Gport GMIC Roadshow USA Report -EN

GMIC 2012 ROADSHOW USA China’s Tech Leaders On Tour GMIC 2012 ROADSHOW USA | Company Visits November 5th-‐11th, 2011

EVENT INTRODUCTION| GMIC 2012 Global Mobile Internet Conference May 9th – 11th 2012 Beijing, ChinaAsia’s largest mobile internet conference §  5000 aPendees §  61% CxO and VP level §  Elite Speakers §  G20 Summit closed door leaders meeMng §  Startup and developer tracks: G-‐Startup and AppSpace gmic.greatwallclub.com research@greatwallclub.com | Copyright 2011. All rights reserved.

EVENT INTRODUCTION| GMIC ROADSHOW GMIC ROADSHOW is one of the Great Wall Club’s (GWC) events as well as an overseas promoMon for the Global Mobile Internet Conference (GMIC). This event is designed to show GMIC as a communicaMon link between Asia, especially China, and overseas markets to global industry leaders and entrepreneurs. 。 5 research@greatwallclub.com | Copyright 2011. All rights reserved.

EVENT INTRODUCTION | DELEGATION MEMBERS LEI JUN LIN BIN Wang Jian CEO, Xiaomi President, Xiaomi CTO, Alibaba Michael Song Wang Yong WANG QIANGYU CEO, Skymobi CEO, DeNA China CEO, Duanqu 文厨 BO YIQUN BARRETT PARKMAN CEO, GWC President, GWC VP, GWC 6 research@greatwallclub.com | Copyright 2011. All rights reserved.

EVENT INTRODUCTION | ITINERARY NOVEMBER 5 -‐13 , 2011: HIGHLIGHTS REVIEW TH TH §  Glu Mobile | One of the top 3 mobile game development and publishing companies in the world. Square | A payment giant with an annual transacMon Company §  volume of more than $2 billion. Visits §  SV Angel | A legendary angel investment agency that 11/7 -‐ invested in Google, Facebook, TwiPer, and Groupon. §  RocketSpace | A startup company incubator. §  Zynga | A leading social game developer. §  GMIC Roadshow San Francisco Events §  VIP Dinner Company §  eBay | The worlds largest e-‐commerce plaeorm. Visits §  Paypal |The worlds largest payment soluMon provider. 11/8 -‐ §  Venture Capitalist Dinner Events §  Boundless Mobile InnovaMon §  CEO Dinner 7 research@greatwallclub.com | Copyright 2011. All rights reserved.

EVENT INTRODUCTION | ITINERARY NOVEMBER 5 -‐13 , 2011: HIGHLIGHTS REVIEW TH TH §  Sequoia Capital | The world’s largest venture Company capital ﬁrm. 11/9 -‐ Visits §  Google Android | The development team for the most popular mobile operaMng system. Events §  SVCW CEO Dinner §  Evernote |The world’s No. 1 cross-‐plaeorm Company note-‐taking sohware / cloud storage plaeorm. 11/10 -‐ Visits §  Mozilla | The world’s 3rd largest browser provider. 8 research@greatwallclub.com | Copyright 2011. All rights reserved.

USA Market Review Ø  From Horizontal to VerMcal Ø  Three Important Trends of the VerMcal Market Ø  Social-‐Local-‐Mobile Ø  Other Noteworthy Segments research@greatwallclub.com | Copyright 2011. All rights reserved.

MOBILE MARKET IN THE UNITED STATES AND IN GENERAL From Horizontal to VerDcal »  With the introducMon of cloud networking and increased bandwidth, the market for Mobile Services stands to increase significantly. One of the important trends is that market entrance shihs from horizontal products and services to verMcal business soluMons, which is exemplified by Square (see the company visits page) »  Two Major Classes of Services in the Future Mobile Market §  Horizontal -‐ Services and products that meet user needs. §  VerMcal -‐ Services and soluMons that meet the market segments needs. »  Three Major Reasons §  Users’ core needs have been met in general. SubstanMal innovaMon in a single market is difficult. §  Technological development makes it possible for package soluMons to be applied in market segments. §  Hot segments and products are cooling down. Making revenue from a single product or service hot spot is becoming difficult. Product integraMon and added-‐value services that meet the systemaMc needs are becoming popular. 10 research@greatwallclub.com | Copyright 2011. All rights reserved.

MOBILE MARKET IN THE UNITED STATES AND IN GENERAL Three Important Trends of the VerMcal Market 1.  Connected devices could reach 50 billion devices by 2020 (There were roughly 12.5 billion as of 2010). §  Two Types: Single Use (eReaders, Health Monitors) and MulM-‐purpose devices (smartphones, tablets). §  Major technological reﬁnements and adjustments are going to need to take place to handle this increase in data transfer. 2.  Healthcare oriented services via mobile will surge. §  Healthcare will account for 20% of the U.S. GDP soon. §  The aging populaMon of the U.S. and the world will act as the accelerant that pushes this market into overdrive. 3.  Ongoing Development of Mobile Search Engines §  Constraints of mobile devices demand simpler ways to search for things than tradiMonal “Google-‐like” search engines. §  New search methods, such as “voice command” searches like Siri that are capable of doing one or two word searches with reasonable accuracy, are the future. §  The winner in this market will be the new Google for the next 10 years. 11 research@greatwallclub.com | Copyright 2011. All rights reserved.

