09 01 13 Web 2.0 Weekly
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09 01 13 Web 2.0 Weekly

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Introducing the Web 2.0 Weekly - Our weekly report will provide an ongoing framework for investors to identify key trends in Web 2.0, along with specific financial metrics by which to measure the ...

Introducing the Web 2.0 Weekly - Our weekly report will provide an ongoing framework for investors to identify key trends in Web 2.0, along with specific financial metrics by which to measure the success of the companies.

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    09 01 13 Web 2.0 Weekly 09 01 13 Web 2.0 Weekly Document Transcript

    • SOFTWARE & SERVICES 13 JANUARY 2009 DAVID SHORE, CFA, MBA 416.860.6784 WEB 2.O WEEKLY david.shore@researchcapital.com Arun Thomas (Associate) 416.860.7666 INTRODUCING THE “WEB 2.0 WEEKLY” INT RO D UCT IO N W e are very pleased to announce the introduction of a new weekly publication from Research Capital – The Web 2.0 Weekly. In this report, we will highlight key events from around the globe relating to the W eb 2.0 sector. W e will provide summaries of capital market activity, industry news, price performance, upcoming events, and valuation. W e have identified over 70 public companies globally that are involved in the W eb 2.0 sector, ranging from MMOG (Massive Multi-Player Online Gaming) companies, social networking software companies, media sharing companies, to social lending companies. Our weekly report will provide an ongoing framework for investors to identify key trends in W eb 2.0, along with specific financial metrics by which to measure the success of the companies. CA P IT AL M AR K ET A CT I V IT Y This section will highlight capital market events including mergers, acquisitions, price performance, and financings (both public and private). IN DU ST R Y N E W S This section will discuss corporate activity such as partnerships, new product launches, and financial results V AL U AT I O N This section provides an overview of valuation metrics for the 76 public W eb 2.0 companies we have identified thus far. This report has been created b y Anal ysts that are emplo yed b y Research Capital Corporation, a Canadian Investment Dealer. w w w . r e s e a rc h c a p i t a l . c o m T o ro n t o 4 1 6 . 8 6 0 . 7 6 0 0 Montreal 514.399.1500 Vancouver 604.662.1800 Calgary 403.265.7400 Regina 306.566.7550
    • Page 2 THE WEB 2.0 UNIVERSE A m yriad of companies and technologies: The term W eb 2.0 was first coined by Tim O’Reilly who used it to refer to “… the business revolution in the computer industry caused by the move to the Internet as a platform, and an attempt to understand the rules for success on that new platform.” It has come to be used to refer to numerous types of technologies, such as blogs, wikis, and social networking. As the figure below shows (Figure 1), W eb 2.0 companies can be defined by the area on which they focus – such as music or video. However, note that there are companies, Google (GOOG- NASDAQ) or Yahoo (YHOO-NASDAQ) for example, which are involved in numerous areas within W eb 2.0. One interesting characteristic of many of these companies is how few of them are independent public entities. For example, the largest social networking sites include MySpace (bought by News Corp for $580 million in September 2005), Facebook (private), Bebo (bought by AOL for $850 million in May 2008), and Orkut (owned by Google). Figure 1. The Conversation Prism Source. Brian Solis, www.briansolis.com Over 70 public Web 2.0 companies identified: W e have however identified 76 public companies for our W eb 2.0 universe. These include a wide variety of companies, including MMOG (Massive Multi-Player Online Gaming) companies, social networking software companies, media sharing companies, and social lending companies. See below for a summary of the full universe (Figure 2). Note that we have not included the large technology and media companies such as Google, Yahoo, Disney, and Sony in our universe as they would skew the results due to their immense size relative to the rest of the group.
    • Page 3 C omparable C ompany Analys is > Web 2.0 S ummary T ra di ng C urre nt US D Marke t US D L TM T otal T E V/LT M L TM a s of T ic ker E xc ha nge C ur renc y HQ P ric e C ap ($m) R ev ($m) R e venue E mployees W e bs ite C ompany Na me A cceleriz e New Me dia , In c. 9/30/2 008 AC L Z OT C B B US D United S tates 0. 35 9.4 3.2 4. 3x 20 www. a cce lerize newmedia .com 9/30/2 008 A 05 2790 K OSE KRW S outh K orea 10, 050. 00 65.8 5 4.3 NA www. a ctoz. com A ctoz S oft C o ., L td. 0. 7x 9/30/2 008 3838 TS E JPY J a pa n 29, 000. 00 17.5 6 1.2 NA www.aq i.co. jp A Q Inte ra ctiv e, I nc. - 6/30/2 007 AS MH OT C P K US D United S tates 0. 01 0.4 0.1 3 www. ma cgregorenergy. com A ss ocia ted Med ia H oldings Inc. 13 .2x 9/30/2 008 B O MJ OT C B B US D United S tates 1. 00 40.9 1.1 25 www.boomj.co m B oomJ Inc 40 .7x B right T hings plc 9/30/2 008 AI M:B GT A IM G BP United K ingdom 0. 02 2.9 0.2 11 .3x 9 www. brightthings . com 9/30/2 008 B WBA OT C P K US D United S tates 1. 01 85.7 0.0 46 www.broa dweba s ia .com B roa dW e bAs ia Inc. - 9/30/2 008 C H IN. A Nas daqG S US D H ong K ong 1. 13 121. 9 4 28.1 3,12 5 www.cdcc orpora tio n.ne t C DC C orp. 0. 4x 9/30/2 008 CG WY OT C B B US D United S tates 0. 00 0.0 6.7 37 - C hina G a tewa y C orporation 0. 0x 9/30/2 008 G T S M:3 083 GTSM TW D T a iwa n 92. 00 236. 0 3 8.8 NA www.c hines ega me r. net C hines e G ame r Inte rn ational 4. 6x 10 /31/2008 CWR L OT C B B US D United S tates 0. 25 11.7 0.6 NA www. corne rwo rld. com C orne rW orld C orporation 21 .5x 9/30/2 008 C M:D A CM E UR Italy 6. 90 151. 1 2 29.0 5 74 da da .da da .ne t DA DA S pA 0. 9x DigitalFX Interna tiona l, Inc. 9/30/2 008 DX N A ME X US D United S tates 0. 18 4.5 1 6.9 0. 4x 68 www.digitalfx.com 9/30/2 008 DG L P OT C B B US D United S tates 0. 03 1.7 0.4 11 www.d igita lpo stinterac tive.com DigitalP os t Inte ra ctive, Inc. 6. 6x 8/31/2 008 D GT W OT C B B US D United S tates 2. 70 73.3 NM 3 www.ene tpc .com DigitalTown, I nc . - NA D P DM OT C B B US D United S tates 0. 80 38.9 NA 6 www.d olphin digitalmedia .com Dolphin D igita l Me dia, Inc. - 12 /31/2007 A 04 1060 K OSE KRW S outh K orea 555. 00 19.2 1 8.5 NA www. eolith. co.k r E olith C o. L td. 1. 0x E xte ns ions, Inc. 9/30/2 008 E XT I OT C P K US D United S tates 0. 99 93.5 NM - 2 www.e xt. com 8/31/2 008 F NG P OT C B B US D United S tates 0. 05 3.0 7.8 22 www.wa lls t.ne t F ina ncial Media G roup, In c. 0. 2x 9/30/2 008 T S X:F M N TS X C AD United S tates 0. 31 13.7 4.2 29 www.f luidmedia ne twork s.com F luid Mus ic C ana da , I nc. - 6/30/2 008 FRG XT R A E UR Ge rma ny 5. 80 18.4 5.4 NA www.frogste r-ip.de /en/ind ex. php F rogs ter I nteractive P ic tures A G 3. 3x 9/30/2 008 6180 GTSM TW D T a iwa n 22. 60 103. 6 1 12.2 NA www. ga ma nia .co.k r G amania Digital E ntertainment C o. , Ltd. 0. 7x G ameO n C o Ltd . 9/30/2 008 3812 TS E JPY J a pa n 127, 000. 00 140. 2 8 2.6 0. 9x NA www.ga me on.co. jp 9/30/2 008 G E O 1V H LS E E UR F inla nd 0. 03 36.3 5.5 92 www.benefon.com G eoS entric O yj 5. 6x 9/30/2 008 GA NY S E US D C hina 5. 