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GP Bullhound Turkish Internet Report

  1. 1. INDEPENDENT TECHNOLOGY RESEARCH SECTOR INITIATION  APRIL 2013  DIGITAL MEDIATURKISH COFFEE – GET IT WHILE IT’S BREWINGIn times of global financial flux and uncertainty, a highly dynamic new marketis evolving for financial and strategic investors looking for the next opportunity:Turkey. This report provides comprehensive and in-depth insight into the fastgrowing Internet and Digital Media markets in Turkey.A number of factors are converging in Turkey — favorable demographics(young, prospering and engaged), a developing risk-capital ecosystem, areverse brain transfer (Turkish talent returning home from abroad),widespread mobile penetration, emerging Internet ecosystem and maturingeCommerce sector, stable government, strong online and offline consumptionhabits and more, making Turkey one of the most anticipated markets in theworld.The promise demonstrated by evolving sector dynamics and vastly changingentrepreneurial conditions led last year to considerable hype with regards toinvesting in Turkey. This enthusiasm in turn boosted a perception somewhatin advance of reality, stimulating premature expectations.Now it’s time, for all concerned to come back to Earth. Particularly in regard tothe eCommerce sector, and the hard work called for may be more mundanethan the glittering fanfare. Survival of the fittest is eliminating lagging playersand strengthening the entrepreneurial ecosystem. The young market is in factmaturing, and early investors now have the kind of opportunity that comesaround only when a particular constellation of conditions prevail.This report acknowledges and provides context for short-term cautionassociated with emerging markets such as this. However, the overall findingssuggest substantial potential in the mid to long-term for the Turkish Internet ALI DAGLI ali.dagli@gpbullhound.commarket to be a new growth region for entrepreneurs and investors alike. US: +1 415 412 2015 Turkey : +90 532 245 7505 DANIEL MAGGS London: +44 207 101 7660 Important disclosures appear at the back of this report GP Bullhound LLP is authorised and regulated by the Financial Conduct Authority in the UK GP Bullhound Inc. is regulated by the Financial Industry Regulatory Authority (“FINRA”)
  2. 2. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING TABLE OF CONTENTS Market Overview ......................................................................................................................2 Turkey in Context ....................................................................................................................4 SWOT Analysis ........................................................................................................................5 Emerging Internet Ecosystem in Turkey ...............................................................................5 Private Capital Environment ..................................................................................................7 Digital Media Landscape ........................................................................................................8 Hot Topics................................................................................................................................9 Three Paths to Success ....................................................................................9 Leadership Position and More Innovation .........................................................9 “Copy Now” and “Sell Fast” Does Not Work ......................................................9 Chicken-and-Egg Paradox ..............................................................................10 Undue Focus on User/Revenue Growth ..........................................................10 Appointing Additional Leadership When Needed ............................................11 One-way Ticket Back Home ............................................................................11 Selected Sector Overviews ..................................................................................................12 eCommerce .....................................................................................................12 Gaming ............................................................................................................17 Digital Agencies, Online Advertising and Marketing ........................................22 Social Media and Online Content ....................................................................25 Selected Private Placements................................................................................................ 30 Selected M&A Transactions .................................................................................................32 Facebook and Mobile Internet Rankings.............................................................................33 Company Tree Diagrams by Sector .....................................................................................351 GP Bullhound LLP
