UKRAINE AND RUSSIA COMBINED TO REACH 100 MILLION INTERNET USERS IN THE NEXT FEW YEARSGDP percapita, $(2011) UKRAINE 143.0M 13,262 30 # of users*, M Penetration, % people, 25 90% the world`s 6th 25 CAGR largest +22% economy 20 70% 58% CAGR RUSSIA 15 +34% 14 50% 80 # of users**, M Penetration, % 10 10 8 32% CAGR 70 90% 6 70 25% 30% +11% 5 15% 20% 60 70% CAGR 0 10% +14% 51 2008 2009 2010 2011 2014F 50 45 62% 53% 50% 39 45.8M 40 3,560 In September 2011, Russia 32 39% people overtook Germany as 34% 30% Europe’s largest Internet 30 28% market by number of users 65M users combined in Russia and Ukraine as of 20 10% 2008 2009 2010 2011 2014F end of 2011 163 1,9 GDP, $BSource: comScore, GFK Ukraine, IMF (2011)*older than 18 years old**older than 15 years old 2
E-COMMERCE IN RUSSIA TO MAKE EVEN BIGGER GAINS GDP (PPP) per capita in Russia and Europe E-commerce is gaining momentum, capturing increasing share in Russia`s retail turnover CAGR 2009-11,% Russians and Total retail turnover, $B 621 7% E-commerce in Disposable S32.7K Europeans have Russia is to almost the same E-commerce turnover, $B grow by 40-50% income shopping power 579 10.3 51% to reach $30- 40B in the next 16M people (33% few years S15.0K of Internet users) 545 7.6 made online E-commerce in $13.1K Europe will $10.5K purchases over 4.5 a 6-month- grow just 12% period p.a. over the Average VS Average next 5 years Russian European 2009 2010 2011 Selected retail sectors most heavily disrupted by e-commerce sales Clothes, Consumer Cosmetics Children`s Air tickets footwear and electronics and toiletries toys accessories and home appliances 52M women +10.0% 15-64 spend 22M children $62.5 12% of under the age $56.8 income on 14 +81.8% Total, $B cosmetics (2X $40.0 vs. US&EU) 2010 $21.5 +9.2% +15.2% +23.6% 2011 $10.9 $11.9 $9.8 $11.3 $9.2 $7.4 +75.1% +31.7% +44.7% +41.8% +106.7% Online $641M 1,11B $2.6B $3.4B 47M 69M $322M $457M $537M 1,10B
ONLINE ADVERTISING IN RUSSIA AND UKRAINE: THEFASTEST GROWTH RATES IN THE WORLD RUSSIA UKRAINE Revenues from online advertising to Advertising budgets in Ukraine are yet double every other year to move online +50% p.a. +50% p.a $2.8B $123M $1.8B $83M $0.8B $1.4B $55M $35M 2010 2011 2012E 2013F 2010 2011 2012E 2013F Online ads per capita, $ Online ads per capita, $ $5,7 $9.5 $12.8 $19.2 $0.8 $1.2 $1.8 $2.7 Online ads in Russia exceeded ads in Although online ads have increased by the press for the first time in 2011 and 57% over the last year, they still represent finished the year with 56% growth the smallest market when compared to (highest growth rate in the industry) other media Online $55M Online Out- TV TV Press Out- $1.4B door $4.3B $440M $305M door $1.1B $125M Press $1.3B +18% +56% +6% +15% +33% +57% +10% +25% 4
ENTERPRISE SAAS MARKET CAN REACH $4-5B, IS SET TO GROW BY 100-150% P.A. FROM A MODEST BASE OF $100 MILLION Russia Ukraine Quantity 536K 67K LLCs and corporations Potential SaaS $5,000 $3,000 budget, $ Quantity 1.7M 381K SMBs Potential SaaS $1,000 $500 budget, $ Potential SaaS $4.4B $0.4B market size Existing enterprise $9.1B $0.1B software market In Russia, the SAAS market (~100M in 2011) is likely to grow by seizing share from the existing $9B enterprise software market, especially in collaboration, business intelligence, CRM, ERP and security segments (to reach $4.5B in the next few years). In Ukraine, the SaaS market is yet to emerge and is likely to grow organically thanks to new users (to reach $0.4- 0.5B in the next few years)Source: IDC, Russian and Ukrainian Statisctics Committees
