This Week in Social Media - The Social Graph

Equity Research LOS ANGELES | SAN FRANCISCO | NEW YORK | BOSTON | SEATTLEIndustry Note Social Media December 6, 2010 Lou Kerner (212) 668-9874 lou.kerner@wedbush.com Ed Arce (212) 938-9928 ed.arce@wedbush.com This Week in Social Media – Special Edition, December 6, 2010 Wedbush Experts Call on “The Social Graph” We believe Social Media and its associated technologies will change the world to a larger degree than is currently appreciated on Wall Street. The Social Graph is an increasingly important element of Social Media, yet it’s not well understood. To further the dialogue and understanding of the Social Graph, we hosted a conference call with four leading experts on November 30. . The Social Graph was coined by Mark Zuckerberg in 2007 to describe the relationships between members of Facebook, but has since expanded to include all “objects” created by Facebook members (also called the Open Graph post the integration with outside Websites in 2010) o There are 45 billion+ objects added to the Facebook Social Graph every month, with total objects estimated by Wedbush at over one trillion today Justin Smith, Founder of InsideNetwork o Facebook is positioned to take search share in certain categories o Potential Social Graph competitors include portals (e.g., Google) and carriers. David Kirkpatrick, author of “The Facebook Effect” o Facebook’s Social Graph, and Facebook’s integration with over a million Websites positions Facebook to be a massive advertising platform o Facebook Places and Facebook Deals are steps in developing its ad platform Dave Yovanno, CEO of Gigya (which helps companies optimize their site for the social Web) o Websites should leverage the Social Graph to drive traffic and site personalization o While Facebook has a 46% share of all social sign-ons, Twitter dominates news sites with 45% share of social sign-onsInternet & Social Media Sid Shah, Director of Analytics, Efficient Frontier o Facebook is working well for advertisers in Finance, Travel and Entertainment, who provide offers with elements of urgency o Facebook ad impact happens earlier in the conversion funnel, with conversions taking 10-15 hours on average vs. search, where 80% of conversion happens in the first hour Wedbush Securities does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Please see page 16 of this report for analyst certification and important disclosure information.

Lou Kerner, Social Media Analyst, Wedbush SecuritiesThe term “Social Graph” was coined by Mark Zuckerberg at Facebook’s developer conference in 2007 to refer to the social network ofrelationships between users of Facebook. The term was used to help explain that the Facebook Platform, which was introduced at thesame time, would benefit from the social graph by taking advantage of the relationships between individuals to offer a richer onlineexperience: Exhibit 1: Facebook’s Graphic of the Social Graph Source: FacebookFacebook actually provides an application that every member can access to see the graphic representation of their own social graph.The app can be found by typing in “Social Graph” into the search box on Facebook. Below is a snapshot of my personal Social Graphas displayed by Facebook. Friends that are also connected to each other are grouped together as can be seen by the pink circle in theupper right hand side of my Social Graph where my friends from business school are grouped together. Exhibit 2: Lou Kerner’s Facebook Social Graph Source: FacebookThe social graph evolved over time, and at the Facebook developer conference (f8) in 2010, Zuckerberg introduced “The Open Graph”concept, which enables other Websites to integrate their pages into the Social Graph. These pages gain the functionality of other graphobjects including profile links and stream updates for connected users. Thus, the Social Graph expanded to include Like Button usage,recommendations, and activities. Everything became an object and all objects are connected to a person and the Open Graph.2 | Social Media Lou Kerner (212) 668-9874