MOBILE MARKET IN THE UNITED STATES AND IN GENERAL Social-‐Local-‐Mobile (So-‐Lo-‐Mo) »  So-‐Lo-‐Mo will conDnue to develop and have a deepening impact. §  SoLoMo will provide the informaMon that will allow businesses to target and inﬂuence customers in ways never before possible. §  Dataming and controlling opinions will make or break companies in the future. §  34% of TwiPer users share a link about a product more than once a day. This means that push noMﬁcaMon between users has become a reality in a sense. 12 research@greatwallclub.com | Copyright 2011. All rights reserved.

MOBILE MARKET IN THE UNITED STATES AND IN GENERAL Other Noteworthy Segments 1.  Mobile Payment §  Global Mobile Payments will exceed $750 billion by 2015. §  NFC transacMons will make up 75% of these transacMons. §  SMS payments and mobile web payments will stagnate. §  From July 2009 to July 2010, $1 billion of goods were purchased from Amazon via mobile payment. 2.  Mobile AdverMsing §  Of the $33 billion spent on digital adverMsing in the U.S., $1 billion was mobile. §  Only 35% of U.S. mobile subscribers are currently using smartphones. As this grows exponenMally, so will the mobile adverMsing market. §  Targeted adverMsing through SoLoMo will make mobile markeMng more effecMve and thus more aPracMve. 3.  Mobile VoIP §  Mobile VoIP is expected to jump from 15 billion minutes in 2010 to over 470 billion by 2015. §  This growth will kill the revenue generated from tradiMonal voice and SMS services. §  This will be a baPleground for the coming years as carriers fight to find new ways to balance their loss of profits from tradiMonal services. VoIP services need a way to moneMze their product. 13 research@greatwallclub.com | Copyright 2011. All rights reserved.

