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Research project on media conglomerates, mobile applications, and social gaming
 

Research project on media conglomerates, mobile applications, and social gaming

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My project with Professor Hosanagar last semester. The content is a bit dated, and there's WAY too many slides / info (muddled thinking) but thought this was a good first attempt as building an ...

My project with Professor Hosanagar last semester. The content is a bit dated, and there's WAY too many slides / info (muddled thinking) but thought this was a good first attempt as building an investment thesis and teaching myself about new sectors.

Still, helped me obtain an internship with Genacast Ventures, a study project with Andreessen Horowitz, and opened a lot of doors in the startup community.

More on me (shameless plug): http://www.linkedin.com/in/yujinchung

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    Research project on media conglomerates, mobile applications, and social gaming Research project on media conglomerates, mobile applications, and social gaming Presentation Transcript

    • MEDIA INDUSTRY ANALYSIS: Evaluating the past and thoughts on the future Yujin Chung
    • Special thanks for supporting this project! • Professor Hosanagar, faculty sponsor • Chris Farmer, advisor and fmr Bessemer Ventures • Joshua Auerbach, Betaworks • Gil Beyda, Genacast Ventures • Carter Brokaw, Meebo • Eric Von Coelln, Insidefacebook.com • Ronny Conway, Andreesen Horowitz • Art Chang, Tipping Point Partners • Andrew Chung, Lightspeed Ventures • Tsvi Gal, Exigen Capital, fmr Warner Music CTO • Greg Fodor, Adtuitive CTO • Jonathan Knee, Evercore Partners • Moshe Koyfman, Spark Capital • Justin Nesci, SocialMedia.com • Trevor Oelschig, Bessemer Ventures • David Pakman, Venrock • Dustin Rosen, Mailroom Fund • Douglas Shapiro, Time Warner, fmr Banc of America Securities • Paul Vidich, Betaworks Advisor, fmr head of Warner Music Digital Strategy 2 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Agenda • Executive Summary / Thoughts on Investment & Acquisition • Historical Analysis (2000-2009) • Mobile Applications Industry Analysis • Social Media Industry Analysis 3 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Executive Summary • Media conglomerate shareholder performance has largely underperformed due to poor acquisitions and inability to adapt to open distribution model of the internet • Most acquisitions driven by desire to acquire audience but not having expertise to retain or monetize audience • Inability to innovate traditional content products leads to price erosion and declining sales windows • Continued call for consumer payment via subscription (e.g. Hulu, paywalls for WSJ.com, etc.) are unlikely to be successful • Recently announced magazine consortium represents new approach at preventing intermediary (e.g. YouTube) from usurping audience • Unclear if publishers have technical expertise to develop digital product to drive consumer willingness to pay • New models of content aggregation, search optimization, and publishing by Demand Media and AOL may prove profitable, but will likely litter the web with ―crap content‖ • Question remains of creating premium product / service for traditional content – closest proxy has been iTunes digital albums • Mobile apps show great promise despite inherent structural challenges • Ecosystem has recently evolved toward setting foundation for real, possibly sustainable growth: • Monetization: emerging mobile advertising (Admob), micropayments (storefront) • Feature-rich platforms (iTunes / Android / WebOS) on robust device hardware • Data plans whose focus is away from carrier “walled gardens” • Still no transparent scorecard for ―best‖ developers; closed ecosystem for dominant app distributor (iTunes); bandwidth issues; and extremely low barriers to entry • Investment framework can be based around native phone features, cloud computing infrastructure, and in-app purchases • Apple‘s purchase of lala may introduce robust cloud platform development AND improved social functionality for content and applications • Certain categories within social gaming are attractive for investment • Emergent demand for less time-intensive, lower engagement, and gaming-as-a-service models • High DAU/MAU or ―stickyness factor‖ above ~15% appears to represents sustainable audience for monetization • Microtransactions and early advertising efforts (―cost per installation‖) have proven successful for Zynga and other players • Large opportunities remain as games evolve in sophistication and users become more open toward offering greater access to profile data 4 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Thoughts on Investment & Acquisition Early Stage Growth Equity Strategic Acquisition • Along with cloud computing, native • Developer business models still too • Strategic partnership and licensing more features, and in-app purchases, smart fledging to be considered sustainable, advantageous given hit-driven nature of developers will have instinct for anticipating so unlikely to find immediate growth business iPhone feature release equity prospects • Opportunity for franchise game Thesis: • Given time lag of app store approval, • Still, opportunities likely in 8-12 months branding still available (e.g. sports, Cross Platform first to market presents real strategic for growth equity may include: Halo) advantage by weakening competitive • Productivity, business, and • Strategic value-add through • Winning on response reference verticals offer better marketing/promotion ALL platforms, • Smule good example of developer who retention and pricing than other • But risks also follow as strategics understands this dynamic (and recently categories likely to overprice for content from not just A closed Series B funding) • Proven game developers (e.g. legacy contracts and demand platform • Micromap updating also potentially Ngmoco, Geared by Bryan unrecoupable upfront royalties • Mobile, Mobile disruptive to incumbent GPS players Mitchell) with loyal fanbases, • Location awareness also presents new online, AND • Waze is good example of user- proven sales, and expansive themes product development paths, e.g. offline generated map updating may be viable candidates for coupons, dating, dining, etc. • Freemium model executed via in-app expansion capital • Online incumbents with broad • Becoming a purchases showing early promise - • As mobile audiences achieve audiences, data, and other assets part of your Tapulous (Tap Tap Revenge) , Ngmoco saturation, successful mobile may find acquisition for access to life, not just (Eliminator) developers will need capital to mobile channel attractive thrown away • Focus on churn, usage patterns, and expand online to social, real-time, • More likely opportunity through • Tailored retaining early traffic; similar to social etc. speculated release of tablet devices experience gaming, look for replication of • More robust form of monetization based on development process and mastery of provided tablet offers innovative device, but social, viral aspects native features synched via • Developer space currently led by Zynga, • Mobile / online payments may be