96 1,4 16.7 2 45.1 1,01 6 www.ga-me.com G ia nt I nteractive G roup, Inc. - 9/30/2 008 G IG M Nas daqG S US D T a iwa n 6. 32 341. 5 2 00.5 9 75 www. giga media .com. tw G iga Media Ltd. 1. 4x 9/30/2 008 GOF H OT C B B US D United S tates 0. 18 4.6 6.3 41 www. gofis h.com G oF ish C orporation 2. 4x 9/30/2 008 GRVY Na s daq GM US D S outh K orea 0. 54 15.0 3 6.3 6 36 www.grav ity .co.k r G ravity C o. , L td - NA T S E :36 32 TS E JPY J a pa n 5, 200. 00 0.0 NA NA gree. co. jp G ree, Inc. - G ungH o O nlin e E nterta inmen t, Inc. 9/30/2 008 3765 OS E JPY J a pa n 108, 900. 00 138. 0 1 13.2 1. 0x NA www.gungho. co. jp/eng lish / 9/30/2 008 A 04 7080 K OSE KRW S outh K orea 3, 400. 00 55.3 5 1.5 NA www. ha nbits oft.c o.k r H an bitS oft, I nc. 0. 7x 10 /31/2008 IA S C .A OT C B B US D C a na da 0. 02 1.4 0.0 NA www.ias ene rg y.c om IA S E n ergy, Inc. - 9/30/2 008 OT C B B : IDA E OT C B B US D United S tates 0. 83 33.8 0.0 NA www. id eaedge.c om Id ea E dge, Inc . - 6/30/2 008 AS X: J M B ASX AUD Au s tra lia 0. 39 13.6 1 1.1 72 www. jumbuck .com J umbuc k E nterta inment P ty L td. 0. 8x J umpT V Inc. 6/30/2 008 T S X:J T V TS X C AD C a na da 0. 30 28.6 1 1.5 2. 9x NA www.jumptv .com 9/30/2 008 T S X:K AB TS X C AD C a na da 0. 40 47.0 6 2.3 NA www.k a boos e.com K aboose Inc. 0. 9x 9/30/2 008 LVW D OT C P K US D United S tates 0. 08 2.3 1 1.7 73 www.liv eworld .c om L ive W orld Inc . 0. 1x 9/30/2 008 L OO K Na s daq GM US D United S tates 1. 69 28.7 6 9.5 93 www.look s ma rt.c om L ook S mart, L td. 0. 0x 9/30/2 008 M AG Y OT C B B US D United S tates 0. 02 8.7 0.1 13 www.ma gn itude.c om Ma gnitude Inf ormation S ys tems Inc . - 9/30/2 008 2121 TS E JPY J a pa n 567, 000. 00 961. 9 1 24.8 NA www. mixi.c o.jp Mixi, In c. 6. 8x NA MM OG OT C B B US D United S tates 2. 00 70.6 NA NA www. pla ymoggle. com Moggle, I nc - 7/31/2 008 NLN A ME X US D United S tates 0. 73 6.9 7.4 24 www.na tionalla mpoon. com Nationa l L ampoo n Inc. 1. 6x 12 /31/2007 A 09 5660 K OSE KRW S outh K orea 20, 000. 00 142. 5 1 33.8 NA www. neowiz.com/k or/ NE O W IZ G ames C orpora tion 1. 0x 9/30/2 008 777 S E HK HKD C hina 2. 84 193. 6 9 5.3 1,48 2 www. nd. com. cn NetDra gon W ebS oft, In c. 0. 2x 9/30/2 008 NT E S Nas daqG S US D C hina 18. 04 2,2 19.9 4 22.6 2,41 3 c orp. 163. com Neteas e.c om Inc. - 9/30/2 007 N XP C OT C P K US D United S tates 1. 00 55.8 NM 19 www.n explore. co m NeX plo re C orpo ra tio n - Northga te T echnologies L imited 9/30/2 008 5 9005 7 BS E INR India 55. 55 40.1 1 37.9 0. 3x 2 86 www.northga tetech. co m 9/30/2 008 OT E X Nas daqG S US D C a na da 30. 75 1,5 94.8 7 44.2 3,00 0 www.opente xt. co m O pen T ext C orp. 2. 2x 9/30/2 008 OP WV Nas daqG S US D United S tates 0. 76 63.1 1 99.0 6 18 www.openwa ve. com O penwave S y s tems Inc. - 9/30/2 008 PWRD Nas daqG S US D C hina 17. 28 985. 8 1 86.9 1,40 1 www.wa nmei. co m/e n/index .htm P erfect W o rld C o., L td. - 6/30/2 008 T S X V: PN T S XV C AD C a na da 1. 67 47.0 1 2.7 NA www.pho toc han nel.com P hotoC han nel Network s Inc. 3. 6x Q uepas a C orp. 9/30/2 008 QP SA Na s da qC M US D United S tates 1. 81 22.9 0.1 - 63 www.qu epa sa .c om 9/30/2 008 S NDA Nas daqG S US D C hina 27. 37 1,8 99.0 4 77.9 2,56 4 www. sn da. com S ha nda In tera ctive E n tertainment L td. - 9/30/2 008 SFLY Nas daqG S US D United S tates 7. 54 189. 0 2 03.3 5 12 www.s hutterfly.c om S hutterfly, I nc . 0. 7x 12 /31/2007 A 06 6270 K OSE KRW S outh K orea 6, 150. 00 187. 7 1 53.9 NA - S K C ommunications C o., L td. 1. 2x 9/30/2 008 S TV I OT C B B US D United S tates 0. 94 10.0 2.3 5 www.s nap-intera ctiv e.c om S NAP Interac tive, Inc. 3. 9x 9/30/2 008 S NM N OT C P K US D United S tates 0. 00 0.0 2.0 33 www.s nmglo ba lholdin gs .com S NM G lobal H oldings - 9/30/2 008 LOV A ME X US D United S tates 2. 57 55.1 6 0.1 1 76 www.s park .net S pa rk Network s , I nc . 0. 8x S pectrumDNA , Inc. 9/30/2 008 S PXA OT C B B US D United S tates 0. 19 9.2 0.1 - 7 - 9/30/2 008 700 S E HK HKD C hina 45. 00 10, 4 18.5 9 03.6 6,03 9 www.te nc ent. co m. hk/ind ex_ e.s html T enc e nt H oldings L td. 12 .5x 8 /2/2 008 K I DS . Q OT C P K US D United S tates 0. 05 1.3 1 12.0 3 47 www.theparentcompa ny .com T he P a re nt C ompany 0. 2x 9/30/2 008 NC T Y Nas daqG S US D C hina 14. 05 387. 9 2 52.5 1,36 1 www.the 9.c om T he9 L imited - 9/30/2 008 TS CM Na s daq GM US D United S tates 3. 21 97.9 7 5.2 3 49 www.thes tree t.c om T heS tree t. com, Inc. 0. 3x T ree.C om, Inc. 9/30/2 008 TREE Na s daq GM US D United S tates 4. 15 38.9 2 31.2 0. 1x 1,00 0 www. lendingtre e. com 8/31/2 008 T S XV: US S T S XV C AD C a na da 0. 05 1.0 2 7.2 NA www. unise rve.com U nis erve C ommunic ation s C orp. 0. 5x 9/30/2 008 U N TD Nas daqG S US D United S tates 6. 04 495. 1 5 38.7 9 28 www. unitedon line.net U nited O nline Inc. 1. 6x 10 /31/2008 U OM O OT C B B US D C a na da 0. 08 6.8 0.5 NA www.u omolife. co m U O MO M edia , I nc 15 .1x 9/30/2 008 V O IS OT C B B US D United S tates 0. 40 2.9 0.0 4 www.vo is .c om V OI S , Inc. - W ebze n In c. 9/30/2 008 W ZE N Na s daq GM US D S outh K orea 0. 96 11.4 2 1.0 - 3 38 www.webzen .co.k r 9/30/2 008 W ZE A ME X US D United S tates 0. 76 34.3 6.2 1 10 www. wiz za rdsoftwa re.c om W izz ard S oftware C orpora tio n 5. 5x 9/30/2 008 W ZY F OT C B B US D United S tates 0. 15 2.6 0.0 14 www.woozyfly. co m W oo zy F ly, I nc. - NA W Y ND OT C B B US D United S tates 0. 12 2.2 NA NA www. wy ndstorm.c om W ynds torm C orpora tio n - 9/30/2 008 O1 B C XT R A E UR Ge rma ny 31. 35 220. 3 4 2.3 1 61 www. xing.c om X I NG AG 3. 8x 12 /31/2007 A 05 2770 K OSE KRW S outh K orea 7, 270. 00 84.4 5 0.9 NA www. yed ango nline. com/ind exhome .as p Y edangO nline C orp. 1. 6x 12 /31/2007 A 02 3770 K OSE KRW S outh K orea 4, 310. 00 7.8 1 4.5 NA www.y nk .net Y nk K o re a In c. 0. 5x Z ipL oca l In c. 9/30/2 008 T S X V : ZI P T S XV C AD C a na da 0. 01 0.7 3.0 0. 5x NA www.z iploca l.com H igh 10, 4 18.5 903. 6 6,0 39 21 .5x L ow 0.0 0.0 2 - A verage 354. 8 110. 9 2.7x 627 Figure 2. Web 2.0 Universe Summary Source. Capital IQ
    • Page 4 C A P I T A L M A R K E T S A C T I V I T Y (M & A A N D F I N A N C I N G ) January rebounds from December: After 16 financings in December totalling $107.9 million (average $6.7 million), the New Year has started strong, with eight financings already totalling $66.5 million (average $8.3 million). The largest financing in the last three months was of HuffingtonPost for $25.0 million in November (Figure 3). Three companies have raised $10 million each thus far in January – Yodle, RatePoint, and DECA. For additional details, see Figure 19 (at end of note). Financings - Last three months 30.0 25.0 20.0 Jan-09 (US$m) 15.0 Dec-08 Nov-08 10.0 5.0 0.0 Overlay.TV Xobni Rockyou PlaySpan FooMojo One True Media Social Median Casual Collective Multiply GoFish Yodle Scribd JibJab Superfish Snapmylife Jackbe Tagged DotBlu Play Hard Sports StockTwits NetShelter Tumblr HuggingtonPost Angie's List RatePoint DECA Blue Kai KickApps ChakPak AboutUs Clickpass Figure 3. Financings, Last Three Months Source. Company reports But impact of worldwide financial meltdown lingers: However, on a trailing 12-month basis, financings are down for the third month in the last four, although average round sizes increased slightly as of January (Figure 4).
