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Web 2.0 Weekly
“Fluid Music – Muzak’s Younger, Hipper Sibling”
                                                           ...
Key Developments (past week)
    Deals (M&A, Finance) – Group Deals and Muzak’s Younger, Hipper Sibling
     Fluid Music (...
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
                          ...
7
                         Source: CapitalIQ
                                                                             ...
8
                         Source: CapitalIQ
                                                                             ...
9
                         Source: CapitalIQ
                                                                             ...
10
                                                                     -
                                                ...
11
                                                                                     0.0
                              ...
12
                                                                                                           0.0
        ...
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
Web 2.0 Weekly - May 11, 2010
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Web 2.0 Weekly - May 11, 2010

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Slow start in May after record April: Total transaction value (excluding M&A) in the Web 2.0 universe for April was $813.5 million - the highest monthly total we have recorded. The number of financings was also a record, at 49, averaging $16.6 million each. Note that this includes the $300 million investment in DST by Tencent. Excluding this transaction, the average is $10.7 million. May 2010, in contrast, has started slowly, with only $37.4 million in financing announced thus far, averaging just $3.4 million across 11 deals. In comparison, total capital raised in May 2009 was $375.0 million, averaging $12.5 million over 30 deals.

Deal round-up for May: The large deal highlights for the month include:
Fluid Music (TSX:FMN, digital music distributor) will acquire Mood Media (provider of sensorial marketing solutions) for €160 mm.
Lithium is purchasing analytics developer, Scout Labs, for $20 mm.
Fatfoogoo (purveyor of virtual goods) is being acquired by Digital River for $10 mm.
Groupalia, the Spanish answer to online group discount retailers, Groupon and LivingSocial, raised $2.5 mm in a Series A financing – the online group discounters have been raising money quickly (DST invested $135 mm in Groupon in April) with a total of $222 mm in funding coming to just these three players thus far.

Bearish week again: Price performance was largely negative in our Web 2.0 universe, with prices dropping for over 70% of the companies.

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Transcript of "Web 2.0 Weekly - May 11, 2010"

