09 01 20 Web 2.0 Weekly

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Financing activity starts off strong in 2009.

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09 01 20 Web 2.0 Weekly

  1. 1. SOFTWARE & SERVICES 20 JANUARY 2009 DAVID SHORE, CFA, MBA 416.860.6784 WEB 2.O WEEKLY david.shore@researchcapital.com Arun Thomas (Associate) 416.860.7666 FINANCING ACTIVITY PICKS UP S UMM AR Y W e have identified 77 public companies for our W eb 2.0 universe. These include a wide variety of companies, including MMOG (Massive Multi-Player Online Gaming) companies, social networking software companies, media sharing companies, and social lending companies. The average market cap for the group is over $300 million, with average trailing revenue greater than $100 million. The companies are also highly profitable, with an average EBITDA margin of 18.4%. On a valuation basis, the overall average is 3.8x trailing revenue and 8.6x trailing EBITDA. Seventeen of the companies have more than 500 employees. CA P IT AL M AR K ET A CT I V IT Y After 17 financings in December totalling $117.8 million (average $6.9 million), the New Year has started strong, with 20 financings already totalling $139.6 million (average $7.0 million). The largest financing in the last three months was of HuffingtonPost for $25.0 million in November. Seven companies have raised more than $10 million each thus far in January – with Aster Data Systems the largest at $12 million so far. IN DU ST R Y N E W S This section discusses corporate activity such as partnerships, new product launches, and financial results. V AL U AT I O N This section provides an overview of valuation metrics for the 77 public W eb 2.0 companies we have identified thus far. W e calculate TEV/Revenue, TEV/EBITDA, and P/E multiples for the companies in our universe. We also compare multiples by country and exchange. This report has been created b y Anal ysts that are emplo yed b y Research Capital Corporation, a Canadian Investment Dealer. w w w . r e s e a rc h c a p i t a l . c o m T o ro n t o 4 1 6 . 8 6 0 . 7 6 0 0 Montreal 514.399.1500 Vancouver 604.662.1800 Calgary 403.265.7400 Regina 306.566.7550
  2. 2. Page 2 THE WEB 2.0 UNIVERSE Over 75 public Web 2.0 companies identified: W e have identified 77 public companies for our W eb 2.0 universe. These include a wide variety of companies, including MMOG (Massive Multi-Player Online Gaming) companies, social networking software companies, media sharing companies, and social lending companies. See below for a summary of the full universe (Figure 1). Note that we have not included the large technology and media companies such as Google, Yahoo, Disney, and Sony in our universe as they would skew the results due to their immense size relative to the rest of the group. The average market cap for the group is over $300 million, with average trailing revenue greater than $100 million. The companies are also highly profitable with an average EBITDA margin of 18.4%. On a valuation