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Siemer & Associates Digital Video Report 2013

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  • 1. Embedded Specialized Accomplished Digital Video Report Fall 2013
  • 2. Table of Contents Section I Industry Trends and Dynamics Section II Multi-Channel Networks Section III Social Video Section IV OTT Video Platforms Appendix Transaction Case Studies Public and Transaction Comparables 2 Summer 2013 Digital Video Report
  • 3. INDUSTRY TRENDS AND DYNAMICS
  • 4. Online & Mobile Video Overview Video content spans all connected devices – smartphones, tablets, connected TVs and OTT platforms, and even including wearable technologies – delivering a perpetually always-on digital video audience Digital video – with its comparatively small production budgets and unlimited distribution – has democratized content creation and turned audiences global, allowing upstarts to scale rapidly and compete with traditional incumbents for audience engagement and advertising spend Multi-channel networks in particular have sought to capitalize on the proliferation of content creators, leveraging YouTube as a distribution platform and attempting to differentiate via defined verticals and ancillary services (advertising, analytics tools, etc.) With users increasingly accessing their chosen content across multiple platforms, digital video adtech companies have been responding accordingly by expanding their product and service suite to support cross-platform functionality and programmatic media buying / selling 4 Summer 2013 Digital Video Report
  • 5. Online & Mobile Video Overview The way customers access video content continues to change as the functionality in both mobile applications and gaming consoles are further developed ― Non-Desktop video views, a combination of both mobile applications and game consoles, accounted for 19.0% of all views in Q1 2013 in the US, up from only 3.0% in Q1 2012 ― As a result, desktop video minutes per viewer is down 5% in YoY growth as consumers increasingly use nondesktop devices to stream content The industry is characterized by various subsectors and unique monetization strategies ― YouTube and other destination sites (e.g., DailyMotion) aside, multi-channel networks (MCNs), social video and over-the-top (OTT) video platforms have all emerged as prominent players ― Prominent MCNs Fullscreen and Maker Studios recently received $30.0 million and $26.0 million in investment led by the Chernin Group and Canal+ / SingTel Innov8, respectively Total US Video Views by Platform Q1 2012 Q1 2013 3% 19% 81% 97% Desktop videos Desktop videos Non-desktop videos* Non-desktop videos* *Non-desktop videos includes game consoles in the calculation Source: Wells Fargo Securities, LLC, ComScore, FreeWheel 5 Summer 2013 Digital Video Report
  • 6. Domestic Penetration The US stabilizes as a mature market with steady growth and penetration projections Internet Users Who Download or Stream Video Online at least Once per Month 200 187.6 178.7 Viewers (in mm) 120 90.0% 169.3 158.1 160 80.0% 145.6 130.8 65.0% 68.2% 100.0% 70.8% 72.9% 74.7% 76.0% 70.0% 60.0% 60.5% 100 50.0% 80 40.0% 60 30.0% 40 20.0% 20 10.0% 0 % of Internet Users 180 140 195.5 0.0% 2009A 2010A 2011A 2012A Online video viewers 2013P 2014P % of Internet users 2015P Source: Wall Street Research, eMarketer 6 Summer 2013 Digital Video Report
  • 7. Current Market Trends Online video audiences are expected to double by 2016, reaching 1.5 billion globally, as the penetration and affordability of computers and mobile devices continues to expand As the market matures, US mobile video revenues are projected to nearly triple to $4.0 billion in 2013, up from $1.3 billion in 2012 US Mobile Video Revenues (By Type, in $000s) $4,500 $4,015 $4,000 $3,463 $3,500 $2,838 $3,000 $2,298 $2,500 $1,316 $1,500 $1,000 $500 $208 $1,730 $2,000 $650 $316 $1,611 $1,274 $903 $583 $148 $331 $735 $1,051 $270 $349 $1,508 2014 E $1,251 $1,665 2015 E $1,874 $2,054 $0 2011 A 2012 A 2013 E Subscription-based* Ad-supported 2016 E 2017 E Pay-per-view download *Subscription-based revenues include mobile-only subscription revenues and a portion of revenues from cross-device subscription bundles Source: Wall Street Research, eMarketer 7 Summer 2013 Digital Video Report
  • 8. Online & Mobile Video Overview The online video industry posted strong growth through the first part of the year as indicated by May’s YoY 22.0% increase from 46.7 billion total IP-video streams to 57.0 billion ― Total viewers grew to 178.0 million, a 2.0% YoY growth, suggesting an increase in per capital consumption as the primary driver for industry growth Consumers are willing to accept higher advertisement loads per content segment in return for more viewing convenience ― Long-form ad loads grew 28.0% from Q1 2012 to Q1 2013, an increase from 7.4 ad units per content segment to 9.5 units Ad Completion Rate by Site Type 100.0% 80.0% Video Ads Per Video Viewed (Long-Form Content) 12 91.0% 10.2 76.0% 10 68.0% 8 60.0% 9.2 Q2 2013 Q3 2012 9.5 8.9 7.4 6 40.0% 4 20.0% 2 0.0% Ad Networks / Exchanges Internet Brands Major Media Brands 0 Q1 2012 Q4 2012 Q1 2013 Source: Wells Fargo Securities, LLC, ComScore 8 Summer 2013 Digital Video Report
  • 9. Current Market Trends The average US viewer watches almost 100,000 minutes of television each year. Viewing habits are changing as 229 million viewers are expected to be connected to over-the-top services on devices by 2016 ― 35% of these viewers will watch TV on these devices Almost 25% of television viewing time is dedicated to ads and content providers are taking advantage of viewers’ acceptance of ads tied to TV as they look to increase their digital ad spending US Digital Video Ad Spending, 2011-2017 2016 Projected Share of TV Viewing by Device (US) $10 $9 $9 56.5% $8 $8 Tablet, 16% $ bn Computer, 14% Television, 65% 50.0% $7 $7 $6 60.0% $6 41.4% 40.8% $5 40.0% 38.9% 30.0% $4 $4 $3 $2 Smartphone, 5% $3 20.0% 21.4% $2 15.1% $1 12.8% $- 10.0% 0.0% 2011 A 2012 A 2013 E 2014 E Digital video ad spending 2015 E 2016 E 2017 E % Change Source: IAB, Multiscreen Marketer; TDG, TV Everywhere Update; mDialog; eMarketer 9 Summer 2013 Digital Video Report
  • 10. Current Market Trends This ultimately creates a potential linear video ad market of 4 trillion ads by 2016 ― 50,000 ads x 229 million viewers x 35% of total devices Consumption of digital video ads is increasing – 23% of the 39 billion content videos viewed in December included video ads, up from 14% the prior year Increasing sophistication of brand engagement via new methods such as interactive content or longform advertorials versus traditional TV advertisements are capitalizing on the advantage that online video provides ― Chipotle’s new branded video generated almost 4 million views on YouTube in its first five days Impact of Made-for-Web vs. Repurposed TV Advertisement by Age Group 7 5.9 6 4.6 4.7 5 4 3 3.3 2.5 3.4 3 3.7 2.8 2 2 4.6 1.2 1.7 1.5 1 2 1 1.4 1.3 0.4 1.1 0.7 0.7 0.6 0.5 TV Web 0 TV Web Aided Brand Awareness TV Web TV Online Ad Awareness Web Brand Favorability 18-34 35-49 Purchase Intent / Consideration 50+ Source: TDG, TV Everywhere Update; mDialog; Tubefilter; Wall Street Journal 10 Summer 2013 Digital Video Report
  • 11. Current Market Trends Larger supply inventory coupled with the increased use of programmatic buying of ads is reducing the average price per CPM in the near term as the advantage shifts to the buyers ― Publishers who provide access to distinct and high value market will remain more resistant to this commoditized pricing US Online Video Ad CPM, by Inventory Tier, 2010-2017 Total Spending on RTB Video (in $mm) $50 $1,200 $1,141 $45 $45 $41 $40 $33 $35 $30 $1,000 $37 $27 $26 $25 $25 $25 $31 $24 $31 $31 $31 $25 $25 $26 $800 $686 $600 $20 $15 $16 $17 $18 $19 $20 $21 $23 $22 $402 $400 $10 $5 $200 $190 $2010 2011 Indirect 2012 Midtier 2013 2014 Premium 2015 2016 2017 $- Average CPM 2011 2012 2013 2014 Source: Credit Suisse, Google – Doubleclick, Wall Street Journal, Forrester, Tubefilter 11 Summer 2013 Digital Video Report