  3. 3. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING Market Overview Turkey is a country where East and West have always met, diverse cultures co-exist, and a dynamic young population is expanding. A quarter of Turkeys 75m people are less than 15 years old, growing up in the world of Facebook, Twitter, and mobile Internet, and promising a stronger future for the Turkish economy and its emerging Internet and Digital Media sectors. th th Turkey is the worlds 15 , and Europes 6 , biggest economy by GDP. According to the Organization for Economic Co-operation and Development, Turkey is expected to overtake India as the world’s second fastest growing economy by 2017. EXHIBIT 1: TURKISH GDP, 2001-2013 $1,200bn $1,000bn $912bn $841bn $800bn $600bn $400bn $200bn $0bn 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E 2013E Source: The World Bank Since the Turkish economic crisis of 2001 and the reforms initiated by Kemal Dervis, the Minister of Economic Affairs and the Treasury at the time, inflation has fallen from 18.4% in 2003 to around 7.4% (expected) in 2012, and unemployment has fallen from 13.3% in April 2009 to 9.2% in 2012 — the lowest level since 2005. Although the budget deficit and foreign debt remain cause for concern, in November 2012 rating agency Fitch raised Turkey’s credit rating to investment grade as a vote of confidence in Turkish officials’ efforts to transition the country towards a more self-sustaining, export-driven economy. There is an exponentially developing appetite for digital media consumption in Turkey. Use of IP-based platforms such as web, social networks, and mobile Internet is growing at an unprecedented pace. 36.5m Turks are Internet users — the fifth largest digital population in Europe after Germany, UK, Russia and France, and with more room for growth. Broadband Internet subscriptions have grown 38% year-on-year to 19.3m in 2012. EXHIBIT 2: INTERNET BROADBAND PENETRATION IN TURKEY 30 30% 25.8% 25 25% 19.3 20 20% 14 15 15% 8.6 10 5.9 6.8 10% 5 5% 0 0% 2008A 2009A 2010A 2011A Q3 2012E No. of Broadband Users (m) Penetration as % of Population Source: IMF, The World Bank Mobile penetration is high at 90% with 67m users. Turkcell, Vodafone, and Avea are the dominant carriers with 52%, 28%, and 20% market shares respectively. 60% of mobile users are currently on 3G data plans. According to Flurry, Turkey is one of the top ten fastest growing iOS and Android markets at 185% year-on-year growth. 71% of mobile subscribers2 GP Bullhound LLP
  4. 4. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING connect to the Internet via mobile phone at least once a day. Every major eCommerce and Digital Media — and even traditional — company in Turkey is releasing new mobile initiatives and experiencing significant upside from this rapidly growing medium. EXHIBIT 3: MOBILE IS BECOMING MOBILE INTERNET – 3G SUBSCRIBER GROW TH 100 94% 90 92% 92% 80 90% 88% 89% 90% 70 87% 89% 85% 60 88% 28.5 26.9 50 33.9 30.8 42.4 86% 40 65.8 55.7 30 84% 20 37.7 40.3 31.4 34.9 82% 10 19.4 7.1 0 80% 2008 2009 2010 2011 Q1 2012 Q2 2012 Q3 2012 No. of 2G Subscribers (m) No. of 3G Subscribers (m) Mobile Penetration (%) Source: People in Turkey are extremely digitally engaged and social, evident on the ground and in the statistics. Turkish people spend the third-longest time online in Europe after the Netherlands and the UK, and with 32.4m Facebook users — 89% of all Internet users and 43% of the total population — Turkey is ranked the seventh largest country on Facebook. With 9m users and rapidly growing, Turkey is also becoming one of the largest Twitter-using countries. Just recently, leading mobile operator Turkcell and Twitter reached an agreement to better integrate Twitter into Turkcell’s mobile phone architecture. Turkeys overall infrastructure is well developed. Credit-card penetration, at some 60%, is higher than the European average of 50%. And, relative to for example Russia, logistics and physical infrastructure are good. Thanks to heavy investment, communication links are strong. The third-generation network, at least in major urban areas, is often faster than that found in many other European countries. Available data indicates that Turkey’s economic environment is, and appears likely to remain, strong; likewise the political environment is, and appears likely to remain, stable. With more "profit-focused" execution, innovation, and smart money/investors feeding into Turkey, these positive digital media trends are on track to continue for years to come.3 GP Bullhound LLP
  5. 5. TURKEY RUSSIA ISRAEL FINLAND SWEDEN BRAZIL UK US Population and Area Population 75.6m 143.4m 7.9m 5.4m 9.6m 193.3m 63.2m 315.6m Population Density 97/km2 8/km2 360/km2 18/km2 23/km2 23/km2 255.6/km2 34/km2GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING Area 783,562/km2 17,075,400/km2 22,145/km2 303,893/km2 410,314/km2 8,514,877/km2 243,610/km2 9,161,074/km2 Largest Cities  Istanbul (13.3m)  Moscow (11.5m)  Jerusalem (0.8m)  Helsinki (0.6m)  Stockholm (1.3m)  S’Paulo (11.2m)  London (9.5m)  NY (8.2m)  Ankara (4.3m)  St. P’burg (4.8m)  Tel Aviv (0.4m)  Tampere (0.2m)  Goth’burg (0.5m)  Rio de J. (6.3m)  B’ham (2.4m)  LA (3.8m)  Izmir (2.8m)  Nov’birsk (1.5m)  Haifa (0.3m)  Turku (0.2m)  Malmӧ (0.3m)  Salvador (2.7m)  M’chester (1.9m)  Chicago (2.7m) Economic Indicators (2011 Actuals, IMF) GDP (PPP) $1,260bn $3,015bn $216bn $202bn $392bn $2,289bn $2,234bn $14,991bn GP Bullhound LLP GDP Growth 8.5% 4.3% 4.6% 2.7% 3.9% 2.7% 0.8% 1.8% Inflation Rate 6.5% 8.4% 3.5% 3.3% 2.9% 6.6% 4.5% 3.1% Unemployment Rate 9.8% 6.5% 7.1% 7.8% 7.5% 5.9% 8.0% 8.9% Users and Infrastructure Internet Users* 36.5m (48%) 70.6m (49%) 5.4m (68%) 4.8m (89%) 8.7m (91%) 87.3m (45%) 51.6m (82%) 245.5m (78%) 3G Penetration** 20% 8% n.a. n.a. 73% 41% 53% 64% Credit Card Penetration* 60% (45.4m) 5% (7.2m) n.a. n.a. n.a. 21% (40.6m) n.a. 33% (104.0m) Social Media Facebook Users*** 32.4m (89%) 7.7m (11%) 3.8m (70%) 2.3m (48%) 4.9m (56%) 65.2m (75%) 32.8m (64%) 167.4m (68%) Twitter Users*** 9.0m (25%) 5.0m (7.1%) 0.1m (1.9%) 0.3m (6.3%) 0.3m (3.4%) 41.2m (47%) 10.0m (19%) 59.0m (24%) Sample Success Stories Turkey in Context Joygame vKontakte Marcadolivre Rightmove Gilt Groupe Local Successes - - Markafoni Yandex Klarna Submarino Moneysupermarket Uber Rovio Spotify Betfair Google Global Successes - Kaspersky Terra Waze Supercell Skype Facebook No. US-based Companies on 2 4 64 1 3 28 39 n/a NASDAQ, NYSE and Amex Sources: The World Bank, IMF, Capgemini, Socialbakers, Wired, Webrazzi, Beantin,, Semiocast Research VISA, KPCB, * As % of total population ** As % of mobile subscribers *** As % of Internet users 4
  6. 6. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING SWOT Analysis EXHIBIT 4: SW OT ANALYSIS Strengths Opportunities  Strong macro trends and growing economy  Exponentially growing appetite for digital media  Young, educated and engaged population  Pressing move in 2013 towards more  Large Internet user base w/ room for growth innovative and profitable businesses  90%+ mobile penetration  Money-spend online to catch up with time-  Robust logistics, payments and Internet spend online (consumers and advertisers) infrastructure  Massive growth trajectory in smartphone and  Entrepreneurial energy and quick problem- broadband penetration solving capability  Foreign investors looking to invest in Turkey  Hard-working and low-cost labor force  Investment incentives from government  East/West geographical and cultural magnet  Affluent professionals coming back home Weaknesses Threats  R  Young Internet ecosystem  Immature business models failing with  Lack of private capital, small set of smart potential chilling effect on new investment institutional investors  Domestic challenges to modernization  Insufficient innovation  Internet censorship by government agencies  Unbalanced activity in eCommerce versus  Unstable conditions in nearby countries other digital media segments  Undue focus on revenue growth  Dependence on Google user acquisition  Lack of non-founding employee incentives and stock options Source: GP Bullhound Emerging Internet Ecosystem in Turkey New Internet startups are being formed and large traditional corporations are announcing new online initiatives in Turkey virtually every day. Large conglomerates such as Dogan and Dogus have numerous Internet companies under their umbrellas (such as Amazon-like HepsiBurada and Hulu-like Tvyo). The spread of entrepreneurship in Turkey is taking place not just at the corporate level, but at the startup level as well. Many Turkish professionals have embraced the Internet as the forward-looking direction for growth. There is tremendous energy behind a push to create what might one day become the Silicon Valley of Anatolia. Entrepreneurship and Internet studies are being taught in every major university across Turkey, and entrepreneurs and sector experts frequently attend panel discussions and give lectures to stimulate debate and initiative. Arda Kutsal and his team at the very popular Turkish tech portal Webrazzi are playing a major role in cultivating the Silicon Valley paradigm in Turkey — by updating Turkish entrepreneurs on a daily basis as to what’s going on in California, and how to emulate or localize these dynamic developments in Turkey. Burak Buyukdemir has done an outstanding job of mentoring and incubating up-and-coming entrepreneurs through his incubation platform eTohum. In fact, there are growing numbers of incubators and accelerators (Fit Startup Factory, Dunya Invest, Inventram, among others). The Turkish arm of Endeavor, which offers strategic advice, mentorship and global contacts to promising startups, is working hard to help mature the entrepreneurial ecosystem. The quality of advice available from some of the local counsels — such as Sidika Baysal Hatipoglu of B+B or Enver Sezer Caliskan of Caliskan & Kizilyel — compares favorably to that which one would get from seasoned professionals at Wilson Sonsini or Fenwick in Silicon Valley.5 GP Bullhound LLP