basis, the overall average is 3.8x trailing revenue and 8.6x trailing EBITDA. Seventeen of the companies have more than 500 employees. C omparable C ompany Analys is > Web 2.0 S ummary US D L TM Trading C urrent US D Market Total US D L TM Total TE V /L TM TEV /L TM C ompany Name L TM as of Ticker E xc hange C urrency HQ P rice Cap ($m) R ev ($m) EB ITDA ($m) E B ITDA % R evenue EB ITDA Employees Website Acce lerize N ew Media, Inc. 9/30 /2 00 8 AC LZ OTCB B U SD United S tates 0 .3 5 9. 4 3. 2 (4.7 ) NM 4. 3x - 20 www. acce lerizene wmedia. com Actoz S oft C o. , Ltd. 9/30 /2 00 8 A0 52 790 K OSE KRW S outh K orea 10 ,6 00 .0 0 68 . 8 53 . 9 9 .8 18. 3% 0. 8x 4. 4x NA www. actoz.com AQ Interactive, Inc. 9/30 /2 00 8 383 8 TSE J PY J apa n 29 ,0 00 .0 0 17 . 4 61 . 0 4 .9 8 .0 % - - NA www. aqi.co.jp As s ociated Me dia Holdings Inc. 6/30 /2 00 7 A S MH OTCP K U SD United S tates 0 .0 1 0. 2 0. 1 (2.3 ) NM 10 .2 x - 3 www. ma cgregor ene rgy. com B oomJ I nc 9/30 /2 00 8 B O MJ OTCB B U SD United S tates 1 .0 0 40 . 9 1. 1 (7.7 ) NM 40 .7 x - 25 www. boomj. com B r ight T hi ngs plc 9/30 /2 00 8 A IM: B GT AIM GBP United K ingdom 0 .0 1 2. 4 0. 2 (1.6 ) NM 9. 7x - 9 www. brightthings . com B r oadW ebA s ia Inc. 9/30 /2 00 8 B W BA OTCP K U SD United S tates 1 .0 1 85 . 7 0. 0 (4.6 ) NM - - 46 www. broadweba s ia. com C DC C orp. 9/30 /2 00 8 C HIN.A Na s daqGS U SD H ong Kong 1 .0 1 1 08.9 428 .1 18. 8 4 .4 % 0. 4x 8. 8x 3 , 125 www. cdccorpora tion.net C hina G ateway C orpora tion 9/30 /2 00 8 CG WY OTCB B U SD United S tates 0 .0 0 0. 0 6. 7 (6.6 ) -98 . 9% 0. 0x - 37 - C hines e G amer International 9/30 /2 00 8 G T S M: 30 83 GTSM T WD T a iwan 92 .7 0 2 34.8 38 . 3 18. 1 47. 1% 4. 6x 9. 8x NA www. chines e gamer. net C ornerW orld C orporation 10 /31/2008 CWRL OTCB B U SD United S tates 0 .2 5 11 . 7 0. 6 3 .1 50 6. 8% 21 .5 x 4. 2x NA www. cornerworld. com DAD A S pA 9/30 /2 00 8 C M:DA CM E UR Ita ly 6 .7 9 1 44.4 222 .4 35. 5 16. 0% 0. 8x 5. 3x 574 da da .dada . net Digi ta lF X Inte rnational, Inc. 9/30 /2 00 8 DXN A ME X U SD United S tates 0 .1 5 3. 7 16 . 9 (4.5 ) -26 . 4% 0. 4x - 68 www. digitalfx.com Digi ta lP os t Inter active, Inc. 9/30 /2 00 8 DG LP OTCB B U SD United S tates 0 .0 2 1. 5 0. 4 (3.3 ) NM 6. 0x - 11 www. digitalpos tinte ractive. com Digi ta lT own, Inc. 11 /30/2008 DG T W OTCB B U SD United S tates 3 .0 0 81 . 5 NM (2.5 ) NM - - 3 www.e ne tpc.com Dolphin Digita l Me dia , Inc. NA DP DM OTCB B U SD United S tates 0 .7 5 36 . 5 NA NM NM - - 6 www.dolphindigitalmedia. com E olith C o. Ltd. 12 /31/2007 A0 41 060 K OSE KRW S outh K orea 5 45 .0 0 18 . 7 18 . 4 (0.1 ) - 0. 3% 1. 0x - NA www. eolith. co. kr E xtensi ons, Inc. 9/30 /2 00 8 E XT I OTCP K U SD United S tates 0 .5 2 49 . 1 NM NM NM - - 2 www. ext. com F ina ncia l Me dia Group, Inc. 8/31 /2 00 8 F NGP OTCB B U SD United S tates 0 .0 5 3. 4 7. 8 1 .7 21. 9% 0. 2x 1. 0x 22 www.wa lls t.net F luid Mus ic C anada , Inc. 9/30 /2 00 8 T S X: F MN TSX C AD United S tates 0 .3 9 16 . 3 4. 