open • Media incumbents may continue internet Playdom, and Playfish, to growth equity investment as business acquisitions similar to EA / Playfish connection • Audience size, stickiness models mature given need to acquire • Zynga / Playdom unlikely to be (DAU/MAU), and monetization carrier and distribution partners purchased except for extremely high • New business efficiency are key metrics in evaluating • Somewhat validated by Boku’s prices models players acquisitions of Paymo and other • Recent funding rounds and • e.g. purchase • Concern now around ―spamming the small mobile payment players acquisitions have also set high options mixed feed‖ • Looming giant Paypal presents price per unique (~$5/MAU) Social w/ localized • Virtual goods / in-game transactions market risk but also exit thesis • Social and display ad networks Gaming advertising continue to grow given evolving game • Bootstrapped developers interested in experiencing consolidation as well optimized sophistication liquidity and expansion e.g. Playdom • Teracent / Google against social • Live Gamer and Playspan are well- • Proven successes on social platform • AdLink / Hi-Media data capitalized players with experienced but future growth from cross • SocialMedia.com / AdKnowledge management platform (e.g. mobile, independent • International perspective, e.g. Live URL) and cross-promotion of Gamer’s purchase of N-Cash, Korean genre titles payment solution provider 5 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Agenda • Executive Summary / Investment Frameworks • Historical Analysis (2000-2009) • Mobile Applications Industry Analysis • Social Media Industry Analysis 6 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • The modern media conglomerate is typified by scale and centralized ownership via the ―Mogul‖ Controlling Mogul / Revenue by Conglomerate CEO Weighted Average Revenue CAGR Across Conglomerate (2000-2008): 9.7% Sumner Redstone / Les Moonves Rupert Murdoch / Rupert Murdoch / Jeffrey Bewkes Sumner Redstone / Philippe Dauman Roberts Family / Brian Roberts / Jean-Bernard Lévy / Robert Iger Billions Source: Curse of the Mogul, Jonathan Knee; Boldface represents broadly held public companies; Vivendi values converted to dollars using historical exchange rate; 2000 value for 7 Viacom actually 2002; 2000 value for CBS actually 2003; substitutions made due to data availability This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Their ownership expansion has been impressive, with properties ranging from content to distribution Distribution Content Online Satellite Radio Cable TV Broad- Cable TV News- Content / Mag. Video Business Book Movie / Broad- Broad- e-Comm. Music Sports System casting Channel Network papers Social Publish. Games Info Publish. TV Studio casting casting Network Source: Curse of the Mogul, Jonathan Knee 8 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • But their stock performance has been disappointing Stock Price Performance Past Nine Years Stock Price Performance Past Three Years (1/1/2000 – 8/31/2009) (5/16/2006 – 8/31/2009) Conglomerate Avg: (47.5) Conglomerate Avg: (31.8) Note: Conglomerate average calculated as straight average of stock price performance 9 Source: Yahoo Finance; prices adjusted for dividends and stock splits; This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Both the ―Mogul Effect‖ and the Internet contribute to this underperformance ―Mogul Effect‖ (Internal) Internet (External) Content Packaging Retail • Creative data production • Aggregation • Delivery to final customer • Marketing / Promotion • Wholesale distribution • Inability to consistently choose ―hits,‖ • Lowered barriers to entry given • Pricing power is weakened in a leaving revenue generation to be continued launches of improving online digital world largely unscalable ventures • Fast growth incentivizes new entrants • Release windows are shortened to attack incumbents online as well Mergers / Acquisitions • Overpaying for acquisitions • Overestimation of synergies • Acquisition for growth, not strategic rationale 10 Source: Framework provided by Curse of the Mogul, Jonathan Knee This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Market share volatility implies conglomerates are more lucky than skilled in picking ―winners‖ Content Packaging Distribution Poor M&A across the value chain Absolute Market Share of Share Absolute Market Share of Share Top Music Labels Change Top Movie Studios Change 2.7 0.9 4.7 8.0 4.6 0.8 6.8 9.7 2.5 4.8 5.6 5.8 Average: 5.2 Average: 4.5 11 Source: www.the-numbers.com; absolute market share defined as normalized market share of top studio / music labels; absolute share change < 4 implies share instability This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Most conglomerate shareholders would have been better off without big mergers / acquisitions… Content Packaging Distribution Share Price ($ / Share) Mergers / Acquisitions Source: ―Hey Big Media: The Jig is Up on Big Media Mergers,‖ Bank of America Securities, Douglas Shapiro, July 7, 2004 Assumptions behind analysis: 1) legacy businesses growing only at average secular growth rates over the period; 2) assumed that all free cash flow that would have been thrown off by these theoretical companies would have been used only to pay down debt or accrued as cash 3) increased the share base of each by 4% per year to account for options issuance, a much more rapid rate of options dilution than actually occurred (under the rationale that these ―hypothetical‖ companies would have experienced better stock performance over the period); and 4) to arrive at the current price of the hypothetical company, only the current multiple 12 of each company is applied, even though a better capital allocation track record over the last few years would have arguably resulted in a higher multiple. This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • …though they did help ―grow the empire,‖ these deals generally hurt the share price… Content Packaging Distribution Mergers / Acquisitions Acquisitions Why they worked for the mogul Revenue impact +475% +159% +138% +239% from deals EBITDA impact +320% +162% +153% +233% from deals Why they didn’t • Cable network cashflow • While ABC / Fox Family • AOL-Time Warner • Decline of cable public work for share would have been used performance suffered, synergies greatly market values (versus cash holders more effectively to pay ESPN performed much overestimated paid for asset) down debt or simply better than expected accrued as cash • Additional capital deployed (not included in purchase price) to pay for upgrade Share price impact (121%) +4% (150%) (27%) from deals Source: ―Hey Big Media: The Jig is Up on Big Media Mergers,‖ Bank of America Securities, Douglas Shapiro, July 7, 2004 13 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • …and yet these same firms continued to engage in questionable acquisitions Content Packaging Distribution Mergers / Acquisitions Deals Bebo IGN CNET • Overpaid for asset ($850M) relative to • Overpaid for asset ($650M) • Overpaid for asset in sole bidder revenue ($20M) and EBITDA ($5M) at • CEO (then COO of Fox Interactive situation ($1.8B) time of acquisition Media) left soon after acquisition • Executives admit having ―overpaid‖ • Now