09 02 03 Web 2.0 Weekly

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Video companies lead financing activity.

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09 02 03 Web 2.0 Weekly

  1. 1. SOFTWARE & SERVICES 3 FEBRUARY 2009 DAVID SHORE, CFA, MBA 416.860.6784 WEB 2.O WEEKLY david.shore@researchcapital.com Arun Thomas (Associate) 416.860.7666 VIDEO SITES LEAD BUSIEST FINANCING MONTH SINCE APRIL 2008 S UMM AR Y W e have identified 80 public companies for our Web 2.0 universe with a combined market cap of almost $25 billion. 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. The average market cap for the group is over $300 million, with average trailing revenue of $100 million. The companies are also highly profitable with an average EBITDA margin of 17.6%. On a valuation basis, the overall average is 4.0x trailing revenue and 9.4x trailing EBITDA. Seventeen of the companies have more than 500 employees. CA P IT AL M AR K ET A CT I V IT Y After 18 financings in December totalling $122.1 million (average $6.8 million), January has been the busiest month since April 2008, with 29 financings totalling $199.5 million (average $6.9 million). The largest financing in the last three months was of HuffingtonPost for $25.0 million in November (Figure 2). Ten companies raised more than $10 million each in January – with AdMob the largest at $12.5 million. Financing by Sector - January 2009 60.0 50.0 40.0 (US$m) 30.0 51.7 20.0 38.5 10.0 20.0 12.0 12.0 11.5 11.4 11.0 10.0 6.5 6.2 5.0 2.5 1.2 0.0 Crowdsourced Content Ad Network Social Networks Analytics Travel Video Infrastructure Gaming Micromedia Blog RSS Comment/Reputation Wiki Virtual World # companies 7 4 2 1 2 2 1 2 1 1 3 1 1 1 IN DU ST R Y N E W S This section discusses 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 80 public W eb 2.0 companies we have identified thus far. W e calculate TEV/Revenue, TEV/EBITDA, and P/E multiples for the companies in our universe. We also compare multiples by country and exchange. 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
  2. 2. Page 2 THE WEB 2.0 UNIVERSE 80 public Web 2.0 companies identified: W e have identified 80 public companies for our W eb 2.0 universe with a combined market cap of almost $25 billion. 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 1). 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. The average market cap for the group is over $300 million, with average trailing revenue of $100 million. The companies are also highly profitable with an average EBITDA margin of 17.6%. On a valuation basis, the overall average is 4.0x trailing revenue and 9.4x trailing EBITDA. Seventeen of the companies have more than 500 employees. Comparable Company Analys is > Web 2.0 S ummary US D LTM Trading Current US D Market Total US D LTM Total TE V/LTM TEV/LTM Company Name LTM as of Ticker E xc hange Currency HQ P rice Cap ($m) Rev ($m) EB ITDA ($m) E BITDA % Revenue EBITDA Employees Website Accelerize N ew Media, Inc. 9/30/2008 AC LZ OTCB B U SD United States 0.35 9.4 3. 2 (4.7) NM 4. 3x - 20 www. accelerizenewmedia.com Actoz Soft Co., Ltd. 9/30/2008 A052790 K OSE KRW South K orea 11,550.00 73.3 52.6 9.6 18. 