  7. 7. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING The Turkish government, recognizing these new developments as vital for boosting the accelerated growth Turkey has been experiencing in recent years, has been initiating a host of policies — legal and fiscal measures and infrastructure projects — to attract entrepreneurial activity and job seekers to the Internet sector. Especially helpful for growing startups is "Government R&D company status" incentivizing them to rent offices in numerous tax-exempt ‘technoparks’ located on university campuses throughout the country. Such government support is aimed at overcoming some of the known liabilities inherited from the past, creating a friendly, proactive and robust environment for new businesses. Despite all these positive trends, the Turkish Internet ecosystem is still young and inexperienced in regard to the mores and skill sets of Silicon Valley. The older generation is still bound by tradition and this can hamper younger players from developing and deploying the entrepreneurial spirit to which Silicon Valley is accustomed. Cronyism, lack of vision, fear of failure, insufficient skill in planning and cooperation are formidable deterrents. At times, new business leaders can be impatient and naïve, underestimating what it takes to grow a sustainable enterprise. There is a lack of institutional private funding, and existing local investors want too much control, being unwilling to allow entrepreneurs to chart untried trajectories. This results in a lack of innovation, premature abandonment of good ideas, and inadequate financial incentives. Of course, all these shortcomings are natural part of continued growth and development. And as the country’s new business leaders demonstrate that they are finding their feet in this newly developing arena, Internet entrepreneurship in Turkey is increasingly acquiring a distinctive flavor, both local and global, creating a new and as yet untapped sphere of opportunity for investors.6 GP Bullhound LLP
  8. 8. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING Private Capital Environment To date, the Turkish private capital environment has been largely dominated by local investors and a small set of outside investors. Many of these are angel investors in the form of successful entrepreneurs such as Emre Kurttepeli, founder of leading Internet portal Mynet, Hasan Aslanoba, CEO of Aslanoba, and Tolga Tatari, Ahmet Emre Sari, and Sina Afra, co-founders of eCommerce giant Markafoni. Turkish angels have generally invested in rounds of up to $1m so far, although in some cases they have joined larger rounds alongside non-angel investors. We see significant deal activity from a number of key local digital media investors. 212 and iLab in particular have been highly active and have played a key role in building awareness of and confidence in the Turkish tech scene. 212 is the largest early-stage VC fund dedicated to making investments in Internet and technology companies in Turkey, investing in a broad range of verticals including social gaming, eCommerce, cloud services and social media. iLab is unique in being both an investor and incubator, and focuses primarily on the classifieds, comparison, e-commerce and content categories – all proven models and highly scalable businesses. Founded in 2000, iLab is an icon of the Turkish tech scene - it has holdings in 12 businesses with a combined total of over 700 employees, more than 400m page views, 24m users, 6m unique monthly visitors, and a reach of 25% of the Turkish Internet market. iLab invested in GittiGidiyor in 2006 and still owns a minority stake. Generally speaking, the serious money has been provided by a small set of international investors, with the largest raises to date coming from General Atlantic ($44m for Yemek Sepeti, together with Endeavor Global) and Tiger Global Management (large stakes in Mynet and Trendyol). Hummingbird and Earlybird have also made multiple investments. As global investors get comfortable with the idea of investing in Turkey, we expect foreign capital inflows to increase significantly. EXHIBIT 5: SELECTED VC FIRMS W ITH TURKISH INTERNET INVESTMENTS Investor Key Investments Source: CapitalIQ, Webrazzi, GP Bullhound7 GP Bullhound LLP
  9. 9. eCommerce Advertising Content Gaming eTailers & Social Media Private Shopping Digital Creative Agencies Console Gaming Marketplaces MMO Group Buying & Price Internet-Only Media Companies Daily Deals Comparison Web / DownloadGP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING Brand and Brand and Performance Ads Performance Vertical eCommerce - Sellside Ads - Buyside Traditional News Outlets Social Network Gaming GP Bullhound LLP Online Video & Music Mobile Gaming Video Ad Networks Licensed Betting Online Dating Mobile eMail Marketing Marketing 3rd Party Services Digital Media Landscape Vertical Content Enabling Technologies Online Video Classifieds, Yellow Pages, and HR Payments Mobile Internet 8
  10. 10. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING Hot Topics Three Paths to Success For an emerging country such as Turkey, we see three major routes to entrepreneurial success. The first is to clone existing products/services that are already successful in developed markets, but need a lot of work to flower in new territory. To date this has been a common strategy for many Turkish entrepreneurs, and has been highly profitable for first- movers such as eBay-clone Gittigidiyor and Gilt-clone Markafoni. The second route is to create a unique or differentiated product/service for the local market only — in this case, offerings with specific appeal to the Turkish population. Peak Gaming’s flagship title Okey, for instance, has created unique appeal for Turkish gamers by successfully porting the tea house experience of playing tile games to the Internet. Players can also send each