    • Page 5 LTM Financing 4,000.0 20.0 18.0 3,500.0 16.0 3,000.0 14.0 2,500.0 12.0 (US$m) 2,000.0 10.0 8.0 1,500.0 6.0 1,000.0 4.0 500.0 2.0 0.0 0.0 May-06 May-07 May-08 Nov-05 Mar-06 Nov-06 Mar-07 Nov-07 Mar-08 Nov-08 Aug-05 Sep-05 Oct-05 Dec-05 Jan-06 Feb-06 Apr-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Dec-06 Jan-07 Feb-07 Apr-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Dec-07 Jan-08 Feb-08 Apr-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Dec-08 Jan-09 Total Average Figure 4. Financings, Last 12 Months Source. Company reports Cumulative total approaches $5.0 billion: On a cumulative basis, W eb 2.0 financings have totalled almost $5.0 billion, with the majority of the financing coming in late 2007 and the first three quarters of 2008 (Figure 5). Web 2.0 Financing (cumulative) 1,400.0 6,000.0 1,277.0 1,200.0 5,000.0 1,000.0 921.2 4,000.0 800.0 695.7 3,000.0 600.0 488.2 2,000.0 400.0 285.4 273.8 1,000.0 200.0 143.0 117.9 87.2 84.0 64.6 66.5 56.7 41.1 29.4 37.5 33.5 20.0 2.4 35.5 28.8 15.8 14.7 35.0 0.0 0.0 Q2/2002 Q4/2002 Q4/2003 Q1/2004 Q2/2004 Q3/2004 Q4/2004 Q1/2005 Q2/2005 Q3/2005 Q4/2005 Q1/2006 Q2/2006 Q3/2006 Q4/2006 Q1/2007 Q2/2007 Q3/2007 Q4/2007 Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 2002 2003 2004 2005 2006 2007 2008 2009 Figure 5. Financing, Cumulative Source. Company reports
    • Page 6 U.S. remains dominant: U.S. companies continue to dominate capital market activity – with just over 73% of financings/M&A involving U.S. companies (based on dollars). Canadian companies generated under 1% of capital market activity based on dollar volume (Figure 6). Based on number of transactions, the U.S. leads with approximately 77% of deals, while Canada moves to third at 5.7% (Figure 7). Financing/M&A by Country - LTM UK 13.5% China 8.1% Russia Canada 1.7% 0.7% ROW 2.8% USA 73.2% Figure 6. Financing/M&A, by Country (LTM, $) Source. Company reports Financing by Country - LTM (#) Canada UK 5.7% 5.7% Israel 2.4% China 2.4% ROW 7.1% USA 76.8% Figure 7. Financing/M&A, by Country (LTM, #) Source. Company reports
    • Page 7 More early-stage funding (by count): Over 40% of financings in the last 12 months are for early-stage companies (Angel/Seed or Series A) (Figure 8). Series B rounds are 32.4% of the total, with later-stage (Series D and PIPE) deals accounting for just 7.1%. Financing by Type - LTM Series C 13.5% Series B 32.4% Series D 5.3% Angel/Seed 7.6% Debt financing 3.5% PIPE 1.8% Series A 35.9% Figure 8. Financing, by Type (LTM, $) Source. Company reports But “D” Series are largest equity rounds (by dollar): In the last 12 months, there have been nine “D” series rounds, averaging just over $25 million per financing (Figure 9). Note that we have excluded the $430 million Series C financing of Oak Pacific Interactive as it skews the results substantially. Average Financing Round Size - LTM 45.0 40.0 35.0 30.0 25.0 (US$m) 41.9 20.0 15.0 25.6 22.1 10.0 11.7 5.0 9.8 6.5 4.9 0.0 Angel/Seed Debt financing PIPE Series A Series B Series C Series D # rounds 13 6 3 61 55 22 9
    • Page 8 Figure 9. Average Size per Round Source. Company reports C A P I T A L M A R K E T S A C T I V I T Y (P R I C E P E R F O R M A N C E ) Price Performance: Our W eb 2.0 index (market-cap weighted) has closely tracked the performance of the NASDAQ composite index, although it outperformed the index in the last few weeks of 2008 (Figure 10). Web 2.0 Index Price Performance 120 100 80 60 40 20 0 1/14/2008 1/28/2008 2/11/2008 2/25/2008 3/10/2008 3/24/2008 4/7/2008 4/21/2008 5/5/2008 5/19/2008 6/2/2008 6/16/2008 6/30/2008 7/14/2008 7/28/2008 8/11/2008 8/25/2008 9/8/2008 9/22/2008 10/6/2008 10/20/2008 11/3/2008 11/17/2008 12/1/2008 12/15/2008 12/29/2008 1/12/2009 NASDAQ COMP Web 2.0 (Market Cap Weighted) Figure 10. Web 2.0 Price Performance Source. Capital IQ BroadWebAsia leads performance, Shanda lags: W ith a 1-week return over 80%, BroadW ebAsia (BW BA-OTCPK) had the best performance in the group (for stocks with prices greater than $1) (Figure 11). Shanda Interactive (SNDA- NASDAQ) fell the most, -18.3%, after a number of insiders filed to sell shares.
    • Page 9 1-Week Price Performance BroadWebAsia Inc. 83.6% 16.5% YedangOnline Corp. XING AG 14.8% 13.3% PhotoChannel Networks Inc. GungHo Online Entertainment, Inc. 9.8% 9.6% Quepasa Corp. Tree.Com, Inc. 6.2% 6.0% GigaMedia Ltd. Shutterfly, Inc. 5.1% 4.9% United Online Inc. Gamania Digital Entertainment Co., 3.4% LookSmart, Ltd. 3.0% The9 Limited 2.9% Eolith Co. Ltd. 1.8% GameOn Co Ltd. 1.6% Mixi, Inc. 1.3% SK Communications Co., Ltd. 0.0% Moggle, Inc 0.0% HanbitSoft, Inc. 0.0% DigitalTown, Inc. 0.0% 0.0% AQ Interactive, Inc. Spark Networks, Inc. -0.4% Perfect World Co., Ltd. -0.7% NetDragon WebSoft, Inc. -1.4% -1.6% Chinese Gamer International Actoz Soft Co., Ltd. -2.4% Open Text Corp. -3.4% NEOWIZ Games Corporation -4.1% -4.3% DADA SpA Gree, Inc. -4.4% Giant Interactive Group, Inc. -5.2% Ynk Korea Inc. -5.7% CDC Corp. -7.3% TheStreet.com, Inc. -11.1% Netease.com Inc. -11.9% Frogster Interactive Pictures AG -14.1% Tencent Holdings Ltd. -14.1% BoomJ Inc -16.0% Northgate Technologies Limited -16.7% Shanda Interactive Entertainment Ltd. -18.3% -40.0% -20.0% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Figure 11. 1-Week Price Performance Source. Capital IQ INDUSTRY NEWS (PARTNERSHIPS, FINANCIAL RESULTS, NEW PRODUCTS) Dolphin moves to Florida: Dolphin Digital Media Inc. announced that it has completed a strategic relocation of its corporate headquarters from Toronto, Canada to Miami, Florida, as part of its wider strategy to streamline its operations with Dolphin Entertainment. BoomJ reports strong December revenue: BoomJ Inc. reported December revenue of US$1.0 mm, or more than four times revenue recorded in November. In addition, the company expects that it will be profitable in the month of January. National Lampoon director resigns: Paul Skjodt resigned as a director on December 19, 2008 and the company appointed David Tornek on December 22, 2008 to fill the vacancy. TheStreet.com director resigns: On January 8, 2009, Jay Hoag resigned as a director of TheStreet.com, Inc. Mr. Hoag had served as the director designee of the Series B Preferred Stockholders, who at this time have not elected a successor to fill the vacancy created by Mr. Hoag's