Fred Destin - Tech Tour: Show Me The Money

Social Networking “ Show me the money” Fred Destin Montreux, 15 November 2007

Social networks are real – usage isn’t hype 1
Social networking sites have attracted over 300M users world-wide
Social networks are 1 in 20 UK internet visits
MySpace has over 100M registered users and is 2nd largest web site in page views
85% of US college students have Facebook profiles
More than 90% of UK teens use social networks
In US, 80% of young adults, 60% of teens and 30% of adults
The top 20 social networks receive over 15% of all attention spent online in US
MySpace has 329 monthly page views per unique visitor, more than Google (273) and Yahoo! (223)
60% of Facebook users log in daily and spend an average of 20 minutes
Average UK social network visit duration was 25 minutes, 250% average
StudiVZ had 4.5B page views in September, up from 2.5B in July
Source: ComScore 2007, Forrester 2007, Hitwise 2007, Merrill Lynch 2007 VERY LARGE ABSOLUTE SIZE DEEP REACH IN TOTAL POPULATION STICKINESS IS UNPRECEDENTED

Huge untapped potential in advertising revenues 1 Awareness Education / Information Branding Direct response (leads, sales, etc.) Internet $23.7 bn Print $147.6 bn Outdoor $23.0 bn TV $162.1 bn DM $166.5 bn Radio $33.2 bn Source: eMarketer 2007, Merrill Lynch 2007, Initiative Spheres 2006
Online advertising in general is tiny relative to the importance of the medium
Social networking sites command much more attention (15%) than their current share of online advertising (3%) – and they can target ads well
FACTS:
Advertising on social networks in US is $900M in 2007 and growing at 100% to $1.8bn in 2008
US social network advertising revenues will grow to $3.6bn by 2011
MySpace advertising revenues were $500M in 2007 and expected to grow to $930M
Facebook will have ad revenues of $400M in 2008

Social networks change behaviour and influence commerce 1
Traffic to UK online retailers from social networking sites was up 153% 2006-YTD2007
TopShop.co.uk‘s #2 referring website in April 2007 was MySpace (+500% YoY)
Social shopping communities such as Threadless or LaFraise are generating significant revenues
Mobile social network content delivery will generate revenues of $500M in 2007, expected to rise to $5.7bn in 2011
Mobile social network content downloads will increase from 200M in 2007 to 9B in 2011
Korean social network Cyworld is the second largest retailer of MP3s after iTunes, having sold more than 160M songs directly to its members
Average online video consumer watches 100 minutes a month
DailyMotion has grown from 2 to 40M uniques in a year and attracts c. 55% of French broadband users each month
SOCIAL SHOPPING WILL DRIVE ECOMMERCE MUSIC & VIDEO CONSUMPTION WILL CHANGE SIGNIFICANTLY MOBILE IS A HUGE POTENTIAL REVENUE GENERATOR Source: Juniper2007, Merrill Lynch 2007, proprietary data

With no hard financials, how do acquirors value social networks today? 1
Usage statistics have a clear impact on revenues and profitability
Best indicators for advertising revenue are absolute monthly unique visitors (impressions per person) and monthly page views (sell-through)
Good indicator for strategic value is number of registered users (depending on the service)
Value per unique then gets assessed against operational leverage and likely EBIT potential of business model
EXAMPLE : Club Penguin
700K registered users, 10M uniques and 500M page views
$350M TEV implies $0.69 per page view and $35 per unique
Double these figures for $700M TEV with earn-out
However, strategic value is huge given young demographic: $500 per registered user before earn-out!
Source: Jefferies 2007, Merrill Lynch 2007, Atlas