3% 0. 9x 5.0x NA www. actoz.com AQ Interactive, Inc. 9/30/2008 3838 TSE J PY J apan 39,000.00 23.6 61.4 4.9 8.0% - - NA www. aqi.co.jp Associated Media Holdings Inc. 6/30/2007 ASMH OTCP K U SD United States 0.01 0.2 0. 1 (2.3) NM 10.2x - 3 www.macgregorenergy. com BoomJ Inc 9/30/2008 BOMJ OTCB B U SD United States 0.90 36.8 1. 1 (7.7) NM 36.9x - 25 www.boomj. com Bright Things plc 9/30/2008 AIM:B GT AIM GBP United K ingdom 0.02 3.1 0. 2 (1.6) NM 13.0x - 9 www. brightthings.com BroadW ebAsia Inc. 9/30/2008 B W BA OTCP K U SD United States 1.01 85.7 0. 0 (4.6) NM - - 46 www. broadwebasia.com CDC Corp. 9/30/2008 CHIN.A NasdaqGS U SD H ong Kong 0.75 80.9 428.1 18.8 4.4% 0. 3x 7.3x 3,125 www.cdccorpora tion.net China G ateway Corporation 9/30/2008 CG WY OTCB B U SD United States 0.00 0.0 6. 7 (6.6) -98.9% 0. 0x - 37 - Chinese G amer International 9/30/2008 G TSM:3083 G TSM T WD Ta iwan 90.30 227.5 38.1 18.0 47. 1% 4. 5x 9.5x NA www.chinesegamer. net CornerW orld Corporation 10/31/2008 CW R L OTCB B U SD United States 0.41 19.3 0. 6 3.1 506.8% 33.7x 6.7x NA www. cornerworld.com DADA SpA 9/30/2008 CM:DA CM E UR Ita ly 5.63 116.9 217.1 34.7 16. 0% 0. 7x 4.6x 574 da da.dada. net Digita lFX International, Inc. 9/30/2008 DXN AME X U SD United States 0.12 3.0 16.9 (4.5) -26.4% 0. 3x - 68 www. digitalfx.com Digita lP ost Interactive, Inc. 9/30/2008 DG LP OTCB B U SD United States 0.02 1.2 0. 4 (3.3) NM 5. 3x - 11 www. digitalpostinteractive.com Digita lTown, Inc. 11/30/2008 DG TW OTCB B U SD United States 1.50 40.7 NM (2.5) NM - - 3 www.enetpc.com Dolphin Digital Media , Inc. NA DP DM OTCB B U SD United States 0.70 34.1 NA NM NM - - 6 www.dolphindigitalmedia. com Eolith Co. Ltd. 12/31/2007 A041060 K OSE KRW South K orea 530.00 17.8 18.0 (0.0) -0. 3% 1. 0x - NA www.eolith. co. kr Extensions, Inc. 9/30/2008 EXTI OTCP K U SD United States 0.20 18.9 NM NM NM - - 2 www.ext.com F inancia l Media Group, Inc. 11/30/2008 F NGP OTCB B U SD United States 0.02 1.3 6. 8 1.2 18. 3% 0. 1x 0.4x 22 www.wa llst.net F luid Music Canada , Inc. 9/30/2008 TS X:F MN TSX C AD United States 0.40 16.9 4. 2 (8.6) NM - - 29 www.fluidmedia networks. com F rogster Interactive P ictures AG 6/30/2008 FR G XT R A E UR G ermany 4.63 13.9 5. 2 (3.1) -60.6% 2. 6x - NA www.frogster-ip.de/en/index.php Ga mania Digital E ntertainment Co., L td. 9/30/2008 6180 G TSM T WD Ta iwan 20.80 93.6 110.2 18.6 16. 9% 0. 6x 3.7x NA www.ga mania.co.kr Ga meOn Co L td. 9/30/2008 3812 TSE J PY J apan 119,500.00 132.5 83.0 21.0 25. 4% 0. 8x 3.2x NA www.gameon.co.jp GeoS entric Oyj 9/30/2008 G E O1V HL SE E UR F inland 0.03 34.4 5. 3 ( 12.1) NM 5. 6x - 92 www.benefon.com Giant Interactive G roup, Inc. 9/30/2008 GA NYS E U SD China 5.80 1,378.7 244.7 155. 3 63. 5% - - 1,016 www.ga-me. com GigaMedia L td. 9/30/2008 GIGM NasdaqGS U SD Ta iwan 6.52 352.3 200.5 48.0 23. 9% 1. 4x 6.0x 975 www.gigamedia.com.tw GoFish Corporation 9/30/2008 G OF H OTCB B U SD United States 0.20 5.1 6. 3 ( 11.0) NM 2. 5x - 41 www.gofish.com Gravity Co., Ltd 9/30/2008 GRVY Nasda qG M U SD South K orea 0.72 20.0 35.2 6.8 19. 