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1. How to Build a $1 Billion Content Business in Three Years or Less December 2, 2010 New York, NY

4. The Web Back in the Day…

5. … Was Not Much Different Than Consuming…

6. … Offline Content

7. Google Might be an Exception

8. Snapshot of the Web in 2005 Source: JP Morgan, Barclays, Nielsen 73.4 MM U.S. online users Users spend 14 hours per week online 76% of U.S. households have a mobile phone 48.0 MM U.S. households with broadband & broadband penetration

9. Portals Were Newspapers, Commerce Players Were Malls, and Exclusive Content Was Exclusive 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Most Visited Web sites in Jan. 2005 (by uniques) Exclusive content Portals, text based media Source: ZDNet First commerce movers

10. Browsing and Consuming Behavior, No Change Since the 1950’s… Browse Consume

11. But Consumers Are Changing, Leading to Accelerating Subscription Declines… Post WWII boom, circulation increased 15% from 1950-1970 Subscribers go online, circulation decreased 5% from 1995-2002 US Newspaper Circulation Volume (MM) Huge shift in consumption, 16% decrease from 2004-2009 Source: Newspaper Association of America

12. … Across All Major Traditional Mediums Radio – 19% Magazine – 30% Newspaper – 30% Television – 33% % of Consumers Spending Less Time in Medium Due to Time Spent Online Source: Arbitron/Edison Media Research Internet and Multimedia, 2006

13. Wide Gap in Valuation in 2005… Source: CapIQ, Represents LTM revenue multiples Offline Content Providers Online Content Providers

14. ...Sustained Over a Three Year Period Stock Performance Over Time Source: CapIQ Digital includes: ACOM, ADAM, AOL, DIET, EDGR, HOLL, HSTM, KNOT, TSCM, WBMD, WEBM, YHOO Traditional includes: ALOY, CBS, DIS, GCI, LINT.A, MDP, MNI, NWSA, NYT, SNI, TWX, VIA.B, WPO Indexed to 100

16. 2005 Was the First Year We Started to See M&A Experimentation with New Content Models 2005 2006 2009 2007 2008 2010 UGC Gaming ($ in millions) Source: CapIQ, greater than $100MM transactions $756 (Canvas Technology) $618 (News Corp.) $730 (Electronic Arts) $619 (NBC) $1,539 (Google) $500 (Penthouse) $860 (AOL) $1,870 (CBS) $125 (Comcast) $2,408 (Hellman & Friedman) $763 (Disney) $391 (Electronic Arts) $400 (DeNA) $179 (Google) $100 (Yahoo!)

21. 1. $1.5BN 3. $963MM “ Strategic” M&A IPO (Mkt. Cap at IPO) 2. $1.9BN 4. $860MM 5. $756MM Source: CapIQ M&A Has Been the Primary Liquidity Opportunity for Digital Content Top 5 Digital Content Deals in Past Five Years Only a Few $1BN+ Independent Digital Content Business in the Market $3.0BN $2.6BN $21.1BN $1.3BN

25. Consumer Behavior Shift Source: JP Morgan, Nielsen Social is onramp to content and products Depth and breadth of high quality content New forms of entertainment competing for consumer time PC feels a little old

26. Anyone Can Become a Content Company

27. Digital Environment is a “Little” Fragmented Brand Driven

28. Offline vs. Online Content Valuation Snapshot Offline Content Providers Online Content Providers Source: CapIQ

29. Nowadays, Scalable Digital Content Companies Command Premiums in the Market Source: CapIQ Premium Digital includes: ACOM, WBMD, YHOO Other Digital includes: ADAM, AOL, DIET, EDGR, HOLL, HSTM, KNOT, TSCM, WEBM Traditional includes: ALOY, CBS, DIS, GCI, LINT.A, MDP, MNI, NWSA, NYT, SNI, TWX, VIA.B, WPO Indexed to 100 Stock Performance Over Time

30. Buyers Much More Focused on Smaller Digital Content Assets in Today’s Environment Digital M&A: Content Digital M&A: Non-Content Source: CapIQ 2005 - 2006 2009 - 2010 % of Digital Deals over $500MM that are “Content” related 50% 38% 2007 - 2008 7% Total Digital Deals 37 48 41 Digital Content Deals 12 15 8

31. Part of the Problem Brand Buying Audience Buying VS.

32. Fragmentation on the Demand Side Doesn’t Help

33. Drivers of Influence The Network Science Curation Incentives Location Acknowledgment Tweet “ Like” Content Consumption Model is Quite a Bit Different Today Tag Check-in Content Enlightenment Play Watch Read Converse Opine Review Rank Revenue Acclaim Loyalty Intelligence

34. Billion Dollar Businesses Are Created by Engagement and Business Model Innovation Curated Information Entertainment Shopping Founded Nov. 08 Founded Jul. 07 Founded Jul. 06 Users (MM) * No. of daily active users 175.0 Source: Zynga Source: Groupon Source: NYTimes

35. Common Themes Across Valuable Content Franchises Virally Driven Creation of New Business Model in Recent Past The Network Dictates Value             

37. Three Pillars of Content Value Integrated marketing Distribution Scarcity Optimal Value

38. Content Economics Paid Links Advertising Subscription Technology Driving More Monetization Channels Syndication Commerce Game Mechanics

39. How Integrated Will Content Be With Commerce? Viral Discoverable (SEO) Tailored Engaged  Higher Engagement  Greater Content Stickiness  Higher Consumer Yield

41. We Are Already Seeing This in Mobile… 30% - Users Pay for Instant Access Digital Content (Music, Video...) 5% ’ 08E Rev. Mix for Top 50 Global Internet Companies ’ 08E Rev. Mix for Global Mobile Internet 76% - Users Pay for Instant Access Digital Content (Wallpaper, Ringtone, Games, Music…) 54% Source: Morgan Stanley

42. … and eReaders Source: Forrester Research, May 2009; Wall Street Journal, August 2010 US eReader Consumers (MM) More content available More brands appear Animation, more wireless devices $199 price point Color available $99 price point Full-frame video available “ Amazon customers buy 3.3 times as many books after buying a Kindle, a figure that has accelerated in the past year as prices for the device fell” – WSJ, Aug. 2010

43. Good or Bad?

44. Scarcity of High Value Content 5 bullets, no comments, mostly ads 5 pages, >50 comments, rich media, few ads Demand Media creates ~1.5MM pieces of content per year Source: WIRED, eHow

45. Key Ingredients of a Valuable Content Enterprise Engagement Mechanics Science Multi-Level Monetization Distribution Innovation Quality

52. IV. Quick Gridley Plug

54. Gridley Publications The Compass Quarterly Newsletter Comprehensive Industry Overviews

55. Gridley Conference Content Panelists, Presenters, and Attendees – 1/11/11 The IDEA Conference Innovation… Disruption… Engagement… Action! January 11, 2011 The Jumeirah Essex House 160 Central Park South, New York City

56. Linda Gridley Gridley & Company LLC [email_address] 212.400.9720 tel Twitter: @gridleyco www.gridleyco.com