resignation. Shutterfly financing? Shutterfly, Inc. has filed a Shelf Registration in the amount of $9.98 million. JumpTV Inc. announced the expansion of its HD iPTV Service: NeuLion now unveils the iPTV HD TV Box delivering high-definition programming in 720p and 1080i to the television. NeuLion's existing iPTV HD PC browser service provides HD quality programming of live channels, sports, entertainment events, and video on demand in up to a 1080i format to its Network Partners across the globe. The launch of the HD TV Box provides adaptive streaming in high definition without buffering. NeuLion now offers HD streaming services of live TV channels, live events, and video on demand over the Internet directly to the television. NeuLion lets the consumer choose viewing of content on either the TV, PC or both. The debut of the NeuLion iPTV HD TV Box includes such features as high definition (supporting the major industry standard CODEC and streaming protocol) with standard definition formats in the same box; view the best in both HD and SD programming; Network DVR; store unlimited hours of HD and SD programming; live channel delivery in real time for linear channels and events; on-demand customizable programming menus for personalized entertainment libraries; pause and
    • Page 10 rewind live HD TV; gives viewer control to rewind, slow down or use instant replay; 480i, 480p, 720p, 1080i picture output and multiple screen formats supported; multiple connection ports (HDMI, Component, S-Video, Composite, Optical Audio outputs); iInteractive service to increase network revenue using home shopping, donation prompting, auction, and other e- commerce features; take advantage of NeuLion iPTV interactive features like channel selection overlays, on screen picture-in-picture, weather information, lottery results and more; customized channel guide; 7-day Stored Program Guide. Search the channel guide for shows up to 7 days in the past; Dolby Digital 5.1 surround sound capable; listen to superb theatre-quality sound with additional hardware; and parental controls/locks (ability to lock out objectionable programming for children). CDC reaffirms strong results: CDC Corp. announced that it has reaffirmed its previously-increased guidance for the second half of 2008. Based on preliminary financial results, projections, and estimates, the company continues to expect adjusted EBITDA from continuing operations (Adjusted EBITDA) for the second half of 2008 to be in the range of approximately $16.0 million to $18.0 million. The current Adjusted EBITDA guidance represents an increase of approximately 189%-225% from the prior year period, when the company posted approximately $5.5 million in Adjusted EBITDA for second half of 2007. Furthermore, the current Adjusted EBITDA guidance represents an approximately 88% increase based on the midpoint of the range from the original, lower guidance that was announced on August 26, 2008, and where Adjusted EBITDA estimates were in the range of $8.0 million to $10.0 million. Openwave director appointed: Effective as of January 8, 2008, the Board of Directors of Openwave Systems Inc. appointed David Nagel to serve as a member of the company’s Board of Directors as a Class III Director. Nagel brings to Openwave more than 35 years of technology leadership and management experience in building profitable businesses. Nagel previously served as president, chief executive officer, and as a director of PalmSource Inc. W ith this appointment, Openwave's Board is now composed of seven directors, six of whom are independent. Prior to joining Openwave's Board, Nagel served as a member of the Palm Board of Directors and then as the first chief executive officer of PalmSource, now known as ACCESS Systems Americas Inc. Perfect World licenses new game: Perfect W orld Co. Ltd. announced that it recently signed an agreement with CJ Internet Corporation to license “Zhu Xian”, the 3D massive multiplayer online role-playing game (MMORPG), in South Korea. This is the second time that Perfect W orld has cooperated with CJ Internet. Shutterfly collaborates with Adobe: Shutterfly Inc. announced a collaboration with Adobe Systems Incorporated that will help customers make the most of their digital images. Shutterfly's services are now integrated into Adobe Photoshop Elements 6 and 7(R), Photoshop Album Starter(R) Edition, and Photoshop.com, making it easy for Adobe users to create quality photo books, cards, calendars, and prints in just a few clicks. By integrating Shutterfly into Adobe's broadly- distributed consumer imaging products, it is creating a seamless experience for customers to turn their digital artistry into beautiful prints and merchandise. There are few companies as passionate about inspiring photographers and helping them be creative with their images as Shutterfly. Additionally, digital scrapbook customers, who consider Adobe a basic necessity, will find tremendous value in the ease and integration to turn their digital works into beautiful physical works of art. Quepasa hires new VP Business Development, new GM Brazil: Quepasa Corp. announced that it has hired Brian Garrett to serve as VP of Business Development and Strategy, and Paulo Maia as the General Manager of Quepasa Brazil, which is slated to launch in late March. Prior to joining Quepasa, Garrett was co-founder and managing director of Crosscut Ventures. He has spent the last eight years investing in numerous early-stage companies as a venture capitalist and has been actively advising several companies in the digital media ecosystem. In his new role at Quepasa, Garrett will be responsible for identifying and developing new business opportunities and partnerships, as well as creating revenue- generating initiatives. Maia brings nearly a decade of experience to Quepasa. As General Manager of Quepasa Brazil, Maia will be responsible for overseeing all aspects of daily operations in Brazil, including development, production, sales, promotions, and the overall launch of the site. Before joining Quepasa, Maia was CEO of ClickFilmes. Tencent launches social network: Tencent Holdings Ltd. officially launched a campus social networking service (SNS) on January 6, 2009. The move is destined to pose a new challenge to existing campus SNS providers in the Chinese market, such as 51.com, xiaonei.com, and kaixin.com, noted industry watchers. In addition, the Hong Kong-listed instant messaging provider will be likely to launch a QQ-themed netbook this year by cooperating with manufacturers. UPCOMING EVENTS This section will highlight select upcoming conferences and events regarding W eb 2.0.