other topical gifts such as Turkish coffee, a nargila water pipe and even a belly dancer! The third and less well trodden route is to create a product/service with global appeal which can compete outside of Turkey as well as within it — here the most innovation is required. Already we see a number of success stories in the making. In mobile Internet games, for instance, we see promising, high-quality, products such as Picnic Hippos Bucketz, Duellos iSlash, and Fugos Wordz. Leadership Position and More Innovation Naturally, Turkish entrepreneurs and investors at first directed most of their attention and money into types of businesses with which they and consumers are most familiar and comfortable. That is, selling offline goods through online channels with a new make-up and social mechanics. Accordingly, the majority of Internet-based businesses in Turkey and MENA have been about selling offline goods online. And this has been fine, as a start. However, we have to keep in mind that by their nature online shopping businesses have relatively lower margins. In addition, low barriers to entry result in intense competition and additional margin pressure. This means that only companies in the leading position by a high margin and/or offering proprietary products will be embraced by consumers over the long term. Thus there are two ways to move forward in creating more local and global online success stories in Turkey. Either the leading players further ramp up to widen the margin between themselves and the competition, or entrepreneurs retool and come up with a wider range of innovative, diversified, differentiated, and disruptive businesses — both in eCommerce and other under-penetrated Internet sectors — that can in due course reach scale and profitability. In Turkey so far, (online retailer), Sahibinden (online classifieds), Cicek Sepeti (online flower delivery), Yemek Sepeti (online food delivery), Mynet (online portal), Joygame (online gaming), (online recruitment) have revenue scale and profitable growth. All these companies offer differentiated products and are distinguished leaders of their respective sectors. What is needed is more of them. “Copy Now” and “Sell Fast” Does Not Work Being inspired by and “cloning” a business that has been successful elsewhere can be a smart move for entrepreneurs, and may bring considerable success. And it may at first appear that this route is a shortcut compared with launching an enterprise that is brand new on the scene. This perception may, however, be deceptive. Whether it is cloning a winning business model or innovating from the ground up, local case studies support the common experience of excessive workloads before payback can be expected.9 GP Bullhound LLP
  11. 11. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING In other words, successful and enduring companies are not built easily or overnight. When we look at the time span of some of the successful online businesses in Turkey, where there is both revenue scale and profitability (or a successful exit), this point becomes evident: EXHIBIT 6: SELECTED COMPANIES W ITH REVENUE SCALE AND PROFITABILITY 1998 2000 2002 2004 2006 2008 2010 2012 2013 LEGEND 7 years old Amazon Private Placement M&A (Exit) 6 years old Hummingbird Ventures iLab Ventures eBay $235m 13 years old eBay 15 years old $15m (50% stake) 4 years old CJ Games iLab Ventures iLab Ventures 14 years old 5 years old $7.2m Allegro Trayas (Naspers) Tiger Global 14 years old Management $2.5m 11 years old Intel Capital 13 years old European Founders $44m Fund Management General Atlantic 12 years old Endeavor Global Source: CapitalIQ, GP Bullhound Chicken-and-Egg Paradox Today, investors all over the world are looking for growth, but with developed countries in abeyance and many developing countries (such as Brazil and India) experiencing lower than anticipated growth, attractive opportunities without high risk are few and far between. In many respects, Turkey is becoming a standout place to look for high growth opportunities, and investors are now keen on investing in Turkey. However, many are sitting on the sidelines, waiting for more definitive signs. Optimistic and willing though they may be, they remain cautious. On the other hand, Turkish entrepreneurs require early-stage capital and seasoned investors backing them up to unlock the ecosystem’s underlying value, to maturate the nascent developments into the solid opportunities the investors are waiting for. Thus we have at the moment something of a chicken-and-egg paradox, awaiting bold moves on the part of frontrunner investors to break into a new and profitable arena. Undue Focus on User/Revenue Growth As commonly experienced in the western European and Silicon Valley start-up community, we see many examples in Turkey where Turkish entrepreneurs focus on customer acquisition and revenue growth as markers of success. However, this mentality can prove to be short- sighted. Investors, on the other hand, anticipating changes wrought by maturity, need to see not just revenue growth but a path to profitability.10 GP Bullhound LLP
