.7x Median 4.3x 3.9x 27.3x 21.1x Min 0.5x 0.5x 6.9x 7.0x Max 17.7x 16.5x 32.7x 30.2x Priceline.com ReachLocal Source: Capital-IQ; Note: All values as of November 21, 2013 19
  21. 21. Trading Comparables – Other Notable Companies Comparables Market data Company Name Operational Data Trading Multiples % of 52 Share Price Market Revenues 2yr Rev. LTM EBITDA Week High Cap. EV LTM CAGR (%) Margin (%) LTM EV/Revenues CY+1 LTM EV/EBITDA CY+1 All values are in $ mn, except share price and per share data Other Notable Companies Amazon.com 368.92 98.8% 168,867 164,221 70,133 26.8% 4.5% 2.3x 2.2x NM 32.7x Apple 521.14 87.6% 468,886 445,256 170,910 25.7% 32.6% 2.6x 2.6x 8.0x 8.0x AVG Technologies 17.48 65.8% 952 936 400 25.2% 33.0% 2.3x 2.3x 7.1x 6.6x eBay 50.21 86.5% 65,002 59,262 15,510 20.0% 29.7% 3.8x 3.7x 12.9x 11.0x IBM 184.13 85.3% 199,938 225,976 101,356 -2.4% 25.6% 2.2x 2.3x 8.7x 8.4x Intuit 73.16 98.9% 20,683 19,521 4,231 5.3% 34.4% 4.6x 4.5x 13.4x 11.6x Oracle 34.94 95.9% 159,238 144,669 37,371 1.2% 43.5% 3.9x 3.9x 8.9x 7.9x SAP AG 81.36 93.0% 97,101 99,860 22,646 10.1% 35.0% 4.4x 4.4x 12.6x 12.6x Microsoft 37.40 97.9% 312,214 248,805 80,370 6.3% 39.0% 3.1x 3.0x 7.9x 7.9x Mean 3.3x 3.2x 9.9x 11.8x Median 3.1x 3.0x 8.8x 8.4x Min 2.2x 2.2x 7.1x 6.6x Max 4.6x 4.5x 13.4x 32.7x Source: Capital-IQ; Note: All values as of November 21, 2013 20
  22. 22. V. IPO OVERVIEW
  23. 23. Buzzing IPO Activity in Digital Media & Internet IPOs remain on an uptrend $4 35 31 $4 28 27 $3 23 $3 23 24 25 21 20 23 $2 18 15 3.1 10 $1 2.8 10 7 7 1.9 4 2.4 0.1 $0 08'Q2 08'Q3 0.4 08'Q4 0.2 09'Q2 8 1.8 1.1 9 2.1 0.7 0.5 2.5 0.3 0.6 0 09'Q3 09'Q4 10'Q1 10'Q2 Deal Value in $ bn (LHS) 10'Q3 10'Q4 11'Q1 11'Q2 11'Q3 11'Q4 12'Q1 12'Q2 12'Q3 12'Q4 13'Q1 13'Q2 13'Q3 Deal Volume (RHS)  2013'Q3 announced IPOs in the Digital Media & Internet space were up 9.5% Q/Q, relatively flat from the prior quarter and up 80% over 2012’Q2  2013'Q3, together with 2013'Q2, were the busiest quarters for IPOs since the Facebook public offering. Gross offerings in 2013’Q3 stood at nearly 2x the offered amount in the previous quarter  The average IPO raised $123 mn, up from $58 mn in the same quarter last year Source: Capital-IQ; Note: 2012’Q1 deal value exclusive of the 16 bn Facebook IPO; Deals refer to effective, closed and announced IPOs not withdrawn till date 22 10 5 1.1 0.9 0.1 09'Q1 10 2.3 1.8 0.7 08'Q1 20 15 3.4 3.2 $1 18 16 14 $2 30 27
  24. 24. Impressive IPO Performance 2013'Q3 IPOs Fared Well, Registering Notable 1-Day and 1-Week Gains Avg. 1-Day Return (%) 100% 37% 2013'Q3 IPOs registered the best average one-day performance in the last 18 quarters 20-Quarter Average 64% 41% 38% 30% 37% 42% 39% 30% 24% 35% 45% 39% 38% 43% 32% 28% 25% 18% 15% 22% 28% -1% 08'Q1 37% 08'Q2 08'Q3 08'Q4 20-Quarter Average 09'Q1 09'Q2 09'Q3 09'Q4 10'Q1 100% 10'Q2 10'Q3 10'Q4 11'Q1 11'Q2 11'Q3 11'Q4 12'Q1 12'Q2 12'Q3 12'Q4 13'Q1 13'Q2 13'Q3 2013”Q3 IPO Avg. 1-Week gain nearly 3x that in same period last year Avg. 1-Week Return (%) 65% 54% 48% 37% 20% 41% 33% 50% 42% 33% 40% 33% 31% 28% 23% 20% 44% 32% 17% 15% 13% -9% 08'Q1 08'Q2 08'Q3 08'Q4 09'Q1 09'Q2 09'Q3 09'Q4 10'Q1 10'Q2 10'Q3 Source: Capital-IQ; Note: Deals refer to effective, closed and announced IPOs not withdrawn till date 23 10'Q4 11'Q1 11'Q2 11'Q3 11'Q4 12'Q1 12'Q2 12'Q3 12'Q4 13'Q1 13'Q2 13'Q3