Companies Visited Ø  Glu Mobile Ø  Sequoia Capital Ø  Square Ø  Google Android Ø  SV Angel Ø  Evernote Ø  Zynga Ø  Mozilla Ø  eBay Ø  Paypal research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS| GLU MOBILE »  Company IntroducDon §  One of the top 3 mobile game development and publishing companies in the world. §  Founded in 2001, Glu is based in San Francisco and has a branch in Beijing. §  Listed on the NASDAQ in 2007. (NASDAQ: GLUU) §  Beijing branch employs about 150 people. Contract Killer Super KO Boxing Big Time Gangsta Guitar Hero Deer Hunter StarBlitz15 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS| GLU MOBILE »  OperaDng condiDons §  More than 70 million users §  22,090 acMve users per month §  2,103 acMve users per day §  34% are Android users; 66% are iOS users »  Financial PosiDon §  Market Value: $197.06M §  Total Revenue in the Last 12 Months: $66.65M §  Gross Proﬁt in the last 12 Months: $47.69M §  Net Proﬁt in the Last 12 Months: -‐$16.02M 16 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS| GLU MOBILE »  Business Model Free + Premium §  Micro-‐TransacMons-‐-‐75% of Total Revenue §  Display Ads (CPM)-‐-‐5% of Total Revenue §  Incented Ads (CPX)-‐-‐20% of Total Revenue »  Product Strategy ü  Seek “Word of Mouth” and Social CommunicaMon ü  Give the Full Game to the Customer ü  Free + Premium + Maximized Product Value (Fully Develop the Commercial Value of Each Game) 17 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS| GLU MOBILE »  Keys to Glu’s Success 1.  Free + Premium (Freemium) Business Model 2.  Great cross-‐plaeorm porMng capability: Dedicated teams responsible for the adaptaMon of all aspects in the Android ecosystem to ensure that each game can be run in a variety of hardware and sohware environments. 3.  Industrial chain coverage: From the proposal of game concepts to the release and promoMon of it -‐ cooperaMon with chip makers, handset manufacturers, most of the SNS plaeorms and almost all retail stores. 4.  Tremendous advantages on heavy client games, especially 3D game development. 5.  Make business strategies based on its own advantages. Instead of following the trends of social games or the socializaMon of games, it sMcks to the player-‐ oriented strategy to add social elements at the premise of gameplay and players experience (As social as relevant). »  The Future of the Game Market from Glu’s PerspecDve 1.  Three Major Trends: Mobile, Freemium, and Social Games 2.  Two DirecMons for the Development: CompaMbility (browser-‐oriented) or user 18 experience (local resource-‐oriented) research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS| SQUARE »  Company IntroducDon §  A payment giant with annual transacMon volume of more than $ 2 billion. §  Co-‐founded in February 2009 by TwiPer founder Jack Dorsey. It is headquartered in San Francisco, United States. §  By October the company has raised over 170 million U.S. dollars. »  OperaDng CondiDons §  Nearly 20,000 acMve users per day. More than 900,000 actual users. §  More than 9,000 sales outlets in the United States. Nearly one million card readers have been distributed. §  More than 100,000 new businesses per month. Total number of businesses has reached 10% of that of Visa or MasterCard. §  Usage by mobile device： iPad(21%), iPhone(45%) iPod(3%), Android(31%) »  Financial PosiDons §  Over $11M in daily transacMons §  Over $2B in annual transacMons §  Company valuated at $2B 19 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS| SQUARE »  Business Model Current: Cost Per TransacDon §  Cost Per Swipe – 2.75% of the transacMon volume. No extra charge. §  Cost Per Keyed-‐in -‐-‐ 2.75% of the transacMon volume. No extra charge. Future: product recommendaMons + adverMsing, and may become a e-‐ commerce plaeorm as well as a portal 20 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANIES VISITS | SQUARE »  Keys To Square’s Success 1.  Reasonable Commercial PosiDoning: Believe in the concept of "new technologies will not just improve the tradiMonal payment methods but completely change the payment industry" and posiMon the company as a "one-‐ stop payment soluMon provider" rather than a mere "mobile payment" company. 2.  Simple Business Model: Do everything possible to simplify the user payment process. Cancelled the $0.15 extra charge early in this year. 3.  Product for Niche Market: TradiMonal payment system could not meet the needs of small businesses and individuals, and it is by paying aPenMon to their needs that helped Square accumulate core users in its early stage. 4.  Customer Experience-‐Oriented Product InnovaDon: Instead of using new technologies (e.g., NFC) sequaciously, Square set its target as "to support every payment method available to customers" and "to help businesses complete every possible transacMon.” 5.  Cost: Eﬃcient strategies for markeMng and core user accumulaMon : 1) add word-‐of-‐mouth and popular elements to the product so that it is sought aher by users; 2) distribute product trials to diﬀerent target groups; 3) use social 21 communicaMon plaeorms. research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS| SV ANGEL »  Fund InformaDon 1.  Founded in 2005 by Ron Conway, a legendary angel investor in Silicon Valley who has invested in Google, Facebook, TwiPer, and Zynga. 2.  Headquartered in Silicon Valley, the $60 million fund mainly conducts small investments to start-‐up companies during their early stage. 3.  Only one General Partner (David Lee), others including Ron Conway are LPs. 4.  As of November 15, 2011, SV ANGEL has invested in more than 220 business projects, including TwiPer, Foursquare, Groupon, Dropbox, Square, Filpboard and AirBnB. More than half of the companies have received Series A ﬁnancing, and 25% of them received investments from Top 10 venture capital investors。 5.  The average investment amount is around $ 150,000 (about 1% to 5% of the equity), while that of key projects vary from $ 500,000 to 1,000,000. 6.  Give priority to projects with long-‐term impacts, and put parMcular emphasis on establishing long-‐term relaMonships with excellent entrepreneurs as well as on future investment possibiliMes. 22 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS| SV ANGEL »  SV Angel’s Views： 1.  Two key market drivers: MobilizaMon and GlobalizaMon 2.  Three future market direcMons: §  New Media Channel, Real Time Data ConsumpMon §  O2O Commerce §  CollaboraMve ConsumpMons 3.  A technology update cycle usually lasts about 20 to 25 years, and now everything is only in the early stage of the cycle, so the industry is sMll far from being a bubble. SV Angel will conMnue its current momentum of investment for at least another ﬁve years. 4.  SV Angel has never been so opMmisMc for this industry and does not think there are signs of slowdown. 5.  The next Google and Facebook will come from Y Combinator. 23 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS| ZYNGA »  Company IntroducDon §  Worlds No.1 social gaming company §  Founded in June 2007, it began to proﬁt in the fall the same year. §  Headquartered in San Francisco, USA. Employs more than 2,000 people. Maintains a branch in Beijing. §  Core team: Mark Pincus (CEO) Cadir Lee (CTO) Dave Wehner (CFO) research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS| ZYNGA »  OperaDng CondiDons §  Over 148 million unique users per month (average) spread over 166 countries. §  232 million acMve users per month (average). §  Over the past year: §  More than 60 million users logged on at least one Zynga game plaeorm every day. 2 billion minutes were spent in Zyngas games per day. §  Zynga sold 38,000 virtual goods per second and the annual revenue from virtual goods reached $ 575 million. §  Zynga gained only $ 22.8 million from adverMsing, a figure decreased by 36% compared to 2009. »  Financial PosiDon §  Annual Revenue: $598M, an 391% increase compared with 122 million in 2009 §  Q1 revenue: $235M, 133% more than last year §  Annual profit: $90M §  Q1 profit : $11.8M, 84% more than last year §  Current disposable cash : $1 billion §  The total cost of markeMng in 2010 was more than $114 million §  R & D costs in the first quarter reached $71.8 million, 158% more than last year 25 research@greatwallclub.com | Copyright 2011. All rights reserved.