  12. 12. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING For example, for long-term value, Turkish e-commerce entrepreneurs need to look beyond simply acquiring large numbers of users, instead focusing on the lifetime value of customers, conversion rates, user royalty, and organic channels of customer acquisition and other key performance indicators. Emre Aydin, founder and CEO of Cicek Sepeti, has successfully demonstrated this by a relentless focus on analyzing customer data and leveraging it to make operational enhancements, as well as ongoing product innovation. And the result is clear — over the years, Cicek Sepeti has enjoyed strong revenue growth with unprecedented EBITDA margins of around 20%, delivering flowers online, in many respects, better than its global counterparts. Appointing Additional Leadership When Needed It is very common, both in Turkey and globally, for founders of Internet companies to be wearing lots of hats. Although these talented leaders have had what it takes to get their enterprises off the ground to considerable acclaim, Turkish entrepreneurs sometimes underestimate the need to delegate authority and to widen the talent pool by bringing in professional personnel with additive experience and complementary responsibilities. Such limitation can prove to be damaging. Not only does it constrain the scope of realizable potential for the enterprise, but the leader may be blindsided by the success they’ve enjoyed, becoming overwhelmed and spending a lot of their time where they are not needed or as valuable. It was a smart decision, when Burak Balik, the founder of the highly successful online gaming company Joygame, brought in Baris Ozistek as CEO in March 2011, two years after the company’s founding. Today Burak is leading the product teams, game selection and on-going platform innovation with Baris leading day-to-day execution and dealing with the corporate development needs of the business. We expect this leadership to continue to translate to exciting milestones for Joygame that the Turkish ecosystem as a whole can be proud of — Korean entertainment and media company CJ E&M recently acquired 50% of Joygame for $15m. Another great example of successful additional leader appointment is in the case of Sina Afra joining Tolga Tatari and Ahmet Sari in order to bring organizational experience and discipline to the initial Markafoni team. The three leaders truly complemented each other with their respective roles and turned Markafoni into the great success story it has become. Naspers acquired 66% of Markafoni in 2011 and continues to back Markafoni with their new initiatives. The collective goal is to turn Markafoni into a billion dollar company and have an IPO in a few years. One-way Ticket Back Home A fairly recent phenomenon of significance for the tech sector in Turkey is the accelerating “reverse brain transfer,” whereby Turkish professionals who have been studying and working abroad are returning home to seek newly emerging opportunities. The tech sector has been a major beneficiary of this trend. For example, after 17 successful years in the US — having sold SelectMinds to Oracle — entrepreneur Cem Sertoglu returned home in 2006 and became one of the early pioneers of the (then non-existent) VC community. Two companies Sertoglu invested in — Gittigidiyor and Grupanya — have already enjoyed exits. In addition, well-regarded sector executives such as Hakan Bas of Lidyana, Rina Onur of Peak Games, and Demet Mutlu of Trendyol studied in leading US universities and returned home after a few years of investment banking experience to participate in this rapidly growing sector. In another manifestation of coming back home, there are numerous Turkish executives working abroad for US-based enterprises being asked by their companies to return to Turkey to lead their operations in the region. Just recently, Baris Aksoy was asked by Intel Capital to relocate from Silicon Valley to head their new offices in Istanbul.11 GP Bullhound LLP
  13. 13. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING Selected Sector Overviews eCommerce eCommerce is arguably the sector in the Turkish digital media landscape which has attracted the most attention and investment. The combination of a young and affluent demographic, rapid economic growth, developed infrastructure and strong Internet, mobile and credit card penetration has created fertile ground for eCommerce players to thrive. As penetration has risen, the value of domestic eCommerce transactions has dramatically increased, from around $3.1bn in 2007 to over $17bn in 2012, representing a 41% CAGR. Likewise, the volume of such transactions has surged from 54m in 2007 to 162m in 2012, a 24.5% CAGR. Even in 2012, when other sectors slowed down, domestic eCommerce spending rose by 34%, and volumes by 29%. EXHIBIT 7: VOLUME AND VALUE OF DOMESTIC ECOMMERCE TRANSACTIONS 25 162.0 180 160 20 125.9 17.3 140 120 15 91.9 12.9 100 64.6 66.5 80 10 54.1 8.6 5.8 60 5.1 5 3.1 40 20 0 0 2007A 2008A 2009A 2010A 2011A 2012A Transaction Value ($bn) Transaction Volume (m) Source: Interbank Card Center,, GP Bullhound Turkish people are spending more online not only in aggregate terms, but also per transaction – average basket sizes have grown 13.1% in 2012 alone. Turkey already has around 10m online shoppers. Assuming Turkish Internet penetration will continue towards EU averages, this number should reach around 16m by 2016. EXHIBIT 8: AVERAGE DOMESTIC ECOMMERCE TRANSACTION VALUES ($) 102.7 107.0 93.6 87.3 79.6 57.8 2007A 2008A 2009A 2010A 2011A 2012A Source: Interbank Card Center,, GP Bullhound Investor interest in Turkish eCommerce has been heightened by a series of landmark transactions which took place in 2011. First, eBay acquired 83% of Turkey’s largest auction site GittiGidiyor, in a deal rumoured to value the company at $215m. Then South African media conglomerate Naspers acquired 70% of Markafoni, one of Turkey’s largest private shopping companies, in a deal valuing it12 GP Bullhound LLP