2% - - 636 www.gravity. co.kr Gree, Inc. NA TSE :3632 TSE J PY J apan 5,930.00 0.0 NA NM NM - - NA www.gree. co.jp GungHo Online Entertainment, Inc. 9/30/2008 3765 OS E J PY J apan 106,600.00 135.7 113.7 16.7 14. 7% 1. 0x 6.5x NA www. gungho.co. jp/english/ HanbitS oft, Inc. 9/30/2008 A047080 K OSE KRW South K orea 3,040.00 47.9 49.9 ( 12.8) -25.6% 0. 6x - NA www.hanbitsoft.co. kr IAS E nergy, Inc. 10/31/2008 IAS C.A OTCB B U SD Canada 0.03 1.8 0. 0 (0.9) NM - - NA www. ia senergy.com IdeaE dge, Inc. 9/30/2008 OTCB B :IDAE OTCB B U SD United States 0.42 17.7 0. 0 (3.5) NM - - NA www.ideaedge.com J umbuck Entertainment P ty Ltd. 6/30/2008 AS X:J MB AS X AUD Australia 0.48 15.0 9. 9 4.6 46. 0% 1. 1x 2.4x 72 www.jumbuck. com J umpTV Inc. 6/30/2008 TSX :J TV TSX C AD Canada 0.44 40.3 11.5 (1.8) -15.3% 4. 3x - NA www.jumptv.com Ka boose Inc. 9/30/2008 TSX :K AB TSX C AD Canada 0.43 48.6 59.8 4.6 7.6% 0. 9x 12.2x NA www.kaboose.com Kingsoft Co. Ltd. 9/30/2008 3888 SE HK H KD China 2.66 368.2 106.5 36.0 33. 8% 2. 6x 7.8x 1,660 www. kingsoft.com Lingo Media Corpora tion 9/30/2008 TSX V: LM TS XV C AD Canada 1.05 10.9 3. 3 (1.4) -42.5% 3. 5x - NA www.lingomedia .com LiveWorld Inc. 9/30/2008 LV W D OTCP K U SD United States 0.06 1.9 11.7 (1.2) -10.1% - - 73 www.liveworld. com LookS mart, Ltd. 9/30/2008 LOOK Nasda qG M U SD United States 1.35 23.0 69.5 (2.6) -3. 7% - - 93 www. looksmart.com Magnitude Information S ystems Inc. 9/30/2008 MAGY OTCB B U SD United States 0.03 11.3 0. 1 (3.2) NM - - 13 www.ma gnitude. com Mixi, Inc. 9/30/2008 2121 TSE J PY J apan 534,000.00 909.7 125.3 49.4 39. 4% 6. 4x 16.1x NA www.mixi.co.jp Moggle, Inc 12/31/2008 MMOG OTCB B U SD United States 2.00 70.6 NM (1.1) NM - - 3 www. playmoggle.com National L ampoon Inc. 7/31/2008 NLN AME X U SD United States 0.73 6.9 7. 4 (1.6) -21.1% 1. 6x - 24 www.nationallampoon.com NEOW IZ G ames Corpora tion 12/31/2007 A095660 K OSE KRW South K orea 23,600.00 163.0 129.7 34.9 26. 9% 1. 2x 4.4x NA www.neowiz.com/kor/ NetDra gon WebS oft, Inc. 9/30/2008 777 SE HK H KD China 2.75 187.4 95.1 46.2 48. 6% 0. 1x 0.2x 1,482 www. nd. com.cn Netea se.com Inc. 9/30/2008 NTE S NasdaqGS U SD China 18.73 2,304.8 421.7 273. 8 64. 9% - - 2,413 corp.163.com NeXplore Corporation 9/30/2007 NXP C OTCP K U SD United States 0.55 30.7 NM (4.9) NM - - 19 www.nexplore.com Ngi G roup Inc. 9/30/2008 2497 TSE J PY J apan 34,300.00 47.2 101.8 34.1 33. 5% - - NA www.neta ge.co.jp/en/index. html Northgate Technologies L imited 9/30/2008 590057 B SE INR India 38.90 27.9 137.0 24.4 17. 8% 0. 2x 1.1x 286 www.northgatetech.com Open Text Corp. 12/31/2008 OTEX NasdaqGS U SD Canada 34.74 1,802.6 769.3 195. 4 25. 4% 2. 5x 9.9x 2,915 www.opentext.com Openwa ve S ystems Inc. 12/31/2008 OPW V NasdaqGS U SD United States 0.81 66.9 199.6 ( 10.4) -5. 2% - - 657 www.openwa ve.com Perfect W orld Co., Ltd. 9/30/2008 P WR D NasdaqGS U SD China 13.91 793.5 186.5 99.7 53. 5% - - 1,401 www.wanmei.com/en/index.htm PhotoChannel Networks Inc. 9/30/2008 TS XV : PN TS XV C AD Canada 1.72 46.4 13.7 (2.4) -17.7% 3. 3x - NA www.photocha nnel.com Quepasa Corp. 9/30/2008 QP SA NasdaqCM U SD United States 1.87 23.7 0. 1 ( 11.8) NM - - 63 www.quepasa . com Shanda Interactive Entertainment L td. 9/30/2008 SNDA NasdaqGS U SD China 29.22 2,027.4 477.0 227. 