企业拜访 | ZYNGA »  Business Model Virtual Commodity Trading + AdverMsing §  3% to 5% of the users pay for virtual goods. §  Online and oﬄine purchase channels, with a variety of payment methods. §  Virtual commodity trading accounts for 90% of total revenue, while adverMsing revenue takes an increasingly small proporMon. §  TransacMons conducted via Facebook are charged for 30% of the volume. §  AdverMsing services are via 1) graphics display of the adverMsers brand , 2) implanted adverMsements in the game interface. 26 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS | ZYNGA »  CooperaDon and CompeDDon Netween Zynga and Facebook 1.  CooperaDon §  Facebook is the largest channel plaeorm for Zynga §  Zynga games bring Facebook new users 2.  Facebook Banned “NoDﬁcaDon” §  In May 2010 Facebook stopped social games from using the "noMﬁcaMon" funcMon to promote 3.  Facebook Introduced Credit §  In September 2010, Facebook introduced the Facebook credit §  StarMng from July 1, 2011, the Facebook credit has become the only currency on the plaeorm, and Facebook charges 30% of the trading volume 4.  Zynga Built Its Plahorm Itself §  Zynga built a plaeorm itself in reacMon to Facebooks method, and started to launch new promoMon and revenue channels 27 research@greatwallclub.com | Copyright 2011. All rights reserved.

企业拜访 | ZYNGA »  Why Zynga succeeded? 1.  Started on the shoulders of Facebook §  Take full advantage of Facebooks dominance at the desktop market, and seize the market quickly through strong channels. 2.  Copy successful games ASAP §  Copy popular games in a short period of Mme, and accumulate large numbers of users through large-‐scale adverMsing (which cost 10% to 20% of its total annual income) and cross-‐promoMon between users 3.  AjenDon to the data decision §  Allocate signiﬁcant resources to data centers, and build data models for each game. Zynga invested hundreds of millions of dollars over the past three years on recruiMng engineers and purchasing servers §  Product development relies on its strong technological system and data analysis teams (mostly from Oracle). The company make decisions based on mass data and rigorous analysis rather than experience 4.  Adjust channel strategies according to the situaDon §  In the desktop market, Zynga introduced new promoMon and moneMzaMon channels such as embedded adverMsing and oﬄine payment §  In the mobile market, it remains a loose cooperaMon with Facebook and at the same Mme open up other channels as well 28 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS | EBAY »  Company IntroducMon §  Worlds largest e-‐commerce plaeorm. §  Founded on September 4, 1995; listed on NASDAQ on September 24, 1998 (NASDAQ: EBAY) . §  Headquartered in San Jose, California; 17,700 employees. §  Core team: Pierre Omidyar (founder and Chairman), John Donahoe (CEO), Bob Swan (CFO). 29 research@greatwallclub.com | Copyright 2011. All rights reserved.

企业拜访 | EBAY »  OperaDng CondiDons »  Financial PosiDon §  More than 100 million acMve users §  Market value: $37.43B §  More than 1.6 billion page views per §  Total revenue in last 12 months: day $10.77B §  $ 1,877 worth of transacMons per §  Gross proﬁt in last 12 months: second $7.64B §  2011 Q2 transacMon totaled more than §  Net proﬁt in last 12 months: $1.81B $14.6 billion 30 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS | EBAY »  Business Model C2C online Trading Plaeorm 1.  Online aucMon / fixed price transacMons §  eBay inserMon fee §  eBay final value fee 2.  PayPal transacMon fee income 3.  AdverMsing / classificaMon services revenue 31 research@greatwallclub.com | Copyright 2011. All rights reserved.