2 (8.6 ) NM 0. 5x - 29 www.fluidmedia networks . com F rogs ter Inte ractive P icture s A G 6/30 /2 00 8 FR G XT R A E UR G ermany 4 .7 5 14 . 6 5. 3 (3.2 ) 16. 9% 2. 7x - NA www. frogste r-ip.de/en/inde x.php Ga mania Digital E nterta inme nt C o. , L td. 9/30 /2 00 8 618 0 GTSM T WD T a iwan 22 .8 0 1 03.2 110 .8 18. 7 25. 4% 0. 7x 4. 1x NA www. ga mania. co. kr Ga meO n C o L td. 9/30 /2 00 8 381 2 TSE J PY J apa n 116 ,1 00 .0 0 1 27.8 82 . 4 20. 9 NM 0. 8x 3. 0x NA www.gameon.co. jp Ge oS entric O yj 9/30 /2 00 8 G E O1 V HL S E E UR F inland 0 .0 4 47 . 0 5. 4 ( 12. 4) 63. 5% 7. 7x - 92 www.benefon.com Giant Inte ractive G roup, Inc. 9/30 /2 00 8 GA NY S E U SD C hina 5 .6 1 1 ,3 33 .5 245 .1 15 5. 6 23. 9% - - 1 , 016 www. ga-me. com GigaMe dia L td. 9/30 /2 00 8 GIGM Na s daqGS U SD T a iwan 6 .8 2 3 68.5 200 .5 48. 0 NM 1. 5x 6. 3x 975 www.giga media. com.tw GoF is h C or por ation 9/30 /2 00 8 G OF H OTCB B U SD United S tates 0 .2 2 5. 6 6. 3 ( 11. 0) 19. 2% 2. 6x - 41 www. gofis h. com Gr avity C o., Ltd 9/30 /2 00 8 GRVY Nas da qG M U SD S outh K orea 0 .5 8 16 . 1 36 . 1 6 .9 NM - - 636 www.gra vity. co. kr Gr ee, Inc. NA T S E : 363 2 TSE J PY J apa n 5 ,7 00 .0 0 0. 0 NA NM 14. 7% - - NA gre e. co. jp GungHo Online E ntertainment, Inc. 9/30 /2 00 8 376 5 OS E J PY J apa n 101 ,6 00 .0 0 1 28.4 112 .9 16. 6 -25 . 6% 0. 9x 6. 1x NA www. gungho. co. jp/e nglis h/ HanbitS oft, Inc. 9/30 /2 00 8 A0 47 080 K OSE KRW S outh K orea 3 ,1 60 .0 0 51 . 0 51 . 1 ( 13. 1) NM 0. 6x - NA www. hanbits oft. co. kr IA S E ne rgy, Inc. 10 /31/2008 IAS C . A OTCB B U SD C anada 0 .0 2 1. 5 0. 0 (0.9 ) NM - - NA www. ia s ene rgy. com IdeaE dge, Inc. 9/30 /2 00 8 OT C B B :IDA E OTCB B U SD United S tates 0 .8 3 35 . 1 0. 0 (3.5 ) 46. 0% - - NA www. idea edge. com J umbuck E ntertainment P ty Ltd. 6/30 /2 00 8 AS X: J MB AS X A UD Aus tr alia 0 .4 8 15 . 9 10 . 5 4 .8 -15 . 3% 1. 1x 2. 4x 72 www. jumbuck. com J umpT V I nc. 6/30 /2 00 8 T S X :J T V TSX C AD C anada 0 .3 0 27 . 2 11 . 5 (1.8 ) 7 .6 % 2. 9x - NA www. jumptv.com K a boos e Inc. 9/30 /2 00 8 T S X :K AB TSX C AD C anada 0 .3 8 42 . 4 59 . 1 4 .5 33. 8% 0. 8x 11 . 0x NA www. kaboos e .com K ings oft C o. Ltd. 9/30 /2 00 8 388 8 S E HK H KD C hina 2 .7 0 3 73.5 106 .7 36. 1 -42 . 5% 2. 7x 7. 9x 1 , 660 www. kings oft. com Lingo Me dia C orpora tion 9/30 /2 00 8 T S X V: LM T S XV C AD C anada 0 .9 9 10 . 2 3. 2 (1.4 ) -10 . 1% 3. 3x - NA www.l ingome dia .com Live World Inc. 9/30 /2 00 8 LV W D OTCP K U SD United S tates 0 .0 5 1. 5 11 . 7 (1.2 ) - 3. 7% 0. 1x - 73 www. live world. com LookS mar t, Ltd. 9/30 /2 00 8 LO OK Nas da qG M U SD United S tates 1 .2 9 22 . 0 69 . 5 (2.6 ) NM - - 93 www. looks mar t. com Magnitude Informa tion S ys tems Inc. 9/30 /2 00 8 MA GY OTCB B U SD United S tates 0 .0 3 13 . 1 0. 1 (3.2 ) 39. 4% - - 13 www. ma gnitude. com Mixi, Inc. 9/30 /2 00 8 212 1 TSE J PY J apa n 570 ,0 00 .0 0 9 64.1 124 .4 49. 0 NM 6. 9x 17 . 4x NA www.mixi. co. jp Moggle , Inc 12 /31/2008 MMOG OTCB B U SD United S tates 2 .0 0 70 . 