OPPORTUNITY IN MOBILE APPLICATIONS SMARTPHONE USAGE IN RUSSIA SMARTPHONE USAGE IN UKRAINE 45M total # of mobile internet 5-9M total # of mobile internet 21-29M 4M users (3G USB modems & users (3G USB modems & SIMs, 2G) SIMs, 2G) 12M 1.5-3M 2G mobile internet users 15M 3G mobile internet users 1M (microSIMS) 21M 3G mobile internet users 50K (microSIMs) 6M 16.1M +116% 5.79M +28% 4.54M 1.10M +80% 5.3M +60% +200% 7.6M +292% 0.45M 20M 2.0M 4.69M +15% 5M 10.8M +95% 4.09M 5.6M 6 01`2011 01` 2012 01` 2014F 01`2011 01` 2012 01` 2014F Major drivers: Growth of mobile-only Internet users; 25-40% of social network users check in via mobile devices (up to 10M daily unique mobile users in Russia and Ukraine( Emerging interest to social/local mobile commerce Middle-class and younger users demand more engaging mobile content LTE network development in Russia in 2012 and beyond New licenses for 3G mobile internet via carriers` microSIM expected in Ukraine in 2012-2013 Alternative monetization models preferred (affiliate programs etc.) - Apples App store and Googles Play accept payments almost exclusively through bank cards, which Russians and Ukrainians are reluctant to use for digital paymentsSource: MTS, Kyivstar, Life:), AIN.UA, Informa Telecoms & Media, eMarketer, Svyaznoy, Xyologic, i-Free
OPPORTUNITIES IN GAMES: RUSSIA Russian online gaming market, $B TOP-5 Russian original game developers* $1.40 +35-40% Revenue, Company Game type 2011 Social, Casual, Mail.ru Games $129M +21% p.a. $1.00 Browser $0.74 Game Insight Mobile $40M $0.68 MMOG and Innova Systems $36M browser Alawar Casual $30M ZeptoLabs Mobile $24M 2009 2010 2011 2012E Highlights: Russian gaming industry is relatively young, most of its top players emerged in mobile/social era Total gaming audience represented by 38M people, casual games being the most popular (played by 29M people), while console games attract some 14M players only. Total industry revenue reached estimated $1B, despite the fact that 75% of PC or console games are being downloaded illegally. Casual and mobile game developers are globally oriented businesses, while social games are fine-tuned for domestoc social network users The market is still fragmented and awaits consolidation*other successful gaming companies include VC-backed Drimmi and PixonicSource: Discovery Research Group, NewZoo, Forbes.ru 7
OPPORTUNITIES IN GAMES: UKRAINE Major original game developers in Ukraine Company Game type Examples of games International publisher/ client GSC Game World Console & PC S.T.A.L.K.E.R, Cossaks: European WARS THQ Inc (USA) Action Forms / Tatem Console & PC/ iOS Carnivores, Vivisector Beeplex Group (USA) Games mobile 4A Games Console & PC Metro 2033, etc., Men of War THQ Inc , Best Way (USA) Quest games Sherlock Holmes, World of Frogwares Console & PC, mobile Frogwares Games (Ireland) Battle, etc. Dereza Production Studio Console & PC, casual Turnips Quest games, Sinbad IDDK Group (Russia) Overload, Family Game Night, World of Microsof, Disney, Zynga, Persha Studia Console & PC, casual tanks, World of warplanes etc. Casual, social, mobile Absolutist 100+ titles Self-publisher & PC Mistery of the Earl, Celtic Lore, online Zen-producers Social, casual, PC Self-publisher portal Funlinker Highlights: Ukrainian gaming industry emerged in the late 1990s when Ukraine became a hotbed of outsourced labor for major Western games publishers Most Ukrainian game developers are represented by “legacy” players specializing on expensive AAA console games; cumulative annual budget of top players is greater than $100M The monetary value of internal market is unclear, with lion`s share of revenues going to Russian social networks` gaming applications Casual and mobile game developers are globally oriented / most of them combine original products with outsourcing workSource: Bagnet org, team analysis 8
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