企业拜访 | PAYPAL »  Company IntroducDon §  Worlds largest payment soluMon provider. §  eBay was founded in December 1998 and is headquartered in San Jose, California. It was acquired by eBay in 2002, and now is an eBay company. §  Paypal can be used in 194 countries and regions worldwide and supports more than 20 currencies. §  Core Team： ScoP Thompson (President)， Patrick Dupuis (CFO) 32 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS| PAYPAL »  OperaDng CondiDons §  More than 90% of the sellers and more than 85% of buyers use PayPal in internaMonal online transacMons. §  More than 100 million acMve users, and about 1 million new users per month. §  More than $315 million of daily transacMon volume, which means $3,650 per second. §  In 2011 the total transacMon volume will exceed $120 billion. »  Financial PosiDon §  Total revenue in 2010: $3.4 billion, in which internaMonal business accounted for 47% §  Gross proﬁt in 2010: about $1 billion §  2011 Q3 revenue was $1.1 billion, an 32% growth over the same period last year. 33 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS | PAYPAL »  Business Model Core payment methods 1) Banking system recharge 2) operator billing 3) Paypal Credit Card Core proﬁt model -‐-‐ Account TransacMon Fees §  Monthly trading volume less than $ 3,000 -‐ $ 0.30 per transacMon + 3.9% of turnover; §  Monthly trading volume from $ 3,000 to $10,000 -‐ $ 0.30 per transacMon + 3.4% of turnover; §  Monthly trading volume from $ 10,000 to $100,000 -‐ $ 0.30 per transacMon + 3.2% of turnover; §  Monthly trading volume more than $ 100,000 -‐ $ 0.30 per transacMon + 2.9% of turnover. 34 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS | PAYPAL »  eBay and the Mobile Internet 1.  By October, eBay mobile client has been downloaded for more than 57 million Mmes. 2.  Last year eBay mobile client contributed more than 5 billion worth of transacMon volume. 3.  Each week 2600 automobiles are sold via eBay mobile clients. 4.  It is expected that within three years, 50% of eBay customers will use mobile devices for Internet communicaMons . 5.  Aher acquiring RedLaser, eBay began to implement new mobile strategies -‐ to ﬁnd and develop mobile applicaMons that support voice and video recogniMon technologies. »  Paypal and the mobile Internet 1.  In 2011 Paypals mobile payment totaled $ 3.5 billion ($ 10 million per day or more than $ 10,000 per minute. 2.  Aquired the mobile payment company Zong for $ 240 million. 35 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS | SEQUOIA CAPITAL »  Fund introducDon 1.  Worlds largest venture capital ﬁrm. 2.  Founded in 1972, Sequoia Capital owns nearly 30 funds and $10 billion managed capital in total. 3.  Sequoia Capital has invested in a total of more than 500 companies -‐ more than 130 of which have been successfully listed. The companies they invested in take up 10% of the total NASDAQ value. 4.  Sequoia Capital has invested in a number of prominent companies such as Apple, Cisco, Oracle, Yahoo and Google. For more than 30 years, Sequoia Capital has powered many of the well-‐known companies in the United States. 5.  Sequoia Capital China Fund currently manages seven funds with a worth of 2 billion US dollars and 4 billion yuan in total for investments in Chinas high-‐ growth companies. 36 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS | SEQUOIA CAPITAL »  Sequoia Capitals Views 1.  Look for sparks that can start prairie fires: §  New technological and innovaMve projects §  Projects with superior customer values and fast distribuMon plaeorms 2.  Investment strategy should not change with market condiMons, for at any stage of the economic cycle there will be good businesses. 3.  One of the standards to measure whether an industry is overheated is the difficulty and cost for start-‐ups to recruit people. 4.  Sequoia sees itself not as an investor but a business partner with the companies. Do not pursue "in-‐and-‐out" profits, but look for products that change the world. 5.  Prefer projects with long-‐term and extensive values to delicate small business. 6.  According to Sequoias observaMon, Chinese e-‐commerce companies spend a lot on markeMng but the customer conversion rate and product gross margin are far below the average of their U.S. counterparts (Amazon enjoys 25% to 30% gross margin rate, which is the lowest in the US). 37 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS | GOOGLE ANDROID »  Company IntroducDon §  The most popular mobile operaMng system in the world. §  Google officially unveiled the Android operaMng system in November 5th, 2007. §  It was founded by Andy Rubin and only supported phones at first. In 2005, only 22 months since its founding, Android was acquired by Google, who later invited a number of manufacturers to form the Open Handset Alliance. The system was gradually ported to Tablet PCs and other devices. §  In the first quarter of 2011, Android surpassed Nokias Symbian which had been dominaMng for more than 10 years and became the worlds No.1. 38 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS | GOOGLE ANDROID »  OperaDng CondiDons §  By August 2011, Android has been the No.1 in 35 countries, with an average 48% market share. §  By November 2011, Android has taken over 52.5% of the global smart phone market share. In China the number was 58%. §  November 18, Google reported that more than 200 million Android devices have been acMvated via Google servers, and 55 million new acMvaMons each day. To be noted, this is only the acMvaMons via Google servers. research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS | GOOGLE ANDROID »  Views from the Android Team 1.  