  25. 25. Vibrant IPO Activity Marked by Well-Performing Offerings YTD’2013 Closed IPOs Date Announced Company Offering Size ($ mn) IPO Price/Share ($) 1-Day Performance Business 416.0 1.89 28.0% Online foreign exchange services Mobile messaging platform Sep 23, 2013 OzForex Group Limited Sep 06, 2013 Macromac 0.8 0.16 50.0% Aug 26, 2013 RingCentral 97.5 13.00 - Aug 16, 2013 Rocket Fuel 116.0 29.00 93.5% Artificial-intelligence digital advertising solutions Aug 14, 2013 Benefitfocus 130.8 26.50 102.1% Cloud based solutions for insurance carriers Aug 13, 2013 CentralNic 10.8 0.85 19.1% Domain name registry services Jul 31, 2013 RapidCloud International 1.6 0.83 28.7% SaaS solutions for Web and mobile online applications Jul 23, 2013 99 Wuxian 18.9 0.38 12.5% Mobile online marketplace Jul 08, 2013 Cvent 117.6 21.00 - Online events and meetings Jul 02, 2013 YuMe 46.1 9.00 - Digital video brand advertising solutions Jul 01, 2013 Control4 Corporation 64.0 16.00 - Automation and control solutions for the connected home Jun 17, 2013 RetailMeNot 190.9 21.00 - Digital coupon marketplace Jun 06, 2013 Photocreate 3.3 16.51 130.2% E-commerce platform for event photos May 23, 2013 Tremor Video 75.0 10.00 -10.0% Technology-driven video advertising solutions May 14, 2013 Covisint Corporation 64.0 10.00 23.1% Business process management platform May 09, 2013 Outsourcery 19.2 1.66 15.0% Mobile virtual service provider May 06, 2013 SLI Systems 21.5 1.20 18.7% site search and navigation technology provider Apr 17, 2013 Ymagis Société Anonyme 15.2 10.07 -8.5% Digital cinema solutions for exhibitors and distributors Apr 11, 2013 Liquid Holdings Group 28.6 9.00 - Apr 11, 2013 ChannelAdvisor 80.5 14.00 31.7% E-Commerce channel management Apr 05, 2013 Textura Corporation 75.0 15.00 39.4% Online collaboration platform for the construction industry Source: Capital-IQ 24 SaaS solutions for business communications Trading and real-time risk management solutions
  26. 26. Vibrant IPO Activity Marked by Well-Performing Offerings (Contd.) YTD’2013 Closed IPOs Date Announced Company Offering Size ($ mn) IPO Price/Share ($) 1-Day Performance Business Apr 04, 2013 Cyan 88.0 11.00 1.0% Carrier-grade networking solutions Apr 02, 2013 Marketo 78.8 13.00 77.7% Cloud-based marketing software platform Apr 02, 2013 Tableau Software 254.2 31.00 63.7% Business analytics software products Apr 02, 2013 Halogen Software 55.0 11.47 - Mar 22, 2013 Aucfan 8.4 26.15 130.0% Mar 21, 2013 SoMedia Networks 3.1 0.81 5.9% Cloud-based video content platform Mar 11, 2013 Rally Software Development 84.0 14.00 27.2% Software lifecycle management solutions Feb 19, 2013 Starcom 4.1 0.30 12.5% Remote tracking and fleet monitoring solutions Feb 15, 2013 Broadleaf 213.4 11.36 37.0% After-market automobile software solutions Feb 14, 2013 MC-link 3.4 10.08 - Voice, Internet, data and managed services Feb 13, 2013 Marin Software 105.0 14.00 16.1% Feb 13, 2013 Model N 104.5 15.50 - Revenue management solutions Jan 11, 2013 Xoom Corporation 101.2 16.00 - Consumer-to-consumer online money transfers services Dec 26, 2012 Mono Technology 91.8 0.37 4.4% Nov 