  14. 14. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING around $200m. Lastly, Amazon invested in leading online flower store Ciceksepeti. Since then, Turkish fundraising activity has been dominated by e-commerce plays as investors seek to tap the sector’s long-term growth potential (see Selected M&A Transactions and Private Placements on pages 30-32 for details). At the same time, the sector faces a number of challenges. The success of and hype surrounding leading companies such as Markafoni, Yemek Sepeti, Grupfoni and Lidyana has spawned numerous imitations, creating intense competition for market share and driving down (already low) gross margins for the market as a whole. There are hundreds of small-scale firms in each eCommerce segment, but many lack distinctive sustainable business models and are too small to attract investment. That said, the overall long-term picture is still one of considerable optimism. Turkish per capita income currently stands at c. $10,000, and is projected to reach $60,000 by 2050. GDP growth will further the infrastructure investment needed to bring increasing numbers of Turks online. High mobile penetration will go a long way to overcoming current infrastructure issues. In addition, the ongoing and anticipated demise of large numbers of companies will bring maturity to the Turkish eCommerce sector. Entrepreneurs and investors will need to have a more considered and disciplined approach, and will need to focus more on product differentiation, sustainability, unit level economics, and paths to profitability along with revenue growth. With eCommerce penetration standing at around 0.6% of retail sales, the sector is still in its infancy with a long and profitable way to catch up with the consumption levels of already mature European counterparts. EXHIBIT 9: E-COMMERCE SHARE OF RETAIL SALES (2011, NON-TRAVEL) 10.7% 8.0% 7.4% 7.0% 6.8% 6.0% 5.8% 4.3% 3.3% 3.0% 2.5% 0.6% Source: Center for Retail Research General eTailers and Horizontal Marketplaces Leading general business-to-consumer eTailers serving Turkish customers, such as Dogan Group’s Hepsiburada and Amazon, work with large numbers of merchants and sell hundreds of thousands of products across a broad range of categories. Founded in 1998, is the largest eCommerce site in Turkey with over 6m monthly unique visitors, 900,000 monthly purchases and annual revenues of over $300m. The Company offers 350 SKUs in 32 categories and employs 250 employees. Although much smaller, Sabanci Group’s Kliksa and Hurriyet’s newcomer Yenicarsim are other prominent players in this segment. Horizontal marketplaces act as virtual bazaars that bring together merchants, small businesses, and individuals to trade almost anything. Sahibinden is currently the leading marketplace and classifieds destination in Turkey, with over 13m monthly unique visitors. It claims over 3m listings at any one time and around 50,000 new listings a day. eBay’s GittiGidiyor is currently second in the space with over 6m monthly unique visitors. eBay’s 2011 acquisition of GittiGidiyor remains the largest Internet acquisition in Turkey, with a deal value of $217m.13 GP Bullhound LLP
  15. 15. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING Online Private Shopping Online private shopping clubs offer an environment that hosts sales of designer brands for members at deep discounts. They often encourage members to introduce friends in their online social networks with additional savings and offers. UK-based Vente Privee offered this model to online customers for the first time in 2001 and remains one of the most valuable private companies in the world, with revenues in 2011 of $773m and valuations estimated between two to three billion dollars. Gilt Groupe, the first to bring the luxury sample sale to the US online market when launched in 2007, has also experienced extraordinary growth. Realizing this massive opportunity, Turks were fast to follow, with private shopping clubs Markafoni and Trendyol launching in 2008 and 2009, respectively. Other sizable (and somewhat challenged) players are Limango, Vipdükkan, Morhippo, and Group Buying and Daily Deals Group buying sites offer products and services at significantly reduced prices providing that a minimum number of buyers purchase the same item. They are viral versions of traditional daily deal sites, bolstered by integration with Facebook and various social features. Huge consumer demand and hype for this segment was reflected in the creation of 150+ new players and a rash of deals in Turkey in 2011. That year, Intel invested in Grupanya, Quants