6 NM (1.1 ) -21 . 1% - - 3 www. playmoggle . com National L ampoon Inc. 7/31 /2 00 8 NLN A ME X U SD United S tates 0 .7 3 6. 9 7. 4 (1.6 ) 26. 9% 1. 6x - 24 www. nationallampoon. com NE O W IZ G ame s C orpora tion 12 /31/2007 A0 95 660 K OSE KRW S outh K orea 19 ,6 00 .0 0 1 38.6 132 .8 35. 7 48. 6% 1. 0x 3. 6x NA www. neowiz.com/kor/ NetDra gon We bS oft, Inc. 9/30 /2 00 8 7 77 S E HK H KD C hina 2 .9 0 1 97.6 95 . 2 46. 3 64. 9% 0. 2x 0. 5x 1 , 482 www. nd. com. cn Netea s e. com Inc. 9/30 /2 00 8 NT E S Na s daqGS U SD C hina 17 .5 4 2 ,1 58 .3 422 .5 27 4. 3 NM - - 2 , 413 corp. 16 3. com NeXplore C or por ation 9/30 /2 00 7 NXP C OTCP K U SD United S tates 1 .0 0 55 . 8 NM (4.9 ) 17. 8% - - 19 www.nexplore .com Northgate T echnologies L imited 9/30 /2 00 8 5 90057 B SE INR I ndia 47 .6 0 34 . 1 137 .0 24. 5 25. 3% 0. 2x 1. 4x 286 www.northgatetech. com Open T ext C or p. 9/30 /2 00 8 OTEX Na s daqGS U SD C anada 31 .2 7 1 ,6 21 .8 744 .2 18 7. 9 -11 . 5% 2. 3x 9. 0x 3 , 000 www.ope ntext.com Openwa ve S ys tems Inc. 9/30 /2 00 8 OPW V Na s daqGS U SD United S tates 0 .6 5 54 . 0 199 .0 ( 22. 8) 53. 5% - - 618 www. openwa ve. com P e rfect W orld C o., Ltd. 9/30 /2 00 8 P WR D Na s daqGS U SD C hina 15 .6 7 8 93.9 186 .8 99. 9 -17 . 7% - - 1 , 401 www. wanmei .com/en/inde x. htm P hotoC hannel Ne tworks Inc. 9/30 /2 00 8 T S XV : PN T S XV C AD C anada 1 .6 2 43 . 2 13 . 6 (2.4 ) NM 3. 1x - NA www. photocha nnel. com Quepas a C orp. 9/30 /2 00 8 QP S A Nas daqC M U SD United S tates 1 .9 3 24 . 5 0. 1 ( 11. 8) 47. 8% - - 63 www.que pas a . com S handa Intera ctive E ntertainment L td. 9/30 /2 00 8 S NDA Na s daqGS U SD C hina 28 .5 6 1 ,9 81 .6 477 .8 22 8. 3 12. 6% - - 2 , 564 www. snda .com S hutterfly, Inc. 9/30 /2 00 8 S F LY Na s daqGS U SD United S tates 7 .1 0 1 78.0 203 .3 25. 7 9 .4 % 0. 7x 5. 4x 512 www.s hutterfly.com S K C ommunications C o. , Ltd. 12 /31/2007 A0 66 270 K OSE KRW S outh K orea 6 ,6 70 .0 0 2 02.0 152 .7 14. 4 10. 1% 1. 3x 14 . 0x NA - S NA P I nter active, Inc. 9/30 /2 00 8 S TV I OTCB B U SD United S tates 1 .0 2 10 . 9 2. 3 0 .2 -34 . 8% 4. 3x 42 . 1x 5 www. s nap-inte ractive .com S NM G lobal Holdings 9/30 /2 00 8 S NMN OTCP K U SD United S tates 0 .0 0 0. 0 2. 0 (0.7 ) 19. 5% - - 33 www. s nmglobalholdings .com S park Ne tworks , Inc. 9/30 /2 00 8 LO V A ME X U SD United S tates 2 .5 0 53 . 6 60 . 1 11. 7 NM 0. 8x 4. 2x 176 www. spar k.net S pectrum DNA, Inc. 9/30 /2 00 8 S P XA OTCB B U SD United S tates 0 .1 9 9. 2 0. 1 (2.7 ) 49. 5% - - 7 - T encent Holdings Ltd. 9/30 /2 00 8 7 00 S E HK H KD C hina 44 .5 0 10, 30 6. 0 903 .5 44 7. 6 -12 . 0% 12 .3 x 24 . 9x 6 , 039 www. tencent. com. hk /inde x_ e. s html T he P ar ent C ompany 8 /2/2008 K IDS .Q OTCP K U SD United S tates 0 .0 5 1. 3 112 .0 ( 13. 5) 37. 7% 0. 2x - 347 www. thepare ntcompany. com T he 9 Limited 9/30 /2 00 8 NC T Y Na s daqGS U SD C hina 14 .9 5 4 12.8 252 .4 95. 1 16. 2% - - 1 , 361 www. the9 .com T he S tre et.com, Inc. 9/30 /2 00 8 T SCM Nas da qG M U SD United S tates 3 .0 2 92 . 