Exhibit 3: Facebook’s Graphic Presentation of the Open Graph Source: FacebookMuch of this information in the Facebook Social Graph is available to Websites that integrate with Facebook. Applications that run onFacebook can request access to pieces of Social Graph data from a user when that user first engages with an application. The SocialGraph information available from Facebook, as outlined by Facebook, is below: Exhibit 4: Objects/Information Available Through Facebook’s Open Graph 1 About Me Biographacial information input by the member 2 Activities Activities noted by the member like reading or sleeping 3 Birthday Day, month and year of birth 4 Check Ins Where the user has checked in via Facebook Places 5 Education Educational institutions attended 6 Events Events posted on Facebook that have been RSVPd to 7 Groups Facebook Groups that the member has joined 8 Hometown Hometown as input by the member 9 Interests Interests highlighted on Facebook like music or movies 10 Likes Includes everything a users has indicated they like by hitting the like button on Facebook or other websites 11 Location Information regarding current location if given 12 Notes Notes the user has created on Facebook Notes 13 Photos Photos the member has uploaded 14 Photos tagged Photos the member has been tagged in 15 Relationships Family and personal relationships noted 16 Videos Videos the user has uploaded 17 Website Webiste indicated as belonging to a user 18 Work History Where the member has indicated they have worked Source: FacebookHowever, as we broaden our thinking about the Social Graph, it includes significantly more information than is available throughFacebook. People around the world engage with other Websites every day, populating the Social Graph. The problem is that this datais not well connected together like the information on Facebook’s Open Graph. We highlight 24 other companies/sites that eitherdirectly provide significant data to the Social Graph (e.g., LinkedIn or Twitter), that provide tools that then indirectly populate the socialgraph (e.g., Bit.ly, Tynt), and company’s that leverage data provided by the Social Graph to provide services (e.g., Klout, Exelate). It’salso important to note that the Social Graph is being populated all around the world, thus our inclusion of several internationalcompanies into our Social Graph 25.Lou Kerner (212) 668-9874 Social Media | 3

Exhibit 5: Wedbush’s Social Graph 25 Source: WedbushAs social media companies continue to proliferate and create significant shareholder value (e.g., Facebook recently passed $50 billionin market value in the increasingly active secondary market for private shares), we note that VCs are funding these companies inincreasingly large amounts: Exhibit 6: Quarterly VC Funding of Social Media Companies Source: Wedbush Securities, TechCrunch4 | Social Media Lou Kerner (212) 668-9874

Finally we note that there remain significant privacy concerns over the availability of Social Graph data, and we anticipate increasinginterest by governments around the world in Facebook’s privacy policies and controls, as well as those by other companies thatproduce or mine that Social Graph data.Interestingly, we also anticipate that there will be a growing chorus of those who believe that Facebook and others aren’t providingenough access to their Social Graph data. Below we highlight recent comments made by Tim Berners Lee: Exhibit 7: Access to Social Graph Data Will Be a Growing Issue Source: Scientific American Magazine, November, 2010Justin Smith, Founder of InsideNetworkInsideNetwork specializes in research and data on Facebook and its ecosystem (social gaming and marketing). Publications includeInsideFacebook.com, InsideSocialGames.com, as well as data services InsideVirtualGoods and AppData.Facebook has always valued the concept of Social Graph. And there are two fundamental building blocks for the Social Graph --people and the data on those people. While other social networks existed before Facebook, Facebook has really invested heavily inboth technical systems and product design that enabled the creation of a highly authentic Social Graph. It is only within the past fewyears that people have grown to trust Facebook’s privacy model, and by doing so, have readily provided information about themselvesand their friends such as sex, birthday, siblings, relationship status, city, etc. In addition to automated systems to detect entitiesspamming the network with fake profiles, by enabling others to authenticate members by tagging them in a photo or sending invitationsto an event, the network helps validate that people are real as opposed to a fake profile. Combined across 500+ million users, thatcreates a very high fidelity graph that is highly accurate and can be readily shared with developers, advertisers, etc.Lou Kerner (212) 668-9874 Social Media | 5

Exhibit 8: The Importance of Identity Source: InsideNetworkGiven the growth of Facebook’s user base over the last several years: Exhibit 9: Growth of Facebook’s Membership Source: InsideFacebookThe scale of the data can be difficult to comprehend:Social Graph Data 500M people, almost 10% of the world 900M “objects” (pages, groups, Websites, etc.) Average user connected to 130 people & 80 objects.Social Graph Growth Rate Average user creates 3 new pieces of data per day (likes, comments, etc.) 500M users = 45B new pieces of data per month.6 | Social Media Lou Kerner (212) 668-9874

