Web 2.0 Weekly
                                                            “Big Acquisitions, Little Financing”
          ...
Key Developments (past week)
    Deals (M&A, Finance) – Big Acquisitions, Little Financing
      Google, acquired ITA Soft...
Public Company Data




3                         www.mackieresearch.com
Aggregate Public Data

     Web 2.0 Public Companies   Total      Median    Max           Min
    # Companies             ...
5
                                                                      0
                                                ...
Valuation Dashboard – 1 Week
                   Market Cap                       EV/Revenue
                        Flat
 ...
7
                         Source: CapitalIQ
                                                                             ...
8
                         Source: CapitalIQ
                                                                             ...
9
                         Source: CapitalIQ
                                                                             ...
10
                                                                  -
                                                   ...
Average EV/EBITDA – by Sector

          50.0
                    45.6
          45.0


          40.0                    ...
Average P/E – by Sector

          100.0


           90.0          87.8


           80.0


           70.0


           ...
13
                                                                                                    0.0
               ...
10 07-08 web 2.0 weekly
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10 07-08 web 2.0 weekly
10 07-08 web 2.0 weekly
10 07-08 web 2.0 weekly
10 07-08 web 2.0 weekly
10 07-08 web 2.0 weekly
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10 07-08 web 2.0 weekly

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Summer financing doldrums: After a very strong June (with total transaction value (excluding M&A) of $542.8 million from 66 transactions, averaging $8.4 million each), July has started very slowly with only one small financing announced. However, we have seen some large M&A transactions (see below). In comparison, total capital raised in July 2009 was $206.2 million, averaging $5.4 million over 38 deals. Excluding Dec 09 and Apr 10, the average monthly total is ~$270 million.
Deals (M&A, Finance)
Google, acquired ITA Software, search provider for the travel industry for $700 mm.

infoGROUP, provider of business and consumer databases for sales leads, mailing lists, direct marketing, database marketing, e-mail marketing, and marketing research solutions, was taken private for $645 mm by CCMP Capital Advisers.

GroupSpaces, a provider of web-based tools for sports clubs, university societies, organizations, and groups of friends or coworkers, raised $1.3 mm.

Domain based online advertising services provider, OCTANE360, was acquired by Local.com for $10.9 mm.

Negative price performance
The Web 2.0 public company universe fell again this week, with 61% of companies seeing their market cap fall vs. 27% rising and 12% flat.