  • 12. Current Market Trends Video ad networks are exploring ways to capitalize on growth of video ads and their higher level of engagement ― YuMe launched its new Household Targeting system to deliver in-stream, interactive ads across all connected screens in a household ― Tremor Video announced they would move from serving in-banner video advertising and focus on in-stream video ad content Technologies such as mDialog’s Smart Stream platform, which allows for uniquely addressable advertising within linear, live and VOD, are being launched to maximize the potential of video ads Interactive Online Video Advertising’s Effect on Brand Metrics in the US, Q2, 2012 Completion Rate by Spot Position 100% 0.4 0.5 Brand favorability 90% 70% 1 Message association 1.3 50% 40% 2.3 Online ad awareness 0 59% 60% 1.4 1.3 Aided brand awareness 76% 80% 0.7 0.8 Purchase intent 88% 30% 3 1 2 3 % Increase over Control Group (TV ads) Noninteractive Interactive 20% 10% 4 0% Mid-Roll Pre-Roll Post-Roll Source: eMarketre.com, Milward Brown, Dynamic Logic & Yume, Adobe 12 Summer 2013 Digital Video Report
  • 13. Online & Mobile Video Trends Despite early concerns that consumers would resist utilizing mobile devices for long-form video, both mobile and tablet video users spent more than half of their total online viewing time watching videos longer than 10 minutes ― Previously, analytics focused on the number of views a piece of video content had accumulated, yet recent studies indicate that the number of minutes watched per view is a more relevant metric ― The growing popularity of long-form viewing on online and mobile devices allows for more opportunities to include mid-roll ads within this content As mobile screens proliferate globally, we expect that consumer video consumption will continue to evolve as a more mobile, multi-platform experience Proportions of Videos Watched by Length 80.0% 71.0% 60.0% 53.0% 52.0% 38.0% 40.0% 21.0% 20.0% 14.0% 3.0% 7.0% 5.0% 25.0% 22.0% 15.0% 6.0% 4.0% 22.0% 15.0% 6.0% 5.0% 8.0% 7.0% 0.0% Connected TVs / Gaming Consoles Mobile < 1 min 1-3 min Tablet 3-6 min 6-10 min Desktop > 10 min Source: Wall Street Research, eMarketer 13 Summer 2013 Digital Video Report
  • 14. MULTI-CHANNEL NETWORKS
  • 15. Multi-Channel Network Overview MCNs provide the production, marketing and technology infrastructure to original content channels for a percentage of the revenues generated ― By joining MCNs, video content creators can expand their audience through cross-promotion executed across the massive group of channels aggregated by each firm ― MCN’s scale allows for revenue and cost synergies, as well as removing a lot of the challenges small content creators face MCN’s distinct business model is attracting interest from both large corporations and notable VC firms Milestone Fundings for MCNs Fullscreen raised $30.0 million in Series A funding led by the Chernin Group in June 2013 In July 2013, Base79 secured a multi-million dollar funding, actual amount undisclosed, led by Evolution Media Growth Partners YouTube renewed its contract with VEVO and has taken a 7% stake in the company for a $40-50 million investment Maker Studios turned down a nine-figure acquisition offer to close a $36.0 million investment led by Time Warner Investments in 2012 and raised an additional $26.0 million in August 2013 Tastemade raised $10.0 million in Series B funding led by Raine Venture Partners in August 2013 Machinima closed $35.0 million in venture round funding led by Google in May 2012 and is rumored to be seeking another $80.0 million from large studios (e.g., WB and Paramount) StyleHaul raised an additional $6 million in Series B funding from RTL Group, bringing the total Series B funding to $12.5 million theAudience raised $20.0 million in 2012 from investors including Founders Fund, Guggenheim, Participant Media and Intertainment Media Source: Variety, TechCrunch, Wall Street Research, CrunchBase 15 Summer 2013 Digital Video Report
  • 16. Top YouTube Partner Channels as of June 2013 VEVO leads in total unique visitors and number of views MCNs Total Unique Visitors and Number of Views 50.0 47.5 600.0 533.9 500.0 45.0 35.0 34.3 400.0 28.8 30.0 25.0 476.8 28.4 389.5 26.5 22.6 309.2 20.0 300.0 20.4 16.8 200.0 15.0 10.0 160.2 137.2 127.0 5.0 Videos (in Thousands) Unique Visitors (in mm) 40.0 100.0 85.3 0.0 0.0 Total Unique Visitors Views* *Views are defined as any streamed segment of audiovisual content, including both progressive downloads and live streams. For long-form content, each segment of content is counted as a distinct video stream. Video views are inclusive of both user-initiated and auto-played videos that are viewed for longer then 3 seconds. Source: comScore.com 16 Summer 2013 Digital Video Report
  • 17. Industry Challenges for Multi-Channel Networks Because music makes up the largest share of the MCN market, developers must consider legal obstacles to maintain unique visitors and earnings ― Fullscreen was sued in August 2013 by the National Music Publishers’ Association (NMPA) for copyright infringement of videos ― Maker Studios also settled a lawsuit with the NMPA and will pay music publishers for past and future infringements Utilizing MCNs requires a trade-off on behalf of the content publisher ― Ad revenue is often deferred to network providers in exchange for greater exposure and marketing Primary Benefits / Concerns for Content Creators Joining an MCN Access to high-end equipment and resources allowing for better quality video production Significantly increased marketing support and endorsement Opportunity for cross-promotion between channels within the network Forgo advertising revenue generated from channel content Forfeit merchandise revenue due to profit split with MCN Potential loss of freedom in producing original content Source: TechCrunch, Wall Street Research 17 Summer 2013 Digital Video Report
  • 18. Industry Challenges for Multi-Channel Networks Networks poaching other networks’ clients is proving to be dangerous to the industry ― Some MCNs are beginning to prioritize poaching big-name channels and popular YouTube personalities over developing the quality of their current talent Poaching talent and co-opting material from other networks has the potential to drive up the percent of revenue share that MCNs split with talent, which limits long term financial benefits of acquiring new talent ― MCNs currently have a net revenue margin of around 16.5% (after profit splits with both YouTube and Talent) and further compression could prove challenging to achieving both profitability and future growth prospects Percentage Revenue Splits Net Revenue Margin 16.5% 45% 45.0% 30% 55% 38.5% 70% MCN YouTube MCN Talent MCN Talent YouTube Source: Wall Street Research, TubeFilter, Upfront Ventures 18 Summer 2013 Digital Video Report
  • 19. Industry Challenges for Multi-Channel Networks MCNs may become less advantageous as different applications emerge offering similar analytics ― Google Chrome’s free extension, VidIQ, offers video analytics to help content producers maximize audiences ― For each video, VidIQ tracks and displays watch time, social media shares and VidIQ score, which determines how likely a video is to show up in YouTube’s related, recommended and search categories ― This may prove threatening to Fullscreen, which has a differentiated product among MCNs, offering key data analytics, tools and support ― Optimizing videos through third-party applications may deliver increases in a video’s exposure comparable with what MCNs provide While incumbent MCNs have their own challenges, new or aspiring MCNs face enormous hurdles and barriers to enter the market, including the scale already achieved by incumbents, as well as large funding disadvantages ― The first MCNs were able to capitalize on YouTube’s Partner Grants program which allocated an initial $5.0 million to help spur the creation of original content ― Many feel the “land grab” is largely complete – so new networks have to attract talent away from the large players – which will prove costly Source: Wall Street Research, TubeFilter 19 Summer 2013 Digital Video Report