    • Page 11 Upc oming E vents E vent Date L ocation Webs ite B log W ell J a nua ry 22 C h icago www. ga speda l. com/blogwe ll/ S ocial M edia C onferenc e J a nua ry 22 -2 3 M iam i www. s ocialmediaconference. co m/con ference-m ia mi-2 009. php O MMA S oc ia l J a nua ry 26 Ne w Y o rk www. mediapost. c om/om ma social W eb 2. 0 C anadian Le aders hip S eries F ebruary 3 T o ronto http: //web2lea ders hipse ries . iglo oevents. net/ O 'R eilly Money: T ech F ebruary 4-6 Ne w Y o rk www. conf erenc es .oreilly .c om/money/ Us er G ene ra ted C onte nt F ebruary 9-10 S an J o se www. ug cx ev ent. com/ E ngage! E xpo March 10 -1 1 Ne w Y o rk www. en gageexpo.c om Me sh 200 9 April 7-8 T o ronto www. mes hc onf erence.c om Figure 12. Upcoming Events Source. Company reports VALUATION Six companies top US$1 billion market cap: Just six companies in our W eb 2.0 universe top US$1 billion in market capitalization (Figure 13). However, 55 of the 76 companies have market caps under US$100 million, with 23 under $10 million. Online gaming companies dominate the top of the list with five of the top six by market cap. Market Cap (US$ mm) Tencent Holdings Ltd. Netease.com Inc. 2243.2 Shanda Interactive Entertainment 1896.2 Open Text Corp. 1578.3 Giant Interactive Group, Inc. 1426.3 Perfect World Co., Ltd. 1017.1 Mixi, Inc. 961.9 United Online Inc. 505.8 The9 Limited 400.6 GigaMedia Ltd. 379.8 Chinese Gamer International 236.0 XING AG 218.7 Shutterfly, Inc. 195.3 NetDragon WebSoft, Inc. 193.6 SK Communications Co., Ltd. 187.7 DADA SpA 153.2 NEOWIZ Games Corporation 142.5 GameOn Co Ltd. 140.2 GungHo Online Entertainment, Inc. 138.0 CDC Corp. 124.0 Gamania Digital Entertainment Co., 103.6 Extensions, Inc. 93.5 TheStreet.com, Inc. 93.0 BroadWebAsia Inc. 85.7 YedangOnline Corp. 84.4 DigitalTown, Inc. 73.3 Moggle, Inc 70.6 Actoz Soft Co., Ltd. 65.8 Openwave Systems Inc. 63.1 HanbitSoft, Inc. 55.3 Spark Networks, Inc. 54.5 Kaboose Inc. 49.4 GeoSentric Oyj 48.4 PhotoChannel Networks Inc. 47.8 BoomJ Inc 43.0 Northgate Technologies Limited 40.1 Tree.Com, Inc. 37.7 Wizzard Software Corporation 34.8 IdeaEdge, Inc. 34.6 Dolphin Digital Media, Inc. 34.1 LookSmart, Ltd. 29.0 JumpTV Inc. 28.6 Quepasa Corp. 24.7 Eolith Co. Ltd. 19.2 Frogster Interactive Pictures AG 18.4 AQ Interactive, Inc. 17.5 Gravity Co., Ltd 15.0 Fluid Music Canada, Inc. 13.7 Jumbuck Entertainment Pty Ltd. 13.6 CornerWorld Corporation 11.7 Webzen Inc. 11.7 Magnitude Information Systems Inc. 11.2 SNAP Interactive, Inc. 10.0 Accelerize New Media, Inc. 9.4 SpectrumDNA, Inc. 9.2 NeXplore Corporation 8.4 Ynk Korea Inc. 7.8 National Lampoon Inc. 6.9 UOMO Media, Inc 6.8 GoFish Corporation 5.1 Financial Media Group, Inc. 3.4 DigitalFX International, Inc. 3.0 Bright Things plc 2.9 VOIS, Inc. 2.9 WoozyFly, Inc. 2.6 LiveWorld Inc. 2.3 Wyndstorm Corporation 2.2 DigitalPost Interactive, Inc. 1.5 IAS Energy, Inc. 1.4 The Parent Company 1.3 Uniserve Communications Corp. 1.0 ZipLocal Inc. 0.7 Associated Media Holdings Inc. 0.4 China Gateway Corporation 0.0 0 500 1,000 1,500 2,000 2,500 3,000 Figure 13. Market Cap Ranking Source. Capital IQ TEV/Revenue (LTM) averages 2.7x: The overall average TEV/Revenue (LTM) multiple for our group is 2.7x (Figure 14). However, this is skewed by BoomJ at 42.7x (BOMJ-OTCBB) and CornerW orld (CW RL-OTCBB) at 21.5x. Excluding those
    • 0. 0 5. 0 10. 0 15. 0 20. 0 25. 0 30. 0 35. 0 40. 0 45. 0 0. 0 5. 0 10. 0 15. 0 20. 0 25. 0 30. 0 35. 0 40. 0 45. 0 S NM G lobal Holdings NetDragon W ebS oft, Inc. 0.4 C hina G ateway C orporation LookS mart, Ltd. F ina ncia l Media G roup, Inc. 1.0 Source. Capital IQ Source. Capital IQ T ree. C om, Inc. LiveW orld Inc. T heS treet.com, Inc. 1.3 NetDragon W ebS oft, Inc. Average, 8. 6 T heS treet.com, Inc. Northga te T echnologies Limited 1.6 Average, 2.7 F ina ncia l Media G roup, Inc. Figure 15. TEV/EBITDA Ranking Figure 14. TEV/Revenue Ranking J umbuck E nterta inment P ty Ltd. T he P a rent C ompany 1.7 Northga te T echnologies Limited multiples under 1.5x. G ameOn C o Ltd. DigitalF X International, Inc. 3.6 C DC C orp. NE O W IZ G a mes C orporation 3.7 ZipL oca l Inc. Unis erve C ommunications C orp. Actoz S oft C o., Ltd. 4.0 Y nk K orea Inc. G amania Digital E ntertainment C o., Ltd. G amania Digital E ntertainment C o., Ltd. 4.1 HanbitS oft, Inc. Actoz S oft C o., Ltd. 0.0 0.0 0.0 0. 1 0.1 0.2 0. 2 0.2 0.2 0.3 0. 3 0.4 0.5 0. 5 0. 5 0.7 0. 7 0. 7 have EBITDA multiples under 7x. C ornerW orld C orporation 4.2 S hutterfly, Inc. J umbuck E nterta inment P ty Ltd. S pa rk Networks , Inc. 4.3 S pa rk Networks , Inc. DADA S pA DADA S pA 5.4 G ameOn C o Ltd. K aboos e Inc. S hutterfly, Inc. 6.0 G ungHo Online E ntertainment, Inc. G igaMedia Ltd. NE O W IZ G a mes C orporation 6.5 E olith C o. L td. United O nline Inc. S K C ommunica tions C o., Ltd. 6.6 0.8 0.8 0. 8 0. 9 0.9 0. 9 1.0 1.0 1.0 1. 2 Na tional Lampoon Inc. TE V/L TM E B ITDA (x) TE V/L TM R evenue (x) G ungHo Online E ntertainment, Inc. 6.6 G igaMedia Ltd. United O nline Inc. Y edangOnline C orp. 7.4 Y edangOnline C orp. Open T ext C orp. 1.6 1.6 1. 6 1. 6 2.2 Open T ext C orp. 8.7 G oF is h C orpora tion 2.5 J umpT V Inc. C DC C orp. 9.6 F rogs ter Interactive P ictures AG 2. 9 3.3 P hotoC hannel Networks Inc. C hines e G a mer International 9.8 X ING AG S NAP Interactive, Inc. 3.7 3.8 3. 9 X ING AG 9.8 Accelerize New Media, Inc. C hines e G a mer International K aboos e Inc. 4.3 4. 6 11.9 W iz za rd S oftware C orpora tion S K C ommunica tions C o., Ltd. DigitalP os t Interactive, Inc. 5. 6 6. 0 13.0 Mixi, Inc. 6.8 Mixi, Inc. G eoS entric Oyj 7. 7 17.3 B right T hings plc 11.3 Unis erve C ommunications C orp. T encent Holdings L td. 18.7 13. As s ociated Media Holdings Inc. 12. 5 2 T encent Holdings L td. 25.1 UO MO Media, Inc 15. 1 C ornerW orld C orporation 21.5 S NAP Interactive, Inc. 38.4 B oomJ Inc 42. 7 Page 12 100x) is 8.6x LTM EBITDA, led by SNAP Interactive’s (STVI-OTCBB) 38.4x multiple (Figure 15). Sixteen of the companies companies, the average is 2.3x. Note that we exclude multiples greater than 100x. Twenty-eight of the companies have TEV/EBITDA (LTM) averages 8.6x: The average multiple for the 27 companies with positive EBITDA (and multiples under
