The Virtual Goods Ecosystem

The Virtual Goods Ecosystem December 2010 CONFIDENTIAL

A Word from Gridley & Company, LLCThe post Web 2.0 digital environment is creating communities and different“realms” where users can connect with others. The biggest example is socialnetworks, but they also include other various platforms as well as online games. Inmany of these virtual worlds, especially niche ones, users are very engaged withtheir communities and activities. These activities have spawned a particular classof assets: virtual goods. By creating a currency that users actively work for andtrade, the users become even more engaged in their virtual world. This presents anopportunity for marketers to reach audiences and provides a way for virtual worldoperators to monetize their creation. In this report, we go through the differentplayers in the virtual goods ecosystem.We hope you enjoy this comprehensive industry overview and our perspectives.Please give us a call to discuss the content of this presentation. Linda Gridley President & CEO linda.gridley@gridleyco.com Karen Yau Smith 212-400-9710 Pratik Patel Vice President Vice Presidentkaren.smith@gridleyco.com pratik.patel@gridleyco.com 212-400-9718 212-400-9712 2

Fresh Opportunities in Virtual Goods • Global virtual goods market amounts to $5.5 billion; U.S. market alone expected to reach $2.5 billion by 2013 • Approximately 12% of Americans have bought a virtual good at some point between July 2008 and July 2009, and average spending is up 14% in 2010 to $99 Virtual Goods Revenue Estimates $7,000 $6,006 $6,000 $5,047 $5,000 $4,070 $3,544 $4,000 $M $3,107 $3,028 $3,000 $2,523 $2,219 $2,000 $2,020 $1,325 $1,598 $2,462 $1,000 $1,060 $2,019 $1,547 $1,087 $265 $621 $0 2008 2009 2010 2011 2012 2013 U.S. Non-U.S.Source: eMarketer (August 2009), Magid Survey (May 2010)Note: More recent figures from Inside Virtual Goods estimate the U.S. market to be $1 billion and $1.6 billion for 2009 and 2010, respectively 3

Recent Investments Are Legitimizing Opportunity • Former Disney CEO Michael Eisner invested $300,000 in seed / funding in social gaming company Diversion through his investment company on October 18, 2010 • Google announced acquisition of Jambool (Social Gold) for a / rumored $70MM on August 13, 2010 • Google invested $100-$200 million in Zynga in an under-the- / table deal in July 2010 • SponsorPay raised $5 million in its first round of funding, led by Hasso Plattner Ventures, on June 9, 2010 • Digital River acquired FatFooGoo for $10 million on May 5, / 2010 4

Industry Perspectives on Virtual Goods• “Monetization in virtual goods will continue to grow, and we will see the emergence of a select few successful platforms, as well as several popular virtual currencies. Once such currencies have been established, the growth of secondary markets and currency exchanges will most likely follow.” - Vikas Gupta, Co-Founder/CEO, Social Gold by Jambool• “Virtual goods will become a strong option for brands to drive engagement in social media and will become the standard for branded advertising in social media, finally providing clear value proposition for brands in social media and social gaming.” - Joe Hyrkin, Entrepreneur in Residence, Trinity Ventures• “Growth will continue to be exponential as social gaming becomes more and more mainstream. Everyone will make more money as the pie grows bigger for all of us collectively.” - Charles Ju, Founder, Playmesh• “We have seen companies go from nothing in the last 18-24 months to tens and hundreds of millions of dollars in revenues [from virtual goods].” - Jeremy Liew, Lightspeed Venture Partners 5

Young Players in a Fresh Landscape Ad Networks Social VirtualNetworks Platform Currency Providers Providers Game Developers Payment Processors 6

Young Players in a Fresh Landscape 7

Social Networks Provide Users• Exhibited phenomenal growth within the past 5 years - By 2013, an estimated 52% of internet users will be regular social network visitors• Provide consumer base, marketplace, and contextual structure for virtual goods transactions Facebook MySpace Friendster hi5 Classmates.com Bebo Michael Jones Mark & Richard Mark JoannaCEO Zuckerberg Jason Hirschorn Kimber Bill Gossman Goldston ShieldsRegisteredUsers > 500,000,000 70,000,000 100,000,000 60,000,000 50,000,000 12,000,000 About 75% of Popular inUser users are User base Popular in Mexico, User base MoreProfile outside the Predominantly South East Thailand, Predominantly popular U.S. within U.S. Asia and within U.S. in UK than Portugal in U.S. 8