  • 20. Multi-Channel Networks Reduce Dependency on YouTube Both Youtube creators and MCNs feel that YouTube’s ad revenue splits are overbearing, curtailing the industry’s growth potential and causing MCNs to seek strategic alternatives ― Fullscreen and VEVO remain the only MCNs rumored to be profitable Although YouTube is currently the foundation for all MCNs, leading networks are seeking ways of diversifying their content onto other platforms ― Maker Studios recently acquired Blip Networks and will integrate it into their multi-media platform as an independent destination site (Fullscreen is also exploring this possibility) ― Machinima announced in July 2013 that it wants to raise $80.0 million to launch its own online video platform subscription service with Leading MCNs Delve into Original Content Production premium original content This gaming and comic-oriented MCN originated as a YouTube channel producing original content Having already partnered with Lionsgate to produce an original web series in 2012, Machinima recently teamed up with Ridley Scott to produce 12 original Sci-Fi short films If able to secure funding, the company is earmarked to launch Machinima Plus, a premium subscription product similar to Hulu Plus Founded in 2009, VEVO operates as an online music video platform In March 2013, VEVO announced the release of a 24-hour programmed channel, called VEVO TV, consisting of music-themed original shows supplementing blocks of videos grouped by genre Although Maker Studios represents a wide range of channels, they established themselves as a top network in the gaming vertical in August 2013 with a re-launch of their gaming channel, Polaris Maker Studios, unhappy with YouTube’s revenue share agreement, acquired Blip Networks which will serve as an independent destination site Fullscreen differentiates itself from other MCNs by providing its creators with technical tools After Fullscreen secured $30.0 million in a round of Series A funding led by the Chernin Group, co-founder George Strompolos confirmed that while Fullscreen is currently known as a network of YouTube creators, they are on the path of evolving into a studio Source: Variety, Pandodaily, The Wrap 20 Summer 2013 Digital Video Report
  • 21. SOCIAL VIDEO
  • 22. Emergence of the Social Video Platform Viddy, Socialcam, Chill, and Loopcam, launched in 2011, were the first mobile applications to introduce the concept of viewing and sharing video content in a social media setting ― Between December 2011 and March 2012, mobile video app usage jumped 52.0% from 152.0 minutes per month to 231.0 minutes per month ― During the same period, video usage from Google’s sites, primarily consisting of YouTube, fell 10.0% Twitter, a platform based on shortened and straightforward content, launched Vine in January 2013 ― Vine places control in users’ hands to customize and share brief videos with followers ― In August 2013 Vine hit 40 million users, up 207% from its reported 13 million users just two months prior ― Vine has succeeded where previous mobile video sharing apps have faltered by capitalizing on Twitter’s customer base and market share As the battle ensues for which platform will become the “Instagram of videos,” Instagram announced in late June 2013 that it would allow for users to film and post videos ― Instagram reported it has reached 150 million monthly users in September 2013 July 2011 - Loopcam launches as a platform that allows users to create and loop gif-animations 2011 April 2011 - Viddy launches as a social video platform and becomes #1 in iOS App Store 2012 Source: TechCrunch, CrunchBase, Wall Street Research, LA Times July 2012 – Autodesk acquires Socialcam, a mobile video application, just 18 months after its launch for $60.0 million April 2012 - Viddy secures $30.0 million in Series B funding after reporting 5.5 million new users in 11 days 22 2013 June 2013 – Instagram announces it will launch a 15-second video feature January 2013 – Twitter introduces Vine, which allows users to film 6 seconds of video through punctuated recording Summer 2013 Digital Video Report
  • 23. Online Social Media as a Marketing Tool In the US alone, video advertisements receive 13.2 billion views monthly Social video advertising relies heavily on shared content through social channels Companies aim to leverage “earned media,” or publicity gained through social media ― Popular viral videos may deliver businesses publicity for no extra cost • Better tailor campaigns to customer base Targeting Consumers • Marketing relevancy • Efficient ad placement Social Media Sharing • Expand reach to similar consumers Online video advertising has overtaken traditional TV commercials in terms of customer recall and likability Brand Recognition Effectiveness Metrics: TV vs. Online Video Ads 70.0% Analytics • Potential virality may expand audience 64.0% 60.0% 50.0% 49.0% 46.0% 50.0% 40.0% 40.0% 32.0% 27.0% 30.0% 24.0% 20.0% 28.0% 20.0% 17.0% 15.0% 10.0% 0.0% General Recall Video ads in TV shows online Source: Business Insider Brand Recall Message Recall Video ads in short-form video online 23 Likability TV commercials Summer 2013 Digital Video Report
  • 24. YouTube Demands High Premium for Content Distribution With over 1.0 billion monthly users and 1.0 million content creators, YouTube reigns as the world’s largest online video destination ― YouTube is expected to generate $5.0 billion in revenue in 2013, comprising nearly 11.0% of Google’s total revenue Content creators have the option to join the YouTube Partner Program, which allows them to monetize their videos through automatically-targeted ad formats With increasing digital video ad spend, YouTube’s revenue sharing model has been challenged as it gives content suppliers only 55% of ad revenue generated against their content, while keeping 45% ― YouTube asserts that bandwidth, video hosting, video players, user analytics, ad serving, geo-blocking, content filtering and other large infrastructure costs justify its collecting 45.0% A challenge for YouTube is that premium content providers such as traditional media companies and pure play digital studios could shift toward alternative distributors in an effort to retain more profit Leading Online Video Monetization Platforms (May 2013) Company Name 1 2 3 4 5 6 7 8 9 10 Google Sites Bright Roll platform Hulu LIVERAIL.COM ADAP.TV AOL, Inc. Specific Media TubeMogul Video Ad Platform NDN Tremor Video Total Videos (bn) 16.51 2.62 2.40 2.13 2.10 1.47 1.41 1.23 1.08 0.88 YoY -13% 132% -6% N/A 117% 155% 88% 37% 89% 22% Videos with In-stream ad units (bn) 2.55 2.62 1.67 2.13 2.10 0.63 1.41 1.23 0.58 0.88 Company Name YoY 84% 132% 0% N/A 117% 66% 88% 37% 102% 22% 11 12 13 14 15 16 17 18 19 20 Microsoft Sites CBS Interactive Facebook VEVO Videology Viacom Digital NETFLIX.COM Yahoo! Sites ESPN SpotXchange Video Ad Marketplace Total Videos (bn) 0.81 0.79 0.73 0.66 0.63 0.63 0.62 0.59 0.52 0.48 YoY 0% 33% N/A -7% 58% -8% 47% -39% -31% 22% Videos with In-stream ad units (bn) 0.27 0.49 0.00093 0.072 0.63 0.21 0.00004 0.25 0.34 0.48 YoY -16% 27% N/A 24% 58% -16% -67% 106% -31% -22% Source: Variety, Wall Street Research, Wells Fargo Securities, LLC, comScore.com 24 Summer 2013 Digital Video Report
  • 25. Social Video Advertising Opportunities Most online video can be monetized via pre-roll insertion, banner overlays or interactive in-stream ads, among others, but how can a platform consisting solely of 6 or 15-second videos be monetized? The 6-second Vine or 15-second Instagram video IS the ad Vine can easily add geo-location data to post, a comparative advantage over other video platforms (most notably YouTube) ― This allows local restaurants and vendors to better target their specific, location based, customers Short form video content also naturally lends itself to teaser segments ― Longer form video content could be released in 6 or 15-second segments where the next video is only unlockable after certain follower and retweet thresholds are met ― Ideally suited to ramp up fan engagement for marquee (i.e., sports, movie/TV premieres) events Finally, short, how-to videos can be created to either showcase the product itself, or show off creative uses for a product ― Additionally, customers could be asked to submit Vine or Instagram videos of themselves using the product Source: AdAge 25 Summer 2013 Digital Video Report