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10 07-08 web 2.0 weekly

  1. 1. Web 2.0 Weekly “Big Acquisitions, Little Financing” July 8, 2010 David Shore, CFA, MBA 416.860.6784 dshore@mackieresearch.com Damian Wojcichowsky, CFA 416.860.7652 This report has been created by Analysts that are employed by Mackie Research Capital Corporation, a Canadian Investment Dealer. For further disclosures, please see last page of this report. www.mackieresearch.com Copyright © 2000-2010, Mackie Research Capital Corporation, All rights reserved www.mackieresearch.com
  2. 2. Key Developments (past week) Deals (M&A, Finance) – Big Acquisitions, Little Financing Google, acquired ITA Software, search provider for the travel industry for $700 mm. infoGROUP, provider of business and consumer databases for sales leads, mailing lists, direct marketing, database marketing, e-mail marketing, and marketing research solutions, was taken private for $645 mm by CCMP Capital Advisers. GroupSpaces, a provider of web-based tools for sports clubs, university societies, organizations, and groups of friends or coworkers, raised $1.3 mm. Domain based online advertising services provider, OCTANE360, was acquired by Local.com for $10.9 mm. Financial Results/Guidance/Partnerships/Product Points International Ltd. (TSX:PTS) announced that it has formed a partnership with The Mileage Company. The new partnership means that Airmiles UK members can now purchase miles for themselves or gift Airmiles to other members. RealNetworks Inc. (NasdaqGS:RNWK) is once again scaling back its operations and announced a restructuring of its operations which includes layoffs of 85 employees. The layoffs include a 25% reduction in its executive ranks and the reorganization seeks to streamline its technology and media services divisions. The company is now down to 1,365 employees from 1,700, with roughly 65 layoffs coming out of the Seattle office. 2 www.mackieresearch.com
  3. 3. Public Company Data 3 www.mackieresearch.com
  4. 4. Aggregate Public Data Web 2.0 Public Companies Total Median Max Min # Companies 103 - - - Market Cap (US$ mm) 74,460.8 67.2 30,629.6 1.2 Revenue (US$ mm) 23,139.7 56.0 3,057.7 0.0 1 Year revenue growth 2.5% 8961.6% -100.0% EBITDA as % of revenue - 11.3% 63.1% -99.5% Net cash (US$ mm) 9,273.3 3.3 1,841.1 -670.8 TEV/Revenue - 1.9x 47.4x 0.1x TEV/EBITDA - 8.5x 45.6x 0.5x P/E - 15.3x 90.4x 0.0x Relative to 52 week high -42.9% -4.1% -95.6% Source: CapitalIQ 4 www.mackieresearch.com
  5. 5. 5 0 5 10 15 20 25 30 Gaming 28 Social Networking 18 Media 10 9 Diversified 5 Mobile 5 Marketing Source: CapitalIQ 3 Infrastructure 3 SMS/Voice 3 Enterprise 3 Advertising 2 Internet Retail 2 Virtual World By Sector 2 Dating 2 Music 1 Vertical Communities 1 Search 1 Podcasting 1 Learning 1 Video 1 Collaboration 1 Payment 1 Financial Services Public Company Distribution 0 5 10 15 20 25 30 35 40 45 50 United States Canada China South Korea Japan Taiwan Hong Kong Germany Poland Australia United Kingdom By Country Italy Finland Sweden India Russia Malaysia Switzerland www.mackieresearch.com
  6. 6. Valuation Dashboard – 1 Week Market Cap EV/Revenue Flat 12% Flat 1% Rising Falling 27% 64% Rising 35% Falling 61% EV/EBITDA P/E Flat Flat 0% 0% Rising 35% Rising 44% Falling 56% Falling 65% 6 www.mackieresearch.com
  7. 7. 7 Source: CapitalIQ Multiple (x) 0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x 4.0x 4.5x 5.0x # companies 5/11/2009 5/18/2009 5/25/2009 6/1/2009 6/8/2009 6/15/2009 6/22/2009 6/29/2009 7/6/2009 7/13/2009 7/20/2009 7/27/2009 8/3/2009 8/10/2009 8/17/2009 8/24/2009 Median EV/Revenue 8/31/2009 9/7/2009 9/14/2009 9/21/2009 9/28/2009 10/5/2009 10/12/2009 10/19/2009 10/26/2009 11/2/2009 11/9/2009 Median 11/16/2009 11/23/2009 11/30/2009 12/7/2009 12/14/2009 12/21/2009 12/28/2009 1/4/2010 1/11/2010 1/18/2010 Long-term average 1/25/2010 2/1/2010 2/8/2010 2/15/2010 2/22/2010 3/1/2010 3/8/2010 3/15/2010 3/22/2010 average 3/29/2010 4/5/2010 well below LT 4/12/2010 4/19/2010 down slightly, still Revenue multiples 4/26/2010 5/3/2010 5/10/2010 5/17/2010 5/24/2010 5/31/2010 6/7/2010 6/14/2010 6/21/2010 6/28/2010 373839404040404042444545464646474850515150545556616161626666666565667070707073727167707271767477767979797978807981838283 www.mackieresearch.com
  8. 8. 8 Source: CapitalIQ Multiple (x ) # companies 0. 0x 5. 0x 10. 0x 15. 0x 20. 0x 25. 0x 30. 0x 5/18/2009 5/25/2009 6/1/2009 6/8/2009 6/15/2009 6/22/2009 6/29/2009 7/6/2009 7/13/2009 7/20/2009 7/27/2009 8/3/2009 8/10/2009 8/17/2009 Median EV/EBITDA 8/24/2009 8/31/2009 9/7/2009 9/14/2009 9/21/2009 9/28/2009 10/5/2009 10/12/2009 10/19/2009 10/26/2009 11/2/2009 11/9/2009 11/16/2009 Median 11/23/2009 11/30/2009 12/7/2009 12/14/2009 12/21/2009 12/28/2009 1/4/2010 1/11/2010 1/18/2010 1/25/2010 2/1/2010 Long-term average 2/8/2010 2/15/2010 2/22/2010 3/1/2010 3/8/2010 3/15/2010 3/22/2010 3/29/2010 4/5/2010 4/12/2010 4/19/2010 4/26/2010 5/3/2010 5/10/2010 EV/EBITDA multiples down, depressed below LT average 5/17/2010 5/24/2010 5/31/2010 6/7/2010 6/14/2010 6/21/2010 6/28/2010 7/5/2010 18 20 21 22 22 21 21 21 23 22 25 22 23 23 25 26 26 25 24 24 25 27 28 29 32 34 34 36 39 37 38 39 38 40 41 38 38 38 42 41 40 42 41 41 42 43 44 44 44 47 49 48 50 51 51 49 50 48 47 49 www.mackieresearch.com