28, 2012 GankIt 0.1 0.01 - E-Commerce bidding website Oct 24, 2012 Energizer Tennis 0.0 0.04 - Resources for tennis players Aug 13, 2012 Just Dial 154.2 8.62 - Local services' search platform May 22, 2012 Professional Diversity Network 21.0 8.00 - Professional networking site and job board Dec 22, 2011 Gogo 187.0 17.00 -5.9% Oct 02, 2009 West Corporation 425.5 20.00 - Source: Capital-IQ 25 SaaS based talent management solutions Online auction services Cloud-based digital advertising management platform Digital content and services In-flight digital entertainment solutions Technology-driven communication services
  27. 27. IPO Pipeline Encouraging YTD’2013 Announced IPOs Date Announced Company Logo Offering Size ($ mn) IPO Price/Share ($) Business Sep 30, 2013 Qunar Cayman Islands 125.0 - Online travel commerce and advertising platform Sep 27, 2013 58.com 150.0 - On-line classified advertisement services Sep 18, 2013 Criteo 187.2 23.00 to 26.00 Advertisement analytics Sep 09, 2013 Endurance International 374.2 14.00 to 16.00 Cloud-based marketing solutions Oct 10, 2013 Twitter 1,400.0 17.00 to 20.00 Online microblogging platform Aug 27, 2013 Globant 86.3 - Content management systems, marketing solutions Aug 14, 2013 Chegg, 150.0 - Student-first connected learning platform Source: Capital-IQ 26
  28. 28. VI. DEALS OUTLOOK
  29. 29. Optimistic Outlook for Deals Strategic Transactions and Strong Buyer Interest to Drive Deal Activity Technology Companies to Stay in Demand Marketing Automation & SaaS Attractive Consolidation among Marketing Agencies Industry-Focused and Content Marketing Companies to Garner Interest Buzzing Primary Market Activity Source: Mtech Advisors 28  As technology players continue to challenge conventional operating models, larger companies will snap up emerging innovative players in the Digital Media and Internet space  The trend in acquisitions at high multiples is expected to continue  The prevalence of marketing automation is accelerating. Increasing focus by digital marketers and local companies on automating certain aspects of their workflow is expected to be one of the major drivers for M&A  Cloud computing continues to be a bright spot, with software as a service (SaaS) companies specifically being a hot target for high-multiple deals  There has been a substantial increase in interactive/digital marketing agencies in the past five years  Such businesses will continue to experience consolidation, similar to the “dot com” experience a decade ago  Companies with an industry-specific focus (healthcare, insurance, retail, communications and financial services among others) will attract much strategic investor interest  Given the increased focus by enterprises on content marketing, an opportunity exists for vendors with proven track records and quantifiable ROI across multiple channels such as search, display/web, social, mobile, e-mail, video  Capital market activity is expected to be vibrant as fresh companies pique investor interest  The IPO pipeline is strong with over $2 bn in announced IPOs YTD, including the much anticipated Twitter IPO
  30. 30. Digital Media 29 Interactive Marketing Mobile Software

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