The fundamental difference between how Facebook is approaching data as opposed to how Google approaches data is that search iskeyword targeted, and ads on Facebook are profile targeted. Facebook is dependent on the information that is uploaded by the userand/or their friends to provide the right contextual advertising. Facebook can enhance the creative by showing users actions that theirfriends have taken, for example showing your friends that have liked an object or are the fan of a page. Exhibit 10: Facebook’s Advertising Platform Source: InsideNetworkBut Facebook’s fundamental value proposition is aggregating so much authentic data about you that has been re-enforced by yourfriends. So far the only ads Facebook shows are those on the right hand side of the page and a small unit on the home page.The application platform that was launched in 2007 also fundamentally depends on the Social Graph. Before the Social Graph wasmapped certain applications were not possible. Now that the data is mapped, there is a new wave of consumer applications (i.e., socialgaming). Social games are now a significant growing revenue source and their popularity on Facebook, is due to the nature of theSocial Graph (as opposed to games on Yahoo! for example). Additionally, Facebook is layering on its virtual currency (FacebookCredits), which is a potentially large second revenue stream. Exhibit 11: Facebook’s Applications Platform Source: InsideNetworkLou Kerner (212) 668-9874 Social Media | 7

Facebook drives a lot of organic traffic to Websites through the news feed as users Like and share information with their friends.Facebook is the largest source of referral traffic for many sites and Website categories on the web. As it expands its search efforts andpopulates Social Graph data in search results, it’s possible that Facebook could gain a foothold in search in those categories.Facebook is also taking the long view in messaging toward making sure people have the appropriate experience within the context ofthe Social Graph. This is different from the context of email as the contact list is a different set of people with whom members want todo different things than they do within the Facebook environment. Exhibit 12: Facebook Search, Messaging & More Source: InsideNetworkFacebook has been able to expand internationally and into a lot of markets where there were established incumbents. But there willlikely be some carve outs by other companies, potentially by age, geography, or interests, for example. Potential Social Graphcompetitors include portals that have access to users email lists, like Google and Yahoo, or device manufacturers who know who youcall and where you are. These are long-term fundamental questions, that illustrate the barriers that Facebook has created by identityauthentication, and the services built on top of that. Exhibit 13: Who Will Challenge Facebook? Source: InsideNetwork8 | Social Media Lou Kerner (212) 668-9874

David Kirkpatrick, Author of “The Facebook Effect”Facebook’s Social Graph is the most valuable thing that Facebook owns. The profile data is also valuable, as it’s the one thing no onehas the ability to match. Google desperately wants a social graph. I disagree with Lou that Google has anything comparable toFacebook’s Social Graph. Google will try to build a Social Graph, but it will be piecemeal with gMail and YouTube. Google is trying to th thlayer elements on both those properties, and they own Orkut, the 4 or 5 largest social network, largely based on its usage in Braziland a few other markets. Google actually moved Orkut’s headquarters to Brazil, highlighting how non-core the asset is to Google. ButGoogle clearly needs a Social Graph. With Microsoft’s Bing recently incorporating Facebook Social Graph data, you can see howGoogle is challenged by data outside of its control.If you look at the Facebook platform, and the extension of the platform via the Social Graph, it’s the most interesting thing about thecompany. One thing Facebook has not done yet is distribute advertising with it. That is a Holy Grail that Facebook will exploit at somepoint down the road. If you take two things and dovetail them 1. The continued growth of the platform with 1mm+ Websites already 2. The assumption that Facebook will distribute advertisingYou can come up with some stunningly large revenue numbers. Look at Facebook Places and Facebook Deals, which lets merchantsgive members offers based on their location. Facebook Deals is the beginning of what might be possible. Facebook really doesn’thave competitors other than in a few countries where they do not yet dominate (e.g., Russia, China, Korea, Japan and Brazil). Onedata point to look at to understand Facebook’s international reach is to recognize that Indonesia is Facebook’s second largest country.Google doesn’t have a “quality” Social Graph, but is believed to be trying to build one. They have a segmented system in that theyhave Gmail and YouTube. Each product has a specific purpose, but lacks a master system/community which can weave it togetherseamlessly. Google has to have a social graph in order to keep itself relevant. Microsoft’s Bing now incorporates Facebook data in itssearch results, so that puts pressure on Google. Its mere existence challenges Google as this is something outside of Google’s controlas a search engine.Dave Yovanno, CEO of GigyaI joined Gigya two years ago after nine years at Valueclick, where I was last the COO of North America U.S. Media. Gigya helpscompanies to leverage the Social Graph by deploying Facebook Connect, Twitter, Linked In, Yahoo and other social sign on (SS)platforms as a key to unlock social elements on their own Website instead of kicking people over to Facebook.The value of the Social Graph, results in two things site traffic and personalization. The combination of Internet traffic from Facebook,Twitter and other social networks is driving more traffic to many sites than the traffic generated from Google. Exhibit 14: Social Is the Next Search Source: Compete, August 2010Lou Kerner (212) 668-9874 Social Media | 9