    • 0. 0 10. 0 20. 0 30. 0 40. 0 50. 0 60. 0 T he9 Limited 1. 0 G iant Interactive G roup, 1. 3 Source. Capital IQ Inc. Figure 16. P/E Ranking P erfect W orld C o., Ltd. 1. 6 S handa Interactive Average, 13.7 1. 7 E ntertainment Ltd. Neteas e.com Inc. 1. 7 Northga te T echnologies 2. 5 Limited L ookS ma rt, L td. 4. 2 S park Networks , Inc. 5. 5 NetDragon W ebS oft, Inc. 5. 5 J umbuck E ntertainment P ty 7. 0 Ltd. United Online Inc. 7. 7 NE OW IZ G a mes 7. 9 companies have P/E multiples under 10x. C orporation DADA S pA 8. 9 Y edangOnline C orp. 9. 7 P/E L TM (x) G iga Media Ltd. 11. 2 G amania Digital 11. 6 E ntertainment C o., L td. Actoz S oft C o. , Ltd. 12. 5 G a meOn C o L td. 13. 6 C hines e G a mer 13. 9 International T heS treet. com, Inc. 15. 8 X ING AG 20. 6 O pen T ext C orp. 26. 9 S hutterfly, Inc. 32. 0 T encent Holdings Ltd. 34. 1 Mixi, Inc. 41. 7 S NAP Intera ctive, Inc. 55. 6 Page 13 P/E (LTM) averages 13.7x: The average multiple for the 26 companies with positive earnings (and multiples under 100x) is 13.7x LTM EPS, led by again by SNAP Interactive’s (STVI-OTCBB) 55.6x multiple (Figure 16). Fourteen of the
    • Page 14 C omparable C ompany Analys is > W eb 2.0 P ric e P erforma nc e C ompany Name C urrenc y Tic ker Ex change US D Market C ap ($m) Current Price 1 Wk 1 Mth 3 Mth 6 Mth 1 Yr 52 W eek A cc eleriz e New Me dia , In c. USD A C LZ OTCB B 9.4 0. 3 5 0 . 0% 0.0% -30.0 % -46.2 % -48 .5% -56 .3% A ctoz S o ft C o ., L td. KRW A 052 790 K OS E 65. 8 10, 0 50. 0 0 -2. 4% 1.0% 18. 8% 27.5 % 27 .2% -21 .2% A Q Inte ra ctive, I nc . J PY 3 838 TSE 17. 5 29, 0 00. 0 0 0 . 0% -3 .3% -19.4 % -82.9 % -90 .7% -91 .5% A ss oc iated Media Holdin gs Inc . USD A S MH OTCP K 0.4 0. 0 1 73 3.3% 2 33.3 % 25. 0% 809. 1% -75 .0% -87 .5% B oomJ Inc USD B O MJ OTCB B 43. 0 1. 0 5 -16 .0% 1 6. 7% -50.0 % -67.7 % NM -68 .2% B right T hings plc GBP AIM : B G T AI M 2.9 0. 0 2 2 0.0% 5 6. 3% 57. 9% -18.9 % -51 .0% -64 .7% B ro adW e bAs ia In c. USD BW BA OTCP K 85. 7 1. 0 1 8 3.6% 0.0% 68. 3% -32.7 % NM -66 .3% C D C C orp. USD C HIN.A N a sdaqG S 124. 0 1. 1 5 -7. 3% 8.5% -36.1 % -56.8 % -69 .9% -74 .4% C hina G a teway C o rporation USD CGWY OTCB B 0.0 0. 0 0 3 3.3% 0.0% -80.0 % -93.3 % -99 .5% -99 .7% C hines e G ame r Inte rn ational TWD G T S M:3 083 GTS M 236. 0 92. 0 0 -1. 6% 6.7% 36. 5% 32.6 % -12 .0% -33 .8% C orne rW orld C orporation USD CWR L OTCB B 11. 7 0. 2 5 0 . 0% -46 . 8% 25. 0% -59.0 % -77 .3% -83 .9% DA DA S pA E UR C M: DA CM 153. 2 7. 0 0 -4. 3% 1.8% -5. 2% -24.4 % -48 .5% -56 .8% DigitalFX Internationa l, Inc . USD DXN AM E X 3.0 0. 1 2 0 . 0% -29 . 4% -64.7 % -81.3 % -90 .8% -92 .9% DigitalP os t Inte rac tive, In c. USD D GL P OTCB B 1.5 0. 0 2 -15 .4% -12 . 0% -37.1 % -80.2 % -95 .7% -96 .3% DigitalTo wn, I nc . USD DG T W OTCB B 73. 3 2. 7 0 0 . 0% -1 .8% -10.0 % -3. 6% 8 . 0% -55 .7% Dolphin D igital Me dia, In c. USD DP D M OTCB B 34. 1 0. 7 0 -12 .5% -12 . 5% -18.6 % NM NM -38 .1% E olith C o. L td. KRW A 041 060 K OS E 19. 2 5 55. 0 0 1 . 8% -3 .5% -20.7 % -27.5 % -76 .3% -81 .9% E xte ns ion s, Inc . USD E XT I OTCP K 93. 5 0. 9 9 0 . 0% 8 90.0 % 890. 0% 560. 0% 56 0. 0% -2. 0% F inanc ial Media G roup, In c. USD F NG P OTCB B 3.4 0. 0 5 -33 .3% -39 . 8% -85.3 % -94.0 % -78 .3% -94 .9% F luid Mus ic C ana da, I nc . C AD T S X: F MN TSX 13. 7 0. 3 1 -11 .4% 4 0. 9% -22.5 % -80.6 % NM -84 .8% F rogs ter I nterac tive P ic tures A G E UR FRG XT R A 18. 4 5. 8 0 -14 .1% 2 6. 6% 18. 6% 23.7 % -33 .9% -44 .0% G am ania Digital E ntertainment C o. , L td. TWD 6 180 GTS M 103. 6 22. 6 0 3 . 4% 4 9. 2% 47. 2% -7. 4% -20 .3% -38 .8% G am eO n C o L td. J PY 3 812 TSE 140. 2 1 27, 0 00. 0 0 1 . 6% 0.8% 82. 7% 1. 6 % 0 . 0% -22 .3% G eoS entric O yj E UR G E O1 V HL S E 48. 4 0. 0 4 0 . 0% 3 3. 3% 33. 3% -20.0 % -20 .0% -55 .6% G ia nt I nterac tive G roup, Inc . USD GA NY S E 1, 4 26.3 6. 0 0 -5. 2% 0.5% -5. 2% -47.3 % -45 .5% -65 .1% G igaMedia L td. USD G IG M N a sdaqG S 379. 8 7. 0 3 6 . 0% 2 1. 8% -1. 4% -41.6 % -55 .5% -66 .4% G oF ish C orporation USD G OFH OTCB B 5.1 0. 2 0 5 . 3% 2 5. 0% -4. 8% -31.0 % -61 .5% -66 .1% G ravity C o. , L td USD G R VY Na sdaqG M 15. 0 0. 5 4 -10 .0% -6 .9% -40.0 % -44.3 % -82 .4% -83 .9% G ree, Inc . J PY T S E : 36 32 TSE 0.0 5, 2 00. 0 0 -4. 4% NM NM NM NM -12 .0% G ungHo O nlin e E nterta inm en t, In c. J PY 3 765 OS E 138. 0 1 08, 9 00. 0 0 9 . 8% 1 1. 5% -16.2 % -35.6 % -36 .7% -75 .0% Han bitS o ft, I nc. KRW A 047 080 K OS E 55. 3 3, 4 00. 0 0 0 . 0% 7.6% 3.3 % 24.8 % -53 .5% -58 .5% IA S E n ergy, Inc . USD IA S C .A OTCB B 1.4 0. 0 2 -20 .0% -33 . 3% -85.7 % -90.5 % -95 .6% -95 .6% IdeaE dge, Inc . USD O T C B B : IDA E OTCB B 34. 6 0. 8 5 6 . 2% -37 . 0% -59.1 % -68.2 % -30 .5% -70 .0% J umbuc k E ntertainment P ty L td. A UD AS X: J MB AS X 13. 6 0. 3 9 0 . 0% -11 . 4% -20.4 % -30.4 % -35 .0% -55 .7% J umpT V Inc . C AD T S X: J T V TSX 28. 6 0. 3 0 -36 .2% 0.0% -56.5 % -67.4 % -83 .7% -85 .1% K aboo se Inc . C AD T S X :KAB TSX 49. 4 0. 4 2 1 8.3% 6 8. 0% -40.8 % -40.0 % -80 .6% -83 .8% L ive W orld Inc . USD L VW D OTCP K 2.3 0. 0 8 15 0.0% 5 0. 0% 7.1 % -73.2 % -73 .2% -90 .0% L o ok S mart, L td. USD LO O K Na sdaqG M 29. 0 1. 7 0 3 . 0% 8.3% -4. 5% -50.7 % -51 .3% -64 .6% Ma gnitude Inf ormation S ys tems Inc . USD MA G Y OTCB B 11. 2 0. 0 3 8 . 0% 1 7. 4% 35. 0% 41.4 % 35 .0% -22 .9% Mixi, In c. J PY 2 121 TSE 961. 9 5 67, 0 00. 0 0 1 . 3% -3 .2% -5. 5% -10.3 % -59 .5% -60 .9% Mo ggle, I nc USD MMO G OTCB B 70. 6 2. 0 0 0 . 0% 3 3. 3% NM NM NM 0 . 0% Nation al L ampoo n Inc. USD NL N AM E X 6.9 0. 7 3 0 . 0% 0.0% -23.2 % -50.7 % -60 .1% -70 .4% NE O W IZ G ames C orpora tio n KRW A 095 660 K OS E 142. 5 20, 0 00. 0 0 -4. 1% 3.1% 13. 3% -7. 8% -36 .9% -50 .0% NetDra gon W ebS oft, In c. H KD 7 77 S E HK 193. 6 2. 8 4 -1. 4% -3 .1% -12.6 % -71.5 % -79 .1% -81 .4% Neteas e.c om In c. USD NT E S N a sdaqG S 2, 2 43.2 18. 2 3 -11 .9% -6 .5% -16.8 % -12.9 % -2 .6% -32 .9% NeX plo re C orpo ra tio n USD NX PC OTCP K 8.4 0. 1 5 -85 .0% -85 . 1% -75.0 % -72.7 % NM -89 .7% North gate T ec hno logies L imited INR 59 0057 BSE 40. 1 55. 5 5 -16 .7% 1 1. 