  • 26. Social Video Viral Advertising Sharing of branded content grew in Q2 2013 by 7.0% across all verticals to 33.3 million video shares ― However, sharing in Q2 was highly concentrated with the top 10 videos accounting for 45.0% of total sharing FMCG / CPG brands put in an excellent social video performance, growing shares by 10.3% from the previous quarter, which had been boosted by a strong Super Bowl performance Entertainment (including movie, videogame and TV trailers, but excluding music videos) remained the strongest social vertical, with a 33.1% share of total video shares ― Entertainment sharing remains highly hit-driven, with Man of Steel and Call of Duty driving much of the activity Social Video Sharing by Vertical: Q2 2013 Market Share Performance by Vertical: Q1 2013 vs. Q2 2013 12,000,000 +12.0% +10.3% 3.1% 8.6% 8.7% Quarterly Shares 10,000,000 33.1% 17.8% 28.7% 8,000,000 +1.6% 6,000,000 +218.6% 4,000,000 -67.3% 2,000,000 0 Entertainment FMCG Tech Retail Autos Entertainment Other FMCG Q1 2013 Tech Q2 2013 Retail Autos Source: Wall Street Research 26 Summer 2013 Digital Video Report
  • 27. Social Video Advertising Overview Popular social media platforms such as Twitter and Facebook now have over 200.0 million and 1.1 billion monthly users, respectively ― As of July 2013, 76.0% of Twitter and Facebook users log in at least once each day Simultaneously the growth of online video “snacking,” or viewing short, easily accessed clips has served to increase social video sharing To capitalize on the organic growth in users sharing their favorite videos, an ecosystem of video seeding companies distribute branded videos for their agency or direct clients has developed ― Optimum content placement, or “seeding,” is achieved by providing means for the advertiser to segment and target their intended audience by geo-location, interest vertical, etc., across as large a publisher base as possible, with additional sequential ads, vendor or in-network re-targeting capabilities provided These companies such as Giant Media, Unruly Media and Feed Company, among others, seek to maximize outreach and optimize content placement ― Outreach is designed to target both social media communities, influential online personalities and followers of niche interest blogs and forums across the web and get people talking about and sharing a campaign Source: Wall Street Research, 27 Summer 2013 Digital Video Report
  • 28. Social Video Advertising Overview To ensure that consumers are truly engaging with the brand, and to effectively measure a campaign’s ROI, social video campaigns are generally priced on a CPV model However, video views are just one important consideration when trying to effectively measure brand engagement, with other metrics arguably providing deeper insight: ― Time spent viewing the ad, even if not to completion ― Interactivity, such as starting the ad, or intentionally mousing over it ― Dwell rate, or the proportion of impressions that were intentionally engaged with by touch, interaction or click ― Sharing or commenting on ads – the foundation of the social, word-of-mouth or viral aspects of brand engagement ― Visiting a brand’s website as a result, even if not directly, of viewing the video ad ― Simply paying attention to ads and being aware of the brand – which are, in many ways, the core engagement metrics Source: eMarketer 28 Summer 2013 Digital Video Report
  • 29. Social Video Advertising Opportunities Making branded videos shareable can dramatically increase a brand’s reach, generate recommendations among peer groups, increase brand uplift, and trigger purchases / conversions While video views are primarily an indication of media spend (“paid media”), video shares on platforms such as Facebook, Twitter and across the blogosphere, demonstrate that the consumer has engaged much more deeply with the content ― These shares are an indication that the product or promotional video has gained genuine social traction and organic consumer demand (“earned media”) ― As word-of-mouth is the primary factor behind 20%-50% of purchasing decisions, peer-to-peer recommendations are one of the most powerful marketing tactics available to move buyers down the purchase funnel Survey: User Behavior Within Three Days of Video Viewing 40.0% 30.0% 12.0% 9.0% 20.0% 10.0% 26.0% 6.0% 9.0% 21.0% 20.0% 3.0% 8.0% 1.0% 7.0% Commented on video Shared link of video 11.0% 0.0% Talked to someone Went brand's site about it Source: Unruly Media, McKinsey Searched for brand online Searched for similar products Immediate 29 2.0% 5.0% 2.0% 4.0% Visited/followed Sent video directly brand on social to someone media 2.0% 2.0% Purchased product Delayed Summer 2013 Digital Video Report
  • 30. Social Video Seeding Opportunities Added competition in social video has fueled the need for the leading companies to go beyond seeding to stand out from the crowd and stay ahead through various initiatives including: 1. Emotional measurement — Take a more scientific approach to work out what makes someone decide to share a piece of content — Calculate the amount of “earned media” a video is likely to attract across the social web and how much paid investment (“paid media”), will need to be deployed — Partner with companies who measure how users are likely to respond to advertising 2. Exchange-based seeding — Create an ad format that can be served into standard MPU (300x250) and into Facebook by buying on the exchanges — Focus more on presenting the media as content, rather than as an ad 3. Self-service platform — Develop a platform through which smaller advertisers can set up their own campaigns in a simple way and can choose from a variety of geo and audience targeting options Source: Videoadnews.com 30 Summer 2013 Digital Video Report
  • 31. OTT VIDEO PLATFORMS
  • 32. OTT Overview and Trends Bonus Add-on Advertisements VOD SVOD The global OTT video market is estimated to be worth over $20.0 billion as of February 2013, with opportunities for extensive growth in upcoming years ― Much of this growth potential lies abroad, as approximately 510.0 million (excluding current developed markets, India and China) international homes are expected to have broadband by 2021 Subscription video-on-demand (SVOD) represents a key market opportunity in the sector while the highly fragmented global marketplace allows for potential consolidation ― SVOD platforms are expected to spend between $9.2 billion and $13.8 billion on content rights by 2021, with content producers expected to earn up to $10.0 billion annually from OTT digital rights sales Apart from SVOD, OTT providers focus on three other principal monetization strategies: bonus add-ons, advertisements and VOD Concerns arise with certain research suggesting that the growth in SVOD rights sales may eat into revenues of the much more pervasive advertising strategy ― SVOD inherently promotes the avoidance of ads and a shift away from traditional television ratings metrics Major players, such as Netflix, will gain the most from global SVOD growth if they can leverage their market position to wisely expand their content offerings and geographic distribution Source: Wall Street Research 32 Summer 2013 Digital Video Report
  • 33. Original Content The industry leaders in online television expand to include original programming Netflix leads in original content programming with critically acclaimed offerings such as Arrested Development, House of Cards and most recently, Orange is the New Black In late July 2013, Netflix announced it will expand its lineup into additional content verticals including feature films, documentaries, stand-up comedy specials, news programs and talk shows Netflix executives attributed their YoY subscriber growth for Q2 2013 to their original programs Hulu began launching original series as early as 2011, with its most recent offerings featuring stars such as Seth Meyers and Eva Longoria In April 2013, with content costs rising, Hulu lost the exclusive rights to old SNL clips to Yahoo; this may lead to a need for increased focus on original programming Hulu retracted its for-sale status for a second time in July 2013, with owners Disney, NBCUniversal and 21st Century Fox instead investing $750.0 million into the company to compete more directly with Netflix and Amazon Prime Although it remains in last place in terms of original content production, Amazon created buzz in the industry earlier this year when it put out 14 pilots at once and invited user feedback, disrupting traditional pilot season in favor of crowdsourcing After airing its original pilots in April 2013 and allowing for viewers to vote on their favorites, Amazon announced in May that it will produce five original series Source: TechCrunch, Vulture.com, Wall Street Research 33 Summer 2013 Digital Video Report