The way people navigate the Internet is they are now spending passive time on the web. They are spending times in their feeds onFacebook and Twitter. The majority of time spent on the Internet, is passive. People are relying on their network of friends/people theyfollow to procure and curate content. It’s the new portal. With that content, there will be a Web link, and that link is what is drivingtraffic. There are two ways for businesses to get into the feed. The first is to get someone to fan or like something, this is the business-to-consumer (B2C) model. The B2C model is not as scalable as the consumer-to-consumer model, also called earned media, oramplification. Businesses need to learn how to engage people to do marketing for them by authentically sending messages to theirfeed.People prefer to use SSO to engage with Websites. Consumers are now accustomed to authorizing Websites to access their profiledata. This includes the user’s identity, their network of friends, and access to put information in their newsfeed. Name, contactinformation, gender, location, etc. Anything that you’ve “Liked” in the past, this authorization will allow the developer to look at thatdespite a user’s privacy settings. Facebook is the leader on this. Other companies are catching up. Exhibit 15: People Prefer to Use “Social Sign On” (SSO) Source: GigyaWhile Facebook is clearly the largest at 46% of SSO’s, other providers also have meaningful SSO share: Exhibit 16: Marketshare of Social Sign On’s (SSOs) Across All Verticals by SSO Platform Source: GigyaHowever, depending on the context, the preferred SSO can change dramatically. For news sites, people sign in via Twitter 45% of thetime while Facebook generates just 25% of SSOs:10 | Social Media Lou Kerner (212) 668-9874

Exhibit 17: Marketshare of Social Sign On’s (SSOs) Across News Sites by SSO Platform Source: GigyaInstead of Websites having to write to each platform’s native API, Gigya provides a central API and manages connectivity over 25providers. Gigya recently added PayPal SSO as an example. Each provider provides access to a different set of profile data throughSSO: Exhibit 18: Profile Data Provided by Various SSO Platforms Source: GigyaThe Social Graph is really opening everything up. The popular carriers are interested in how people can sign in with a cell number andhave access to payment, friends, and other apps. The ecosystem is really brewing. .Once someone authorizes access to a Facebook or Twitter account, as they interact with a Website, they can message back to theirfeeds. YouTube account settings can connect with Facebook and Twitter, and YouTube provides check boxes for auto-sharing. Autoshare increases the velocity of getting info in to the feeds. Zynga makes addictive consumer friendly games, but their competency isreally marketing, by being able to optimize how people are messaging out to their feed. The massive benefit of this sharing is thatsharing, on average, results in five additional visits by friends/followers of the person sharing.Gigya conducted a case study recently with Turbo Tax and found: 50,000 people signed in with their social media ID and allowed Turbo Tax access to their news feed Each share generated five additional visits to the siteLou Kerner (212) 668-9874 Social Media | 11

75% of share driven traffic was new to the TurboTax site Facebook generates a 3X-4X return rate on traffic. Twitter generates as high as an 8X return rate on traffic.One of the reasons that Twitter has such a high return rate is due to the sheer amount of noise on Facebook. Facebook also has aunique algorithm called EdgeRank that prioritizes postings in the feed so many shares end up never even being seen.Personalization is about the ability to provide the most personalized experience for a specific individual based on what you know aboutthem. Facebook may not been seen as a search engine right now, but we believe in the future they will be.Gigya conducted research with Edge, and 80% of executives say SSO is a key part of their strategy to personalize sites.Amazon allows people to sign with Facebook and they are better able to suggest products to the user. Amazon also knows thebirthdays of users’ friends, and can suggest gifts for their friends based on the Social Graph data provided. Exhibit 19: Amazon’s SSO Implementation Enables Additional Personalization Source: GigyaBusinesses are interested not only in creating a great Website experience, but also customizing the experience for the individual.Additionally, they complement that with a social layer that helps them understand who they are related to/talk to and how they canbetter personalize the shopping experience.We also believe that Facebook is well positioned to create an AdSense-type of system to apply Facebook Connect technology todisplay ads on a site.Gigya has an initiative with major e-commerce providers to offer SSO and add a social layer on the shopping experience. This is howshopping can be more personalized.12 | Social Media Lou Kerner (212) 668-9874