8% -30.3 % -81.2 % -88 .9% -90 .3% O pen T ext C orp. USD OTE X N a sdaqG S 1, 5 78.3 30. 4 3 -3. 4% 1 2. 2% 12. 4% 0. 3 % 4 . 9% -22 .2% O pen wave S y s tems Inc. USD OP W V N a sdaqG S 63. 1 0. 7 6 1 0.1% 3 8. 2% -14.6 % -46.9 % -66 .8% -73 .7% P erfec t W o rld C o., L td. USD PWRD N a sdaqG S 1, 0 17.1 17. 8 3 -0. 7% 6.0% -12.9 % -31.1 % -21 .2% -46 .8% P hoto C han nel N etwo rk s Inc. C AD T S X V:P N T S XV 47. 8 1. 7 0 1 3.3% 1 4. 9% -17.1 % -48.6 % -48 .0% -59 .0% Q uepas a C orp. USD QPS A N as daqC M 24. 7 1. 9 5 9 . 6% -2 .0% -22.9 % -7. 1% -21 .7% -51 .1% S handa In terac tive E n tertainment L td. USD S NDA N a sdaqG S 1, 8 96.2 27. 3 3 -18 .3% -2 .5% -0. 2% 16.9 % 0 . 6% -28 .5% S hutterfly , I nc . USD S F LY N a sdaqG S 195. 3 7. 7 9 5 . 1% 1.0% 7.0 % -32.4 % -59 .4% -64 .8% S K C ommun ic ations C o., L td. KRW A 066 270 K OS E 187. 7 6, 1 50. 0 0 0 . 0% 2 4. 6% -35.9 % -57.3 % -81 .4% -83 .9% S N AP In terac tive, Inc . USD S T VI OTCB B 10. 0 0. 9 4 3 4.3% 3 4. 3% 370. 0% 36.2 % -7 .8% -14 .5% S N M G lobal Ho ldings USD S NMN OTCP K 0.0 0. 0 0 -100 . 0% -10 0.0% -1 00.0 % -1 00. 0 % -10 0. 0% -100 . 0% S park Netwo rk s , I nc . USD LO V AM E X 54. 5 2. 5 4 -0. 4% -7 .6% -9. 6% -37.9 % -51 .7% -57 .7% S pec trumDNA , In c. USD S P XA OTCB B 9.2 0. 1 9 2 6.7% -9 .5% 18. 8% NM NM -68 .3% T enc e nt Ho ldings L td. H KD 7 00 S E HK 10, 418. 5 45. 0 0 -14 .1% -3 .7% -16.7 % -24.2 % -6 .9% -37 .5% T he P a re nt C o mpany USD K ID S .Q OTCP K 1.3 0. 0 5 -10 .0% -81 . 7% -93.8 % -97.3 % -98 .9% -99 .1% T he9 L imited USD NCTY N a sdaqG S 400. 6 14. 5 1 2 . 9% 1 9. 1% -12.1 % -43.2 % -23 .2% -49 .1% T heS tree t.c om, In c. USD TSCM Na sdaqG M 93. 0 3. 0 5 -11 .1% -10 . 0% -23.0 % -50.8 % -73 .1% -76 .3% T ree. C om, Inc . USD TREE Na sdaqG M 37. 7 4. 0 2 6 . 2% 1 43.9 % 63. 6% NM NM -63 .7% Unis erve C ommu nic ation s C orp. C AD T S X V :U S S T S XV 1.0 0. 0 5 2 5.0% 6 6. 7% -72.2 % -76.2 % -88 .9% -89 .6% United O nline Inc . USD U NT D N a sdaqG S 505. 8 6. 1 7 4 . 9% 0.5% -27.2 % -40.4 % -39 .6% -50 .6% UO MO M edia, I nc USD UO MO OTCB B 6.8 0. 0 8 -20 .0% -33 . 3% -60.0 % -82.3 % -88 .4% -90 .0% V OI S , Inc . USD V O IS OTCB B 2.9 0. 4 0 0 . 0% 3 3. 3% -46.7 % -91.6 % NM -92 .9% W ebze n In c. USD W ZE N Na sdaqG M 11. 7 0. 9 9 3 . 1% 2 3. 8% -17.6 % -63.2 % -74 .7% -77 .8% W izz ard S oftware C orpo ra tio n USD W ZE AM E X 34. 8 0. 7 7 -18 .9% -17 . 2% -18.9 % -37.9 % -65 .8% -76 .3% W oo zy F ly , I nc . USD W ZY F OTCB B 2.6 0. 1 5 0 . 0% -50 . 0% NM NM NM -100 . 0% W y nds to rm C orpo ra tio n USD W Y ND OTCB B 2.2 0. 1 2 0 . 0% 0.0% -40.0 % -60.0 % NM -85 .9% XI NG AG E UR O1BC XT R A 218. 7 31. 1 2 1 4.8% 1 6. 1% 7.3 % 10.6 % -21 .4% -31 .6% Y edan gO nline C orp. KRW A 052 770 K OS E 84. 4 7, 2 70. 0 0 1 6.5% 1 5. 9% 5.7 % -29.1 % -11 .0% -42 .1% Y nk K o re a In c. KRW A 023 770 K OS E 7.8 4, 3 10. 0 0 -5. 7% -14 . 5% -49.3 % -57.3 % -73 .6% -78 .3% ZipLoc al In c. C AD T S XV : ZIP T S XV 0.7 0. 0 1 10 0.0% 0.0% -75.0 % -90.9 % -92 .9% -95 .9% Aver age 316. 8 1 1.1% 1 8.7% 1. 4% -20.4 % -41 .9% -64 .3% Figure 17. Price Performance Source. Capital IQ
    • Page 15 Comparable C ompany Analys is > Web 2.0 Valuation Multiples P ri mary U S D Mar ket T E V/L T M T E V / NTM T E V /L T M TE V /NT M C ompany Na me E xc ha nge Ti c ker C ap ($m) R ev enue R e venue E B I TDA E B IT DA P /L TM E P S P /NT M E P S P /T angB V Acce lerize N ew Media, Inc. O T C BB AC L Z 9.4 4 .3x - - - - - - Actoz S oft C o. , Ltd. K OS E A052790 65 . 8 0 .7x - 4.0 x - 1 2. 5x - 1. 3x AQ Inte ractive, Inc. TS E 3 838 17 . 5 - - - - - - 0. 3x As s ociated Me dia Holdings Inc. O T C PK A S MH 0.4 13. 2x - - - - - - BoomJ Inc O T C BB B O MJ 43 . 0 42. 7x - - - - - - Br ight T hings plc A IM A IM: B GT 2.9 11. 3x - - - - - - Br oadW ebA s ia Inc. O T C PK B W BA 85 . 7 - - - - - - - C DC C orp. Na sdaqGS C HIN .A 124 . 0 0 .4x 0. 4x 9.6 x 7.3 x - 16 .9 x - C hina G ateway C orpora tion O T C BB C GW Y 0.0 0 .0x - - - - - - C hines e G amer International GTSM G T S M: 30 83 236 . 0 4 .6x - 9.8 x - 1 3. 9x - 4. 5x C ornerW orld C orporation O T C BB C WR L 11 . 7 21. 5x - 4.2 x - - - - DAD A S pA CM C M:DA 153 . 2 0 .9x - 5.4 x - 8. 9x - - Digita lF X Inte rnational, Inc. A ME X DXN 3.0 0 .3x - - - - - - Digita lP os t Inter active, Inc. O T C BB DG LP 1.5 6 .0x - - - - - - Digita lT own, Inc. O T C BB DG T W 73 . 3 - - - - - - - Dolphin Digita l Me dia , Inc. O T C BB DP DM 34 . 1 - - - - - - - E olith C o. Ltd. K OS E A041060 19 . 2 1 .0x - - - - - - E xtensions, Inc. O T C PK E XT I 93 . 5 - - - - - - - F ina ncia l Me dia Group, Inc. O T C BB F NGP 3.4 0 .2x - 1.0 x - - - - F luid Mus ic C anada , Inc. TS X T S X: F MN 13 . 7 - - - - - - 1. 1x F rogs te r Inte ractive P icture s A G XT R A FRG 18 . 4 3 .3x - - - - - 1. 7x Ga mania Digital E nterta inme nt C o. , L td. GTSM 6 180 103 . 6 0 .7x - 4.1 x - 1 1. 6x - 1. 5x Ga meO n C o L td. TS E 3 812 140 . 2 0 .9x - 3.6 x - 1 3. 6x - 1. 7x Ge oS entric O yj HL S E G E O1 V 48 . 4 7 .7x - - - - - 7. 0x Giant Inte ractive G roup, Inc. NY S E GA 1 , 426 . 3 - - - - 1. 3x 12 .7 x 0. 3x GigaMe dia L td. Na sdaqGS G IGM 379 . 8 1 .6x 1. 4x 6.5 x 5.6 x 1 1. 2x 9. 4x 3. 6x GoF is h C orpor ation O T C BB G OF H 5.1 2 .5x - - - - - - Gr avity C o., Ltd Na sdaqGM GRVY 15 . 0 - - - - - - - Gr ee, Inc. TS E T S E :3632 0.0 - - - - - - - GungHo Online E nte rtainme nt, Inc. OSE 3 765 138 . 0 1 .0x - 6.6 x - - - 39. 0x HanbitS oft, Inc. K OS E A047080 55 . 3 0 .7x - - - - - 1. 8x IA S E ne rgy, Inc. O T C BB IAS C . A 1.4 - - - - - - - IdeaE dge, Inc. O T C BB OT C B B :IDAE 34 . 6 - - - - - - 30. 9x J umbuck E ntertainme nt P ty Ltd. ASX A S X: J MB 13 . 6 0 .8x - 1.7 x - 7. 0x - 1. 5x J umpT V Inc. TS X T S X :J T V 28 . 6 2 .9x - - - - - 1. 9x Ka boos e Inc. TS X T S X: K AB 49 . 4 0 .9x 0. 8x 11. 9 x 6.0 x - - - Live World Inc. O T C PK LV W D 2.3 0 .1x - - - - - 1. 1x LookS mar t, Ltd. Na sdaqGM LO OK 29 . 0 0 .0x 0. 0x - - 4. 2x - 1. 0x Magnitude Informa tion S ys tems Inc. O T C BB MAG Y 11 . 2 - - - - - - - Mixi, Inc. TS E 2 121 961 . 9 6 .8x - 17. 3 x - 4 1. 7x - 7. 1x Moggle , Inc O T C BB MMOG 70 . 6 - - - - - - - National L ampoon Inc. A ME X N LN 6.9 1 .6x - - - - - 19. 4x NE O W IZ G ame s C orpora tion K OS E A095660 142 . 5 1 .0x - 3.7 x - 7. 9x - 4. 