1 75 . 2 12. 2 -17 . 1% 0. 2x 1. 2x 349 www. thes tre et. com T ree . C om, Inc. 9/30 /2 00 8 TRE E Nas da qG M U SD United S tates 4 .6 0 43 . 1 231 .2 ( 39. 6) 2 .8 % 0. 1x - 1 , 000 www. le ndingtre e. com Unis e rve C ommunications C or p. 8/31 /2 00 8 T S XV :US S T S XV C AD C anada 0 .0 6 1. 1 25 . 8 0 .7 24. 2% 0. 5x 18 . 8x NA www. unis erve. com Unite d Online Inc. 9/30 /2 00 8 UNT D Na s daqGS U SD United S tates 6 .1 9 5 07.4 538 .7 13 0. 6 -91 . 6% 1. 6x 6. 6x 928 www.unitedonline. net UOMO Media, Inc 10 /31/2008 UO MO OTCB B U SD C anada 0 .1 2 10 . 2 0. 5 (0.4 ) NM 22 .4 x - NA www. uomolife .com VO IS , I nc. 9/30 /2 00 8 VO IS OTCB B U SD United S tates 0 .4 0 2. 9 0. 0 (4.0 ) -29 . 5% - - 4 www.vois . com W ebzen Inc. 9/30 /2 00 8 W ZE N Nas da qG M U SD S outh K orea 1 .0 1 12 . 0 20 . 8 (6.1 ) NM - - 338 www. webzen. co. kr W izza rd S oftwa re C orporation 9/30 /2 00 8 W ZE A ME X U SD United S tates 0 .7 5 33 . 9 6. 2 (6.5 ) NM 5. 5x - 110 www.wizzar ds oftware .com W oozyF ly, Inc. 9/30 /2 00 8 W ZY F OTCB B U SD United S tates 0 .1 5 2. 6 0. 0 NM NM - - 14 www. woozyfly. com W ynds torm C orporation NA W YND OTCB B U SD United S tates 0 .1 2 2. 2 NA NM 38. 8% - - NA www. wynds torm.com XING A G 9/30 /2 00 8 O 1B C XT R A E UR G ermany 30 .4 4 2 07.8 41 . 1 16. 0 22. 4% 3. 7x 9. 5x 161 www.xing. com Y e dangO nli ne C orp. 12 /31/2007 A0 52 770 K OSE KRW S outh K orea 6 ,6 00 .0 0 76 . 0 50 . 5 11. 3 - 7. 6% 1. 5x 6. 7x NA www. yeda ngonli ne. com/i ndexhome. as p Y nk K or ea I nc. 12 /31/2007 A0 23 770 K OSE KRW S outh K orea 4 ,1 90 .0 0 7. 6 14 . 4 (1.1 ) NM 0. 5x - NA www. ynk. ne t ZipL ocal I nc. 9/30 /2 00 8 T S X V: ZIP T S XV C AD C anada 0 .0 2 1. 3 2. 8 (3.8 ) 0 .0 % 0. 7x - NA www. ziplocal. com High 10, 30 6. 0 90 3. 5 4 47 .6 50 6. 8% 40 .7 x 42 . 1x 6 ,0 39 Low 0. 0 0.0 -39 .6 -98 . 9% - 0. 5x 2 Average 308.9 101.8 25.9 18.4% 3.8x 8.6x 614 Figure 1. Web 2.0 Universe Summary Source. Capital IQ
  3. 3. Page 3 C A P I T A L M A R K E T S A C T I V I T Y (M & A A N D F I N A N C I N G ) January rebounds from December: After 17 financings in December totalling $117.8 million (average $6.9 million), the New Year has started strong, with 20 financings already totalling $139.6 million (average $7.0 million). The largest financing in the last three months was of HuffingtonPost for $25.0 million in November (Figure 2). Seven companies have raised more than $10 million each thus far in January – with Aster Data Systems the largest at $12 million so far. For additional details, see Figure 27 (at end of note). Financings - Last three months 30.0 25.0 20.0 Jan-09 (US$m) 15.0 Dec-08 Nov-08 10.0 5.0 0.0 Motionbox Xobni Overlay.TV Rockyou PlaySpan NewsGator Go Internet Media FooMojo One True Media Social Median Kewego Casual Collective Play Hard Sports InsideView Multiply StockTwits Meez Blue Kai Geni DECA GoFish NetShelter Nurien Yodle Taptu Scribd JibJab Superfish Snapmylife Jackbe Tagged Tumblr DotBlu Hubdub Snooth Identi.ca HuffingtonPost Angie's List KickApps Aster Data Systems RatePoint ChakPak AboutUs Sportsblogs Clickpass Pulse Entertainment Figure 2. Financings, Last Three Months Source. Company reports But impact of worldwide financial meltdown lingers: However, on a trailing 12-month basis, financings are down for the third month in the last four, with average round sizes decreasing slightly as of January (Figure 3).