Sid Shah, Director of Analytics, Efficient FrontierEfficient Frontier manages about $1 billion in ad spend across search, display and Facebook. In addition, Efficient Frontier has a crosschannel performance marketing solution. We work primarily with performance marketers.The first point I’d like to discuss is the cross channel effect of Facebook, search, and display. Of all Facebook conversions, about halforiginated on Facebook, and then concluded on the Website when someone bought a product. The other half of conversions take a lotlonger to conclude, and include a huge cross channel effect. In the other half, the Facebook member starts the process by clicking onan ad on Facebook and goes to the Website, but they do not purchase immediately. Later the Facebook member may conduct aGoogle search on the product. Facebook is an early funnel effect. With search, 80% of conversions/purchases are made in the firsthour. On Facebook conversion takes 10-15 hours on average:. Exhibit 20: Facebook Is Earlier in the Funnel than Search Source: Efficient FrontierWe also found that Facebook is far better for some channels better than other. Kind of like selling beer works well in a bar, but less wellin other venues. For example, Facebook works very well in the entertainment channel. We see 10X the conversion with onlinegaming. We also see strong performance in travel, and finance.As a rule of thumb, Facebook ads work better when there is an offer and urgency, like a one-off sale Facebook members can sharewith a friend.Performance advertisers need to get used to the different performance metrics on Facebook vs. search. Search is a quick transaction,but Facebook is earlier in the purchasing funnel. We believe that Facebook is more of a push, where new ideas can be pushed on aconsumer. Search is more of a pull, the consumer knows what they want, and merchandisers pull them in. On search they aredescribing their intent. On Facebook, they are likely not even looking for a product, so marketers need to push a product on someoneand see if they respond. So the mindset of advertisers has to change.We also believe there is a big opportunity in merging search results and Facebook data. The research done in this area is called“Social Network Collaborative Filtering” (or “SNCF”). SNCF research out of New York University and other institutions has shown thatthe results of recommendation engines with social data backing it up is equal to the best in class algorithms used by search engines. Insome ways this can democratize recommendations that have been dominated by Amazon with their massive base of user data. TheseSNCF algorithms are computationally intensive. But if Facebook can provide this information to all advertisers, without violating theirprivacy policies, it can really increase conversion rates from the Facebook platform and democratize this computationally intensivemethod of selling product that requires a lot of infrastructure.Our final insight is that while more and more advertisers are looking at Facebook, they want greater control on the way they targetconsumers. But because of current privacy policies there are hurdles there. But we think these hurdles will be overcome and sales onFacebook will accelerate.Lou Kerner (212) 668-9874 Social Media | 13

Question & Answer PeriodQuestion (David Kirkpatrick for Sid Shah): Do you think that Facebook could eventually work so well for brand advertisers thatadvertising comes off TV?Answer (Sid Shah): Absolutely. The data strongly points that Facebook is growing the online advertising pie, that Facebook is nottaking revenue from Google. Google gets a later stage buyer. We think Facebook works well with branding. It also works with certainperformance marketers in travel, finance, and entertainment. It just takes longer to convert to a sale. As we get more data we’ll work tochange the mindset of advertisers. If a brand gets more “Likes” today, and more sales in three months, that’s powerful data. Forperformance based marketers who are used to getting the sale the next hour, that time lag takes some time to get comfortable with.Question: Why aren’t more retailers hosting their own “flash sales,” as opposed to letting the third-party groups (Gilt Group, RueLaLa,etc.) control the market?Answer (Dave Yovanno): Technology in Groupon is more the email based than Social Graph. It has to do with amplification.Business to consumer marketing typically does not scale. Groupon promotions are driven more by emails as opposed to Facebookprofiles. There is a bit of overlap. The technology is there, but it is the execution that is causing people to tend to flock towards GiltGroup, etc.Question: Google just pushed back the introduction of their social network platform until spring of 2011. Do you feel that the pushbackis because they don’t have a Social Graph?Answer (David Kirkpatrick). Google don’t have a social graph and they don’t have the DNA for it. They have a serious crisis on theirhands and don’t have a coherent strategy to do address the crisis.Answer: (Lou Kerner): Google is very aware of the importance of the Social Graph. In addition to gMail and YouTube, Google has thBlogger the 11 most trafficked, and they have a direct feed into Twitter, so they have lots of social data. They will also increasinglyuse SSO for Google search as well. In addition, they are working on a lot of new things like HotPot, which is a social recommendationengine. They also have a new site called Boutiques.com. It‘s a very social site and can potentially create significant amounts of socialgraph data. The site engages the audience to see outfits worn by celebrities, and fashionistas. Google has implemented the ability forusers to “Hate” or “Love” six different elements of each piece of clothing (e.g., the Brand, the Color ). Google is testing to see howmuch Social Graph data people are willing to provide and how they can use that data to provide a more personalized commerceexperience. This type of commerce-related Social Graph data is also part of the reason why Google is interested in Groupon. Exhibit 21: Google’s Boutiques.com Is Pushing the Boundaries of Social Graph Data Source: Boutiques.com14 | Social Media Lou Kerner (212) 668-9874