Social Networking M&A Transactions($ in millions) Implied LTM LTM Enterprise Revenue EBITDADate Acquiror Target Value Multiple Multiple10/22/10 Kabam, Inc. WonderHill, Inc. NA NA NA10/06/10 Beyond.com, Inc. Orbius, Inc. NA NA NA09/14/10 GameHouse, Inc. Backstage Technologies Inc NA NA NA09/02/10 Recruiter.com RecruitingBlogs.com Inc. NA NA NA08/31/10 AOL, Inc. Rally Up, Inc. NA NA NA08/30/10 Google Inc. SocialDeck Inc. NA NA NA08/25/10 Undisclosed Meetrandom.com $0.2 NA NA08/20/10 Facebook, Inc. Hot Potato NA NA NA08/06/10 Google Inc. Slide, Inc. 182.0 NA NA08/04/10 Black Pants, Inc. Diva Dirt NA NA NA07/21/10 NetParty, LLC Charlotte Young Professionals, LLC NA NA NA07/09/10 Insparisk, LLC AuthorizedInspector.com NA NA NA07/08/10 Facebook, Inc. nextstop.com, Inc. NA NA NA07/01/10 FertilityAuthority.com, LLC FertileThoughts.com NA NA NA06/16/10 Criterion Capital Partners, LLC Bebo, Inc. < 10.0 NA NA06/08/10 Salem Web Network Big Jump Media, Inc. 2.5 NA NA06/09/10 Vocus Inc. Two Cats and a Cup of Coffee 1.6 NA NA06/08/10 PurePhoto, Inc. PhotographyMentor.com, LLC NA NA NA05/26/10 Facebook, Inc. Sharegrove Inc. NA NA NA05/04/10 Trans Global Group, Inc. RandPort, Inc. NA NA NA03/26/10 Maverick Capital, Ltd. Loopt, Inc. NA NA NA03/22/10 WebMediaBrands Inc Rotorblog.com NA NA NA02/02/10 Ali Wing, Inc. The Cradle, LLC NA NA NA12/16/09 Ontela, Inc. Photobucket, Inc. NA NA NA12/09/09 MOL AccessPortal Bhd Friendster, Inc. 39.4 NA NA 9

Social Networking M&A Transactions (cont’d)($ in millions) Implied LTM LTM Enterprise Revenue EBITDADate Acquiror Target Value Multiple Multiple12/08/09 Global Grind Digital, Inc. CelebrityTweet NA NA NA10/09/09 Stratus Media Group, Inc. ProElite, Inc. NA NA NM09/27/09 GovDelivery, Inc. GovLoop NA NA NA08/26/09 Delivery Concepts, LLC Eats Media, LLC NA NA NA08/19/09 MySpace, Inc. iLike, Inc. $19.5 NA NA07/31/09 Atrinsic, Inc. Shopit.com, Inc. 2.7 NA NA07/28/09 Cascadia Investments, Inc. www.phace.mobi NA NA NA07/06/09 Match.com, LLC People Media L.L.C. 57.0 NA NA06/04/09 Cascadia Investments, Inc. TinyTwirp.com NA NA NA04/07/09 No Sleep Media LLC Limbo Inc. NA NA NA03/09/09 Stardoll AB Piczo, Inc. NA NA NA03/02/09 TuitionU.com Inc. GreenNote, Inc. NA NA NA01/27/09 Digital Age Motorsports, LLC Hot Import Nights LLC NA NA NA01/26/09 Alloy Inc. Takkle, Inc. 0.7 NA NA01/13/09 MixMatchMusic, Ltd. Mix2r Media Inc. NA NA NA12/17/08 IB3 Networks, Inc. MGV Communications NA NA NA12/01/08 Six Apart Ltd. Pownce, Inc. NA NA NA08/27/08 Lifetime Entertainment Services Inc. ParentsClick Network, Inc. NA NA NA08/24/08 Amazon.com Inc. Tastemakers, Inc. NA NA NA08/04/08 AOL, LLC (nka:Historic AOL LLC) Socialthing, Inc. NA NA NA07/30/08 Deluxe Corp. PartnerUp, Inc. 3.8 NA NA07/20/08 CrowdFunder, Inc. Gubb, Inc. 0.2 NA NA07/09/08 Bigstring Corp. Buddystumbler, Inc. 0.1 NA NA03/30/08 Buzznet, Inc. Tagshine Corp. NA NA NA03/24/08 Follett Corporation Fourteen40, Inc. NA NA NA 10