being actively sold off for asset Outcome MySpace Last.fm • Google search deals, while initially • Overpaid for asset ($280M) lucrative, will not be renewed • Apparent competition with existing • ―Lost‖ social network war to Facebook CBS online radio asset • Repositioning site as music portal • Inability to monetize effectively Growth equity thesis of “buying, then selling to eyeballs” largely unproven Note: Curse of the Mogul; Newsblogs 14 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • The Internet has allowed the proliferation of open distribution and socialization of content… Content Packaging Distribution Poor M&A across the value chain Web 1.0 Web 2.0 Web 3.0? Streaming ??? Downloads ??? File-sharing ??? Social Networks ??? Ease of content sharing leading to loss of willingness to pay Lower barriers of entry over time 15 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • …leading to weakening pricing power… Content Packaging Distribution Poor M&A across the value chain Average Music Retail Pricing Average Advertising Revenue per Hour Average Retail Book Pricing Average Price per DVD Title 16 Source: RIAA; BlackArrow; Fordham University, Marketing Department; MPAA 2007 Industry Report This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • …and shorter content release windows. Content Packaging Distribution Poor M&A across the value chain Median period of Album Release “Heat Period”* Movie Studio Release Windows Source: National Association of Theater Owners (NATO); Soundscan 17 * ―Heat Period‖ defined as length of time album sales stay above 20% of initial peak volume This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Thoughts on adapting in today‘s environment Content Packaging Retail • Creative data production • Aggregation • Delivery to final customer • Marketing / Promotion • Wholesale distribution • Focus on areas with potential product • Leverage viewer base, e.g. hybrid • Deeply integrate with Social extensions less sensitive to erosion professional, for low cost content Network Platforms • Products with merchandise • Search optimize, and eventually • Facebook Connect, Twitter extensions ―social optimize,‖ content for API, Friend Connect discovery • Increase product placement • Additional API‘s as and other embedded ads launched: foursquare, gowalla, etc. • Control content creation and • Develop consumer-focused data acquisition costs strategy • Recognize devaluation of content and • Build relationship on accept depressed pricing access, not ownership Mergers / Acquisitions • Streamline business (not corporate) development process • Accelerate dealflow and deal signing • Goals are new partners AND new learning • Accelerate rights expansion and terms with content makers • Engage in experimental deals with innovative but unproven players Source: Framework provided by Curse of the Mogul, Jonathan Knee 18 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Demand Media: Next Gen Media Conglomerate? Generates revenue by focusing on search and volume Content Valuation Algorithm • Determines what articles to produce • Estimates search term‘s Lifetime Value User Knowledge Engine Packaging + • Generates title ideas by combing through search queries that have included that term • Reviews term and converts to real title Upload Freelance writer spots title and writes article • Copyeditor reads article, makes fixes, and uploads back to Demand Studios Publishing / Discover y / Analytics Distribution Search-based Publishing • Tied to Google adwords and SEM / • Article appears on Demand Media's SEO rankings network of sites and partners • Verticalized distribution based on audience interest Monetization • Ad clicks result in revenue generation for Demand Media and Google Source: Wired 19 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Betaworks: focuses on funding and operating on real-time startups Verticalized Distribution Verticalized Discovery / Packaging Distribution Analytics Content From USER Search / Discovery Content From USER Verticalized Retail Source: Betaworks site 20 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • The next generation of the web is becoming more Social, Mobile, & Real-Time Internet Era Traditional Portal Search Social Mobile (TV / Radio / (Yahoo / AOL) (Google) (Facebook / Twitter) (iPhone/ Android) Newspaper) Content • Passive • Passive • Active • Interactive, user • Wide range of Control • Professional • Specialized • User generated generated developers Discovery • Mass • Prominent page • Search-driven • Recommendation • iTunes / Android app marketing placement • Reference store • Word of mouth • Other apps (e.g. Chorus) Monetization • Classified ads • Banners ads • Text ads • Social ads • Purchase • Mass-market • Light targeting • Targeted based on • Targeted via social • Subscription? • Generic • Light context search relevance • Mobile advertising • Contextual to • Contextual on previous behavior relationship • Virtual goods • Microtransactions Data lag • Days • Hours • Minutes • Real-time • Real-time Analytics • Broad samples • Pageviews • Uniques • Uniques • Geo-targeted / • Focus groups • Uniques • Duration • Retweet location-based • Cost per • Cost per Action • Relevance Thousand 21 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Agenda • Executive Summary / Thoughts on Investment & Acquisition • Historical Analysis (2000-2009) • Mobile Applications Industry Analysis • Social Media Industry Analysis 22 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Apple‘s release of the iPhone and iTouch have been met with groundbreaking growth 23 Source: Mary Meeker, ―Economy and Internet Trends‖ Oct 20, 2009 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • AT&T DataTraffic has surged, implying underlying demand for bandwidth consumptive applications 24 Source: Mary Meeker, ―Economy and Internet Trends‖ Oct 20, 2009 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • iTunes simplifies the act of mobile purchase… 25 Source: Mary Meeker, ―Economy and Internet Trends‖ Oct 20, 2009 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • …leading to the growth of a paid mobile ecosystem 26 Source: Mary Meeker, ―Economy and Internet Trends‖ Oct 20, 2009 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Morgan Stanley estimates mobile app market to be $5.3B by 2012 27 Source: Admob; Yankee Group This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • iTunes App Store has become a fast growing ecosystem, with over 83,000 applications 100,000+ 83,438 75,069 65,173 55,047 44,869 37,366 29,743 22,820 17,422 Source: 148apps.com 28 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Pricing spans a variety of points, though nearly half of all App Store applications priced at $0.99 iTunes App Store Pricing Source: 148apps.com; as of Sept ‗09 29 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Categories vary by loyalty and frequency of use Frequency vs. Retention News Sports Medical Business Social Utilities Books Networking Weather Frequency of Use Health Care / Finance Fitness Travel Per week Entertainment Games Music Reference Productivity Education Lifestyle Navigation 30 Day Retention Source: 148apps.com; as of Sept ‘09; size of bubble denotes # of apps offered 30 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Pricing