6x NetDra gon We bS oft, Inc. S E HK 7 77 193 . 6 0 .2x - 0.4 x - 5. 5x - 1. 1x Netea s e. com Inc. Na sdaqGS NT E S 2 , 243 . 2 - - - - 1. 7x 9. 8x 0. 5x NeXplore C or por ation O T C PK NXP C 8.4 - - - - - - - Northgate T e chnologies L imited B SE 59 0057 40 . 1 0 .3x - 1.6 x - 2. 5x - - Open T e xt C or p. Na sdaqGS OTEX 1 , 578 . 3 2 .2x 1. 9x 8.7 x 7.8 x 2 6. 9x 12 .6 x - Openwa ve S ys tems Inc. Na sdaqGS OPW V 63 . 1 - - - - - - 0. 8x Pe rfect W orld C o., Ltd. Na sdaqGS PW R D 1 , 017 . 1 - - - - 1. 6x 8. 3x 0. 5x PhotoC hannel Ne tworks Inc. T S XV T S XV : P N 47 . 8 3 .7x 1. 9x - 4.7 x - 13 .6 x 16. 3x Quepas a C orp. Na sdaqC M QP S A 24 . 7 - - - - - - 10. 1x S handa Intera ctive E nte rtainment L td. Na sdaqGS S NDA 1 , 896 . 2 - - - - 1. 7x 10 .2 x 0. 9x S hutterfly, Inc. Na sdaqGS S F LY 195 . 3 0 .8x 0. 8x 6.0 x 4.6 x 3 2. 0x - 1. 3x S K C ommunications C o. , Ltd. K OS E A066270 187 . 7 1 .2x - 13. 0 x - - - - S NA P Inter active, Inc. O T C BB S TV I 10 . 0 3 .9x - 38. 4 x - 5 5. 6x - 7. 3x S NM G lobal Holdings O T C PK S NMN 0.0 - - - - - - - S park Ne tworks , Inc. A ME X L OV 54 . 5 0 .8x - 4.3 x - 5. 5x - - S pectrumDNA, Inc. O T C BB S PX A 9.2 - - - - - - 9. 9x T encent Holdings Ltd. S E HK 7 00 10 , 418 . 5 12. 5x - 25. 1 x - 3 4. 1x - 13. 6x T he P ar ent C ompany O T C PK KIDS .Q 1.3 0 .2x - - - - - - T he 9 Limited Na sdaqGS NC T Y 400 . 6 - - - - 1. 0x 7. 1x 0. 2x T he S tre et.com, Inc. Na sdaqGM T SCM 93 . 0 0 .2x 0. 2x 1.3 x 4.0 x 1 5. 8x - 0. 9x T ree . C om, Inc. Na sdaqGM TR E E 37 . 7 0 .1x 0. 1x - - - - 0. 6x Unis e rve C ommunications C or p. T S XV T S XV: US S 1.0 0 .5x - 18. 7 x - - - - Unite d Online Inc. Na sdaqGS UNT D 505 . 8 1 .6x 0. 8x 6.6 x 3.4 x 7. 7x 8. 1x - UOMO Media, Inc O T C BB UO MO 6.8 15. 1x - - - - - - VO IS , Inc. O T C BB VO IS 2.9 - - - - - - - W ebzen Inc. Na sdaqGM WZE N 11 . 7 - - - - - - 0. 0x W izza rd S oftwa re C orporation A ME X W ZE 34 . 8 5 .6x - - - - - - W oozyF ly, Inc. O T C BB W ZY F 2.6 - - - - - - - W ynds torm C orporation O T C BB W Y ND 2.2 - - - - - - - XING A G XT R A O 1B C 218 . 7 3 .8x - 9.8 x - 2 0. 6x - 5. 6x Ye dangO nline C orp. K OS E A052770 84 . 4 1 .6x - 7.4 x - 9. 7x - 4. 5x Ynk K or ea Inc. K OS E A023770 7.8 0 .5x - - - - - - ZipL ocal Inc. T S XV T S X V: ZIP 0.7 0 .5x - - - - - - High 10 , 418 . 5 21. 5x 1. 9x 38. 4 x 7.8 x 5 5. 6x 13 .6 x 39. 0x Low 0.0 - 0. 0x 0.4 x 3.4 x 1. 0x 7. 1x 0. 0x Average 355.9 2.7x 0.9x 8.6x 5.2x 13.7x 10.2x 5.9x Median 34 . 7 1 .0x 0. 8x 6.3 x 4.7 x 8. 4x 9. 8x 1. 7x Figure 18. Valuation Comparison Source. Capital IQ
    • Page 16 Financing - Last Three Months (US$ mm) Month Company Name Country Debt financing PIPE Seed Series A Series B Series C Series D Grand Total USA 25.0 25.0 Nov-08 HuggingtonPost USA 18.0 18.0 Angie's List USA 17.0 17.0 Rockyou USA 16.8 16.8 PlaySpan KickApps USA 14.0 14.0 USA 5.0 5.0 Multiply UK 1.0 1.0 Casual Collective Nov-08 Total 18.0 1.0 16.8 61.0 96.8 USA 22.5 22.5 Dec-08 GoFish Canada 11.1 11.1 NetShelter Blue Kai USA 10.5 10.5 USA 9.9 9.9 FooMojo Scribd USA 9.0 9.0 Israel 5.3 5.3 Superfish USA 5.0 5.0 Tagged Jackbe USA 5.0 5.0 USA 5.0 5.0 Snapmylife India 5.0 5.0 ChakPak Tumblr USA 4.5 4.5 Canada 3.8 3.8 Overlay.TV DotBlu USA 2.0 2.0 USA 1.0 1.0 Angie's List USA 0.8 0.8 StockTwits Dec-08 Total 5.0 22.5 23.8 43.1 1.0 5.0 100.4 USA 10.0 10.0 Jan-09 Yodle USA 10.0 10.0 RatePoint DECA USA 10.0 10.0 USA 9.0 9.0 One True Media Play Hard Sports USA 8.0 8.0 USA 7.5 7.5 JibJab USA 7.0 7.0 Xobni AboutUs USA 5.0 5.0 Jan-09 Total 5.0 34.0 27.5 66.5 Grand Total 23.0 22.5 1.0 28.8 93.9 89.5 5.0 263.7 Figure 19. Financing, Last Three Months Source. Company reports
    • Page 17 RELEVANT DISCLOSURES: LIST OF DISCLOSURE TERMS: None Applicable. 1. ANALYST CERTIFICATION Each analyst of Research Capital Corporation whose name appears in this report hereby certifies that (i) the recommendations and opinions expressed in this research report accurately reflect the analyst’s personal views and (ii) no part of the research analyst’s compensation was or will be directly or indirectly related to the specific conclusions or recommendations expressed in this research report. I n f o r ma t i o n a b o u t Re s e a r ch C a p i t a l C o r p o r a t i o n ’ s Ra t i n g S y s t e m, t h e d i s t r i b u t i o n o f o u r r e s e a r ch t o cl i e n t s a n d t h e p e r ce n t a g e o f r e c o m me n d a t i o n s wh i c h a r e i n e a c h o f o u r r a t i n g c a t e g o r i e s i s a v a i l a b l e o n o u r we b si t e a t ww w. r e s e a r ch c a p i t a l . c o m. T h e i n f o r ma t i o n c o n t a i n e d i n t h i s r e p o r t h a s b e e n d r a wn f r o m s o u r c e s b e l i e ve d t o b e r e l i a b l e b u t i t s a c cu r a c y o r co mp l e t e n e ss i s n o t g u a r a n t e e d , n o r i n p r o vi d i n g i t d o e s R e s e a r c h Ca p i t a l C o r p o r a t i o n a s s u me a n y r e sp o n si b i l i t y o r l i a b i l i t y . R e s e a r ch C a p i t a l C o r p o r a t i o n , i t s d i r e ct o r s , o f f i c e r s a n d o t h e r e mp l o y e e s ma y , f r o m t i me t o t i me , h a v e p o si t i o n s i n t h e s e cu r i t i e s me n t i o n e d h e r e i n . Co n t e n t s o f t h i s r e p o r t c a n n o t b e r e p r o d u c e d i n wh o l e o r i n p a r t wi t h o u t t h e e xp r e ss e d p e r mi s si o n o f R e se a r ch C a p i t a l C o r p o r a t i o n . ( U . S . I n s t i t u t i o n a l Cl i e n t s — Re s e a r ch C a p i t a l U . S. A . I n c. ( a wh o l l y o wn e d s u b si d i a r y o f R e s e a r c h C a p i t a l Co r p o r a t i o n ) a cc e p t s r e s p o n si b i l i t y f o r t h e c o n t e n t s o f t h i s r e p o r t s u b je c t t o t h e t e r ms & l i mi t a t i o n s s e t o u t a b o v e . F i r ms o r i n s t i t u t i o n s r e ce i vi n g t h i s r e p o r t s h o u l d e f f e ct t r a n s a ct i o n s i n s e c u r i t i e s d i sc u s se d i n t h e r e p o r t t h r o u g h R e s e a r ch C a p i t a l U . S . A . I n c. , a B r o k e r - D e a l e r R e g i s t e r e d wi t h t h e U n i t e d S t a t e s S e cu r i t i e s a n d E xc h a n g e C o m mi s si o n ) . Tor on to 4 16. 8 60. 76 00 M ontr eal 51 4. 39 9. 150 0 V anco u ver 60 4. 66 2. 180 0 C al gar y 40 3. 26 5. 740 0 R egi na 306. 566. 7550 www.researchcapital.com