Social Networking M&A Transactions (cont’d)($ in millions) Implied LTM LTM Enterprise Revenue EBITDADate Acquiror Target Value Multiple Multiple03/13/08 AOL, LLC Bebo, Inc. $860.0 NA NA02/28/08 LiveUniverse.com, Inc. Revver, Inc. NA NA NA02/07/08 uLocate Communications, Inc. (nka:W Zync, Inc. NA NA NA12/31/07 USA Today International Corporation BNQT NA NA NA12/19/07 Tiger Global Management; MYNET Yonja, LLC NA NA NA12/06/07 Double Eagle Holdings, Ltd. Ultimate Social Network, Inc. 1.8 NA NA12/04/07 Fox Digital Media Beliefnet, Inc. NA NA NA11/17/07 Penthouse Media Group, Inc. Various, Inc. 500.0 NA NA11/02/07 Microsoft Corporation WebFives Corp. NA NA NA10/09/07 Disaboom Inc. Lovebyrd.com, LLC 0.1 NA NA08/28/07 BabyCenter, LLC Mayas Mom, Inc. NA NA NA08/25/07 Hi-Media S.A. Fotolog, Inc. 90.0 NA NA08/14/07 Jack 9 Entertainment, Inc. CommunityX.net NA NA NA07/02/07 SideStep, Inc. TripUp, Inc. NA NA NA06/12/07 American Capital Strategies, Ltd. Zencon Technologies, L.L.C. NA NA NA06/11/07 The Amergence Group SonicMountain, Inc. NA NA NA05/30/07 Canvas Technology Inc. Flektor, Inc. NA NA NA05/30/07 MySpace, Inc. Photobucket, Inc. NA NA NA05/10/07 SonicMountain, Inc. Odeo, Inc. NA NA NA04/17/07 ProElite, Inc. MMAMix.com NA NA NA03/09/07 NA Decentral.tv Corp. NA NA NA02/09/07 Cisco Systems, Inc. Five Across, Inc. NA NA NA 11

Online Games Are The Swans…• Global population of virtual worlds expected to grow to about 640 million by 2015• According to eMarketer, social games could generate $2.2 billion in virtual dollars by 2012 Year CapitalCompany Founded Type Investors Raised ($mm) www.bigfishgames.com 2002 Social Balderton Capital, General Catalyst Partners, $88.3 Seattle, WA Networking Salmon River Capital LLC www.bigpoint.net 2002 Social GMT Communications Partners LLP, Peacock 8.2 New York, NY Networking Equity Fund www.gaiaonline.com 2003 MMOG Benchmark Capital, DAG Ventures LLC, 19.9 San Jose, CA Institutional Venture Partners, Redpoint Ventures, Sony Pictures Television Inc.,Time Warner Investments www.secondlife.com 2000 Virtual World Benchmark Capital, Catamount Ventures 19.0 San Francisco, CA Management LLC, Globespan Capital Partners, Omidyar Network (Linden Lab) www.playdom.com 2008 Social Lightspeed Venture Partners, New Enterprise 76.0 Mountain View, CA Networking Associates, Norwest Venture Partners (Disney) www.sulake.com 2000 Social 3i Group plc, Balderton Capital, Benchmark 35.9 Helsinki, Finland Networking Capital, Elisa Oyj, Movida Group, Taivas www.there.com 2005 Virtual World NA NA San Mateo, CA (Makena) www.zynga.com 2007 Social Avalon Ventures, Foundry Group, Institutional 589.6 San Francisco, CA 12 Networking Venture Partners, Kleiner, Perkins Caufield & Byers, Union Square Ventures

Online Gaming M&A Transactions($ in millions) Implied LTM LTM Enterprise Revenue EBITDADate Acquiror Target Value Multiple Multiple10/22/10 Kabam, Inc. WonderHill, Inc. NA NA NA09/14/10 GameHouse, Inc. Backstage Technologies Inc NA NA NA09/13/10 DeNA Global, Inc. Gameview Studios, LLC NA NA NA08/30/10 Google Inc. SocialDeck Inc. NA NA NA08/17/10 Zynga, Inc. Conduit Labs, Inc. NA NA NA08/11/10 Joytoto Company Limited Joytoto America, Inc. NA NA NA08/02/10 Titan Gaming, Inc. Xfire, Inc. NA NA NA07/27/10 Walt Disney Co. Playdom, Inc. $763.2 NA NA07/08/10 MTV Networks Company Social Express, Inc. NA NA NA06/24/10 Playdom, Inc. Hive7.com, Inc. NA NA NA06/03/10 Zynga, Inc. Challenge Games, Inc. NA NA NA05/18/10 Playdom, Inc. Acclaim Games, Inc. NA NA NA05/12/10 ngmoco, Inc. Stumptown Game Machine, LLC NA NA NA04/26/10 Playdom, Inc. Merscom, LLC NA NA NA04/20/10 News Corp. Irata Labs NA NA NA03/03/10 Playdom, Inc. Offbeat Creations, Inc. NA NA NA02/24/10 hi5 Networks, Inc. Big Six Games, Inc. NA NA NA02/08/10 Zynga, Inc. Serious Business, Inc. NA NA NA02/03/10 Almaz Capital Partners Alawar Entertainment Inc. 13.0 NA NA01/13/10 iEntertainment Network Inc. Thriller New Media, Inc. NA NA NA01/06/10 Cascadia Investments, Inc. CustomFlashGames.com NA NA NA12/03/09 Intralot SA CyberArts Licensing LLC 34.3 NA NA12/03/09 Artix Entertainment LLC Epic Inventions LLC NA NA NA11/18/09 NeoEdge Networks, Inc. Offspring NA NA NA11/12/09 Playdom, Inc. Trippert, Inc. and Green Patch, Inc. NA NA NA 13