Question (Lou Kerner for Sid Shah): Can you give greater detail on the programs that are working for advertisers on Facebook?Answer (Sid Shah): Gaming conversions are 10X what they get on search. We also see strong performance in travel when there arespecial offers. CPA deals in finance are also generating good results. When offers are timely, Facebook does well. Our advertisersare performance based, so they are not optimizing for “Likes,” rather they are optimizing for conversion.Question (Lou Kerner for Dave Yovanno): What are some of the other reasons why you’re seeing a bigger multiplier effect onTwitter on Facebook share?Answer (Dave Yovanno): Facebook has a unique algorithm called Edge that filters what people on Facebook see as the mostrelevant/personalized. If someone is at the edge of a friend’s social graph, information shared is not seen as much. Also, there is a tonof noise on Facebook. When members connect with Facebook on entertainment sites, they are just less engaged. Facebook issupporting rich media elements, so members can see that media without leaving Facebook. The people using Twitter, particularly in abusiness environment, are following people they respect, see more click thrus and more engagement when people click thru. AsTwitter becomes more popular, people are un-friending some friends on Facebook. .Answer (David Kirkpatrick): Facebook should allow members to have various categories of friends. The vast majority of membersaggregate large numbers of Facebook friends. Facebook’s challenge is to give users the tools to better manage the data to the rightpeople.Answer (Lou Kerner): It’s our belief we’re in the first inning of social media and we’ll look back at today’s functionality in five years andlaugh.Question (Lou Kerner for Justin Smith): What are some of your predictions for Facebook in 2011?Answer (Justin Smith): 2007-2009 was highlighted by Facebook’s growth in users internationally and growth in their platform.Facebook spent a lot of time focusing on new users and developers’ interests, but they’re now moving back towards focusing on thecore user experience and in house applications, the core of the experience. Photos, Groups, and Messaging have all existed for sixyears, but they have not been improved upon significantly. They’re balancing their services that will be able to drive the platform andthe core services. The platform will become more flexible across other Websites and integrated with other devices. One of the largerefforts under way at Facebook are its partnerships with mobile carriers. Facebook represents half of all data for many carriers, and weexpect more partnerships with carriers and device guys. We’ll likely see more things like Facebook Deals and better advertising tools.Answer (David Kirkpatrick): I think Facebook’s shocking willingness to change itself and consider itself a technology company is themajor reason it has remained relevant (as opposed to MySpace, Friendster, etc). One thing to watch carefully is voice, with thepartnership with Skype being important. Messaging is missing voice, and how it’s resolved will be fascinating. I’m also interested inFacebook’s relationship with the carriers with regards to the Social Graph. Clearly there are significant issues with mobile carrierswhich should reduce monthly fees to change business model to data rich models, and avoid risk to Facebook. The one thing Facebookis missing from a communications standpoint, is voice. So it will be interesting to observe and see how they resolve this along with theirmobile carrier partners.Lou Kerner (212) 668-9874 Social Media | 15