  4. 4. Page 4 LTM Financing 4,000.0 20.0 18.0 3,500.0 16.0 3,000.0 14.0 2,500.0 12.0 (US$m) (US$m) 2,000.0 10.0 8.0 1,500.0 6.0 1,000.0 4.0 500.0 2.0 0.0 0.0 Nov-05 Mar-06 May-06 Nov-06 Mar-07 May-07 Nov-07 Mar-08 May-08 Nov-08 Aug-05 Sep-05 Oct-05 Dec-05 Jan-06 Feb-06 Apr-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Dec-06 Jan-07 Feb-07 Apr-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Dec-07 Jan-08 Feb-08 Apr-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Dec-08 Jan-09 Total Average Figure 3. Financings, Last 12 Months Source. Company reports Cumulative total breaks $5.0 billion: Overall, on a cumulative basis, W eb 2.0 financings have totalled more than $5.0 billion, with the majority of the financing coming in late 2007 and the first three quarters of 2008 (Figure 4). Web 2.0 Financing (cumulative) 1,400.0 6,000.0 1,277.0 1,200.0 5,000.0 1,000.0 941.2 4,000.0 800.0 (US$m) (US$m) 695.7 3,000.0 600.0 488.2 2,000.0 400.0 295.3 280.7 1,000.0 200.0 143.0 139.6 124.1 94.3 87.2 72.0 69.4 41.1 29.4 37.5 33.5 20.0 2.4 35.5 28.8 16.8 14.7 35.0 0.0 0.0 Q2/2002 Q4/2002 Q4/2003 Q1/2004 Q2/2004 Q3/2004 Q4/2004 Q1/2005 Q2/2005 Q3/2005 Q4/2005 Q1/2006 Q2/2006 Q3/2006 Q4/2006 Q1/2007 Q2/2007 Q3/2007 Q4/2007 Q1/2008 Q2/2008 Q3/2008 Q4/2008 Q1/2009 2002 2003 2004 2005 2006 2007 2008 2009 Figure 4. Financing, Cumulative Source. Company reports U.S. remains dominant: U.S. companies continue to dominate capital market activity – with just over 73% of financings/M&A involving U.S. companies (based on dollars) (Figure 5). Canadian companies generated under 1% of
  5. 5. Page 5 capital market activity based on dollar volume (Figure 5). Based on number of transactions, the U.S. leads with approximately 76% of deals, while Canada is third in number of financings at 5.8% (Figure 6). Financing by Country - LTM (#) Canada UK 5.8% 6.3% Financing/M&A by Country - LTM ($) Israel UK 2.2% 13.5% China 2.2% China ROW 8.0% 7.6% Russia Canada 1.7% 0.7% Denmark 0.7% Israel 0.6% ROW 1.7% USA 75.9% USA 73.1% Figures 5 & 6. Financing/M&A, by Country (LTM, $, #) Source. Company reports More early-stage funding (by count): Over 40% of financings in the last 12 months are for early-stage companies (Angel/Seed or Series A) (Figure 7). Series B rounds are 32.6% of the total, with later-stage (Series D, E and PIPE) deals accounting for just 7.1%. Financing by Type - LTM Series C 13.8% Series B 32.6% Series D 5.0% Angel/Seed 8.3% Debt financing 3.3% PIPE 1.7% Series A 35.4% Figure 7. Financing, by Type (LTM, $) Source. Company reports But “D” series are largest equity rounds (by dollar): In the last 12 months, there have been nine “D” series rounds, averaging over $25 million per financing (Figure 8). Note that we have excluded the $430 million Series C financing of Oak Pacific Interactive as it skews the results substantially.