  • 34. Internet-to-TV Devices The compatibility of Internet-to-TV devices with an increasing number of content delivery channels signifies the high growth potential for the OTT market in coming years ― The cost to convert a single film for ten Internet delivery channels is in the range of $6,000-$8,000 ― Content providers have proven willing to assume the expenditure due to the growing popularity of the OTT Internet video platform ― Greater compatibility opens the market for more competing OTT content delivery channels ― Rumors suggest HBO is considering unbundling HBO Go and offering it as a broadband package Growing Compatibility of Internet-to-TV Devices OTT Content Channels Chromecast Apple TV Roku Xbox Samsung Smart TV $35 $100 $50-$100 $200-$500 $800-$3,699 Yes Yes Yes Yes Yes Hulu Plus Via Laptop Yes Yes Yes Yes HBO Go Via Laptop Yes Yes Yes Yes Amazon Prime Via Laptop Via AirPlay Yes Yes Yes Google Play Yes Via AirPlay No No Yes Apple iTunes No Yes No No Yes Amazon Via Laptop Via AirPlay Yes No Yes Vudu Via Laptop Via AirPlay Yes Yes Yes No No No Yes No Netflix Subscription Options Rental & Purchase Options Xbox Video Source: Wall Street Research 34 Summer 2013 Digital Video Report
  • 35. Internet-to-TV Device Market Although game consoles are currently the preferred method for Internet-to-TV connection, emerging devices such as smart TVs are on the rise ― Smart TV adoption has steadily increased in China due to aggressive promotions by manufacturers ― Historical usage of smart TVs had been limited by high prices and the widespread availability of other devices ― However, in a survey conducted by Digitalsmiths, the increasing convenience, and relative cheapness, of OTT platforms is driving more consumers to 3rd party rental and subscription services that are delivered over-the-top Internet-to-TV Connection Type (US, Japan, China, France, Germany, Italy and UK) Connected TV, 6.3% Desktop PC, 9.0% Survey: Why Use OTT Services? 0.0% Others, 1.0% Convenience Game console, 19.3% Cable / satellite, 10.7% 30.8% Better selection Easier to find content DVD / blu-ray player, 16.3% Ability to watch on iPad/tablet 60.0% 48.3% Ability to watch certain content Media center box, 17.1% 40.0% 53.1% Cheaper Smart TV, 10.2% Notebook PC, 10.3% 20.0% 27.2% 23.1% 18.3% Ability to watch on smartphone 14.4% Other 14.7% Source: Wall Street Research, Fierce Telecom, Digitalsmiths 35 Summer 2013 Digital Video Report
  • 36. Trends for Global Smart TV Adoption Smart TV adoption is slated to grow exponentially due to: ― Consumers experiencing device fatigue as they look to eliminate devices which perform overlapping tasks ― The smart TV covers the work of the landline, TV, DVD player, entertainment system, and game station all in one ― The continued move from the old broadcast model to on-demand and OTT video ― Smart TVs offer a more curated viewing experience for the consumer at a lower cost structure than broadcasting ― The ability to use social networking services in conjunction with television services ― The next evolution of TV enables viewers to access and share media content via Facebook and Twitter ― Establishes the possibility of setting up “virtual living rooms” where friends can watch videos at the same time through social networks, enabling a shared viewing experience Countries will see a rise in smart TV adoption as consumers become more comfortable using the connectivity features, and as navigation and search capabilities become more intuitive and user friendly Leading Countries for Smart TV Penetration 50.0% 42.0% % of Households 40.0% 40.0% 40.0% 34.0% 28.0% 30.0% 26.0% 26.0% 25.0% Spain Netherlands US 20.0% 10.0% 0.0% France Turkey Poland Germany Italy Source: MediaTel 36 Summer 2013 Digital Video Report
  • 37. OTT Industry Challenges OTT content is the largest driver of network capacity upgrades ― In a survey conducted by Rapid TV News, 82.0% of operators upgraded network infrastructure due to increased usage ― 75.0% of operators attribute these changes to popularity of streaming video OTT growth may be hindered by Internet providers ― Video streaming quality on OTT platforms are trending upward, requiring more bandwidth ― Broadband service providers are opting for bandwidth caps to limit traffic caused by video streaming Tiered Pricing Plans Caching Networks Scalable Video Coding (SVC) Consumer Frustrations with Internet OTT Video 60.0% 53.0% 50.0% HEVC Video Codec Increased Mobile Capabilities Increasing OTT Bandwidth Greater Storage Density Multicast Peer Assisted Delivery 51.0% 45.0% 40.0% 30.0% 19.0% 20.0% 19.0% 17.0% 12.0% 10.0% 0.0% Advertising during the Time required to buffer / Video quality (i.e., poor program download the video definition) Cost of the video content Source: Wall Street Research 37 Broadband / High-speed cost of downloading the video Range of programs available Navigation experience (i.e., search / epg) Summer 2013 Digital Video Report
  • 38. Traditional Networks vs. OTT Despite the growing popularity of OTT, traditional television networks are having some success in competing with this new sector of OTT providers ― Comcast has implemented competitive on-demand services in response, and some traditional networks have quickly developed multi-platform accessibility on desktops, tablets and smartphones ― Other traditional TV operators are looking to partner with OTT providers to provide more flexible, on-demand services In terms of VOD rentals, managed networks still top the market compared to newer OTT players ― VOD rentals, however, do not appear to be nullifying the losses in physical DVD sales Share of Paid VOD Movie Rentals 25.0% 23.0% % Share 20.0% 14.0% 15.0% 9.0% 10.0% 8.0% 7.0% 7.0% Verizon DISH 5.0% 0.0% Comcast DirecTV Time Warner Cable Apple iTunes Source: Wall Street Research 38 Summer 2013 Digital Video Report
  • 39. APPENDIX
  • 40. TRANSACTION CASE STUDIES
  • 41. Case Study: Video Advertising (8/7/2013) ACQUIRES Acquirer: AOL Target: Adap.tv Bus. Description: Offers a suite of online content, products and services to consumers, advertisers, publishers and subscribers worldwide Bus. Description: Builds technology to connect video advertising buyers to sellers on a single platform Implied EV: $405.0mm Deal Commentary ― Demonstrates AOL’s increasing focus on two of the fastest-growing sectors of online advertising: video and programmatic ad buying ― Combination of AOL On video network and Adap.tv will give AOL an end-to-end solution and video stack for publishers and advertisers, including premium original production, content aggregation and syndication, robust video CMS technology and a leading video advertising platform Source: Capital IQ, Wall Street Research 41 Summer 2013 Digital Video Report
  • 42. Case Study: Video Advertising (8/5/2013) ACQUIRES Acquirer: Blinkx Target: Grab Media Bus. Description: Provides video search and advertising services on the Internet worldwide Bus. Description: A video distribution company that connects video content from a collection of professional sources and brand-name advertisers to ideal viewers Implied EV: Not Disclosed Deal Commentary ― The deal should help Blinkx to accelerate its syndication drive, including the introduction of Blinkx VideoAdvantage, designed to expand distribution of premium video content across the web ― Enables Blinkx to add incremental audience and augment its relationships with advertisers, publishers and content providers Source: Capital IQ, Wall Street Research 42 Summer 2013 Digital Video Report
  • 43. Case Study: Multi-Channel Networks (8/21/2013) ACQUIRES Acquirer: Maker Studios Target: Blip Networks Bus. Description: Leading MCN generating over 2.0 billion monthly video views that specializes in production and promotion services for its channels Bus. Description: Blip Networks is a digital media company that develops, produces, and distributes Web content Implied EV: N/A Deal Commentary ― Blip Networks will serve as a content distribution resource for Maker Studios ― The acquisition will reduce Maker Studios reliance on YouTube for content distribution Source: LA Times 43 Summer 2013 Digital Video Report
