Gridley2011 ignitionpresentation

TAKING A DIGITAL BITE OUT OF THE BIG APPLE

November 30, 2011

Traditional Industry Leaders are Highly Vulnerable

© 2011 Gridley & Company LLC 2

Media Time Spent vs. Ad Spend is Out of Whack
…Creating huge opportunities for internet and mobile companies and more potential
downside for print media companies

US Time Spent vs. Advertising Spending (2010)
Traditional Media TV Internet + Mobile

43% 43%

27%
25%
19%
16%
11%
8% 8%

1%

Print Radio TV Internet Mobile
Time Spent Ad Spend

Note: Print includes newspapers and magazines
Sources: KPCB and eMarketer, March 2011


Better Technology Driving Fundamental Shifts in
Consumer Behavior
Social Networking Creating ~8x Growth in Introduction of
Information at Scale US E-Commerce the Smartphone
($ in billions)

$164.6 23%
61%

CAGR = CAGR =
50.1% 20.4%

$25.8
8%

0%

2005 2010 2000 2010 2001 2010

Source: Pew Research Source: US Census Bureau Source: comScore


Convergence of Capabilities
Business models have begun to converge because disruptive technologies and
different marketplaces are springing up and growing fast

Converging Companies Key Themes

• Becoming hard to determine who
is competitive as separate
disciplines converge
• E-commerce is converging with
Content content and social to create
strong audience relationships and
enable sophisticated audience
segmentation and targeting
Users • Convergence has major M&A
implications
Community Commerce


Tremendous Promise with Mobile Given Unique
Characteristics
Converging Companies Key Themes

Newspapers,

Watch
Magazines,
Books
• Global mobile internet ecosystem
Camera
expected to grow to at a 17%
Computer CAGR to $509 billion by 2013
• Mobile online advertising expected
GPS,
Maps,
Snail
Mail
to be fastest growing segment at
Compass 50% CAGR
Video • U.S. mobile internet revenue trails
Camera
the rest of the world, but is
PDA
positioned to catch up fast
Range • The mobile sector has seen heavy
Telephone
Finder investment in the past five years
• Recent investments reinvigorate
Game and legitimize the mobile sector
Credit Console
Cards Alarm
Music Clock
Player

Sources: eMarketer and Morgan Stanley Research, Mobile Internet Report, December 2009


Innovative New Companies Employing
Unprecedented Change Agents
Open Source Open Architecture

Cloud Computing New Business Models


Unprecedented Value Being Created
Company Year Founded Current Valuation IPO Status

2002 $6.2 Billion IPO in May 2011

2004 $73.0 Billion Not Filed Yet




2007 $11.7 Billion Filed July 2011

2008 $10.7 Billion IPO in November 2011

Sources: Second Market and CapIQ as of November 25, 2011


Emerging Innovators vs. Traditional Leaders
Comparative Equity Values ($ in billions)
Legend
Traditional Leaders

$70 Emerging Innovators

$40.1

$73.0

$30
Equity Value

$32.4

$20
$11.9
$10.7 $11.7
$7.1
$9.4
$6.2
$3.2
$2.7 $6.0
$1.1
$0
0.0x 7.5x 15.0x 22.5x 50.0x 57.5x
$1.0
Sources: Second Market and CapIQ as of November 25, 2011. Revenue Multiple


Enter Digital NY

Note: Gridley’s Guide to Digital New York can be found at: http://www.gridleyco.com/digitalny/


Gridley’s Guide to Digital NY
• $4 billion of capital invested in digital NY companies since 2006
• 145 private companies have raised at least $5 million
• 120 VC/PE investors with a focused interest in digital NY
• TONS of innovation and disruption

Note: Gridley’s Guide to Digital New York can be found at: http://www.gridleyco.com/digitalny/


Digital Sector Categorizations (295)
Digital Digital
Content Marketing Social E-Commerce Mobile
(80) (110) (30) (48) (34)
Content Enabling Audio & Video Commerce Brand Storefront Content
Advertising
Family & Content Curation Daily Deals E-Commerce
Education Digital Agencies
Dating E-Commerce Marketing
Finance & Display Infrastructure
Professional Advertising Enterprise Social Social
Marketplace
Games Email Advertising Funding
Private Sales
Health & Fitness Lead Generation Local
Third Party
Lifestyle Local Advertising Social Network Retailer

Music Search Other Other
Advertising
Tech
Social Marketing
Video & Images Management

Note: Several companies have distinct business units that place them in multiple categories


NY Area Private Digital Companies by Equity
Raised (143)
$5M-$10M 41 $10M-$20M 36 $20M-$30M 24 $30-$50
$30M-$50M 24 $50-$100
$50M-$100M 13

Electric Sheep

>$100M 5

FashionStake

Sources: Capital IQ and TechCrunch, September 2011


NY’s Emergence as a Tech Hub
New York City has become a true digital media innovation center

1H2011 Internet VC Funding by Top Cities 1H2011 Internet VC Deals by Top Cities
Total = $3,431 billion Total = 289