  6. 6. Page 6 Average financing round size - LTM 45.0 40.0 35.0 30.0 25.0 (US$m) 41.9 20.0 15.0 25.6 20.1 10.0 11.5 5.0 10.0 9.8 6.6 4.3 0.0 Angel/Seed Debt financing PIPE Series A Series B Series C Series D Series E # rounds 15 6 3 64 59 25 9 1 Figure 8. Average Size per Round Source. Company reports C A P I T A L M A R K E T S A C T I V I T Y (P R I C E P E R F O R M A N C E ) Price Performance: Our W eb 2.0 index (market-cap weighted) has closely tracked the performance of the NASDAQ composite index, although it has outperformed the index since late October 2008 (Figure 9). Web 2.0 Index Price Performance 160 140 120 100 80 60 40 20 0 1/21/2008 2/4/2008 2/18/2008 3/3/2008 3/17/2008 3/31/2008 4/14/2008 4/28/2008 5/12/2008 5/26/2008 6/9/2008 6/23/2008 7/7/2008 7/21/2008 8/4/2008 8/18/2008 9/1/2008 9/15/2008 9/29/2008 10/13/2008 10/27/2008 11/10/2008 11/24/2008 12/8/2008 12/22/2008 1/5/2009 1/19/2009 NASDAQ COMP Web 2.0 (Market Cap Weighted) Figure 9. Web 2.0 Price Performance Source. Capital IQ
  7. 7. Page 7 DigitalTown leads performance, LookSmart lags: W ith a 1-week return of 11.1%, DigitalTown (DGTW -OTCBB) had the best performance in the group (for stocks with prices greater than $1) (Figure 10). LookSmart (LOOK-NASDAQ) fell the most, -23.4%. 1 Week P ric e P erformance DigitalT own, Inc. 11.1% T ree. C om, Inc. 10.8% G ree, Inc. 9.6% S NAP Interactive, Inc. 8.5% S K C ommunica tions C o., Ltd. 8.5% G iga Media Ltd. 7.9% Quepas a C orp. 6.6% T he9 Limited 6.4% Actoz S oft C o., Ltd. 5.5% W ebzen Inc. 5.2% S ha nda Intera ctive E ntertainment 4. 3% United O nline Inc. 2. 5% NetDragon W ebS oft, Inc. 2. 1% Open T ext C orp. 1. 7% G amania Digital E ntertainment 0. 9% C hines e G amer International 0.8% Mixi, Inc. 0.5% Moggle, Inc 0.0% B roadW ebAs ia Inc. 0.0% AQ Interactive, Inc. 0.0% K ings oft C o. Ltd. -0. 4% T encent Holdings Ltd. -1. 1% DADA S pA -1.6% E olith C o. Ltd. -1. 8% NE OW IZ G a mes C orporation -2.0% S pa rk Networks , Inc. -2. 7% Neteas e.com Inc. -2.8% Y nk K orea Inc. -2.8% X ING AG -2.9% P hotoC hannel Networks Inc. -3. 0% S hutterfly, Inc. -5.8% G iant Interactive G roup, Inc. -5.9% T heS treet. com, Inc. -5.9% G ungHo Online E ntertainment, Inc. -6. 8% HanbitS oft, Inc. -7.1% G ameO n C o Ltd. -8.6% Y edangOnline C orp. -9. 2% P erfect W orld C o., Ltd. -9. 3% C DC C orp. -10.6% Northgate T echnologies Limited -14.3% F rogs ter Interactive P ictures AG -18. 1% LookS mart, Ltd. -23.4% -30. 0% -25. 0% -20. 0% -15. 0% -10. 0% -5.0% 0. 0% 5. 0% 10. 0% 15. 0% Figure 10. 1-Week Price Performance Source. Capital IQ INDUSTRY NEWS (PARTNERSHIPS, FINANCIAL RESULTS, NEW PRODUCTS) Netdragon Websoft Inc. Launches New Expansion Pack for Eudemons Online, Divine Path: NetDragon W ebSoft, Inc. has launched a new expansion pack -- 'Divine Path' -- for its major online game Eudemons Online on 16 January 2009. 