8 47. 8% - - 2,564 www.snda .com Shutterfly, Inc. 9/30/2008 S FLY NasdaqGS U SD United States 6.82 171.0 203.3 25.7 12. 6% 0. 6x 5.1x 512 www.shutterfly.com SK Communications Co. , Ltd. 12/31/2007 A066270 K OSE KRW South K orea 7,780.00 230.2 149.2 14.0 9.4% 1. 5x 16.4x NA - SNAP Interactive, Inc. 9/30/2008 S TV I OTCB B U SD United States 1.00 10.7 2. 3 0.2 10. 1% 4. 2x 41.2x 5 www.snap-interactive.com SNM G lobal Holdings 9/30/2008 S NMN OTCP K U SD United States 0.00 0.0 2. 0 (0.7) -34.8% 1. 1x - 33 www. snmglobalholdings.com Spark Networks, Inc. 9/30/2008 LOV AME X U SD United States 2.41 51.7 60.1 11.7 19. 5% 0. 8x 4.1x 176 www.spark.net SpectrumDNA, Inc. 9/30/2008 S P XA OTCB B U SD United States 0.10 4.9 0. 1 (2.7) NM - - 7 - Tencent Holdings Ltd. 9/30/2008 700 SE HK H KD China 47.05 10, 894.1 901.8 446. 8 49. 5% 13.0x 26.3x 6,039 www. tencent.com. hk /index_e.shtml The P arent Company 8/2/2008 KIDS .Q OTCP K U SD United States 0.03 0.7 112.0 ( 13.5) -12.0% 0. 2x - 347 www. theparentcompany.com The9 Limited 9/30/2008 NCTY NasdaqGS U SD China 14.90 411.4 252.0 94.9 37. 7% - - 1,361 www.the9.com TheStreet.com, Inc. 9/30/2008 T SCM Nasda qG M U SD United States 2.87 87.5 75.2 12.2 16. 2% 0. 1x 0.8x 349 www.thestreet. com Tree. Com, Inc. 9/30/2008 TR E E Nasda qG M U SD United States 4.00 37.5 231.2 ( 39.6) -17.1% 0. 1x - 1,000 www.lendingtree. com Uniserve Communications Corp. 11/30/2008 TS XV :US S TS XV C AD Canada 0.10 2.0 24.1 0.1 0.4% 0. 2x 40.7x NA www.uniserve. com United Online Inc. 9/30/2008 UNTD NasdaqGS U SD United States 6.00 491.8 538.7 130. 6 24. 2% 1. 6x 6.5x 928 www.unitedonline.net UOMO Media, Inc 10/31/2008 UOMO OTCB B U SD Canada 0.08 6.8 0. 5 (0.4) -91.6% 15.1x - NA www.uomolife.com VOIS , Inc. 9/30/2008 VOIS OTCB B U SD United States 0.75 5.4 0. 0 (4.0) NM - - 4 www.vois. com W ebzen Inc. 9/30/2008 WZE N Nasda qG M U SD South K orea 1.45 17.2 20.3 (6.0) -29.5% - - 338 www.webzen.co. kr W izza rd S oftwa re Corporation 9/30/2008 W ZE AME X U SD United States 0.70 31.6 6. 2 (6.5) NM 5. 1x - 110 www.wizzardsoftware.com W oozyF ly, Inc. 9/30/2008 W ZYF OTCB B U SD United States 0.15 2.6 0. 0 NM NM - - 14 www.woozyfly. com W orlds.com Inc. 9/30/2008 W DDD OTCB B U SD United States 0.22 11.5 0. 1 NM NM - - 1 www.worlds. com W yndstorm Corporation NA W YND OTCB B U SD United States 0.13 2.3 NA NM NM - - NA www.wyndstorm.com XING AG 9/30/2008 O1B C XT R A E UR G ermany 28.21 188.0 40.1 15.6 38. 8% 3. 3x 8.6x 161 www.xing. com YedangOnline Corp. 12/31/2007 A052770 K OSE KRW South K orea 6,830.00 76.9 49.3 11.0 22. 4% 1. 5x 6.9x NA www. yeda ngonline. com/indexhome. asp Ynk K orea Inc. 12/31/2007 A023770 K OSE KRW South K orea 3,805.00 6.7 14.0 (1.1) -7. 6% 0. 5x - NA www.ynk.net ZipLocal Inc. 9/30/2008 TSX V:ZIP TS XV C AD Canada 0.02 1.3 2. 8 (3.9) NM 0. 7x - NA www. ziplocal.com High 10, 894.1 901.8 446.8 506.8% 36.9x 41.2x 6,039 Low 0.0 0.0 -39.6 -98.9% 0. 0x 0.2x 1 Average 310.2 100.4 26.2 17.6% 4.0x 9.4x 601 Figure 1. Web 2.0 Universe Summary Source. Capital IQ