Compared with iOS, which only covers high-‐end users, Android ecosystem boasts a wider range. iOS developers make simple, but not necessarily more, profits. There will be more innovaMons and bePer opportuniMes in the profit model for Android users. 2.  Rovio, the developer of Angry Birds, makes almost the same amount of profit from in-‐app adverMsing on Android plaeorm than in AppStore. 3.  Android has not devote resources on the profitability of this plaeorm, but this will be one of the main tasks for the Android team. 4.  Android plaeorm is flexible enough to adapt to a variety of market characterisMcs in different regions. 5.  Revenue generated from Android plaeorm in Japan surpassed that of iOS. 6.  Google is prepared for long-‐lasMng, all-‐round compeMMon. What we see now is just the beginning. Googles killer app will be the coordinaMon between various products and services. 7.  Any innovaMons on the plaeorm-‐level face compaMbility issues. 8.  One of the purposes for Androids open strategy is to use many distribuMon channels to maximize the market share, so that customers have easier access to the product. 9.  Current revenue of Android is mainly from adverMsing on search engines. Android, as one of the major markeMng channels for Google search, has brought nearly 1 / 3 of their users. 40 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS | EVERNOTE »  Company IntroducDon §  Worlds No. 1 cross-‐plaeorm note sohware / cloud storage plaeorm. §  Founded in 2007, and headquartered in Mountain View, California. §  Core team: Stepan Pachikov (founder), Phil Libin (CEO), Dave Engberg (CTO) §  66 days aher the product launch, the number of users reached 100 million; 222 days, 200 million; 133 days; 300 million; 1084 days, 400 million; 83 days; reach 500 million; 52 days, 600 million. 41 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS | EVERNOTE »  OperaDng CondiDons §  By Oct 2011 there have been 16 million users, 2/3 of which internaMonal users. §  Registered users grow by 100 million every month. §  By the end of 2010 the total number of unique users had reached 2,089,705. Paying customers grew at 470% annually, exceeding that of free users »  Financial PosiDon §  Total revenue in last 12 months: $16M §  Average monthly income: more than $ 1.2M. Revenue growth rate: more than 300% §  Last valuaMon: $ 1 B 42 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS | EVERNOTE »  Business Model Free + Premium 1.  Accumulate core users with free services (The easiest way to have 1 million paid users is to have 1 billion free users. -‐ Evernote CEO Phil Libin) 2.  By providing amazing free products, improving the user experience gradually, and constantly updaMng its high-‐quality value-‐added services, Evernote switches acMve users into paying users and keep the conversion above 1% (Phil Libin assumed that 1% is enough be proﬁtable, whereas the actual conversion rate is more than 5%). 3.  Ensure the gross margin in the whole 43 process with eﬀecMve cost control. research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS| EVERNOTE »  InspiraDons from Evernote 1.  The core of free + premium business model lies in superior product experience, stable conversion rate from acMve to paid users, and the extraordinary cost control. 2.  One of the benefits that large groups of free users bring is the user ecosystem. §  Large number of free users actually become the most dynamic product development team, and their understanding of user needs and acMve creaMon are qualiMes that even professional teams do not have. §  Its huge number of users influences device manufacturers, such as HTC, so that they build in Evernote products as their default back-‐end service plaeorm as well as take the iniMaMve to integrate their products. 3.  Sharing is informaMon addiMon; search is subtracMon. For most users, search has more pracMcal significance than sharing. 4.  The vision of Evernote is not to make cross-‐plaeorm applicaMons, but a universal memory plaeorm for all mankind. For any plaeorm services, building data centers is of great importance. Evernote has clearly taken this into account when distribuMng the ecosystem in overseas markets. 5.  Pure promoMon and markeMng is much less effecMve than the integraMon of industrial chain. Evernote tends to rely on their own strength of the 44 ecosystem to extend its services at all levels. research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS | MOZILLA »  Company IntroducDon §  Mozilla Fund (referred to as Mozilla) is a non-‐proﬁt organizaMon to support and lead the open-‐sourced Mozilla project, and is the provider for worlds third-‐largest browser Firefox (the top two being IE and Chrome). §  Mozilla OrganizaMon was founded in February 1998 by Netscape staﬀ internally, while the Fund was formally established in July 2003. It is headquartered in Mountain View, California, USA §  Mozilla Fund describes itself as "a public service organizaMon commiPed to the provision of a variety of Internet opMons and innovaMons", and its project includes Firefox, Thunderbird, Drumbeat, Mozilla Labs. §  Core team: Gary Kovacs (CEO), Mitchell Baker (Chairman), Brendan Eich (CTO), Chris Beard (CIO), Jim Cook (CFO) research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS | MOZILLA »  OperaDng CondiDons §  There are about 500 million Firefox users §  More than 140 million daily acMve users §  Over 25% of market share, ranking 3rd §  Its market share in China has been declining since 2008, and is only 3.32% now §  40% of the updates are from volunteers »  Financial PosiDon §  Throughout 2010, Mozilla (including the Fund and its subsidiaries) gained more than $ 123 million of total revenue, a 18% growth compared to 2009. 46 research@greatwallclub.com | Copyright 2011. All rights reserved.