  9. 9. 9 Source: CapitalIQ Multiple (x ) # companies 0. 0x 5. 0x 10. 0x 15. 0x 20. 0x 25. 0x 30. 0x 35. 0x 5/18/2009 5/25/2009 6/1/2009 Median P/E 6/8/2009 6/15/2009 6/22/2009 6/29/2009 7/6/2009 7/13/2009 7/20/2009 7/27/2009 8/3/2009 8/10/2009 8/17/2009 8/24/2009 8/31/2009 9/7/2009 9/14/2009 9/21/2009 9/28/2009 10/5/2009 10/12/2009 10/19/2009 10/26/2009 11/2/2009 11/9/2009 11/16/2009 Median 11/23/2009 11/30/2009 12/7/2009 12/14/2009 12/21/2009 12/28/2009 1/4/2010 1/11/2010 1/18/2010 1/25/2010 2/1/2010 Long-term average 2/8/2010 2/15/2010 2/22/2010 3/1/2010 3/8/2010 3/15/2010 3/22/2010 3/29/2010 4/5/2010 4/12/2010 4/19/2010 and below LT average 4/26/2010 P/E multiples also down 5/3/2010 5/10/2010 5/17/2010 5/24/2010 5/31/2010 6/7/2010 6/14/2010 6/21/2010 6/28/2010 7/5/2010 19 19 18 18 19 18 19 18 20 20 20 18 19 19 19 20 21 24 23 23 24 25 27 26 30 31 32 31 33 32 34 36 37 39 39 38 39 39 40 41 38 39 39 40 37 37 35 33 33 32 35 35 36 35 35 37 35 32 34 33 www.mackieresearch.com
  10. 10. 10 - 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 # Companies 2 Infrastructure 13.4 1 Virtual World 11.9 7 Diversified 9.9 1 Learning 9.4 8 Social Networking 5.3 4 Mobile 5.0 2 Music 4.4 4 Marketing 4.3 1 Vertical Communities 3.7 1 Search 3.6 Gaming 21 3.3 3 SMS/Voice 3.2 Average EV/Revenue – by Sector 1 Podcasting 2.8 1 Collaboration 2.4 3 Advertising 2.2 9 Media 2.2 2 Internet Retail 1.9 3 Enterprise 1.6 1 Video 1.5 2 Dating 1.3 1 Financial Services 0.3 www.mackieresearch.com
  11. 11. Average EV/EBITDA – by Sector 50.0 45.6 45.0 40.0 38.5 35.0 30.0 25.0 20.0 17.7 15.8 15.0 11.5 11.3 11.2 10.9 10.0 8.9 8.7 6.8 5.0 - Diversified Financial Services Internet Retail Search Mobile Enterprise Gaming Social Networking Media Collaboration Marketing # Companies 1 1 3 2 14 5 6 2 6 1 2 11 www.mackieresearch.com
  12. 12. Average P/E – by Sector 100.0 90.0 87.8 80.0 70.0 60.0 53.6 50.0 40.0 37.9 33.8 30.0 26.2 18.9 20.0 15.3 12.9 12.5 10.0 - Internet Retail Enterprise Collaboration Diversified Social Marketing Advertising Gaming Media Networking 2 3 1 9 18 5 3 28 10 # Companies 12 www.mackieresearch.com
  13. 13. 13 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 NeXplore C orporation 47 Source: CapitalIQ 26 S pectrumDNA, Inc. 25 S oc ialG O P L C 16 T enc ent Holdings Ltd. 15 G eoS entric O yj 13 P aid Inc. 12 Worlds . com Inc. G ree, Inc. B ey ond C ommerc e, Inc. 11 11 10 MO K O .mobi Limited Lingo Media C orporation 9 9 C hines e G amer International T rans G aming, Inc. DigitalP os t Interac tiv e, Inc. 8 7 7 F luid Mus ic C anada, Inc. 7 Dena C o. Ltd. H U G HE S T elematics , Inc . 5 5 Acc eleriz e New Media, Inc . Mix i, Inc. 5 4 C hangy ou.c om L imited WebMediaB rands Inc S K C ommunic ations C o., Ltd. F rogs ter Interactive P ictures AG 4 4 4 3 T aleo C orp. Motricity, Inc. Wiz z ard S oftware C orporation K ings oft C orporation L imited is eemedia Inc. EV/Revenue Ranking 3 3 3 2 2 O pen T ex t C orp. eP ro Ltd. Modern T imes G roup Mtg AB NE O WIZ G ames C orporation XING AG S ohu. com Inc. S core Media Inc. V elti P lc S hutterfly , Inc . UO MO Media, Inc P NI Digital Media Inc. G ungHo O nline E ntertainment, Inc. My riad G roup AG V alueC lic k , Inc. P latforma Mediowa P oint G roup S .A. HanbitS oft, Inc . Unilava C orporation Webz en Inc . NeuLion Incorporated Y D O nline C orp. NeXplore has highest revenue multiple at 47x 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 1 1 G amania Digital E ntertainment C o. , L td. S park Network s , Inc. Hutc his on T elec ommunic ations Hong K ong H oldings L td. S NAP Interac tiv e, Inc. Y nk K orea Inc . O riented Media G roup B erhad NetDragon WebS oft, Inc. AQ Interac tiv e, Inc. Internet G roup S A O AO R B C Information S y s tems P oints International Ltd. T he New Y ork T imes C ompany T heS treet.c om, Inc. Northgate T ec hnologies L imited U nis erv e C ommunications C orp. DADA S pA IAC /InterActiveC orp. U nited O nline, Inc. C DC C orp. AO L, Inc . G igaMedia Ltd. 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 G lu Mobile, Inc. C yberplex Inc. T ree.C om, Inc. Ac toz S oft C o., L td. O penwav e S y s tems Inc . G ameO n C o Ltd. J umbuck E ntertainment Limited R ealNetwork s Inc. As k net AG Y ippy , Inc . 0 0 0 0 0 0 0 0 0 0 Mobile Data C orp. www.mackieresearch.com
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