  3. 3. Page 3 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 ) Video sites lead busiest month since April 2008: After 18 financings in December totalling $122.1 million (average $6.8 million), January has been the busiest month since April 2008, with 29 financings totalling $199.5 million (average $6.9 million). The largest financing in the last three months was of HuffingtonPost for $25.0 million in November (Figure 2). Ten companies raised more than $10 million each in January – with AdMob the largest at $12.5 million. For additional details, see Figure 27 (at end of note). Financing - Last Three Months 30.0 25.0 20.0 Jan-09 (US$m) 15.0 Dec-08 Nov-08 10.0 5.0 0.0 Motionbox Xobni Overlay.TV Rockyou PlaySpan AdMob NewsGator Go Internet Media FooMojo One True Media Social Median Kewego SocialMedia Playdo Casual Collective CoveritLive VirtuOz IMVU SundaySky Play Hard Sports InsideView Gbox Multiply Tripwolf StockTwits Meez GoFish NetShelter Nurien Yodle Taptu Scribd JibJab Superfish Snapmylife Tagged Jackbe Tumblr DotBlu Hubdub Snooth Identi.ca HuffingtonPost Angie's List KickApps Aster Data Systems RatePoint AboutUs ChakPak Sportsblogs E-Global Sports Clickpass Blue Kai Geni DECA Machinima.com Pulse Entertainment Worlds.com Inc. Figure 2. Financings, Last Three Months Source. Company reports Video sites lead: The activity was led by seven transactions for video-related companies, raising over $50 million in the month (Figure 3). Four ad networks raised almost $40 million between them. Financing by Sector - January 2009 60.0 50.0 40.0 (US$m) 30.0 51.7 20.0 38.5 20.0 10.0 12.0 12.0 11.5 11.4 11.0 10.0 6.5 6.2 5.0 2.5 1.2 0.0 Travel Video Infrastructure Micromedia Blog Ad Network Social Networks Analytics Crowdsourced Content RSS Gaming Virtual World Comment/Reputation Wiki # companies 7 4 2 1 2 2 1 2 1 1 3 1 1 1
  4. 4. Page 4 Figure 3. Financings, by Sector, January 2009 Source. Company reports But January activity doesn’t offset weak 2H/08: However, on a trailing 12-month basis, financings are down for the third month in the last four, with average round sizes decreasing slightly as of January (Figure 4). 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$m) (US$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 Jul-05 Sep-05 Jan-06 Jul-06 Sep-06 Jan-07 Jul-07 Sep-07 Jan-08 Jul-08 Sep-08 Jan-09 Total Average Figure 4. Financings, Last 12 Months Source. Company reports Cumulative total passes $5.2 billion: Overall, on a cumulative basis, W eb 2.0 financings have totalled over $5.2 billion, with the majority of the financing coming in late 2007 and the first three quarters of 2008 (Figure 5). Web 2.0 Financing (cumulative) 1,400.0 6,000.0 1,303.0 1,200.0 5,000.0 1,000.0 944.7 4,000.0 800.0 (US$m) (US$m) 701.7 3,000.0 600.0 524.9 2,000.0 400.0 338.5 297.0 199.5 1,000.0 200.0 145.7 124.1 116.3 97.0 87.2 73.4 37.5 33.5 18.2 41.9 49.1 29.4 35.5 28.8 20.1 0.0 0.0 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 2003 2004 2005 2006 2007 2008 2009 Figure 5. Financing, Cumulative Source. Company reports
