Some of my thoughts on innovation that we presented to an NEA company

1. A Short Thought Piece by

2. "We've had three big ideas at Amazon
that we've stuck with for 18 years, and
they're the reason we're successful: Put
the customer first. Invent. And be
patient.“ – Jeff Bezos, CEO of Amazon

3. Executive Summary
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1
Successful Internet companies never stop innovating
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2
Scaled companies continue to aggressively enter new markets.
They do not stop innovating. Either organically or through
acquisition
3
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Nascent Internet companies have 2 or 3 major innovations per
quarter. Despite having already achieved multi-billion dollar
valuations, it‟s just the tip of the iceberg
4
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Every successful internet company has made mobile a priority.
Several are seeing mobile as responsible for over 50% of their
businesses. Expect that number to become over 80% in 5 years

4. Innovation Drives GROWTH and VALUE
Market Stats
Market Stats
Market Stats
Market Cap: $343.1B
’13-’14E Growth: +17%
LTM Price Perf: +49%
Market Cap: $164.3B
’13-’14E Growth: +22%
LTM Price Perf: +55%
Market Cap: $122.1B
’13-’14E Growth: +36%
LTM Price Perf: +135%
Innovation Timeline
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•
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Q1’05: Maps
Q4’05: Google Analytics
Q3’05: Acquisition of Android
Q4’06: Google Docs
Q4’06: YouTube acquisition
Q3’07: Mobile AdSense
Q1’08: DoubleClick acquisition
Q3’08: Launch of Google Chrome
Q2’10: Acquisition of AdMob,
launch of KnowledgeGraph
Q3’10: Google Instant
Q2’12: Acquisition of Motorola
Mobility
Q1’13: Google Glass
Q3’13: Chromecast
Eye-PoppingStat
75%
Innovation Timeline
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Q4’05: Mechanical Turk
Q1’06: AWS
Q3’06: Launch of FBA
Q3’07: Amazon Fresh
Q3’07: Amazon MP3
Q4’07: Amazon Prime
Q3’09: Basics (private label
consumer electronics)
Q4’10: Amazon Studios
Q1’11: Amazon Instant Video
Q3’11: Kindle Fire
Q3’12: Kindle Fire HD
Q4’12: Amazon Redshift
Q1’13: Mobile ads
Q3’13: Art Marketplace
Q2’12: Instagram acquisition
Q2’12: Camera app
Q2’12: Sponsored Stories
Q2’12: Ad Exchange (FBX)
Q3’12: Custom Audiences
Q4’12: Graph Search
Q1’13: Home for Android
Q1’13: Partner Categories
Q3’13: Artificial Intelligence
Eye-PoppingStat
Eye-PoppingStat
49%
158
3%
9
Q2 „09
Innovation Timeline
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Q3 „12
Android as % of all
Smartphone shipments
24
07
08
48
61
09
10
41%
82
23%
30%
14%
11
12
AWS Offerings by Year
Q3'12
Q4'12
Mobile Q1'13 Q2'13
Revenue as
Q3'13
Share of Total %
Even at $100B+ sizes, Internet companies continue to enter new markets aggressively

5. Innovation Drives GROWTH and VALUE
Market Stats
Market Stats
Market Cap: $26.3B
’13-’14E Growth: +42%
LTM Price Perf: +106%
Market Cap: $4.7B
’13-’14E Growth: +51%
LTM Price Perf: +179%
Innovation Timeline
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Q3’11: Applied w/ LinkedIn
Q4’11: Polls
Q3’12: Influencers
Q3’12: Endorsements
Q2’13: Contacts
Q2’13: Rich media profiles
Q2’13: Check-in
Q2’13: Channels
Q3’13: Sponsored Updates
Q3’13: University Pages
Q3’13: Pulse/LinkedIn Launch
Q4’13: Intro
Q4’13: Recruiter Mobile
49%
30%
Talent
Solutions
20%
23% 57%
Q2„11
Q3„13
Revenue Mix
(IPO to Present)
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Marketing
Solutions
Premium
Subscriptions
Market Cap: $3.0B
’13-’14E Growth: +42%
LTM Price Perf: +114%
Innovation Timeline
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Q2’12: Launched first International
Sales Office
Q2’12: Introduces Yelp Insights
Q3’12: Apple Maps/ Siri Integration
Q3’12: Qype Acquisition
Q4’12: Gift Certificates
Q4’12: Menus
Q4’12: Mobile Ads
Q1’13: LIVES (health inspection
scores)
Q1’13: Merchant Revenue Estimator
Q2’13: SeatMe Acquisition
Q3’13: Platform (direct transactions)
Eye-PoppingStat
21%
Market Stats
Eye-Popping Stat
Cohort
2005-2006
2007-2008
2009-2010
2011-Present
Total
Y/Y Rev
Growth %
50%
77%
127%
218%
81%
8-year old
cohort
continues to
grow at
50% clip
Revenue Growth by Cohort (Q1 ’13)
Innovation Timeline
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Q4’11: CRM Platform
Q4’11: MLS Listings Integration
Q1’12: Rent Juice acquisition
Q2’12: Rentals Marketplace
Q2’12: Premier Agents website
Q3’12: Mortech and Buyfolio
Acquisitions
Q3’12: Pre-market Inventory
Q4’12: Pricing model transition
Q4’12: HotPads acquisition
Q1’13: Digs Marketplace (Home
Improvement)
Q3’12: StreetEasy acquisition
Eye-PoppingStat
Real Estate
Marketplace
39% 61%
23%
11% 66%
Q4„11
Q3„13
Revenue Mix
(IPO to Present)
Nascent Internet companies have multiple major innovations per quarter
This is still early days
Mortgages
Marketplace
Display

6. Mobile:
It’s not a strategy.
It’s your business.

7. The Shift Has Arrived
“From board meeting to board meeting, we are seeing a
similar pattern. Web is flattish. But mobile is growing like a
weed…It is not good news for those who find themselves
operating a big Internet business started more than five years
ago. You are going to need to make a hard right turn super
fast without flipping over the car.”
“The implication is clear – we are in the middle of a critical
platform transition…The biggest losers will be the web
incumbents who do not understand the rules of the new
road, or the consequences of missed execution.”

8. Winners Have Made Mobile A Priority
Company
Then
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Q3‟09: Android only 3% of
smartphone shipments
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Zero mobile offerings in 2007
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Zero mobile revenue in late
2012
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Q3‟11: 11M mobile visits
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Q1‟12: No mobile app
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Q1‟11: 3.5M mobile
searches/month. No ads. No
mobile reviews.
Now (Key Mobile Innovations)
LTM Stock
Price
Appreciation
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Android 75% of smartphone
shipments. Motorola, Android, Wallet,
Admob, Maps, Drive
+49%
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Kindle, Kindle OS, Silk, Mobile Ads,
Video / MP3 Offering
+55%
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Built native mobile app, now 49% of
revenue is mobile; Instagram;
Sponsored Stories
+135%
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iOS 7 launch demo
27M mobile monthly actives
50% of home views via mobile
+114%
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60M+ downloads, over 50% of
transactions in North America
+146%
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Q3‟13: 11.2M mobile searches/month.
62% of total. 46% of ad rev from
mobile. 25% of reviews written on
mobile
+179%