Covered Public Companies Mentioned in this Report (intraday 12/3/10) Company Ticker Price Rating Price Target Google GOOG $573.00 NEUTRAL $575.00 Yahoo YHOO $16.35 UNDERPERFORM $15.50 ANALYST CERTIFICATIONI, Lou Kerner, certify that the views expressed in this report accurately reflect my personal opinion and that I have not and will not,directly or indirectly, receive compensation or other payments in connection with my specific recommendations or views contained inthis report. IMPORTANT DISCLOSURESINVESTMENT RATINGSOUTPERFORM – Expect the total return of the stock to outperform relative to the median total return of the analyst’s (or the analyst’steam) coverage universe over the next 6-12 months.NEUTRAL – Expect the total return of the stock to perform in-line with the median total return of the analyst’s (or the analyst’s team)coverage universe over the next 6-12 months.UNDERPERFORM – Expect the total return of the stock to underperform relative to the median total return of the analyst’s (or theanalyst’s team) coverage universe over the next 6-12 months.The Investment Ratings are based on the expected performance of a stock (based on anticipated total return to price target) relative tothe other stocks in the analyst’s coverage universe (or the analyst’s team coverage).*16 | Social Media Lou Kerner (212) 668-9874

DISTRIBUTION OF RATINGS (as of September 30, 2010)OUTPERFORM – 53% (11% of this rating category were investment banking clients within the last 12 months).NEUTRAL – 38% (2% of this rating category were investment banking clients within the last 12 months).UNDERPERFORM – 9% (3% of this rating category were investment banking clients within the last 12 months).The Distribution of Ratings is required by FINRA rules; however, WS’ stock ratings of Outperform, Neutral, and Underperform mostclosely conform to Buy, Hold, and Sell, respectively. Please note, however, the definitions are not the same as WS’ stock ratings are ona relative basis.The analysts responsible for preparing research reports do not receive compensation based on specific investment banking activity.The analysts receive compensation that is based upon various factors including WS’ total revenues, a portion of which are generatedby WS’ investment banking activities.WS makes a market in the securities mentioned herein.Lou Kerner maintains a long position in shares of Facebook (private).* WS changed its rating system from (Strong Buy/Buy/Hold/Sell) to (Outperform/ Neutral/Underperform) on July 14, 2009.Please access the attached hyperlink for WS’ Coverage Universe: http://www.wedbush.com/inside/CapitalMarkets/CoverageList.aspApplicable disclosure information is also available upon request by contacting Ellen Kang in the Research Department at (213) 688-4529, by email to ellen.kang@wedbush.com, or the Business Conduct Department at (213) 688-8090. You may also submit a writtenrequest to the following: Business Conduct Department, 1000 Wilshire Blvd., Los Angeles, CA 90017. OTHER DISCLOSURES RESEARCH DEPT. * (213) 688-4505 * www.wedbush.com EQUITY TRADING Los Angeles (213) 688-4470 / (800) 421-0178 * EQUITY SALES Los Angeles (800) 444-8076 CORPORATE HEADQUARTERS (213) 688-8000The information herein is based on sources that we consider reliable, but its accuracy is not guaranteed. The information contained herein is not arepresentation by this corporation, nor is any recommendation made herein based on any privileged information. This information is not intended to benor should it be relied upon as a complete record or analysis; neither is it an offer nor a solicitation of an offer to sell or buy any security mentionedherein. This firm, Wedbush Securities, its officers, employees, and members of their families, or any one or more of them, and its discretionary andadvisory accounts, may have a position in any security discussed herein or in related securities and may make, from time to time, purchases or salesthereof in the open market or otherwise. The information and expressions of opinion contained herein are subject to change without further notice. Theherein mentioned securities may be sold to or bought from customers on a principal basis by this firm. Additional information with respect to theinformation contained herein may be obtained upon request.Lou Kerner (212) 668-9874 Social Media | 17