COMPANY VISITS | MOZILLA »  Views from Mozilla 1.  Browser developers need innovaMons in business models. In the mobile Internet era, a third-‐party browser will no longer suﬃce. "One more choice" is no longer the primary user need. 2.  The next objecMve for Firefox will be deep customizaMon and integraMon of the browser and the user. 3.  Firefox will try a HTML5 applicaMon-‐centric, open Web-‐Based, cross-‐ plaeorm appstore. The ﬁrst step will be a developer Beta in the forth quarter. 4.  One of the purposes of Firefoxs open appstore is to verify the feasibility and pracMcality of the Web as an applicaMon plaeorm. 5.  HTML5 developers should have more paMence -‐ due to technical limits, most of the apps cannot run on HTML5 smoothly for now. However, the HTML5 trend is set, so the advent of large-‐scale, cross-‐plaeorm compaMbility is only a maPer of Mme. 6.  Firefox add-‐on is the largest exisMng Web-‐based appstore. With this Firefox accumulated a lot of experience and developers. This a unique advantage that other plaeorms do not have. 47 research@greatwallclub.com | Copyright 2011. All rights reserved.

Conclusion Ø  Freemium Ø  HTML5 Ø  Ecosystem Ø  On New Technologies and Business Models Ø  On the Mobile Internet Boom Ø  On the Investment research@greatwallclub.com | Copyright 2011. All rights reserved.

KEYWORDS »  Keyword -‐ Freemium Although it has a long history, Freemium only has gained its popularity recently. It is a free + premium business model; companies provide main features of the products or services for free to acquire a large number of high-‐ quality core users, and then charge them with value-‐added services or an advanced versions. China is one of the early markets where Freemium has succeeded. Tencent, now a industrial giant, started with this model. Some companies we visited in GMIC Roadshow, such as Zynga, Glu and Evernote, are also typical Freemium players. Basic Elements of Freemium： §  “IrresisMble” Free Products：Inferior products will not aPract users, even free of charge. Successful Freemium products are amazing because they provide full-‐funcMon versions (instead of crippled ones) to users for free. §  A Large AcMve User Base：AcMve users means product retenMon, and retained users have the possibility to be paid users. As Evernote CEO Phil Libin says – “The easiest way to have 1 million paid users is to have 1 billion free users.” §  Extraordinary Cost Control：Venture capitals do not ensure the long-‐term success of Freemium companies; only great cost control abiliMes do. §  User Data Analysis and Mining：The user value needs to be exploited. The massive number of users requires strong data teams to support the decision making for products and services. Only by knowing who will pay and how much they will pay can Freemium companies succeed. §  InnovaMons in Value-‐Added Services：From the services themselves to the moneMzaMon model, Freemium requires constant innovaMons. With the cost set, how to maximize the value of the product in a way that users accept? How to improve the conversion rate from free users to paid ones? These will always be frequently asked quesMons. 49 research@greatwallclub.com | Copyright 2011. All rights reserved.

KEYWORDS »  Keyword -‐ Freemium Why is Freemium so Popular? §  Users are easier aPracted by free products. It is the "easily-‐aPracted users" that are the premise of Freemium. §  Free products with greater user retenMon cause higher transfer cost to users. The fundamental advantage of Freemium is the accumulaMon and retenMon of core users, because no maPer how good the moneMzaMon model is, it cannot make profits without stable user groups. §  The marginal cost advantage of sohware and Internet products. It was difficult for Freemium to succeed before the Internet era. The reason why it prevails now is that most IT products have almost zero marginal cost. §  Another reason for the popularity of Freemium is its advantages in markeMng. Before there were social media, “word-‐of-‐mouth” markeMng was difficult, whereas now various social media plaeorms amplify its effecMveness. §  Core users aPracted by free products contribute more to the formaMon of the ecosystem. As Evernote CEO said, a major part of the development of Freemium products comes from users. Free users are more willing to contribute their efforts to improve the user experience. Numerous user-‐developed products will, in a short Mme, form a ecosystem that is difficult for compeMtors to replicate. 50 research@greatwallclub.com | Copyright 2011. All rights reserved.

KEYWORDS »  Keywords -‐ HTML5 Cu~ng-‐Edge PracMMoners‘ Views 1.  Webstore -‐ cross-‐plaeorm compaMbility is undoubtedly the primary significance of HTML5. Web-‐based apps is not only a technical soluMon, but also opens up different market segments for more opportuniMes in business model innovaMon. Microsoh, Mozilla and Google have started their own browser-‐related strategies. 2.  The 80/20 rule of HTML5 -‐ due to technical limits at this stage, only about 20% of all apps are suitable to run on HTML5 plaeorm, and the rest 80% are not for they require higher performance. But the trend is set. This 80% represents potenMal rather than obstacle. 3.  Games that are larger than 100m currently cannot run in the browser -‐ although HTML5 reduces the cost of porMng, the response Mme and gaming experience greatly limited so that hard-‐core gamers will not be saMsfied. 4.  HTML5 is hard to promote -‐ on the one hand, HTML5 is being pushed more because of strategic needs from companies than by urgent needs from users; the other hand, its high requirements for hardware and bandwidth are also constraints. 51 research@greatwallclub.com | Copyright 2011. All rights reserved.

