Show me the money Web 2.0 Expo April 18 th , 2007 Jeremy Liew Partner, Lightspeed Venture Partners www.Lightspeedvp.com Lsvp.wordpress.com

Its cheaper than ever to start an internet company… $ ‘000s Source: Carsonified.com/SXSW Presentation

… and cheaper than ever to run an internet company SAMPLE EXPENSE BUDGET Rent, Legal, etc $0.2m Other Costs $1.4m TOTAL $15k/month $0.2m Infrastructure Costs 8 employees $120k fully loaded $1.0m Staff Costs Assumptions Annual Fixed Costs

Rent, Legal, etc

$15k/month

8 employees

$120k fully loaded

As a result, getting to breakeven isn’t too hard… * Assumes ad sales by an ad network or ad rep firm Illustrative 0% - 0% - EBITDA 3% 200 7% 200 Other Costs 3% 200 7% 200 Infrastructure Costs 14% 1,000 36% 1,000 Staff Costs 10% 700 0% - Marketing 70% 4,900 50%* 1,400 Cost of Goods 100% 7,000 100% 2,800 Revenue % $ '000s % $ '000s E-Commerce Media

…but you still need to be big to be public MEDIA E-COMMERCE PUBLIC COMPANY ’07 REV MULTIPLES REVENUE NEEDED FOR $500M EV* * Assumed minimum public company scale to sustain meaningful trading volume and analyst coverage Source: Goldman Sachs Research, March 25, 2007, Lightspeed Analysis

Significant variation in revenue targeted for internet companies to breakeven versus to be public MEDIA E-COMMERCE BREAKEVEN PUBLIC, $500M EV* * Based on median multiples $277M $7.0M $131M $2.8M

Media Companies

Advertising RPMs* depend on your ability to deliver a targeted audience $10-40 $1-5 $0.50 - 2 ** Facebook revenue estimate “well over $100m”, Fandango revenue estimated to be “around $50m with half from advertising and half from ticketing” Source: Myspace, Merrill Lynch; Facebook, MSNBC; Fandango, Techcrunch; Traffic, Comscore; Lightspeed Analysis * RPM = Revenue per thousand pageviews, taking into account multiple ad units and all forms of advertising: CPM, CPC and lead gen 600M 126B 524B Annual US PVs $41.67 50M $25M** Fandango $1.03 12B $150M** Facebook $0.52 44B $271M Myspace RPM March US PVs 2007 Revenue Example

To reach breakeven, US traffic requirements can become quite meaningful, depending on RPMs RPM PV/Mth to reach $2.8M in revenue Sites with comparable US Traffic eHarmony 239M Real 237M Whitepages 230M Tagged 229M NFL.com 49M Nextag 48M Wash’ton Post 47M Heavy 45M Technorati 12M WinAmp 12M UFC.com 12M Digg 11M Source: Comscore, Lightspeed Analysis Not necessarily demographically targeted Not necessarily endemically targeted

eHarmony 239M

Real 237M

Whitepages 230M

Tagged 229M

NFL.com 49M

Nextag 48M

Wash’ton Post 47M

Heavy 45M

Technorati 12M

WinAmp 12M

UFC.com 12M

Digg 11M

US traffic requirements are even higher to reach public company levels RPM PV/Mth to reach $131M in revenue MSN 13,672M Google 12,476M Facebook 12,179M AOL 10,609M Live.com 2,819M Youtube 2,539M Go.com 1,559M Pogo 1,544M MSNBC 592M Expedia 522M Paypal 495M Weather.com 488M Source: Comscore, Lightspeed Analysis Sites with comparable US Traffic Not necessarily demographically targeted Not necessarily endemically targeted

MSN 13,672M

Google 12,476M

Facebook 12,179M

AOL 10,609M

Live.com 2,819M

Youtube 2,539M

Go.com 1,559M

Pogo 1,544M

MSNBC 592M

Expedia 522M

Paypal 495M

Weather.com 488M

E-Commerce Companies

Many e-commerce niches are large enough to support $7M in revenue, our illustrative breakeven level Allheart.com – nursing apparel Figleaves.com – lingerie Hats.com – hats Ridegear.com – motorcycle gear Source: Internet Retailer Top 500 Guide, 2006 Edition

There are three ways to get to over $271M in e-commerce revenues, public company type levels One online store with >$271M in revenue 5-10 online stores, each with $25-50M in revenue 100+ online stores, each with up to $3M in average revenue

One online store with >$271M in revenue

5-10 online stores, each with $25-50M in revenue

100+ online stores, each with up to $3M in average revenue

Relatively few pure play e-commerce companies have achieved over $271M in annual sales so far Amazon.com Newegg.com Source: Internet Retailer Top 500 Guide, 2006 Edition, Goldman Sachs $8,490M $1,300M $804M $688M $399M $345M Below $271M in 2005 but projected over $271M in 2007 Amazon Newegg Overstock Netflix Drugstore Buy.com Bluenile Peapod VistaPrint Zappos 2005 Revenue Company

In 2005, there were at least 227 companies with e-commerce revenues over $25M, but none with multiple websites in this range Source: Internet Retailer Top 500 Guide, 2006 Edition Supplements PC hardware Auto parts Shoes Kitchen goods Plumbing and Lighting Blinds Women’s clothing Beauty Products Sheet Music Products $46M $45M $45M $44M $40M $39M $38M $34M $32M $27M Bodybuilding.com Computer Geeks Parts Train Shoemall Cooking.com Decorative Product Source Blinds.com Shopbop Gloss.com Sheet Music Plus 2005 Revenue Company

A number of companies have taken a portfolio approach, building large numbers of stores Source: Internet Retailer Top 500 Guide, 2006 Edition, Company websites bicycletrailers.com, highchairs.com, sparebed.com, suuntowatches.com, tricyclekids.com Niche Retail Aquariumsdirect.com, croquet.com, daybeds.com, hammocks.com, justglobes.com, potracksgalore.com Netshops Pilates-exercise-direct.com, Rowingmachines.com, sofabed-store.com, tennis-ball-machine-guide.com Mercantila homeclick.com, absolutehome.com, barbeques.com, knobsandthings.com, poolclick.com Home Décor Products adirondack-furniture-direct.com, allairbeds.com, bedrooms.com, csnbunkbeds.com, everysafe.com CSN Stores Sample Websites (not exhaustive) Company

Conclusion Easier than ever to start a consumer internet company Not too hard to get to cash flow breakeven For long term value creation, plan A can’t be “get bought by Google” Need to have a roadmap to be an independent public company Requires real scale Revenue sometimes lags costs when you are growing May need venture capital to bridge the gap

Easier than ever to start a consumer internet company

Not too hard to get to cash flow breakeven

For long term value creation, plan A can’t be “get bought by Google”

Need to have a roadmap to be an independent public company

Requires real scale

Revenue sometimes lags costs when you are growing

May need venture capital to bridge the gap