  • 44. Case Study: Multi-Channel Networks (9/12/13) FUNDED BY Target: Maker Studios Investors: Canal+, Astro, SingTel Innov8, Lakestar, and Northgate Capital Bus. Description: Leading MCN generating over 2.0 billion monthly video views that specializes in production and promotion services for its channels Investment Size: $26.0mm Investment Commentary: ― The $26.0 million comes in addition to the $36.0 million Maker Studios raised in December 2012 ― The December 2012 capital raise was lead by Time Warner Cable and a 25.0% stake was acquired ― Maker Studios acquired Blip Networks to help facilitate original programming and to make content more ad-friendly Source: Wall Street Research, TechCrunch 44 Summer 2013 Digital Video Report
  • 45. Case Study: Multi-Channel Networks (5/1/2013) ACQUIRES Acquirer: DreamWorks Animation (“DWA”) Target: Awesomeness TV Bus. Description: Leading animation production company for film and television Bus. Description: MCN of 55,000 YouTube channels comprised of sketch comedy, scripted and reality/ talk shows for teens Implied EV: $150.5mm Deal Commentary ― AwesomenessTV makes DWA a player in the online content creation space ― AwesomenessTV will serve as a promotional platform for DWA’s animated properties ― As part of the deal, AwesomenessTV CEO Brian Robbins will help develop a branded digital channel aimed at family audiences for DWA Source: Wall Street Research 45 Summer 2013 Digital Video Report
  • 46. Case Study: Multi-Channel Networks (5/3/2012) ACQUIRES Acquirer: Discovery Communications Target: Revision3 Bus. Description: Largest nonfiction media company reaching more than 1.5 billion cumulative subscribers Bus. Description: MCN with more than 23.0 million monthly unique viewers across 27 digital channels Implied EV: $35.0mm Deal Commentary ― Strengthens Discovery’s online presence ― Revision3’s cost-effective online video content allows Discovery to remain the nonfiction media industry leader on multiple platforms ― Revision3 had raised $10.0 million in two rounds from Greylock Partners with additional funding from Marc Andreessen and Mark Cuban Source: Wall Street Research 46 Summer 2013 Digital Video Report
  • 47. Case Study: Multi-Channel Networks (6/17/13) FUNDED BY Target: Fullscreen Investors: The Chernin Group, Comcast Ventures, WPP Digital Bus. Description: Leading MCN of over 10,000 YouTube channels generating over 2.5 billion monthly video views Investment Size: $30.0mm Investment Commentary: ― Fullscreen is looking to focus on video production and investing in the creation of owned and operated content ― Fullscreen further plans to expand the number of platforms it can reach as well as its international presence into overseas markets Source: Wall Street Research, TechCrunch 47 Summer 2013 Digital Video Report
  • 48. Case Study: OTT Video Platforms (7/3/2013) ACQUIRES Acquirer: Samsung Electronics Target: Boxee Bus. Description: Develops, manufactures and sells consumer electronics Bus. Description: Offers set top box devices for live TV broadcasts, DVR and more Implied EV: $30.0mm Deal Commentary ― Samsung is now a more direct competitor in the OTT video streaming space with Apple, Roku and Intel ― Samsung shut down Boxee’s signature cloud DVR service, upsetting Boxee’s existing customers ― Although Boxee has had its focus on TV hardware, speculation suggests Samsung will utilize Boxee’s software technology to boost their smart TV’s capabilities Source: BroadCastEngineering, VentureBeat, Israel21c 48 Summer 2013 Digital Video Report
  • 49. PUBLIC AND TRANSACTION COMPARABLES
  • 50. Select Digital Media Public Comparables (figures in millions of $USD, except per share) Company Name Online Media Akamai Technologies, Inc. Amazon.com Inc. AOL Inc. Apple Inc. Baidu, Inc. Blinkx plc Brightcove, Inc. Diamond Foods, Inc. Digital Generation, Inc. Facebook, Inc. Google Inc. IAC/InterActiveCorp Microsoft Corporation Netflix, Inc. Pandora Media, Inc. Phoenix New Media Limited RealNetworks Inc. SINA Corporation SIRIUS XM Radio Inc. Tremor Video, Inc. Yahoo! Inc. Yandex N.V. Youku Tudou Inc. YuMe, Inc. Share Price as of: 10/18/2013 $51.89 310.89 33.95 492.81 154.90 2.42 12.69 21.80 12.88 49.11 871.99 55.63 34.13 300.85 24.90 11.87 8.55 86.58 3.88 10.64 34.15 38.33 29.55 9.92 Mean Median Market Cap (mm) $9,244.7 142,040.2 2,611.8 447,718.2 54,180.1 892.0 359.4 487.0 359.5 119,598.6 290,391.0 4,615.9 285,352.2 17,726.7 4,710.0 914.4 305.0 5,779.5 24,091.9 527.2 34,844.0 12,511.3 4,900.9 317.1 Enterprise Value (EV) EV / LTM Revenue EBITDA EV / CY 2013E Revenue EBITDA LTM Annual Revenue Growth $8,714.0 137,619.2 2,244.8 422,001.2 50,763.0 833.2 328.9 1,072.0 698.3 111,513.6 244,159.0 4,624.8 225,428.2 17,146.6 4,651.1 727.1 68.3 5,023.6 26,690.0 664.6 32,314.0 12,295.0 4,359.0 370.4 5.9x 2.1x 1.0x 2.5x 11.9x 4.0x 3.4x 1.2x 1.8x 18.2x 4.4x 1.5x 2.9x 4.3x 8.8x 3.6x 0.3x 8.7x 7.4x 5.4x 6.7x 12.1x 11.1x 2.8x 16.0x NA 4.5x 7.6x 23.9x 29.5x NA 17.2x 6.8x 40.4x 14.4x 9.7x 7.5x NA NA 29.7x NA NM 21.7x NM 15.8x 27.4x NA 47.0x 4.9x 1.5x 0.9x 2.3x 7.6x 3.2x 2.6x 1.2x 1.7x 11.3x 3.6x 1.3x 2.6x 3.4x 5.2x 2.6x NA 6.2x 6.4x 3.8x 7.0x 8.0x 5.9x 1.8x 11.3x 20.3x 4.5x 7.0x 18.1x 17.4x NA 9.1x 5.5x 20.6x 9.6x 6.1x 6.8x 33.8x NA 13.5x NA 31.9x 18.4x 126.8x 19.3x 17.8x NA 35.0x 17.0% 23.0% 1.9% 13.8% 42.2% 73.0% 27.7% -12.0% 1.0% 41.4% 30.5% 24.1% 5.6% 14.1% 56.0% 14.9% -21.6% 14.7% 12.8% 0.0% -3.1% 37.1% 95.8% 0.0% $54,762.9 $4,837.4 5.5x 4.2x 19.9x 16.6x 4.1x 3.4x 21.6x 17.6x 21.3% 14.8% Source: CapitalIQ and Siemer Proprietary Research 50 Summer 2013 Digital Video Report
  • 51. Select Traditional Media Public Comparables (figures in millions of $USD, except per share) Company Name Traditional Content and Cable AMC Networks Inc. Axel Springer AG CBS Corporation Crown Media Holdings Inc. Discovery Communications, Inc. The Walt Disney Company Liberty Media Corporation Lions Gate Entertainment Corp. Scripps Networks Interactive, Inc. Starz Time Warner Inc. Twenty-First Century Fox, Inc. Viacom, Inc. Share Price as of: 10/18/2013 $65.95 59.12 56.25 3.23 80.54 66.21 149.23 34.77 77.72 29.05 67.92 33.23 82.00 Market Cap (mm) $4,766.5 5,840.8 35,740.6 1,161.8 28,208.6 118,280.3 17,032.9 4,742.2 11,337.5 3,394.2 62,486.8 75,993.5 39,126.6 $34.20 16.27 136.23 46.06 15.45 60.65 47.88 15.98 2.98 115.79 47.09 Mean Median Source: CapitalIQ and Siemer Proprietary Research EV / LTM Revenue EBITDA EV / CY 2013E Revenue EBITDA LTM Annual Revenue Growth $181,636.2 4,350.6 14,133.0 120,213.3 68,433.8 33,296.5 21,865.1 66,275.6 47,478.5 33,090.7 134,759.0 $6,502.7 6,920.4 41,881.6 1,586.9 34,231.6 131,722.3 30,395.9 6,038.9 12,784.6 4,368.7 79,870.8 89,438.5 47,066.6 4.5x 1.5x 2.8x 4.5x 7.0x 3.0x 8.2x 2.2x 5.3x 2.5x 2.7x 3.2x 3.5x 13.0x 8.8x 11.6x 5.9x 16.9x 10.8x 30.5x 18.4x 11.1x 9.9x 10.4x 13.2x 11.6x 3.9x NA 2.7x NA 5.5x 2.7x 6.2x 2.0x 4.7x 2.6x 2.6x 2.9x 3.2x 10.3x NA 10.4x NA 12.4x 9.6x 20.8x 14.1x 10.5x 10.1x 9.8x 12.0x 10.0x 14.4% 1.1% 7.6% 3.0% 11.4% 5.6% 119.6% 56.1% 10.8% 6.8% 1.4% 10.5% -7.4% $37,908.4 $30,395.9 Mean Median MVPDs / Aggregators AT&T, Inc. Cablevision Systems Corporation Charter Communications, Inc. Comcast Corporation Deutsche Telekom AG DIRECTV Dish Network Corp. NTT DOCOMO, Inc. Singapore Telecommunications Limited Time Warner Cable Inc. Verizon Communications Inc. Enterprise Value (EV) 3.9x 3.2x 13.2x 11.6x 3.5x 2.9x 11.8x 10.4x 18.5% 7.6% $253,355.2 14,099.0 26,930.0 162,956.3 136,294.4 50,144.5 26,532.6 64,945.3 52,567.1 56,604.7 235,200.0 2.0x 2.1x 3.5x 2.5x 1.7x 1.6x 1.9x 1.4x 3.6x 2.6x 2.0x 8.7x 8.2x 10.1x 7.5x 6.6x 6.6x 9.1x 4.2x 9.8x 7.0x 7.2x 1.9x 2.2x 3.0x 2.4x NA 1.5x 1.8x 1.4x NA 2.5x 1.9x 5.9x 8.2x 8.3x 7.2x NA 6.0x 8.7x 4.0x NA 6.8x 5.4x 0.1% 4.3% 4.5% 7.7% -0.2% 7.6% -0.8% 5.8% -4.3% 7.0% 4.5% $98,148.1 $56,604.7 2.3x 2.0x 7.7x 7.5x 2.1x 1.9x 6.7x 6.8x 3.3% 4.5% 51 Summer 2013 Digital Video Report