Online Gaming M&A Transactions (cont’d)($ in millions) Implied LTM LTM Enterprise Revenue EBITDADate Acquiror Target Value Multiple Multiple11/09/09 Electronic Arts Playfish $391.3 NA NA08/24/09 Live Gamer, Inc. TwoFish, Inc. NA NA NA07/28/09 Cascadia Investments, Inc. www.phace.mobi NA NA NA01/16/09 Sony Online Entertainment, LLC Octopi LLC NA NA NA12/09/08 Infogrames Entertainment SA Cryptic Studios, Inc. 74.8 4.40x NA10/10/08 SouthPeak Interactive Corp. Gamecock Media Group 32.5 8.83x NM09/23/08 Funtank, LLC Candystand.com NA NA NA08/18/08 IG Interactive Entertainment Limited True Games Interactive, Inc. NA NA NA07/28/08 NA Octopi LLC NA NA NA06/30/08 Mediastay North America Inc. LSF Network, Inc., Luckysurf Assets NA NA NA04/01/08 THQ Inc. Elephant Entertainment, LLC NA NA NA11/12/07 Big Fish Games, Inc. Thinglefin, Inc. NA NA NA09/21/07 RealNetworks Inc. Game Trust, Inc. 20.2 NA NA07/20/07 Finam Capital Partners Alawar Entertainment Inc. NA NA NA05/15/07 Sony Online Entertainment, LLC Sigil Games Online, Inc. NA NA NA04/30/07 NA Interplay Entertainment Corp. NA NA NM 14

…And Virtual Goods Are The Golden Eggs• Microtransactions drive the virtual goods market - Microtransactions expected to grow to $17.3 billion in 2015 Capital Year Raised Company Founded Investors ($mm) www.ariasystems.net 2002 Hummer Winblad Venture Partners, Venrock $14.0 Media, PA www.come2play.com 2007 NA 1.0 NA www.dealunited.com 2007 Bertelsmann Digital Media Investments, High-Tech 6.2 Munich, Bavaria Gründerfonds Management GmbH, Sympasis Innovation Capital GmbH, VI Partners AG www.fatfoogoo.com 2006 Acquired by Digital River, Inc. on May 5, 2010; previous NA Vienna, Austria investors include Digital River and Gamma Capital (Digital River) Partners www.gwallet.com 2008 Adams Street Partners, LLC, Trinity Ventures 10.5 San Francisco, CA www.getgambit.com 2007 Shopping.com NA San Jose, CA (Kickflip) www.heyzap.com 2009 Union Square Ventures, Y Combinator $3.7 San Francisco, CA 15

…And Virtual Goods Are The Golden Eggs• Microtransactions drive the virtual goods market - Microtransactions expected to grow to $17.3 billion in 2015 Capital Year Raised Company Founded Investors ($mm) www.livegamer.com 2007 Charles River Ventures, FirstMark Capital LLC, Kodiak $36.6 New York, NY Venture Partners www.mochimedia.com 2005 Purcahsed by Shanda Games (NasdaqGS: GAME) on Jan. 14.0 (Shanda San Francisco, CA 31, 2010, for $80.0MM; previous investors include Accel Games) and Shasta Ventures www.peanutlabs.com 2005 BV Capital, BV Capital Management, LLC, eVenture 4.2 San Francisco, CA Capital Partners GmbH, LundKenner A/S www.playspan.com 2006 Easton Capital Investment Group, Ecosystem Ventures 48.3 Santa Clara, CA LLC, Menlo Ventures, Novel TMT Ventures Limited, STIC International, STIC Investments Inc. www.qinteractive.com 1995 Intrepid Investments NA Chicago, IL www.sometrics.com 2007 AT&T, Inc., Big Sky Partners, Greycroft, LLC, Steamboat Los Angeles, CA Ventures, LLC, The MailRoom Fund NA www.sponsorpay.com 2009 Hasso Plattner Ventures, Kite Ventures, Team Europe Berlin, Berlin Ventures 4.6 16