EQUITY RESEARCH DEPARTMENT (213) 688-4529 DIRECTOR OF RESEARCH Mark D. Benson (213) 688-4435CONSUMER PRODUCTS AND SERVICES TECHNOLOGY, MEDIA AND TELECOM LIFE SCIENCESConsumer Products Communications Equipment Biotechnology/BiopharmaceuticalsRommel T. Dionisio (212) 938-9934 Rohit Chopra (212) 668-9871 Gregory R. Wade, Ph.D. (415) 274-6863Kurt M. Frederick, CFA CPA (213) 688-4459 Sanjit Singh (212) 938-9922 Y. Katherine Xu, Ph.D. (212) 938-9955E-Commerce Datacenter TechnologiesEdward Woo, CFA (213) 688-4382 Kaushik Roy (415) 274-6873 Cardiovascular, Devices and RegenerativeNick McKay (213) 688-4343 David Kaczorowski (415) 274-6883 Duane Nash, MD JD MBA (415) 263-6650 Akiva Felt (415) 263-6648Entertainment: Toys Enterprise SoftwareEdward Woo, CFA (213) 688-4382 Michael B. Nemeroff (212) 668-9876 Emerging PharmaceuticalsNick McKay (213) 688-4343 Michael J. Anderson (212) 668-9778 Liana Moussatos, Ph.D. (415) 263-6626 Richard Lau (415) 274-6851Footwear and Apparel Entertainment: RetailCamilo Lyon (212) 938-9924 Michael Pachter (213) 688-4474 Healthcare Services - Managed CareAlicia Jenks (213) 688-4355 Sarah James (213) 688-4503 Entertainment: SoftwareHealthy Lifestyles Michael Pachter (213) 688-4474 Medical TechnologyKurt M. Frederick, CFA CPA (213) 688-4459 Edward Woo, CFA (213) 688-4382 Phillip Nalbone (415) 274-6884 Nick McKay (213) 688-4343 Jeffrey Chu (415) 274-6885Specialty Retail: HardlinesJoan L. Storms, CFA (213) 688-4537 Financial Technology Medical Diagnostics and Life Sciences ToolsJohn Garrett (213) 688-4523 Gil B. Luria (213) 688-4501 Zarak Khurshid (415) 274-6823 Nick Setyan (213) 688-4519Camilo Lyon (212) 938-9924Alicia Jenks (213) 688-4355 Internet and Social Media Lou Kerner (212) 668-9874Specialty Retail: Softlines Ed Arce (212) 938-9928Betty Chen (415) 273-7328Connie Wong (415) 273-7315 Edward Woo, CFA (213) 688-4382 Nick McKay (213) 688-4343Specialty Retail: Sporting GoodsCamilo Lyon (212) 938-9924 Internet and Media TechnologiesAlicia Jenks (213) 688-4355 Kerry Rice, CPA (213) 688-4538RETAIL/CONSUMER MARKET RESEARCH Media James Dix, CFA (213) 688-4315Gabriella Santaniello (213) 688-4557 Movies and EntertainmentCLEAN TECHNOLOGY AND INDUSTRIAL GROWTH Michael Pachter (213) 688-4474 Edward Woo, CFA (213) 688-4382Aerospace and Defense Nick McKay (213) 688-4343Kenneth Herbert (415) 274-6875Andrew Doupé (415) 274-6876 Semiconductors Patrick Wang (212) 938-9938Clean Technology Michael Lucarelli (212) 938-9927Craig Irwin (212) 938-9926David Giesecke (212) 938-9925 Betsy Van Hees (415) 274-6869 Ryan Jue (415) 263-6669Environmental ServicesAl Kaschalk (213) 688-4539 Telecommunications SoftwareKevin Lee (213) 688-4303 Scott P. Sutherland, CFA (213) 688-4522 Suhail Chandy (213) 688-4380Solar TechnologyChristine Hersey (213) 688-4311 Wireless Equipment Scott P. Sutherland, CFA (213) 688-4522Water and Renewable Energy Solutions Suhail Chandy (213) 688-4380David Rose, CFA (213) 688-4319 EQUITY SALES EQUITY TRADING Los Angeles (213) 688-4470 / (800) 444-8076 Los Angeles (213) 688-4470 / (800) 421-0178 San Francisco (415) 274-6800 San Francisco (415) 274-6811 New York (212) 938-9931 New York (212) 344-2382 Boston (617) 832-3700 Boston (617) 832-3700 CORPORATE HEADQUARTERS 1000 Wilshire Blvd., Los Angeles, CA 90017-2465 Tel: (213) 688-8000 www.wedbush.com

This Week in Social Media - The Social Graph

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This Week in Social Media - The Social Graph — Document Transcript