MEDIA INDUSTRY ANALYSIS:

Evaluating the past and thoughts on
the future

Yujin Chung
Special thanks for supporting this project!

           •      Professor Hosanagar, faculty sponsor
           •      Chri...
Agenda


           • Executive Summary / Thoughts on Investment & Acquisition

           • Historical Analysis (2000-200...
Executive Summary
       •     Media conglomerate shareholder performance has largely underperformed due to poor acquisiti...
Thoughts on Investment & Acquisition
                                                                      Early Stage    ...
Agenda


           • Executive Summary / Investment Frameworks

           • Historical Analysis (2000-2009)

           ...
The modern media conglomerate is typified by scale and
           centralized ownership via the ―Mogul‖
                  ...
Their ownership expansion has been impressive, with
           properties ranging from content to distribution

          ...
But their stock performance has been disappointing


                       Stock Price Performance Past Nine Years       ...
Both the ―Mogul Effect‖ and the Internet
           contribute to this underperformance
               ―Mogul Effect‖ (Int...
Market share volatility implies conglomerates are more
           lucky than skilled in picking ―winners‖
                ...
Most conglomerate shareholders would have been
           better off without big mergers / acquisitions…
                 ...
…though they did help ―grow the empire,‖ these deals
           generally hurt the share price…
                          ...
…and yet these same firms continued to
           engage in questionable acquisitions
                                    ...
The Internet has allowed the proliferation of open
           distribution and socialization of content…
                 ...
…leading to weakening pricing power…

                                                                                    ...
…and shorter content release windows.

                                                                                   ...
Thoughts on adapting in today‘s environment

                                     Content                                 ...
Demand Media: Next Gen Media Conglomerate?
           Generates revenue by focusing on search and volume

                ...
Betaworks: focuses on funding and operating
           on real-time startups
                                             ...
The next generation of the web is becoming
           more Social, Mobile, & Real-Time
                                   ...
Agenda


           • Executive Summary / Thoughts on Investment & Acquisition

           • Historical Analysis (2000-200...
Apple‘s release of the iPhone and iTouch have
           been met with groundbreaking growth




                         ...
AT&T DataTraffic has surged, implying underlying
           demand for bandwidth consumptive applications




            ...
iTunes simplifies the act of mobile purchase…




                                                                        ...
…leading to the growth of a paid mobile ecosystem




                                                                    ...
Morgan Stanley estimates mobile app market to be
           $5.3B by 2012




                                            ...
iTunes App Store has become a fast growing
           ecosystem, with over 83,000 applications
                           ...
Pricing spans a variety of points, though nearly
           half of all App Store applications priced at $0.99
           ...
Categories vary by loyalty and frequency of use
                                                                          ...
Pricing and Retention appear to be correlated
                                                                            ...
Gaming apps are fragmented and hit driven,
           with high turnover among the top ten lists
                         ...
iFund developer recipients focus on interactivity
           and gaming
  Name                             Category       ...
Cloud data / processing + native iphone features + in-
           app purchases = Preliminary Investment Thesis

         ...
Structure brainstorming identifies virtual tag, real-time translation,
           and micro-windowed mobile coupons as hav...
Agenda


           • Executive Summary / Thoughts on Investment & Acquisition

           • Historical Analysis (2000-200...
Social networking is a global phenomenon…




                                                                            ...
…with social gaming becoming an emerging
           sub-industry for Facebook app developers




                         ...
In only two years, the social gaming Market is
           estimated to grow to $2.2B; the virtual goods
           market ...
…with room to grow as users shift their time and
           advertisers shift their spend to internet applications

      ...
The Social Gaming Ecosystem is robust with roughly
         300 firms and $1.5B invested across multiple categories
      ...
While many categories have been funded,
           entrepreneurs continue to start firms
                                 ...
More funding does not necessarily translate into
              bigger user bases (1 of 2)
  Firm              Funding Inve...
Research project on media conglomerates, mobile applications, and social gaming
Research project on media conglomerates, mobile applications, and social gaming
Research project on media conglomerates, mobile applications, and social gaming
Research project on media conglomerates, mobile applications, and social gaming
Research project on media conglomerates, mobile applications, and social gaming
Research project on media conglomerates, mobile applications, and social gaming
Research project on media conglomerates, mobile applications, and social gaming
Research project on media conglomerates, mobile applications, and social gaming
Research project on media conglomerates, mobile applications, and social gaming
Research project on media conglomerates, mobile applications, and social gaming
Research project on media conglomerates, mobile applications, and social gaming
Research project on media conglomerates, mobile applications, and social gaming
Research project on media conglomerates, mobile applications, and social gaming
Research project on media conglomerates, mobile applications, and social gaming
Upcoming SlideShare
Loading in...5
×

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

8,327

Published on

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

Published in: Technology
0 Comments
4 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
8,327
On Slideshare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
277
Comments
0
Likes
4
Embeds 0
No embeds

No notes for slide

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

  1. 1. MEDIA INDUSTRY ANALYSIS: Evaluating the past and thoughts on the future Yujin Chung
  2. 2. 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.
  3. 3. 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.
  4. 4. 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.
  5. 5. 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.
  6. 6. 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.
  7. 7. 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.
  8. 8. 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.
  9. 9. 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.
  10. 10. 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.
  11. 11. 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.
  12. 12. 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.
  13. 13. …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.
  14. 14. …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.
  15. 15. 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.
  16. 16. …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.
  17. 17. …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.
  18. 18. 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.
  19. 19. 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.
  20. 20. 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.
  21. 21. 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.
  22. 22. 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.
  23. 23. 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.
  24. 24. 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.
  25. 25. 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.
  26. 26. …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.
  27. 27. 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.
  28. 28. 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.
  29. 29. 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.
  30. 30. 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.
  31. 31. 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.
  32. 32. 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.
  33. 33. 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.
  34. 34. 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.
  35. 35. 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.
  36. 36. 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.
  37. 37. 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.
  38. 38. …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.
  39. 39. 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.
  40. 40. …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.
  41. 41. 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.
  42. 42. 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.
  43. 43. 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.
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×