…And Virtual Goods Are The Golden Eggs• Microtransactions drive the virtual goods market - Microtransactions expected to grow to $17.3 billion in 2015 Capital Year Raised Company Founded Investors ($mm) supersonicads.com 2008 NA $2.0 London, UK www.twofish.com 2006 Rustic Canyon Partners, TriplePoint Capital LLC, Venrock 9.5 Palo Alto, CA www.viximo.com 2007 North Bridge Venture Partners, Sigma Partners 9.0 Cambridge, MA 17

Virtual Goods M&A Transactions($ in millions) Implied LTM LTM Enterprise Revenue EBITDADate Acquiror Target Value Multiple Multiple08/09/10 Google Inc. Jambool, Inc. $70.0 NA NA03/09/10 InComm, Inc. Zeev Exchange, Inc. NA NA NA08/24/09 Live Gamer, Inc. TwoFish, Inc. NA NA NA07/28/09 Live Gamer, Inc. N-Cash Co., Ltd. NA NA NA04/21/09 PlaySpan, Inc. Spare Change Payments, Inc. NA NA NA07/15/08 PlaySpan, Inc. Internet Payment Solutions, Inc. NA NA NA 18

Platform Providers Facilitate the Process Capital Year Raised Company Founded Investors ($mm) www.doubletrump.com 2006 Cedar Fund, Giza Venture Capital NA New York, NY www.sponsorpay.com 2009 Hasso Plattner Ventures, Kite Ventures, Team Europe $4.6 Berlin, Germany Ventures www.offerpalmedia.com 2007 D.E. Shaw Venture Capital, InterWest Partners, North Bridge 19.6 Fremont, CA Venture Partners www.payvment.com NA NA NA www.rixty.com NA NA 1.2 San Francisco, CA www.srpoints.com 2007 Technology Crossover Ventures 48.0 Vancouver, Canada(Adknowledge) www.trialpay.com 2006 Atomico Investment Holdings Limited, Battery Ventures, 15.8 Mountain View, CA Index Ventures 19

Payment Processors Power the Process Capital Year Raised Company Founded Investors ($mm) www.billingservicesgroup.com 2005 ABRY Partners LLC, Artemis Investment Management NA AIM: BILL Ltd., CapitalSouth Partners, CapitalSouth Partners San Antonio, TX Fund L.P., Patient Safety Technologies Inc., Waterside Capital Corporation www.paymentech.com 1985 First Data Corp. NA Dallas, TX(J.P.MorganChase & Co.) www.daopay.com NA NA NA London, UK (DaoTec Ltd.) www.orcaone.com NA NA NA New York, NY www.paybycash.com 1998 NA $28.3 Charlottesville, VA(Playspan Inc.) www.paymentpin.com 2004 NA NA Montreal, Canada www.paypal.com 1998 Acquired by eBay on October 3, 2002, for $1.5BN NA San Jose, CA www.jambool.com 2006 Bay Partners, Charles River Ventures, Hit Forge, 6.0 (Google) San Francisco, CA Madrona Venture Group 20

Facebook’s Push into Virtual Goods• Facebook introduced a virtual currency / payment platform called Facebook Credits• Credits are used to make purchases within the Facebook platform, e.g. premium items in games, virtual gifts, and other services• Facebook gets a 30% fee for usage of Credits• Target stores have started selling Facebook Credits gift cards nation- wide• According to Sean Parker, who was founding President, Facebook Credits will make up a third of Facebook’s income in the next twelve months 21

Investment ConsiderationsHighlights Risks Recent investment and partnership  Monetization of virtual goods dependent activity in virtual goods underscore on volume of users and scale potential growth in the industry  Virtual payment infrastructure is still in – Facebook’s partnerships with PayPal its infancy and Zynga  Software model is still a hindrance in Margins are spectacular virtual currency adoption – Packaged software model still persistent – Lack of free-to-play model 22

Investment Recommendations• Virtual goods ecosystem for gaming is maturing around Facebook • Removes points of control for incumbents (Zynga, etc.) • Creates more liquid market for consumers • Levels playing field for newcomers – opportunity in creative game creation still very large• Tremendous opportunity for virtual goods in many other areas where consumers will engage • Customer loyalty • Shopping • Health • Education • Many others 23

Appendix 24

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The Virtual Goods Ecosystem

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