  1. 1. Web 2.0 Weekly “Fluid Music – Muzak’s Younger, Hipper Sibling” May 11, 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) – Group Deals and Muzak’s Younger, Hipper Sibling Fluid Music (TSX:FMN, digital music distributor) will acquire Mood Media (provider of sensorial marketing solutions) for €160 mm. Lithium is purchasing analytics developer, Scout Labs, for $20 mm. Fatfoogoo (purveyor of virtual goods) is being acquired by Digital River for $10 mm. Groupalia, the Spanish answer to online group discount retailers, Groupon and LivingSocial, raised $2.5 mm in a Series A financing – the online group discounters have been raising money quickly (DST invested $135 mm in Groupon in April) with a total of $222 mm in funding coming to just these three players thus far. Financial Results/Guidance RealNetworks (Internet veteran from the Web 1.0 era) reported Q1/F10 revenue of $128.6 mm (-9% Y/Y) and EPS of $0.05 (vs. $0.10 in Q1/F09). In terms of outlook, management expects Q2 revenue to decline Y/Y and Q/Q and EBITDA to be negative – though Q2 is expected to be the low point in financial performance for F2010. 2 www.mackieresearch.com
  3. 3. Public Company Data 3 www.mackieresearch.com
  4. 4. Aggregate Public Data Web 2.0 Public Companies Total Median Max Min # Companies 99 - - - Market Cap (US$ mm) 78,963.9 72.1 36,243.7 1.0 Revenue (US$ mm) 22,467.7 60.2 3,057.7 0.0 1 Year revenue growth 3.5% 857.0% -91.4% EBITDA as % of revenue - 13.4% 67.7% -75.0% Net cash (US$ mm) 8,591.6 1.8 1,754.4 -670.8 TEV/Revenue - 1.7x 46.4x 0.0x TEV/EBITDA - 8.5x 42.6x 0.0x P/E - 16.4x 93.4x 0.0x Relative to 52 week high -36.7% -3.8% -97.2% Source: CapitalIQ 4 www.mackieresearch.com
  5. 5. 5 0 5 10 15 20 25 30 Gaming 27 Social Networking 16 Media 10 7 Diversified 6 Marketing 5 Mobile 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 Collaboration 1 Podcasting 1 Learning 1 Video 1 Search 1 Payment 1 Financial Services Public Company Distribution 0 5 10 15 20 25 30 35 40 45 United States Canada China South Korea Japan Taiwan Germany Australia United Kingdom Hong Kong Poland Russia By Country Finland Sweden Malaysia India Italy Switzerland Israel www.mackieresearch.com
  6. 6. Valuation Dashboard – 1 Week Market Cap EV/Revenue Flat Flat 10% 4% Rising 30% Rising 17% Falling 73% Falling 66% EV/EBITDA P/E Flat Flat 4% 3% Rising 26% Rising 32% Falling Falling 65% 70% 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 3/23/2009 3/30/2009 4/6/2009 4/13/2009 4/20/2009 4/27/2009 5/4/2009 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 Median EV/Revenue 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 Median 9/28/2009 10/5/2009 10/12/2009 10/19/2009 10/26/2009 11/2/2009 11/9/2009 11/16/2009 11/23/2009 11/30/2009 Long-term average 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 2/8/2010 2/15/2010 2/22/2010 recovering, but 3/1/2010 below LT Average Revenue multiples 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 373737383939393939414344444545454648494949485154545858586163636461636367676867706667657072687372767477777777777980818181 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 3/23/2009 3/30/2009 4/6/2009 4/13/2009 4/20/2009 4/27/2009 5/4/2009 5/11/2009 5/18/2009 5/25/2009 6/1/2009 6/8/2009 6/15/2009 6/22/2009 Median EV/EBITDA 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 Median 9/28/2009 10/5/2009 10/12/2009 10/19/2009 10/26/2009 11/2/2009 11/9/2009 11/16/2009 11/23/2009 11/30/2009 12/7/2009 Long-term average 12/14/2009 12/21/2009 12/28/2009 1/4/2010 1/11/2010 1/18/2010 1/25/2010 2/1/2010 2/8/2010 2/15/2010 below LT average remain depressed 2/22/2010 3/1/2010 EV/EBITDA multiples 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 2020 2122 23 2322 2223 2423 2523 2426 26 2727 2625 2526 2830 29 3232 3436 3937 3737 3939 41 3737 3941 4039 4041 42 4242 4343 4347 4848 5051 51 4951 4847 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 3/23/2009 3/30/2009 4/6/2009 Median P/E 4/13/2009 4/20/2009 4/27/2009 5/4/2009 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 8/31/2009 9/7/2009 9/14/2009 9/21/2009 Median 9/28/2009 10/5/2009 10/12/2009 10/19/2009 10/26/2009 11/2/2009 11/9/2009 11/16/2009 11/23/2009 11/30/2009 12/7/2009 Long-term average 12/14/2009 12/21/2009 12/28/2009 1/4/2010 1/11/2010 1/18/2010 1/25/2010 2/1/2010 2/8/2010 2/15/2010 2/22/2010 below LT average 3/1/2010 P/E multiples also 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 1819 1918 18 1918 1919 2020 1818 1919 20 2124 2525 2425 2628 26 2929 3030 3231 3133 3537 36 3637 3738 3935 3737 38 3636 3331 3130 3333 3433 33 3232 3134 www.mackieresearch.com