and Retention appear to be correlated Retention vs. Pricing Books Weather Navigation • Subscription model News possible? Games Sports Productivity Education Finance Business • Focus on verticals 30 Day Retention Reference Health Care / Fitness Music Social Travel Networking Utilities • Developers should focus on Entertainment creating sustainable process around frequent app release Lifestyle • Cross-sell apps aggressively Avg Price 31 Source: 148apps.com; Flurry.com; as of Sept ‘09; Medical category excluded (avg price: $7.90, retention: 43%) This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Gaming apps are fragmented and hit driven, with high turnover among the top ten lists iPhone Paid App Rankings (Apps in April - June) iPhone Paid App Rankings (lasting three months or later) iPhone Paid App Rankings (Apps lasting three months or longer) Fragmentation Apps do not sustain ranked placement for more than three months 32 Source: Distimo This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • iFund developer recipients focus on interactivity and gaming Name Category Description Unique Features Booyah Location-based Booyahs are topnotch industry vets from a wide range of entertainment, media, • User engagement through "real-life" games Social Network and technology fields who have combined their talents to create something and "boo-yah" moments, which are then larger than themselves. At Booyah, we believe that we can inspire personal recorded and tracked as data discovery and change lives. We spend our days thinking of ways to catalyze mass action, and we spend our nights turning those dreams into reality. Texting Your friends, family, and even the family cat (if they can do so)...can text the • Enabling txt as notification technology for keyword of your TXTsite to the GOGII phone number, 60611, and they access, content, and referral immediately receive the TXTsite, which consists of the information that you placed on it, with menu choices. From here, they can choose to receive text (Gogii) updates, link to a website, download a video, or forward the site to a friend. It's like navigating a website, but all in text. Remote control Stay connected in real-time to what matters most—family, property, home, • Remote access, broadband home and business—from anywhere in the world, anytime, day or night. management Location-based On the intersection of mobile and the physical world. Its goal is to drastically • Unclear, though founders have strong improve the experience of consumers on that intersection. gaming and software development experience Gaming The iPhone can give you all the gaming goodness from arcade to adventure, • Robust, high end gaming from puzzle to platformer & from shooter to sudoku - but it can also give you • Traditionally high price points but recently games that you've never seen before - Alternate & augmented reality games, released in-app purchases for virtual goods mobile social experiences, games that use multi-touch, accelerometers, gps, and microtransactions the camera, your media and your friends to bring you amazing new • Rapid release model experiences. Location-based Pelago is committed to developing innovative products that bring the power of • User engagement through everyday Social Network online information to everyday life in the physical world. Their flagship product, celebration Whrrl v2.0, lets people capture and share the stories of their lives, one moment at a time. Music ID The launch pad to our success has been our core music recognition • Premium and free models (freemium) service technology that enables anyone with a mobile phone to identify music that is • No content licensing playing - even under noisy conditions - wherever they are, simply by Shazaming it. This clip is run through our database of over 8 million tracks (which extends back to the '50s) to find an exact fingerprint match. 33 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Cloud data / processing + native iphone features + in- app purchases = Preliminary Investment Thesis Cloud Computing Native Features In-app purchases Photo Video Compass + Music Location awareness + Voice recognition Touchscreen (Heavy Data / Processing Requirements) Txt/MMS (Pseudo subscription / service model) Accelerometer Voice Mobile App Investment Framework 34 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Structure brainstorming identifies virtual tag, real-time translation, and micro-windowed mobile coupons as having potential Native Features Cloud Features Location / Vertical Multimedia Touchscreen Voice Cloud Processing / Data Possible Concepts Compass Games x x Virtual tag / virtual easter egg hunt Travel x x x Local, interactive maps for malls, parks, etc. Education x Digital flipcards Utilities x x Visual authentication Utilities x x Visual transcription Utilities x x Remote control webcam and monitoring Music x x Song identification (Shazam) Sports x Real-time, location-based rooting Productivity x x X Real-time language translator Productivity x x x Voice / language transcription Business x x Real-time, micro-windowed mobile coupons Healthcare & Fitness x x Augmented reality workouts News x x Real-time, hyperlocal news Location-based social networking Social Networking x x x (Foursquare) Finance x x Digital payment and authentication Emergency alert; health insurance and e- Medical x x record access 35 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Agenda • Executive Summary / Thoughts on Investment & Acquisition • Historical Analysis (2000-2009) • Mobile Applications Industry Analysis • Social Media Industry Analysis 36 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Social networking is a global phenomenon… 37 Source: Mary Meeker, ―Mobile Internet Themes,‖ Dec 2009 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • …with social gaming becoming an emerging sub-industry for Facebook app developers 38 Source: Mary Meeker, ―Mobile Internet Themes,‖ Dec 2009 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • In only two years, the social gaming Market is estimated to grow to $2.2B; the virtual goods market is estimated to grow to $2.0B… 2012: $2.2B 2012: $2.0B 2013: $2.4B 39 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • …with room to grow as users shift their time and advertisers shift their spend to internet applications Lag driven by: • Challenges in managing spend and performance in a variety of mediums (vs. lump sum payment to a mass aggregator like a TV station) • Low costs of social media distribution and tracking • Still relatively new (even considered experimental), spend not yet formalized as line item in CMO budgets 40 Source: Mary Meeker, ―Mobile Internet Themes,‖ Dec 2009; Knowledge@Wharton This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • The Social Gaming Ecosystem is robust with roughly 300 firms and $1.5B invested across multiple categories Social Gaming Firms Venture Capital Dollars ($MM) N=308 Total: $1.5B* invested Source: Social Gaming Summit 2009, Crunchbase, Company Websites, Press Releases, LinkedIn profiles of founders 41 *Over past three years This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • While many categories have been funded, entrepreneurs continue to start firms Total Number of Firms 61 