Valuations are starting to normalise (thank you Longacre/Jefferies) 1 Statistics US$ per Company Valuation date Enterprise value ($m) Monthly page views (bn) Unique monthly visitors (m) Registered users (m) Monthly page view Unique monthly visitor Registered user MySpace Jul-05 580.0 7.8 17.7 22.0 $0.07 $32.77 $26.36 Current 3,750.0 50.6 105.7 75.0 $0.07 $35.48 $50.00 Facebook Apr-06 525.0 7.6 12.9 7.0 $0.07 $40.70 $75.00 Current 15,000.0 33.0 69.3 24.0 $0.45 $216.45 $625.00 Friends Reunited Dec 05 (w/o earnout) 208.0 0.2 5.1 16.4 $0.93 $40.78 $12.68 Dec 05 (w/ earnout) 303.4 0.2 5.1 16.4 $1.35 $59.49 $18.50 Club Penguin Aug 07 (w/o earnout) 350.0 0.5 10.0 0.7 $0.69 $35.06 $500.00 Aug 07 (w/ earnout) 700.0 0.5 10.0 0.7 $1.39 $70.13 $1,000.00 Last.fm May-07 280.0 0.1 11.5 15.0 $2.37 $24.35 $18.67 iVillage Mar-06 616.0 0.3 18.2 NA $2.46 $33.85 NA AuFeminin Jun-07 382.3 1.9 20.0 NA $0.20 $19.14 NA StudiVZ Jan-2007 (w/o earnout) 44.7 1.3 2.2 NA $0.03 $20.52 NA Jan-2007 (w/ earnout) 75.9 1.3 2.2 NA $0.06 $34.88 NA Fotolog Aug-07 90.0 5.3 15.5 10.0 $0.02 $5.81 $9.00 Median $0.69 $34.88 $26.36 Mean $0.79 $34.49 $238.74 High $2.46 $216.45 $1,000.00 Low $0.02 $5.81 $9.00

Hold on to your Social Network: the bigger exits are yet to come 1 Annc Date Target Acquirer Target Description/Comments Curr Bid Value (m) Stake (%) Ent Value (m) EV / LTM LTM Margin EV / 1-Year Forward Forward Margin Sales EBITDA Sales EBITDA Social networking 27/08/2007 Fotolog HiMedia Photo sharing community website USD 90.0 100% 90.0 NA NA NA 19.4x NA NA 01/08/2007 Club Penguin (1) Disney Online community for children USD 350.0 100% 350.0 7.0x NA NA 5.8x 11.7x 50.0% 01/06/2007 AuFeminin Axel Springer Online women’s community EUR 280.0 100% 280.0 20.5x 36.1x 57.0% 12.3x 20.4x 60.0% 30/05/2007 Last.fm CBS Corp Online music community site USD 280.0 100% 280.0 NA NA NA NA NA NA 09/01/2007 Playahead Modern Times Group Swedish online social networking community SEK 102.0 90% 113.3 4.2x NA NA NA NA NA 08/01/2007 MyBlogLog Yahoo! Blog-based online community USD 10.0 100% 10.0 NA NA NA NA NA NA 03/01/2007 StudiVZ (2) Holtzbrinck German-based online community for students EUR 50.0 100% 50.0 NA NA NA NA NA NA 06/03/2006 iVillage NBC Universal Women's community site USD 600.0 100% 600.0 6.1x 32.5x 18.6% 5.3x 23.9x 22.2% 06/12/2005 Friends Reunited (3) ITV Online community site GBP 120.0 100% 175.0 10.2x 18.8x 54.2% 7.0x 13.5x 51.7% 18/07/2005 Intermix Media News Corp MySpace USD 580.0 100% 580.0 7.3x 53.2x 13.8% 4.9x 37.9x 13.0% 20/06/2005 Neopets Viacom Virtual pet community USD 160.0 100% 100% NA NA NA NA NA NA 25/10/2004 Classmates Online United Online Online community-based networking USD 100.0 100% 100.0 1.4x 8.7x 15.9% NA NA NM 24/05/2004 Tickle Monster Worldwide Matchmaking and social networking services USD 93.9 100% 93.9 3.8x NA NM NA NA NM Median 6.8x 35.4x 18.6% 6.4x 20.4x 50.0%

http://www.freddestin.com	241
http://freddestin.com	14
http://www.netvibes.com	11
http://www.slideshare.net	2
http://static.slidesharecdn.com	1
http://localhost	1

Fred Destin - Tech Tour: Show Me The Money

by Fred Destin on Nov 20, 2007

Accessibility

Categories

Tags

Upload Details

Usage Rights

6 Embeds 270

Statistics

Fred Destin - Tech Tour: Show Me The Money — Presentation Transcript