'Divine Path' is the fifth expansion pack of the game following the previous expansion pack 'The W ings of the Ruler', which launched in April 2008. 'Divine Path' combines mythical elements of Greece and launches a brand-new map 'Land of the God', which brings players a new era of 'god incarnation'. The latest expansion pack with enriched game features such as new challenges, maps, skills and equipment will enable NetDragon to continue to offer a fantastic entertainment experience for the Company's players. Perfect World to Launch Closed Beta Testing for 'Pocketpet Journey West' in North America: Perfect W orld Co., Ltd. announced that it will begin closed beta testing for 'Pocketpet Journey West,' a 3D MMORPG, in North America on February 10, 2009. The game will be released as 'Ether Saga Online' through its wholly owned U.S. subsidiary, Perfect W orld Entertainment Inc. Based on the Chinese literary classic, Journey to the W est, 'Ether Saga Online' features youthful anime graphics, as well as exciting in-game systems, and has been localized to cater to North American game players. Since the game's launch in China in October 2008, it has been well-received by domestic online game players. CDC Corp. Reaffirms Earnings Guidance for the Second Half of 2008: CDC Corp. reaffirmed earnings guidance for the Second Half of 2008. The company announced that, based upon preliminary financial results and estimates, it expects: (i) Adjusted EBITDA from continuing operations (Adjusted EBITDA) to be in the range of approximately $17.0 million to $19.0 million for the second half of 2008; and (ii) total revenue to be in the range of approximately $95.0 to $97.0 million, for the fourth quarter of 2008. This revised estimated Adjusted EBITDA range represents an increase of between 207% and 243% from Adjusted EBITDA in the prior year period, and represents an increase of $1.0 million from the Adjusted EBITDA guidance of $16.0 million to $18.0 million, that was reaffirmed by the Company on January 8, 2009. GoFish Corporation Files Shelf: GoFish Corporation has filed a Shelf Registration in the amount of $3.54 million. The Parent Company Delisted: The NASDAQ Stock Market announced that it will delist the common stock of The Parent Company. The Parent Company's stock was suspended on January 8, 2009 and has not traded on NASDAQ since that time. NASDAQ will file a Form 25 with the Securities and Exchange Commission to complete the delisting. The delisting becomes effective ten days after the Form 25 is filed. LiveWorld Inc. Announces Revenue Results for the Fourth Quarter of 2008: LiveW orld Inc. announced revenue results for the fourth quarter of 2008. For the quarter the company reported revenues of approximately $3.0 million. This represented an increase of 12% compared to $2.7 million in revenue for the third quarter of 2008.

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