  • 52. Select Precedent Online Video Transactions EV / LTM (figures in millions of $USD) Date Announced 10/8/2013 9/1/2013 8/21/2013 8/21/2013 8/12/2013 8/7/2013 8/5/2013 7/9/2013 7/1/2013 6/28/2013 5/30/2013 5/29/2013 5/6/2013 5/1/2013 4/26/2013 4/8/2013 2/11/2013 1/7/2013 12/12/2012 11/14/2012 11/13/2012 11/2/2012 9/19/2012 8/10/2012 7/18/2012 7/17/2012 Target Break Media ViKi Blip Networks, Inc. Orb Networks, Inc. Stringwire Adap.tv Grab Media Greenhouse Studio, Inc. Red Bee Media Limited Virtual Nerd, LLC DeFranco Creative Zubox Limited PPStream, Inc. AwesomenessTV, Inc. E-surfing Media Co., Ltd. Microsoft, Mediaroom IPTV Business Preview Networks Aps Pipewave, Inc. KickApps Corporation Russer Communications Verivue, Inc. iQIYI.com, Inc. Zui.com, Inc. 15miles Inc. Castfire, Inc. Socialcam Inc. Acquirer Alloy Digital, LLC Rakuten, Inc. Maker Studios, Inc. Qualcomm NBC News Digital LLC AOL Blinkx Burdette Ketchum Ericsson Pearson Revision3 Corporation Digimania, Ltd. iQIYI.com, Inc. DreamWorks Animation SKG China Telecommunications Corporation Ericsson Rightster Ltd. ZEFR, Inc. Perfect Sense Digital, LLC Corcoran Consulting & Coaching Inc. Akamai Technologies, Inc. Baidu, Inc. Saban Brands LLC GearyLSF Group AlphaBird, Inc. Autodesk, Inc. Implied EV NA $200.0 NA NA NA 405.0 NA NA NA NA NA NA 370.0 150.5 244.9 NA NA NA NA NA 32.1 NA NA NA NA 60.0 Revenue NA NA NA NA NA 3.5x NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA EBITDA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA Source: CapitalIQ and Siemer Proprietary Research 52 Summer 2013 Digital Video Report
  • 53. Select Precedent Online Video Transactions EV / LTM (figures in millions of $USD) Date Announced 6/18/2012 6/17/2012 6/13/2012 5/21/2012 5/15/2012 5/14/2012 3/12/2012 2/8/2012 1/23/2012 1/17/2012 1/10/2012 1/6/2012 12/14/2011 11/29/2011 10/31/2011 9/26/2011 9/21/2011 8/24/2011 3/29/2011 3/25/2011 3/24/2011 2/22/2011 2/9/2011 1/31/2011 1/11/2011 Target Clevver Media LLC Metacafe, Inc. Wuaki.TV, S.L. On Demand Group, Ltd. Cull TV, Inc. Splat Interactive, Inc. Tudou Holdings Limited DirectBrand Live Matrix, Inc. WebVisible, Inc. SBDS Active, SAS ChannelFlip Media Limited Quadia Web TV B.V. Genesis Media LLC Auditude, Inc. QianJun, Inc. Remixation, Inc., Vodpod.com FilmRookie The Web TV Enterprise Ltd. Global Inspiration s.r.o. Camtenna Oy Fliqz, Inc. Shine Limited KickApps Corporation BitGravity, Inc. Source: CapitalIQ and Siemer Proprietary Research Acquirer Implied EV Revenue EBITDA Alloy Digital, LLC Collective Digital Studio, LLC Rakuten, Inc. Vubiquity, Inc. EatLime, Inc. UIEvolution, Inc. Youku Tudou Inc Image Now Design and Film Consultants OVGuide.com, Inc. The Berry Company, LLC Lagardere Active SAS Shine Limited Van den Ende; Deitmers Venture Capital TVGenesis LLC Adobe Systems Inc. Renren Inc. Lockerz, LLC Eurotech, Ltd. Collective Media, Inc. Seznam.cz, a.s. Qbrick AB VBrick Systems, Inc. Twenty-First Century Fox, Inc. KIT digital, Inc. Tata Communications NA NA $18.7 27.0 NA NA $721.8 NA NA NA NA NA NA NA NA 80.0 NA NA NA NA NA NA 615.0 43.2 10.7 NA NA NA NA NA NA 7.3x NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA 3.9x NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA Mean Median $213.8 $80.0 5.6x 5.6x NA NA 53 Summer 2013 Digital Video Report
  • 54. Select Precedent Online Video Financings Amount Raised ($mm) $26.0 Date Company 9/13/2013 Maker Studios, Inc. Description Operates a digital video studio that engages in digital content production and distribution Investors Canal+; SingTel Innov8; Astrolabe Ventures; Lakestar; Northgate Capital Round C 8/16/2013 Open Road Integrated Media, Inc. Operates as a digital publisher and multimedia content company that publishes ebooks and produces video content Food-focused online video network Azure Capital Partners; Golden Seeds LLC; Kohlberg Ventures; NewSpring Capital Raine Ventures; Redpoint Ventures NA 11.0 B 10.0 Provides video management, delivery, and measurement solutions on a cloud-based platform that enables advertisers to manage, deliver, and measure video Develops video technology solutions that help carriers to identify, monitor, store, and deliver Internet video to their subscribers Provides an online video service that offers a selection of hit shows, clips, movies, and more Digital Generation, Inc. NA 40.0 Accel Management Co, Inc; Bessemer Venture Partners; Redpoint Ventures C 16.0 NBCUniversal Media, LLC; The Walt Disney Company; Twenty-First Century Fox Provides audience targeting and optimization solutions for Accel Management Co, Inc.; Samsung publishers and advertisers in the U.S. Venture Investment Corporation; Cox Media Group, Inc. Provides online video advertising solutions to connect New Enterprise Associates; Comcast brands with consumers Ventures; Valhalla Partners; Catalyst Investors; Pinnacle Ventures Fashion-focused online video network RTL Group Provides digital advertising solutions for advertisers and Redpoint Ventures; CBC Capital; WPP agencies Digital; KPCB China NA 750.0 C 20.0 D 68.3 B C 6.0 10.0 8/15/2013 Tastemade 8/12/2013 Extreme Reach, Inc. 7/30/2013 Qwilt Inc. 7/12/2013 Hulu, LLC 5/23/2013 Collective Media, Inc. 5/15/2013 Videology, Inc. 5/14/2013 StyleHaul 4/8/2013 Moment Systems Source: CapitalIQ and Siemer Proprietary Research 54 Summer 2013 Digital Video Report
  • 55. Select Precedent Online Video Financings Date 4/4/2013 Company Fullscreen 3/28/2013 Pixability, Inc. 3/26/2013 LearnZillion, Inc. Description Operates as a digital media company that builds nextgeneration channels and networks on the YouTube platform Provides cloud-based online video marketing software and consulting solutions geared toward small and mediumsized businesses Provides online video lessons for teachers, children and parents 3/6/2013 Innovid, Inc. Operates as an interactive video advertisement development company 3/5/2013 Epoxy.tv Provides professional tools for video channel management 2/28/2013 VEVO LLC Owns and operates an online syndication network and platform for entertainment content 1/31/2013 FreeWheel Media, Inc. Provides online video advertising solutions for global media companies 1/29/2013 Magnify Networks, Inc. Provides cloud-based video curation solutions to online publishing, non / profits, communities, brands and advertising networks 1/25/2013 StyleHaul Inc. Owns and operates an online video community through which it provides makeup and style tutorial videos Investors Comcast Ventures; The Chernin Group, LLC; WPP plc Quad / Graphics, Inc. Round A Amount Raised ($mm) $30.0 NA 6.6 A 7.0 C 11.0 Calvert Investment Management, Inc.; DCM; NewSchools Venture Fund, Investment Arm; O'Reilly AlphaTech Ventures, LLC; Calvert Social Investment Fund - Calvert Balanced Portfolio; DC Community Ventures LLC Sequoia Capital; TNAVenture Holding GmbH; Genesis Partners Ltd.; Vintage Investment Partners Upfront Ventures; Greycroft Partners; Bertelsmann Digital Media Investments; Advancit Capital YouTube, LLC NA 2.0 NA 50.0 DIRECTV NA NA WS Investments NA 7.0 B 12.5 Bertelsmann Digital Media Investments; Siemer Ventures; RezVen Partners LLC Source: CapitalIQ and Siemer Proprietary Research 55 Summer 2013 Digital Video Report
  • 56. Select Precedent Online Video Financings Date Company 12/3/2012 Vdopia Inc. 11/20/2012 Kaltura Inc. 11/14/2012 Maker Studios, Inc. 11/7/2012 ClipClock 10/19/2012 LongTail Ad Solutions, Inc. 10/15/2012 Tvinci Ltd. 6/27/2012 Namesake, Inc. 6/14/2012 Ooyala, Inc. 6/7/2012 Visible Measures Corporation 5/7/2012 Machinima, Inc. Investors Description Provides online video advertising network and technology NA services to brands and advertisers Designs and develops online video solutions Intel Capital; Mitsui & Co. Global Investment, Inc.; Avalon Ventures; ORIX Venture Finance, LLC; Nexus Venture Partners; .406 Ventures, LLC Owns and operates a digital video studio that engages in Greycroft Partners LLC; Upfront Ventures; digital content production and distribution Time Warner Investments; Daher Capital Develops and operates an online video editing and Runa Capital sharing platform Provides online video solutions Greycroft Partners LLC; The Cue Ball Group, LLC Operates an over-the-top television platform for pay TV Trellas Enterprises Limited; Kaedan Owns and operates an online community for video sharing Atlas Venture L.P.; Kleiner, Perkins, Caufield & Byers; William Morris Endeavor Entertainment, LLC; Offers online video management, publishing, analytics and Sierra Ventures; Rembrandt Venture monetization solutions Partners; EDB Investments Pte. Ltd.; The CID Group; Telstra Applications and Ventures Group Operates as an independent third-party media Mohr Davidow Ventures; Advance measurement firm for online video advertisers and Publications, Inc.; General Catalyst publishers Partners; Northgate Capital Group, L.L.C.; DAG Ventures, LLC Operates a video entertainment network for video gamers Google Inc.; MK Capital; Redpoint Ventures Round B Amount Raised ($mm) $7.4 D 25.0 NA 36.0 A 2.5 B 5.0 NA A 4.5 8.0 E 35.0 NA 21.5 D 36.0 Source: CapitalIQ and Siemer Proprietary Research 56 Summer 2013 Digital Video Report