Boston, 9
Los Angeles Washington,
Boston 3% Los Angeles, 13 D.C., 1
6% San Francisco
Chicago, 18
Washington, D.C. 21%
12% San Francisco,
103
Bay Area
Palo Alto
$1,534 bn Bay Area
Chicago 11% 167
New York, 81
17%
Redwood City
6% Palo Alto, 29
M ountain View San M ateo, 7
New York M ountain View,
San M ateo 4% Redwood City, 9 19
18%
2%

Source: CB Insights “Venture Capital Activity Report”


Over 300 NY Digital Start-Ups Founded in the Last
Few Years…
Digital Start-Ups Founded in NY

80
71
62
53 55

2007 2008 2009 2010 YTD2011

Sources: CapIQ and Gridley estimates


NY Ecosystem has Very Different Roots and Growth
Opportunities than Silicon Valley
Internet Services Wall Street

Leadership
Talent

Operational Engineering
Data Services Efficiencies Talent Advertising

Key Creative
Customers Talent

Strategic Strategic
Acquirers Partnerships
Fashion Business Media
Development


Recently Announced Digital NY M&A Deals
EV/Revenue
Acquirer Target Price Multiple Comment
• Brings strong technology to help
$80MM1 NA monetize long-tail consumer
products
• Improves Yahoo!’s data story for
$264MM 2.0x
media management

• Shows Disney’s continued digital
$40MM1 5.0x
expansion into niche verticals
• Expands U.S. footprint and adds
$40MM 1.6x
social media capabilities
• Improves Google’s positioning
$400MM1 NA and monetization capabilities with
Tier 1 publishers
• Represents industry consolidation
$5MM 1 NA of companies offering premium
services
• Adds market leading data
$58MM1 NA management capabilities to
Adobe’s publishing tool-set
1Rumored market value.


Key Disruptive Trends / Issues in Digital NY

Advertising • Traditional creativity vs. performance-driven ad tech

Media • Change in content creation and consumption

Retail • Change in consumer purchase behavior, increasing availability
of data, and mobile’s growing impact

Big Data • Cloud-based services and new data sources


Traditional Ad Agencies vs. Performance-Based
Marketing
Legend
Traditional Ad Agencies
Performance Based Marketing
$200
Emerging Threats
Equity Values

$70 $208.7 $182.3

$30 $73.0

$12.7
$8.0
$11.0 $4.7 $10.7
$3.9

$0.6
$0.8
$0.9 $0.4
$0
0.0x $2.2 5.0x 10.0x 20.0x
$0.4 $1.2
$0.5 $1.6 $0.4 Revenue Multiple
Sources: Second Market and CapIQ as of November 25, 2011


Traditional Ad Agencies vs. Performance-Based
Marketing
Comparative M&A Activity (2009-2011YTD)

Notable Acquisitions over $100MM by Notable Acquisitions over $100MM by
Traditional Ad Agencies Performance Based Marketing Co.’s

$575MM $1.6BN

$750MM
$530MM
NA

$390MM $420MM

$400MM
$345MM

$348MM
&
$200MM
$275MM

Source: CapIQ and Gridley estimates


The Rapid Growth in Online Advertising Has Created
Various Measurement Complexities and Opportunities
On Social
On Site
Platforms Transaction Brand

How are
users
behaving? How
Data Suppliers effective are
my ads?
Data Providers / Data Exchanges

Creative Optimization

Advertiser Ad Server
Publisher Ad Server

Ad Networks DSPs

Verification
Verification
Retargeting
Supply Side
$$
Tools

Publishers
Platforms

Media
Ad Exchanges
Agencies

Analytics
Audit How do I measure
Data Mgmt. safety and
Workflow
effectiveness in blind
Direct environments?


Advertising Disruptors & Innovators
Digital Disruptors &
Marketing (110) Innovators

Power of RTB

Helping brands to speak
directly to consumers via
social networks

Performance-driven, next
generation ad agency

Growing importance of
video vs. TV

Open Table for doctors
appointments


Traditional Media vs. Social Networks
$90 Legend
Traditional Media
Social Networks
$60.2

$60 $57.1 $73.0
Equity Value

$40.1
$32.4

$15.4
$23.4
$30

$4.0 $11.7
$9.1 $7.1
$2.7
$6.0
$1.0 $6.2
$1.2
$0
0.0x 2.5x 5.0x 15.0x 35.0x 55.0x

$2.5
Revenue Multiple
$0.1
Sources: Second Market and CapIQ as of November 25, 2011.