20 15 10 5 8 4 4 5 3 6 2 3 3 2 3 2 2 1 1 Total Firms Funded Firms Unfunded Firms Source: Social Gaming Summit 2009, Crunchbase, Company Websites, Press Releases, LinkedIn profiles of founders 42 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • More funding does not necessarily translate into bigger user bases (1 of 2) Firm Funding Investors Description CEO MAU DAU DAU / MAU Playdom $43M NEA, Lightspeed, Norwest Playdom is game developer with a focus on social, online games. The John 14,416,661 2,119,342 14.7% company has a number of popular titles on the iPhone, Myspace, and Pleasants Facebook. Zynga $39.0 Reid Hoffman, Avalon Zynga is a network of gaming applications built off of classic games like Mark 185,624,645 53,399,185 28.8% Ventures, Clarium Capital, Poker, Battleship, and Attack!. The games are found on social networks like Pincus Foundry Group, Pilot Group, Facebook and Bebo. Union Square Ventures, Peter In addition to making their own games, the company has created a network Thiel, Bob Pittman, Andy which allows third party developers to become part of the Zynga network. Russell, Brad Feld, Kleiner Perkins, playfirst $26.5 Mayfield, Trinity Ventures, PlayFirst is a casual gaming startup, based out of San Francisco. is focused John Welch 3,185 174 5.5% Rustic Canyon Partners, DCM on creating ―shared casual game experiences around lasting original brands‖ that includes game play ―rich in story and character.‖ PlayFirst titles include Wedding Dash, Chocolatier, and Dream Chronicles. Playfish $21.0 Accel Partners, Index Playfish is a creator of social games for friends to play together over social Kristian 60,212,645 13,381,393 22.2% Ventures platforms such as Facebook, MySpace, Bebo, Google, iPhone and Android. Segerstrale Each of the company‘s seven games has been a top 10 hit on Facebook, including Pet Society, which is the platform‘s most popular game and enjoyed by more than 11 million people every month. Challenge $14.5 Sequoia, Globespan Challenge Games creates online social games that are fun and easy to play Andrew 1,983 159 8.0% Games whether you‘re a serious or casual gamer. Tapping the capabilities of social Busey networks, Challenge Games helps people play with and against friends. Citizen $10.0 Radar Partners Citizen Sports offers a number of web applications that allow for interaction Mike Kerns 1,159,016 98,937 8.5% Sports between fans. They also are the creators of Protrade.com, where users can buy, sell, and trade their favorite sports figures as they try to win money. SuperSecret $10.0 Freestyle Capital, Opus SuperSecret.com is an online social game for tweens who are ready to move Ted Barnett NA NA Capital on from Club Penguin or Webkinz, but are too young for World of Warcraft or Facebook. The company actively involves tweens in product design to create an engaging experience available online, and its proprietary World Builder™ platform allows SuperSecret to quickly and easily expand game content to keep up with the imagination and skills of its tween audience. RotoHog.com $8.0 Allen & Co., DFJ Dragonfund, RotoHog.com is the provider and developer of fantasy sports with current Kelly 443 8 1.8% Mission Ventures, SCP partners like NBA.com, Turner Digital, Pro Football Weekly, LG Electronics Perdew Worldwide, Jeff Fluhr and Grupo RBS in Brazil. RotoHog is a product of Sports Composite DE, is privately held, and based in Los Angeles, CA. 43 Source: Social Gaming Summit 2009, Crunchbase, Company Websites, Press Releases, LinkedIn profiles of founders; MAU: Monthly Avg Users; DAU: Daily Avg Users This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • More funding does not necessarily translate into bigger user bases (2 of 2) Firm Funding Investors Description CEO MAU DAU DAU / MAU WonderHill $7.0 Charles River Ventures, WonderHill is a casual gaming company looking to build games Stan Chudnovsky 50,016 4,123 8.2% Shasta Ventures that anyone can play, and are likely to be popular with the 30+ demographic. LOLapps $4.5 Polaris Venture Partners, LOLapps is a provider of distributed social applications. The Kavin Stewart 9,691 331 3.4% Ron Conway companies first products are two Facebook applications, a white label gift maker (Gift Creator) and a survey tool. Sparkplay Media $4.3 Redpoint Ventures, Prism SparkPlay Media is a developer of browser-based MMO games, Matt Mihaly 9,691 3 0.0% VentureWorks the first of which will be released in 2008 and titled Earth Eternal. SparkPlay is also developing a platform for developers to work with to lower the barriers to entry for MMOG creators. eRepublik $4.1 AGF Private Equity eRepublik is a massive online social strategy game. The browser Alexis Bonte NA NA based game allows users to interact with each other and act as politicians, entrepreneurs, soldiers, journalists, etc. Users help develop their countries‘ economies in the ―New World‖. Serious Business $4.0 Lightspeed Serious Business is a social game development studio. Siqi Chen 7,450,360 1,308,128 17.6% Three Rings $3.5 True Ventures, Chance Three Rings is an internet games development company based Daniel James 30,818 4,621 15.0% Technologies in San Francisco. Puzzle Pirates is their hit game. xpd media $2.0 True Ventures, Pilot House In an era of profound change in the media landscape, XPD Robin Chan 5,415 823 15.2% Media was established to build innovative enterprises based on Internet and mobile platforms Somo $1.6 Hit Forge, Lightspeed PhoneBook is a smart photo dialer that *automatically* sorts Joachim De NA NA Enterprises your top contacts. Dial your best friends faster than ever- no Lombaert more scrolling through that lengthy contact list. Virgance $0.8 Quest Venture Partners Virgance is a for-profit, web 2.0 company that takes new Steve Newcomb NA NA activism ideas and uses the power of online social networks to scale each idea into a large-scale, citizen-powered global campaign in order to improve the world. Three Melons $0.6 Santander Bank Three Melons is a game studio that develops online games on Mariano Battan NA NA free-to-play business models, both with original IP and well- established third party properties, designed for Advertising and Entertainment. GameLayers $0.5 O'Reilly AlphaTech, Joi Ito, GameLayers Inc is a small game design company making what Justin Hall 46,527 1,862 4.0% Richard Wolpert it calls ―passively multiplayer online games.‖ Hive7 $0.1 Dhillon Capital Hive7 creates massively multiplayer web games for social Max Skibinsky 394,336 31,404 8.0% networks such as MySpace and Facebook. 