  • 57. Select Precedent Online Video Financings Date Company 3/21/2012 NicePeopleAtWork SL 3/2/2012 DramaFever Corp. 2/21/2012 Maker Studios, Inc. 2/8/2012 Unicorn Media, Inc. 2/1/2012 Videoplaza AB 2/1/2012 Conviva, Inc. 1/26/2012 StyleHaul Inc. Description Develops and provides high definition Internet video distribution software solutions to Web, mobile devices, set top boxes and connected televisions Operates DramaFever.com, an online video platform for entertainment on the Web Investors Axón Capital e Inversiones, SGECR, S.A. AMC Networks Inc.; MK Capital; Bertelsmann Digital Media Investments; NALA Investments, LLC Owns and operates a digital video studio that engages in Greycroft Partners LLC; Upfront Ventures; digital content production and distribution YouTube, LLC Provides Internet video solutions that enable companies to Nexeven AB maximize IP video profitability Develops advertising solutions for publishers of online Innovacom Gestion; QUALCOMM video Ventures; Northzone Ventures; Creandum AB Provides a media platform to companies for managing the Time Warner Investments distribution of live media and programming online Owns and operates an online video community through RezVen Partners LLC which it provides makeup and style tutorial videos Mean Median Round NA Amount Raised ($mm) $1.3 B 6.0 NA NA A NA B 12.0 NA 15.0 A 4.4 $39.5 $11.0 *Mean and Median calculation excludes Hulu, LLC Source: CapitalIQ and Siemer Proprietary Research 57 Summer 2013 Digital Video Report
  • 58. Select Precedent Mobile Video Transactions EV / LTM (figures in millions of $USD) Date Announced 9/4/2013 5/19/2013 4/17/2013 3/14/2013 10/9/2012 9/25/2012 7/17/2012 6/7/2012 6/6/2012 8/1/2012 5/1/2012 4/9/2012 12/9/2011 10/17/2011 10/10/2011 4/13/2011 6/15/2011 2/4/2011 2/4/2011 1/31/2011 1/18/2011 1/6/2011 Target Saffron Digital Ltd Mogreet, Inc. Digital Broadcasting Group, Inc. Clk2c.com Vine All Night Media Socialcam Inc. Bytemobile, Inc. ESPN STAR Sports PixSense Inc. Ortiva Wireless, Inc. Instagram, Inc. Mobiclip Livecam Mobile Qumu, Inc. Commobility Inc. YuMe Europe Limited Transpera, Inc. Inlet Technologies LLC decentral tv Corp. Yospace Technologies Ltd., EyeVibe Qik, Inc. Acquirer Mean Median Revenue NA NA NA NA NA NA NA NA NA NA NA NA NA NA 3.9x NA NA NA NA 1.8x NA NA EBITDA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NM NA NA NA NA NA NA NA $232.1 $60.0 Cinram Group, Inc. payvia, Inc. Alloy Digital, LLC ValueFirst Messaging Twitter, Inc. MOKO.mobi Autodesk, Inc. Citrix Systems International GmbH STAR Group FunSpot Corp. Allot Communications Ltd. Facebook, Inc. Nintendo Co. AppTech Corp. Rimage Corporation Intertainment Media Inc. YuMe, Inc. Tremor Video, Inc. Cisco Systems, Inc. KIT digital, Inc. MOKO.mobi Limited Skype Technologies, S.A. Implied EV $47.0 32.0 NA NA NA NA 60.0 435.0 670.0 NA NA 1,000.0 NA NA 52.8 4.5 NA NA 95.0 6.7 NA 150.0 2.9x 2.9x NA NA Source: CapitalIQ and Siemer Proprietary Research 58 Summer 2013 Digital Video Report
  • 59. Select Mobile Video Precedent Financings Company Date 4/23/2013 Apalya Technologies Pvt. Ltd. 3/27/2013 Vantrix Inc 1/17/2013 Keek Inc. 12/31/2012 Streamweaver, Inc. 12/31/2012 Streamweaver, Inc. 9/18/2012 Keek Inc. 8/22/2012 XinLab, Inc. NA 4.5 Pinetree Capital Ltd.; AGF Investments Inc; Plazacorp Ventures; Cranson Capital Solutions Inc C 18.0 Tennessee Community Venture Fund LLC; Mountain Group Capital LLC; The INCITE Co-Investment Fund NA A 1.8 Description Operates as a content aggregation, provisioning and distribution platform in the mobile video delivery space in India Provides mobile video mediation and delivery solutions for streaming, browsing and messaging worldwide Operates a social networking platform enabling users to create and watch videos using Webcam, iPhone, Android or BlackBerry devices, as well as tablets and laptops Investors Cisco Systems, Inc.; QUALCOMM Ventures; IDG Ventures India; Kalaari Capital NXT Capital Venture Finance Provides a multi-angle mobile video app that connects a client with client’s friends 12/14/2012 Spot411 Technologies, Operates as a social technology company that delivers Inc. and licenses interactive social television programs for the second screen 12/6/2012 Vantrix Inc Provides mobile video mediation and delivery solutions for streaming, browsing and messaging worldwide 10/11/2012 Skyfire Labs, Inc. Round C Amount Raised ($mm) $10.0 Develops and creates a compression-as-a-service based mobile video optimization browser / platform for wireless carriers and device makers Provides a multi-angle mobile video app that connects a Operates a social networking platform enabling users to Provides mobile video services that work on videoenabled mobile phones with an Internet access. Its services index various videos from the Web; and enables users to watch videos on PCs Summerhill Venture Partners; Innovacom Gestion; JK&B Capital; BDC Venture Capital; Tudor Growth Equity; Entrepia Ventures Matrix Partners; Trinity Ventures; Lightspeed Venture Partners; Panorama Capital; Verizon Ventures Tennessee Community Venture Fund Whitecap Venture Partners; Pinetree New Enterprise Associates; SingTel Ventures (Pte) Ltd.; JAFCO Ventures NA 2.0 D 13.5 D 10.0 A B D 1.8 7.0 15.0 Source: CapitalIQ and Siemer Proprietary Research 59 Summer 2013 Digital Video Report
  • 60. Select Mobile Video Precedent Financings Date Company 4/26/2012 Viddy 2/3/2012 Viddy 1/31/2012 Socialcam Inc. 1/25/2012 Skyfire Labs, Inc. 11/29/2011 Reality Mobile LLC 10/5/2011 Keek Inc. 8/22/2011 Mogreet, Inc. 7/21/2011 Vringo, Inc. 4/27/2011 Viddy 3/31/2011 XinLab, Inc. Description Offers a social mobile application that helps in capturing, producing and sharing bite-size videos with the world Investors New Enterprise Associates, Khosla Ventures, Goldman Sachs Group, Merchant Banking Division Offers a social mobile application that helps in capturing, Bessemer Venture producing and sharing bite-size videos with the world Partners, QUALCOMM Ventures, Greycroft Partners LLC Develops a video sharing application for capturing, editing Y Combinator and sharing videos from smartphones Develops and creates a compression-as-a-service based Matrix Partners; Trinity Ventures; Lightspeed Venture Partners; Verizon mobile video optimization browser / platform for wireless Ventures carriers and device makers Develops enterprise-class real-time mobile video visual NA data collaboration solutions AlphaNorth Asset Management; Operates a social networking platform enabling users to create and watch videos using Webcam, iPhone, Android Plazacorp Ventures or BlackBerry devices, as well as tablets and laptops Operates Mogreet Messaging System (MoMS), a mobile Draper Fisher Jurvetson; Ascend video messaging platform that delivers and monetizes rich Venture Group, LLC; DFJ Frontier; Black Diamond Ventures, LLC; Bryant Park media to mobile devices Ventures, LLC Provides software products for mobile video entertainment Benchmark Capital; Alpha Capital AG; Offers a social mobile application that helps in capturing, Bessemer Venture producing and sharing bite-size videos with the world Partners, QUALCOMM Ventures Provides mobile video services that work on videoNew Enterprise Associates; JAFCO enabled mobile phones with an Internet access Ventures Mean Median Source: CapitalIQ and Siemer Proprietary Research 60 Round B Amount Raised ($mm) $30.1 A 6.4 NA 1.5 C 8.0 NA 5.8 NA 5.5 NA 4.1 NA NA 2.5 $1.6 C 8.0 $7.9 $6.1 Summer 2013 Digital Video Report
  • 61. Contact Information 61 Summer 2013 Digital Video Report