  5. 5. Page 5 U.S. remains dominant: U.S. companies continue to dominate capital market activity – with almost 73% of financings/M&A involving U.S. companies (based on dollars) (Figure 6). Canadian companies generated under 1% of capital market activity based on dollar volume (Figure 6). Based on number of transactions, the U.S. leads with 73% of deals, while Canada is third in number of financings at 5.5% (Figure 7). Financing/M&A by Country - LTM (#)Canada Financing/M&A by Country - LTM ($) 5.5% UK UK 5.9% 13.2% Israel 3.1% France China 2.3% 7.9% Russia ROW 1.7% Israel 10.2% 0.8% Canada 0.7% Denmark 0.7% ROW 2.4% USA USA 73.0% 72.6% Figures 6 & 7. Financing/M&A, by Country (LTM, $, #) Source. Company reports More early-stage funding (by count): Almost half of financings in the last 12 months are for early-stage companies (Angel/Seed or Series A) (Figure 8). Series B rounds are 30.1% of the total, with later-stage (Series D, E and PIPE) deals accounting for just 7.1%. Financing by Type - LTM Series B Series C 30.1% 13.0% Series D 4.6% Angel/Seed 9.2% Debt financing 2.9% PIPE Series A 2.1% 38.1% Figure 8. Financing, by Type (LTM, $) Source. Company reports “D” series are largest equity rounds (by dollar): In the last 12 months, there have been 11 “D” series rounds, averaging over $25 million per financing (Figure 9). Note that we have excluded the $430 million Series C financing of Oak Pacific Interactive as it skews the results substantially.
  6. 6. Page 6 Average financing round size - LTM 40.0 35.0 30.0 25.0 (US$m) 20.0 38.1 15.0 26.2 10.0 18.2 11.3 5.0 10.0 8.8 6.4 3.3 0.0 Angel/Seed Debt financing PIPE Series A Series B Series C Series D Series E # rounds 22 7 5 91 72 31 11 1 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 has outperformed the index since late October 2008 (Figure 10). Web 2.0 Index Price Performance 140 120 100 80 60 40 20 0 2/4/2008 2/18/2008 3/3/2008 3/17/2008 3/31/2008 4/14/2008 4/28/2008 5/12/2008 5/26/2008 6/9/2008 6/23/2008 7/7/2008 7/21/2008 8/4/2008 8/18/2008 9/1/2008 9/15/2008 9/29/2008 10/13/2008 10/27/2008 11/10/2008 11/24/2008 12/8/2008 12/22/2008 1/5/2009 1/19/2009 2/2/2009 NASDAQ COMP Web 2.0 (Market Cap Weighted) Figure 10. Web 2.0 Price Performance Source. Capital IQ
  7. 7. Page 7 Moggle leads; DigitalTown continues weak performance: DigitalTown (DGTW -OTCBB) again had the worst performance in the group (for stocks with prices greater than $1) (Figure 11), falling 34.8% on the week. Moggle (MMOG- OTCBB) increased the most, +33.3%. 1 Week Pric e P erformanc e Moggle, Inc 33. 3% AQ Interactive, Inc. 30. 9% 13. 3% S hutterfly, Inc. S K C ommunications C o. , L td. 10. 4% 10. 1% Mixi, Inc. Actoz S oft C o. , L td. 9. 0% G ree, Inc. 8. 4% 8. 2% G ungHo Online E ntertainment, Inc. O pen T ext C orp. 7. 2% 7. 1% L ingo Media C orpora tion T encent Holdings L td. 6. 3% Neteas e. com Inc. 5. 7% 4. 9% S ha nda Interactive E ntertainment L td. NetDragon W ebS oft, Inc. 3. 8% E olith C o. L td. 2. 9% NE O W IZ G ames C orpora tion 2. 6% L ookS ma rt, L td. 2. 3% 1. 4% W ebzen Inc. K ings oft C o. L td. 0. 0% C hines e G a mer International 0. 0% S park Networks , Inc. -0. 8% T heS treet. com, Inc. -1. 0% -1. 1% Q uepas a C orp. HanbitS oft, Inc. -1. 1% P hotoC hannel Networks Inc. -1. 1% -1. 2% G iga Media L td. U nited O nline Inc. -1. 5% -2. 7% G iant Interactive G roup, Inc. XING AG -2. 7% G ameO n C o L td. -2. 8% -3. 