44 Source: Social Gaming Summit 2009, Crunchbase, Company Websites, Press Releases, LinkedIn profiles of founders; MAU: Monthly Avg Users; DAU: Daily Avg Users This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • These developers also show promise despite being unfunded Firm Description CEO MAU DAU DAU / MAU TheBroth TheBroth.com quickly became a web community for users to interact with each other, play games, and create Markus 6,906,611 1,430,012 20.7% collaborative art. With the advent of Facebook‘s developer platform, the company created a series of applications Weichselbaum and games that quickly saw TheBroth become a leader in social games. In 2008, the company relocated its headquarters to San Francisco while still maintaining its strong R&D center in Australia. The company is self- funded and profitable. Mob Science Mob Science is a new type of company that makes casual games for social networks like Facebook. What makes Michael Witz 5,303,408 412,967 7.8% us different is that our games exist to support a philanthropic cause, such as helping to keep our oceans clean. Meteor Games Meteor Games is an independent game studio founded in 2007 by Adam and Donna Powell, creators of Adam Powell 5,165,050 198,600 3.8% Neopets.com. Meteor Games first title in development is Twin Skies. Twin Skies is an online game that combines casual game play, the community-focused elements of social networks and the depth of traditional massively multiplayer online gaming experiences. Crafted Fun Every month, our collection of fun applications is used by more than a million visitors and serve 10+ million Keith Schacht 992,299 54,680 5.5% pageviews in the process. We're actively working on our next application and have big plans for the future. Superfan.com SuperFan is also a social game where fans use a virtual currency to compete to become the ―SuperFan‖ of their Rick Marini 773,625 44,351 5.7% top Faves. As the SuperFan, the user gains control over certain aspects of the Fave profile such as the color palette, wallpaper, profile picture and can add a personal quote about their Fave. SuperFan works like a video game where Fans earn Points for contributing to the site and climb higher Reputation Levels. Fans can also earn or buy Credits (virtual currency) to be used to compete to become the SuperFan, send a virtual gift, post a site- wide Shout-Out or customize the Fan profile. Offbeat Offbeat Creations, Inc. is a premier developer and publisher of entertainment software on social media platforms. Chia Chin Lee 751,658 77,355 10.3% Creations Backstage Backstage creates casual games for social networks, and is the only company developing for the Facebook Russell Ovans 503,156 175,823 34.9% Platform® that provides charities and non-profits with fundraising and awareness opportunities through the creation of branded content that seamlessly blends into their applications. Player Axis Focusing on engaging multiplayer games, Player Axis believes in involving their users as soon as possible to Chad Boyda 174,291 18,823 10.8% tune and shape the development of their games. Their games are currently available on Facebook and will soon be on MySpace and other Popular Social Networks. Fame Express Most Eligible singles, pillow fight, funniest people Shikha Arian 27,155 898 3.3% Monkey Gods Focused on development and distribution of games for social networks, the IPhone®, and game consoles Jason Rubin 22,528 1,667 7.4% LLC including Xbox® 360, PlayStation® 3, and Nintendo Wii.; experienced team 45 Source: Social Gaming Summit 2009, Crunchbase, Company Websites, Press Releases, LinkedIn profiles of founders; MAU: Monthly Avg Users; DAU: Daily Avg Users This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Mobile Payment Firms have experienced some consolidation with Boku purchasing Paymo…start of larger trend? Firm Funding Investors Description CEO Allopass NA Subsidiary of Hi-Media Allopass is an Internet Payment Service Provider,that specializes in pay-per-phone Cyril Zimmermann and pay-per-SMS (text message). daopay NA Unfunded Worldwide Payments, charged to the Phone Bill. daopay enables web sites to Peter Krapfl receive payments from anyone with a telephone in over 200 countries. What makes daopay unique is that buyers don‘t need to sign up or set up an account. daopay works with any landline or mobile phone, even with prepaid / ―to go‖ plans. Customers just dial a service number and without ever giving away any personal or financial information, they hold the line for a minute or two until the product price has been charged to their bill; or they send an SMS text message instead to confirm their payment. PaymentPin NA Unfunded PaymentPin‘s online micro-payment service leverages both phone line and mobile Malik Yacoubi billing platforms allowing Internet users to transact without a credit card by adding the charges to their phone. Obopay $ 126.0 Qualcomm, Obopay lets consumers and businesses purchase, pay, and transfer money through Carol Realini AllianceBernstein, Citigroup, any mobile phone using Obopay‘s mobile application, text message, mobile Web, or Redpoint, Societe Generale, Obopay.com. Obopay works on any mobile phone and any carrier in the U.S. Richmond Mgmt, Essar Obopay‘s prepaid MasterCard works with any merchant that accepts MasterCard Communications, Onset, debit cards. Obopay has partnerships with Citi, Fidelity Information Services, Olayan, Promethean, Nokia MasterCard MoneySend, Bancorp, Verizon Wireless, AT&T and RIM. Boku Inc. $ 13.0 Benchmark, Khosla, Index BOKU is a mobile online payments company. Mark Britto Zong $ 12.5 Newbury Ventures, Advent Noted for its frictionless user experience, Zong converts ―shoppers‖ into ―buyers‖ at David Marcus Venture Partners rates up to 10 times greater than traditional payment methods, like credit cards. Zong leverages direct connections with leading mobile network operators around the world to provide unrivaled connectivity and service quality. Zong is featured in hundreds of top applications on popular social networks like Facebook and MySpace as well as leading virtual worlds and other online gaming sites, such as Gaia Online, IMVU and Outspark. BilltoMobile $ 9.5 Subsidiary of Danal (South When users surf merchant sites and wish to buy goods online, they select Jim Greenwell Korea firm), Morgenthaler ―BilltoMobile‖ as their payment option when they check out. They then input their Ventures mobile phone number and their own personal identification number (either their voicemail password or last-4 digits of social security number). A six-digit number is sent to their cell phones via text as a One Time Password. They enter this authentication code online, and see the charges in the next month‘s wireless bill. Paymo $ 5.0 Seed Paymo is a mobile payments network that allows consumers anywhere in the world to Paul McGuire buy online and pay with their mobile phone. 46 Source: Social Gaming Summit 2009, Crunchbase, Company Websites, Press Releases, LinkedIn profiles of founders; MAU: Monthly Avg Users; DAU: Daily Avg Users This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Virtual Goods (funded) players may face disintermediation from FB native currency exchange Firm Funding Investors Description CEO PlaySpan 28.3 Easton Capital, Menlo PlaySpan provides monetization solutions for online games, virtual worlds, and Karl Mehta Ventures, Novel TMT social networks. Ventures, STIC International, Social network payment solutions are available through Spare Change. Featured on over 700 applications, across Facebook, MySpace and Bebo, Spare Change empowers developers to successfully monetize their applications through micro payments. Live Gamer 26.8 Charles Rivers Ventures, Live Gamer is a marketplace solution for player-to-player trading of virtual assets. Mitch Davis Kodiak, FirstMark Specifically, Live Gamer provides a fully publisher-supported virtual trading marketplace. Users are able to access Live Gamer from within the game itself, and can then conduct secure transactions. Traded