KEYWORDS »  Key word -‐ Ecosystem InspiraMons from great Silicon Valley business 1.  APenMon to their own posiMon in the ecosystem and to the industry chain integraMon capabiliMes. No maPer who is speaking, Glu, Zynga, or Google Android, the construcMon and development of ecosystem have become an important part of their long-‐term strategy. §  Androids success comes from the rapid formaMon of a large ecosystem, thanks to Googles eﬀorts. In terms of scale it is even larger than that of Apple. Googles core strengths in the future also lie in the synergy between various parts of its ecosystem. §  Glu has dedicated teams responsible for the adaptaMon of all aspects of the Android ecosystem. It also cooperates with the industrial chain covering chip makers, handset manufacturers, SNS plaeorms, and a variety of retail stores. §  Evernote believes that pure markeMng is much less eﬀecMve than integraMng the industrial chain, therefore it always adheres to the construcMon of ecological system, with which to promote and extend its own business. 2.  Drive product development and markeMng by customer needs to accelerate the formaMon of ecosystems. This is parMcularly evident in development of companies like Evernote and Mozilla, whose large number of free users and volunteers actually become the most dynamic product development team, and their understanding of user needs and acMve creaMon are qualiMes that even professional teams do not have. 3.  Lead or parMcipate in the construcMon of a business ecosystem so that companies have resources beyond their own borders and beyond the local market. During the enMre trip this is the theme of all China-‐related topics. Glu and Mozilla are acMvely seeking cooperaMon with OEMs and operators; Zynga formed an alliance with Tencent; Evernote began trying to build data centers in China; Google, although quiet in the Chinese market, conMnues to envolve Chinese developers into its own ecosystem. 52 research@greatwallclub.com | Copyright 2011. All rights reserved.

CONCLUSION »  On New Technologies and Business Models -‐ InspiraDons from Square and Evernote §  Whether it is HTML5 or NFC, new technologies tend to be over-‐sought or idolized. But we also see such entrepreneurs as Jack Dorsey who set up companies in a quite different way: From the beginning, the idea was not to mobilize the payment method. It was the overall development of technologies to make a whole new model that completely changes tradiMonal methods or even the way of life. As Jack Dorsey said, “First of all, Square is not a mobile payment company; secondly it is not even a payment company.” §  What Square pursues is "make the payment itself no longer a hindrance" -‐ "to support every payment method available to customers" and "to help businesses complete every possible transacMon". They will support NFC as long as customers need them to. While most companies focus solely on new technologies, Square sees the bigger picture and emphasizes on how these technologies can be applied to the business model and ecosystem. This difference in perspecMve differenMate this companies from ordinary ones. §  In Evernote we also heard them say "to be a universal memory plaeorm of mankind". We cant help thinking about the words Mr. Lei Jun said to Tencent employees in a recent GWC mobitalk: "It is Mme for Tencent, as a giant with $40 billion of market value, to change the world." A great company from China is something we all look forward to. 53 research@greatwallclub.com | Copyright 2011. All rights reserved.

CONCLUSION »  On the Mobile Internet boom -‐ trend or trick ? §  Throughout the GMIC Roadshow, we heard more than once American colleagues amazement: The startup-‐boom in Beijing is quite similar to that in Silicon Valley some Mme ago. Angel investors and VCs have different views due to their business backgrounds. For example, SV Angel, from the perspecMve of science and technology update cycle, believes that mobile Internet is sMll only at the early stage and far from a bubble, not to menMon slowing down; Sequoia capital measures whether there is overheaMng based on "the difficulty and cost for start-‐ups to recruit people." They thinks that "at any stage of the economic cycle there will be good businesses," and invest in projects and entrepreneurs with long-‐term and extensive values for in-‐and-‐out returns. »  On the direcMon of investment -‐ angel investment vs venture capital. ü  SV Angels focuses §  New media channels, real-‐Mme content consumpMon §  O2O Business §  Collaborated consumpMon ü  Basic investment philosophy of Sequoia Capital : find a spark can start a prairie fire: §  New technological and innovaMve projects §  Projects with superior customer values and fast distribuMon plaeorms 54 research@greatwallclub.com | Copyright 2011. All rights reserved.

PICTURES | COMPANY VISITS Do nahoe TwiPer Founder -‐ Jack Dor eBay CEO -‐ John sey Aliyun President, Wang ice President of Mobile Bus iness, David Marcus Jian -‐ GMIC Roadshow Paypal V research@greatwallclub.com | Copyright 2011. All rights reserved.

ABOUT GWC: WHO WE ARE enable’s its members and clients to: Develop trusted relationships Learn market leading strategies Promote their initiativesConnecting the mobile internetecosystem of China to that of the world’sen.greatwallclub.com research@greatwallclub.com | Copyright 2011. All rights reserved.

If you have any comments on this report or want more informaMon about GWC and the Global Mobile Internet Conference, please contact us at research@greatwallclub.com SHAWN MICHAEL CUI | MARKET RESEARCH AND CONSULTING PROJECTS, SENIOR MANAGER »  Email: shawn@greatwallclub.com »  www.linkedin.com/in/shawnmichael CommiPed to building a world-‐leading mobile Internet business plaeorm. We help our members and clients establish business relaMonships based on mutual trust, learn strategies and innovaMve market-‐leading business model, and promote their development major This report is an internal publicaMon of Great Wall Club and is intended for its members. strategic markets both in China and the world. Unauthorized publicaMon and/or use of communicaMons are prohibited without permission from the copyright owners. research@greatwallclub.com | Copyright 2011. All rights reserved.

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Gport GMIC Roadshow USA Report -EN

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Gport GMIC Roadshow USA Report -EN Presentation Transcript