5% G amania Digital E ntertainment C o. , L td. Y edangO nline C orp. -3. 7% Y nk K orea Inc. -3. 7% T he9 L imited -5. 8% F rogs ter Intera ctive P ictures AG -6. 5% -7. 2% T ree. C om, Inc. Northgate T echnologies L imited -8. 5% P erfect W orld C o. , L td. -10. 0% DADA S pA -12. 4% Ngi G roup Inc. -23. 1% -34. 8% DigitalT own, Inc. -40. 0% -30. 0% -20. 0% -10. 0% 0. 0% 10. 0% 20. 0% 30. 0% 40. 0% Figure 11. 1-Week Price Performance Source. Capital IQ INDUSTRY NEWS (PARTNERSHIPS, FINANCIAL RESULTS, NEW PRODUCTS) DigitalTown, Inc. Names Jan K. Andersen as CEO: The board of directors of DigitalTown, Inc. named Jan K. Andersen to the new position of Chief Executive Officer. Richard A. Pomije will continue as Chairman of the Corporation. Andersen most recently served as President and CEO of Bellacor.com, which he led from its inception in 2000 to become a leading e-tailer in the home furnishings category. W hile at Bellacor.com, he grew revenues by more than 50% annually and brought the company to profitability within a year of its initial launch. He was also an early pioneer of several e-tail strategies now commonplace. Openwave Systems Inc. Enters into $40 Million Secured Revolving Credit Arrangement with Silicon Valley Bank: Openwave Systems Inc. and Silicon Valley Bank entered into a $40 million secured revolving credit arrangement to improve liquidity and working capital for the Company. The Company may borrow, repay and reborrow under the line of credit facility at any time. As of January 27, 2009, the line of credit facility bears interest at 4% per annum. The Company's line of credit is collateralized by substantially all of the Company's assets and requires the Company to comply with customary affirmative and negative covenants principally relating to use and disposition of assets, the satisfaction of a liquidity coverage ratio test and minimum EBITDA requirements. In addition, the credit arrangement contains customary events of default. Upon the occurrence of an uncured event of default, among other things, the Bank may declare that all amounts owing under the credit arrangement are due and payable. The line of credit and facility expire on January 22, 2011. Tree.Com Amends Line of Credit Agreement with Countryw ide Bank, FSB; Names Patrick L. McCrory as Director: On January 23, 2009, the Tree.Com, Inc., through its subsidiary Home Loan Center, Inc., mutually agreed with Countrywide Bank, FSB to extend the term of its $50 million committed line of credit to February 23, 2009 and to revise
  8. 8. Page 8 the interest rate to 30-day LIBOR plus 225 basis points. In addition to certain amendments to the financial covenants, the parties also mutually agreed to reduce the uncommitted line of credit from $150 million to $50 million. Both parties continue to work on a one-year extension of the committed facility. On January 26, 2009, the Company's Board of Directors appointed Patrick L. McCrory as a director of the Company. The Board of Directors determined that Mr. McCrory qualifies as an 'independent' director, and appointed him to serve on the Company's Compensation and Nominating Committees. VALUATION MMOG companies lead market cap charts: Just five (same as last week) companies in our W eb 2.0 universe top US$1 billion in market capitalization (Figure 12). In addition, 60 of the 80 (same as last week) companies have market caps under US$100 million, with 22 (24 last week) under $10 million. Online gaming companies dominate the top of the list with five of the top seven by market cap. Market C ap (US D m) T encent H oldings L td. Netea s e.com Inc. 2304. 