  10. 10. 10 - 5.0 10.0 15.0 20.0 25.0 # Companies 2 Infrastructure 2 Music 7 Social Networking 1 Learning 5 Diversified 1 Vertical Communities 3 SMS/Voice 6 Marketing 4 Mobile Gaming 21 1 Search 1 Collaboration EV/Revenue 9 Media 3 Advertising 1 Podcasting 1 Video 2 Internet Retail 3 Enterprise 2 Dating 1 Financial Services 1 Virtual World - 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 Average Valuation – by Sector # Companies 1 Mobile 2 Enterprise 5 Diversified 2 Internet Retail 6 Media 1 Collaboration Gaming 14 EV/EBITDA 5 Social Networking 3 Marketing 1 Dating 1 Advertising www.mackieresearch.com
  11. 11. 11 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 0.1 Ngi Group Inc. Asknet AG Cyberplex Inc. GigaMedia Ltd. Source: CapitalIQ Jumbuck Entertainment Limited RealNetworks Inc. Actoz Soft Co., Ltd. Tree.Com, Inc. Uniserve Communications Corp. Openwave Systems Inc. Glu Mobile, Inc. GameOn Co Ltd. DADA SpA Northgate Technologies Limited TheStreet.com, Inc. IAC/InterActiveCorp. Points International Ltd. AOL, Inc. Internet Group SA CDC Corp. United Online, Inc. 0.10.2 0.30.40.4 0.4 0.50.50.50.60.6 0.60.60.6 0.70.70.80.80.80.80.8 The New York Times Company AQ Interactive, Inc. CornerWorld Corporation OAO RBC Information Systems HanbitSoft, Inc. EV/Revenue Ranking infoGROUP, Inc. NetDragon WebSoft, Inc. Gamania Digital Entertainment Co., Ltd. Hutchison Telecommunications Hong SNAP Interactive, Inc. Spark Networks, Inc. YD Online Corp. ValueClick, Inc. Ynk Korea Inc. Oriented Media Group Berhad 0.9 1.0 1.0 1.2 1.3 1.3 1.3 1.4 1.4 1.5 1.5 1.5 1.6 1.7 1.7 Shutterfly, Inc. Score Media Inc. NeuLion Incorporated Modern Times Group Mtg AB XING AG Velti Plc PNI Digital Media Inc. Sohu.com Inc. Wizzard Software Corporation 1.9 2.0 2.12.22.22.2 2.3 2.4 2.5 GungHo Online Entertainment, Inc. Webzen Inc. Open Text Corp. 2.82.82.9 Myriad Group AG Frogster Interactive Pictures AG iseemedia Inc. UOMO Media, Inc NEOWIZ Games Corporation Taleo Corp. 3.0 3.1 3.13.3 3.53.6 SK Communications Co., Ltd. Changyou.com Limited revenue multiple at 46.4x SpectrumDNA has highest DigitalPost Interactive, Inc. HUGHES Telematics, Inc. Kingsoft Corporation Limited WebMediaBrands Inc 4.6 4.74.94.9 5.0 5.2 Lingo Media Corporation Mixi, Inc. Accelerize New Media, Inc. 5.4 5.6 5.6 Unilava Corporation Gree, Inc. 7.9 8.3 TransGaming, Inc. Fluid Music Canada, Inc. 11.1 Chinese Gamer International 11.811.8 GeoSentric Oyj Beyond Commerce, Inc. 13.8 MOKO.mobi Limited 15.5 Paid Inc. 19.2 Tencent Holdings Ltd. 21.8 Bright Things plc 27.8 SpectrumDNA, Inc. 46.4 www.mackieresearch.com
  12. 12. 12 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 Jumbuck Entertainment Limited Cyberplex Inc. 0.8 1.9 Source: CapitalIQ Actoz Soft Co., Ltd. AOL, Inc. GameOn Co Ltd. 2.3 2.4 2.5 United Online, Inc. 4.2 The New York Times Company ValueClick, Inc. Sohu.com Inc. Hutchison Telecommunications Hong Kong Holdings 5.3 5.4 5.5 5.6 Ltd. DADA SpA infoGROUP, Inc. NetDragon WebSoft, Inc. EV/EBITDA Ranking Spark Networks, Inc. YD Online Corp. 6.0 6.7 6.9 6.9 7.0 CDC Corp. Changyou.com Limited Gamania Digital Entertainment Co., Ltd. XING AG 7.1 7.4 7.9 8.0 IAC/InterActiveCorp. PNI Digital Media Inc. Uniserve Communications Corp. 8.5 9.0 9.1 GungHo Online Entertainment, Inc. Open Text Corp. Velti Plc 10.2 10.3 10.7 Kingsoft Corporation Limited at 42.6x NEOWIZ Games Corporation Score Media Inc. 11.7 12.312.4 Shutterfly, Inc. Tencent leads the group Gree, Inc. HanbitSoft, Inc. 12.9 13.8 13.8 Modern Times Group Mtg AB Ynk Korea Inc. 15.0 15.0 Mixi, Inc. Frogster Interactive Pictures AG 17.7 18.5 Openwave Systems Inc. 18.9 TheStreet.com, Inc. Chinese Gamer International 22.3 23.1 Taleo Corp. 26.3 Tencent Holdings Ltd. 42.6 www.mackieresearch.com Excluding EV/EBITDA > 100x
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