goods become available in real time for uninterrupted game play Twofish 9.5 Venrock, Rusic Canyon, Twofish is an economic engine for managing micro-transactions within gaming Lisa Rutherford TriplePoint Capital environments. The platform provides game developers with easy-to-use tools that provide account management, cataloging, and analytics services. Jambool | Social 6 Hit Forge, Charles River, Bay Jambool provides SocialGold, a virtual currency and virtual economy platform for Vikas Gupta Gold Partners, Madrona Venture application and game developers. SocialGold is a platform for developers to Group create in-app payments and currency systems. Jambool is a also leader in the social networking application space with dozens of applications live on multiple platforms, reaching several million users world wide. Viximo 5 North Bridge, Sigma Partners Viximo provides a platform for the creation, distribution, and monetization of Rob Frasca virtual ―goods‖ and art for social networks and mobile applications. Viximo provides a link between digital good creators and the market for the distribution of the goods. AdNectar 0.1 Kevin Hartz, Battery Ventures AdNectar is the complete solution for agencies and brands fielding campaigns on Nir Eyal social networks. We turn customers into brand advocates through the simple act of giving branded virtual gifts. 47 Source: Social Gaming Summit 2009, Crunchbase, Company Websites, Press Releases, LinkedIn profiles of founders; This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Virtual Goods (unfunded) – these players also face disintermediation risk from FB native exchanges Firm Description CEO Firecue Give users the opportunity to earn virtual currency by completing free surveys and Jason Rodriguez exclusive advertising offers - turning non-paying users into new revenue gwallet A comprehensive system for all social gaming developers optimized for Facebook, OpenSocial platforms (MySpace, Gurbaksh Chahal Hi5, Tagged, etc), virtual worlds or websites utilizing virtual offer-based currency. Kwedit Payment system for virtual goods and digital content Danny Shader Tapjoy Mobile advertising and virtual goods Lee Linden Virtual Greats Virtual Greats is the world‘s leading virtual goods sales and distribution system, connecting celebrities, artists, IP Dan Jansen holders, consumer brands and content creators with a new generation of fans through the online trade of likenesses, fashion, catchphrases, and other virtual representations of real-world brands. Zeevex Zeevex is an Open Virtual Currency for online Video Games. It‘s the Gamer-friendly way to pay for virtual items and Ron Williams subscriptions in your favorite online Game. And Zeevex works for any amount from 5¢ to $100, even if you don‘t have a credit card, bank account, or Paypal account. Rixty Got Cash? Got Coins? then Rixty is for you! Rixty is a new way to use your cash and coins for online spending. Ted Sorom Don't have a credit card or bank account? With Rixty, you don't need one! Rixty lets you take control of your entertainment spending giving you access to the online world of multiplayer & downloadable games, virtual worlds, social networks, mp3 downloads and mobile games & ringtones. 48 Source: Social Gaming Summit 2009, Crunchbase, Company Websites, Press Releases, LinkedIn profiles of founders; MAU: Monthly Avg Users; DAU: Daily Avg Users This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Preliminary thoughts on Social Gaming Attractiveness Risks • Next generation of casual gaming and time spent on • Low barriers to entry (limited budget to build) web • ―Existential Risk‖ • Real opportunity within virtual goods • E.g. Notifications policy update has huge • BUT at risk of being cannibalized by FB implications on developers • Growing advertiser demand and interest • E.g. Google adsense ―right-pricing‖ • Access to social graph, user feed, and user data • Luck vs. skill • Lots of Monkees, few Beatles What to look for Further Areas of Opportunity • TEAM • Differentiation along engagement vector • Experience in casual gaming and viral • Decreased time per engagement marketing • Further cannibalization of casual gaming segments • Proven management of low cost software • Demographic shift toward Asian countries development • Friendster acquisition by MOL • Experts at data analysis and UI optimization • Recent FB growth in Indonesia, Malaysia, • High DAU / MAU or ―stickiness factor‖ Philippines, and Singapore • ~15% implies sustainable audience • Focus on verticals • Franchises or proven themes, e.g Madden sports 49 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • But social gaming has just scratched the surface given that they do not utilize all available user data 50 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Appendix 51 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • The New Mobile Ecosystem Content Packaging Retail • Platform • iTunes • The Developer • Mobile Advertising • Mobile Payment • Currently incredibly fragmented with • Dominated by iTunes though Google • iTunes has recently announced in-app low barriers to entry has renewed momentum through purchase, potentially limiting piracy Droid / Verizon / Motorola and allowing more service-type • Extremely hit driven functionality • Roll up strategy? • Will there be compatibility across • Will iTunes / Android share data with • Opportunity for sustained competitive appstores? developers to improve innovation and advantage? • Can mobile payment be centralized monetization efforts? across stores? • Can digital goods / currency be centralized across stores? • How can discovery / marketing be improved beyond the storefront? 52 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • The Social Media Ecosystem is designed to help the user find and consume content Discovery / Analytics • Robust data collection • Targeting / recommendation Content Packaging Distribution • Platform • Multiple endpoints • The User • Optimization / Relevance • Monetized through keywords • Generated AND consumed by the • Altered and optimized for SEO / • Verticalized distribution user SEM on search platform (Google) • Social Network aspect • Extremely hit driven • Altered and optimized for SEO / SEM on social platforms (Facebook / • Ad targeting and performance Twitter) • Will traditionally low rates of • Will user data remain in relatively • Where is the monetization analogy payment be sustained in the long- closed platforms (e.g. Facebook)? (to adwords) for Facebook / Twitter? term? • How will we deal with content overload? 