Content Consumption Model is Quite a Bit Different
Today Than Old Model of Browse and Consume
Drivers of Influence Content Enlightenment Acknowledgment

The Network
Science Converse
Play Tweet Tag
Curation Opine
Watch “Like” Check-in
Incentives Review
Read
Location Rank

Revenue Acclaim Loyalty Intelligence


Media Disruptors & Innovators
Digital Disruptors &
Content (80) Innovators Brings multi-new media concepts such
as community, interactivity and multi-
channel content into a single platform

Combines content and commerce
into an integrated user experience

Brings historically siloed content
channels into an integrated platform

Brings over-the-air television to the
home

New form of interactive
entertainment

Electric Sheep
Content marketplace for
monetization and user traffic for
publishers

Re-imagined news publisher


Traditional Retail vs. E-Commerce
Legend
$200 Traditional Retail

$196.1 E-Commerce

$82.9
Equity Values

$100

$50
$35.0
$36.4
$34.4
$9.0

$6.4

$3.6
$6.2 $3.5 $1.1 $0.4
$0
0.0x 4.0x 8.0x 14.0x
$0.2 $0.9 $0.5 Revenue Multiple


Traditional Retail vs. E-Commerce
Comparative M&A Activity (2009-2011YTD)

Top Acquisitions by Top Acquisitions by
Traditional Retail Companies E-Commerce Companies

$2.2BN $2.4BN

$1.8BN $1.2BN
*

$560MM $895MM

$300MM $545MM

$270MM $350MM

* Represents Target acquiring Zellers’ 220 retail locations in Canada


E-Commerce is Growing at 5x Traditional Retail
• Online sales are expected to overtake traditional sales in less than 10 years
• The US was the 2010 leader in global e-commerce sales at 27% of worldwide volume
• US e-commerce retail sales totaled about $177 billion in 2010, up an average of 13% from 2009

E-Commerce Sales vs. Traditional Retail Sales ($ in millions)

$3,526 $3,585 $3,640
$3,405 $3,466
$3,279 $3,343
$3,151 $3,215
$3,022 $3,086

$556 $624
$384 $437 $494
$216 $252 $292 $336
$151 $182

2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
E-Commerce Total Retail - E-Commerce

Source: Goldman Sachs Research and International Data Corporation estimates


Disruptive New Business Models
Daily Deals / Private Sales Social Mobile
Local E-Commerce Model E-Commerce E-Commerce

• Collective • Exclusivity and • Rapid growth due • M-commerce to
bargaining power word-of-mouth to popularity of reach $31bn by
• Minimum threshold marketing social networking 2016, 7% of total e-
of subscribers • Successful due to sites commerce (1)
needed urgency, • 56% of online • Increase in
• Subscribers driven consumers’ herd shoppers follow a smartphone use will
to share deals with mentality, and retailer on a social lead to new wave of
friends online loyalty media site m-commerce
development

Source: Forrester Research (6/17/2011).


Retail Disruptors & Innovators
E-Commerce Disruptors &
(48) Innovators Transforming how retailers get in
FashionStake front of users

Developing a new model for
retail clothing

Using technology to make a
previously difficult category
online-effective

Recreating the consumer and
business model for food ordering

Removing significant barriers to
enjoying artwork

Developing a new model for how
brands acquire new users


Publicly Traded Data Companies
Legend

$200 Traditional Leaders

$208.7 Emerging Innovators

$45
$44.6
Equity Value

$12
$12.1
$10.2

$9.4 $4.7
$6
$4.1

$3.2
$0.9 $1.5
$0 $0.5 $0.6

0.0x 1.0x 2.0x 3.0x 4.0x
2011
Revenue Multiple


M&A Activity by Big Data Companies

M&A Activity (2007-2011YTD)

$4.0BN $345MM

$1.4BN $240MM

$1.2BN $208MM

$205MM D&B Australasia
$534MM
Pty Limited

$387MM NA



Big Data Disruptors & Innovators
Digital Digital
Social (30)
Content (80) Marketing (110) Ingests millions of data
feeds to develop credible
expert network on a broad
range of topics

Provides tools around large
data sets to evaluate
commercial real estate

SpotOn
Reads and reacts to
complex event data in real
time

Provides real time
verification and protection
Electric Sheep to advertisers in ad markets

Organizes large community
information


Disruption Can Lead to Significant Valuation
Destruction…
…and has lead to a significant number of bankruptcies and restructurings of traditional
media companies
Newspapers Print Media

Radio


Future NY Leaders Landscape


Interested in Other Gridley Reports?
Available at www.gridleyco.com/what-we-think/resources/

Recent Conference Presentations

Comprehensive Industry Overviews Quarterly Newsletter


Linda Gridley
President & CEO
212.400.9710
linda.gridley@gridleyco.com

Gridley & Company LLC
10 East 53rd Street, 24th Floor
New York, NY 10022
212.400.9720 tel
212.400.9717 fax
Twitter: @gridleyco
www.gridleyco.com

Gridley2011 ignitionpresentation

Recommended

Recommended

More Related Content

What's hot

What's hot (18)

Viewers also liked

Viewers also liked (7)

Similar to Gridley2011 ignitionpresentation

Similar to Gridley2011 ignitionpresentation (20)

More from Linda Gridley

More from Linda Gridley (20)

Recently uploaded

Recently uploaded (20)

Gridley2011 ignitionpresentation