8 2027. 4 S handa Interactive E nterta inment O pen T ext C orp. 1802. 6 G ia nt Intera ctive G roup, Inc. 1378. 7 Mixi, Inc. 909. 7 P erfect W orld C o. , L td. 793. 5 United O nline Inc. 491. 8 T he9 L imited 411.4 K ings oft C o. L td. 368. 2 G iga Media L td. 352. 3 230. 2 S K C ommunica tions C o. , L td. C hines e G amer Interna tiona l 227. 5 XING AG 188. 0 NetDra gon W ebS oft, Inc. 187.4 S hutterfly, Inc. 171.0 NE O W IZ G ames C orpora tion 163. 0 G ungHo O nline E nterta inment, Inc. 135. 7 G a meO n C o L td. 132. 5 DADA S pA 116. 9 G a ma nia Digita l E ntertainment C o. , 93. 6 T heS treet. com, Inc. 87. 5 B roadW ebAs ia Inc. 85. 7 C DC C orp. 80. 9 76. 9 Y edangOnline C orp. Actoz S oft C o. , L td. 73. 3 Moggle, Inc 70. 6 O penwave S ys tems Inc. 66. 9 S park Networks , Inc. 51. 7 K aboos e Inc. 48. 6 Ha nbitS oft, Inc. 47. 9 Ngi G roup Inc. 47. 2 P hotoC ha nnel Networks Inc. 46. 4 40. 7 DigitalT own, Inc. J umpT V Inc. 40. 3 T ree.C om, Inc. 37.5 B oomJ Inc 36. 8 G eoS entric Oyj 34. 4 Dolphin Digita l Media , Inc. 34. 1 W izza rd S oftwa re C orpora tion 31. 6 NeXplore C orpora tion 30. 7 Northga te T echnologies L imited 27. 9 Q uepa s a C orp. 23. 7 AQ Interactive, Inc. 23. 6 L ookS mart, L td. 23. 0 G ra vity C o., L td 20. 0 C ornerW orld C orpora tion 19. 3 E xtens ions , Inc. 18. 9 E olith C o. L td. 17. 8 IdeaE dge, Inc. 17. 7 W ebzen Inc. 17. 2 16. 9 F luid Mus ic C a na da , Inc. J umbuck E ntertainment P ty L td. 15. 0 F rogs ter Intera ctive P ictures AG 13. 9 W orlds .com Inc. 11. 5 Ma gnitude Informa tion S ys tems Inc. 11. 3 Lingo Media C orpora tion 10.9 S NAP Interactive, Inc. 10.7 Accelerize New Media , Inc. 9. 4 Na tiona l La mpoon Inc. 6.9 6.8 UO MO Media , Inc Y nk K orea Inc. 6.7 V OIS , Inc. 5. 4 G oF is h C orpora tion 5. 1 4. 9 S pectrumDNA, Inc. B right T hings plc 3. 1 Digita lF X Internationa l, Inc. 3. 0 W oozyF ly, Inc. 2. 6 W ynds torm C orpora tion 2. 3 U nis erve C ommunications C orp. 2.0 LiveW orld Inc. 1.9 IAS E nergy, Inc. 1.8 F inancia l Media G roup, Inc. 1.3 1. 3 ZipLoca l Inc. DigitalP os t Interactive, Inc. 1. 2 T he P arent C ompany 0. 7 As s ocia ted Media Holdings Inc. 0. 2 C hina G a tewa y C orpora tion 0. 0 S NM G loba l Holdings 0. 0 G ree, Inc. 0. 0 0 500 1, 000 1, 500 2, 000 2, 500 3, 000 3, 500 4, 000 Figure 12. Market Cap Ranking Source. Capital IQ TEV/Revenue (LTM) averages 4.0x: The overall average TEV/Revenue (LTM) multiple for our group is 4.0x (Figure 13). However, this is skewed by CornerW orld (CW RL-OTCBB) at 33.7x and BoomJ at 36.9x (BOMJ-OTCBB). Excluding those companies, the average is 2.7x. Note that we exclude multiples greater than 50x. Twenty-six of the companies have multiples under 1.5x.

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