53 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • While developers are the most funded category, there is strong investment in peripheral areas like virtual goods and mobile payment Total Number of Funded Firms Funding ($MM) $78.3 119.3 75.7 166.0 114.7 76.9 162.0 37.9 16.0 5.0 6.0 83.3 50.0 43.0 29.5 21.0 13.8 6.1 5.0 0.9 54 Source: Social Gaming Summit 2009, Crunchbase, Company Websites, Press Releases, LinkedIn profiles of founders This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Social Networks (funded) Firm Funding Investors Description CEO Bebo NA Acquired by AOL Bebo is officially the largest social networking site in the UK, Ireland, and New Zealand, and is the third largest social Michael Birch networking site in the US behind only MySpace and Facebook. hi5 35 Mohr Davidow, Social network focused on gaming Ramu Hercules Technology Yalamanchi Growth Capital Friendster Inc. 30 Benchmark, DAG Founded in 2002, Friendster is one of the web‘s older social networking services. Adults, 16 and up can join and connect Richard Ventures, Kleiner with friends, family, school, groups, activities and interests. The site currently has over 50 million users. Kimber Perkins, Reid Hoffman, IDG Ventures myYearbook 17.1 Norwest, US Ventures, myYearbook is a social network for teenagers. It was founded by Catherine and Dave Cook who were 15 and 16 when they Geoff Cook First Round launched the site. The site features various widgets including Owned (to buy and sell your friends), Battles (to battle over photos and videos), Match (to create secret admirers), and Pimp (to decorate and design profiles). Tagged 13.5 Reid Hoffman, Mayfield In October 2006 the site made a drastic change and went from being under-18 only, to allowing users of any age to join. Greg Tseng Fund, Horizon This change has helped user registration skyrocket. Technology, Finance Management, Leader Ventures Kongregate 9 Grelock, Reid Hoffman, Kongregate is a casual gaming social network where gamers can gain ranking and earn awards. The site allows Jim Greer Richard Wolpert, Bezos developers to upload their games and share in revenues (25-50%) from the ads displayed around the games. Kongregate Expeditions, Joi Ito promotes developers to upload new games by having ―game of the week‖ contests. Kongregate pays skilled developers between $20,000-80,000 to create premium games to provide their community with quality games. Each premium game comes with a free version that can be upgraded to paid premium version. Conduit Labs 8.5 Charles River Ventures, Loudcrowd is an online music community focused on music gaming and virtual goods. Loudcrowd users listen to a constant Daniel Prism VentureWorks stream of new music while playing an evolving and connected series of music-themed games with friends. By playing, O'Brien users earn a variety of virtual goods for use within the site including music tracks that can be collected to customize group playlists. Phonezoo 2.06 Tim Draper Phonezoo is a ringtone service that lets you make your own ringtones, download them to your phone and share them with Ram your friends. The site smartly gets around copyright issues by having users create ringtones using songs that they upload. Ramkumar Winster 1.88 Reid Hoffman Winster.com is a social community where friends help friends solve puzzles to win real prizes. You pick the prize you want Jerry Kaplan to win, then play engaging, fun games until you win your prize. Our games are specifically designed to foster a sense of community and promote positive interaction. Players cooperate to help each other win prizes, rather than compete. At Winster.com, players play with each other, never against each other. Vostu 1.3 Intel Capital Vostu is a social network for Spanish speakers to have a global, online environment and create a community of social Daniel Kafie spheres that brings you closer to the people, interests, and ideas you care about the most. Dogster 1 Angels Online network for dog owners Ted Rheingold Girl Ambition Division of Gabo Media Girl Ambition is a division of Gabo Media. Gabo Media is the first technology company to develop a suite of tween-centric, Hilary COPPA and CAN-SPAM compliant social tools and services. Gabo Media's first vertical product is "Girl Ambition," an DeCesare online social community specifically designed to meet the needs of the modern tween girl demographic, ages 8 to 13. The second product from Gabo Media will be "GabX," a COPPA compliant, boy-targeted online site. 55 Source: Social Gaming Summit 2009, Crunchbase, Company Websites, Press Releases, LinkedIn profiles of founders; MAU: Monthly Avg Users; DAU: Daily Avg Users This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Social Networks (unfunded) Firm Description CEO Fragegg social gaming portal for the MMO community. Users can play MMO‘s collect our own virtual currency and Christian Gruber / Felix participate in the fragegg avatar game. Gründorfer On The Record We've figured out the formula to give sports fans like you exactly what you want; multi-sport games about your Mark De Philippi Sports favorite teams and players, a free chance to win cash and killer prizes, and a worldwide social networking community of sports fanatics. Through our strategic partnership with STATS LLC we also offer breaking news, video and comprehensive statistics. On the Record Sports is a compelling experience for sports fans of all levels, from Fantasy Players to Weekend Warriors. OneDegree onedegree is the only social and professional networking site for University students, alumni and fans. Kevin Knaul Stereofame Stereofame is the world's anti-label. Our goal is to be the primary enabler between the artists and the people, so Ken Underwood that artists and fans can deal with each other directly - one on one - without the middleman, enabling artists to get what they deserve. We provide artists with the tools to do this right here on Stereofame. Unlike traditional labels who typically signed just a handful of acts a year, we believe this new age of music democracy and capitalism will produce thousands and thousands of artists who will develop significant numbers of fans and market their products and services through enablers like Stereofame. Tuenti Tuenti is a Madrid-based, invitation-only private social networking website that has been referred to as the Zaryn Dentzel ―Spanish Facebook.‖ VOO! At its juicy core, VOO! is all about flow. It's the messiness and unpredictability of the creative urge. It's the Greg Harper smearing together of people and their ideas to create a giant colored quilt. It's the "worldy" aspect of social mingling with a unique slant that's less about what people are doing and more about what people are thinking, creating and playing. 56 Source: Social Gaming Summit 2009, Crunchbase, Company Websites, Press Releases, LinkedIn profiles of founders; MAU: Monthly Avg Users; DAU: Daily Avg Users This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
    • Preliminary thoughts on Mobile App Industry Attractiveness Risks • Tremendous growth potential in users and mobile • Low barriers to entry internet usage • Recent blog article estimates $2,000 budget • Paid user ecosystem • ―Existential Risk‖ • AND willingness to pay • Developers at whim of Apple / Android / etc. • Easy to use distribution and legitimate platform • Limited data sharing with partners • Killer app yet to be found • Luck vs. skill • In-app advantages allow stickier freemium models • Lots of Monkees, few Beatles • ITunes interface prevents sustainable marketing What to look for • TEAM • Experience in mobile software and marketing • Proven management of low cost software development • Experience with Apple / iTunes licensing / business development • Innovative software development process and ability to generate new apps cheaply and in volume • Date, but don‘t marry a platform • Focus on verticals and developing competitive advantage 57 This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.