Financial Services took a majority stake in Grupfoni, and betting site Bilyoner acquired Grupca. However, with intense competition, low barriers to entry, and questionable ROI, this market has been shrinking. Currently, Istanbul-based Grupanya and Chicago-based Groupon are the leading players in Turkey, with, Grupfoni, and Bonubon chasing after them. Price Comparison and Lead Generation Price comparison services allow individuals to see different lists of prices for specific products from large numbers of retailers. These sites typically do not charge users to use the service, but charge the retailers a flat fee or have them pay every time a user clicks through to the retailers’ product (CPC). Since price is a big value driver of eCommerce for Turkish consumers (in many instances versus convenience), price comparison sites are quite popular. The price comparison sites with the most traffic are Akakce, Ucuzu, and iLab’s Cimri. Vertical eCommerce Companies In Turkey, 2010 was the year of private shopping, 2011 was all about group buying sites, and in 2012 vertical eTailers and Marketplaces grabbed most of the attention. These are destinations where consumers go to buy products or services in a specific vertical, varying from cars, consumer electronics, cosmetics, accessories, baby products, and home decoration. Certain verticals, such as food and flowers, already have their well-established leaders. Yemeksepeti, founded in 2001, and Ciceksepeti, founded in 2006, have done an excellent job of executing their business plans and attracting high quality investors such as General Atlantic, Amazon, and Hummingbird. Benefiting from the company’s strong and influential investor and celebrity network, Lidyana is emerging as the leading player in the accessories market. There is both huge growth and intense competition going after the “golden mom” in the baby and home decoration verticals. The travel vertical is still largely owned by offline players, and there is huge room for growth online. Vertical eCommerce in Turkey has had some consolidation — Dogan’s acquisition of Evmanya and Pera Bulvari buying WestWing — but has yet to see large M&A transactions. The investment landscape, on the other hand, has been very active as investors have started to follow companies that identify a niche and become proficient in catering to it.14 GP Bullhound LLP
  16. 16. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING EXHIBIT 10: LEADING TURKISH VERTICAL ECOMMERCE COMPANIES Vertical Leading Player(s) Selected Investor(s) Accessories and Jewellery Automotive Books Conservative Fashion Consumer Electronics Cosmetics Flowers and Gifts Food Home Decoration Mother and Baby Personalised Fashion Shoes Travel Bookings Rentals Local Events Source: GP Bullhound15 GP Bullhound LLP
  17. 17. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING Payments The Turkish payments industry has benefited greatly from the eCommerce boom of the last few years. As we discussed at the outset, Turkey’s continued GDP growth, 60% credit card and near 50% Internet penetration generated 162m eCommerce transactions in 2012, with a total transaction value of $17.3bn and a per-transaction average of $107. However, as we’ve also noted, only 0.6% of Turkish retail sales take place online, so the balance of payments is firmly weighted towards offline for the time being. This is not just a matter of economic development; there are important market factors which have caused eCommerce to lag behind. Many small businesses which would otherwise sell online lack an appropriate point of sale. Ability to absorb chargebacks is also a concern for small vendors, who may struggle to meet shipping deadlines for large volumes of purchases in a time and cost effective manner. Prior to 2009, eCommerce was largely limited to retail in small-ticket consumer electronics purchases – thin margins meant that few saw an opportunity. A number of large online retailers were also badly damaged by the 2008-2009 financial crisis, which did little to raise confidence in eCommerce. On the demand side, trust and security are important concerns for Turkish consumers. Despite all this, things are clearly changing. The explosive growth of private shopping and group buying sites has been a major boon for Turkish eCommerce. By leveraging social networks and an attractive sense of exclusivity, they have succeeded in creating environments where Turkish users feel comfortable making high-ticket purchases they would previously have made in-store. We now see close to a dozen serious payment players in Turkey: i) Leading micro/mobile payment solutions are Mikro Odeme, Paybyme, PaytoGo / GameSultan, This segment has seen the most transaction activity. On January 25, 2012, Mikro Odeme, Turkey’s leading mobile payment service, received a majority investment from London-based private equity house Mediterra Capital. And in February 2013, Asian e-payments giant MOL acquired a majority stake in PaytoGo/GameSultan. ii) Leading digital wallet solutions are Interbank Card Center’s BKM Express, Turkcell’s Cuzdan (Wallet), Paypal, and Vodafone’s Cuzdan (Wallet). These digital wallet platforms make eCommerce purchases easier and faster by letting users register their debit, credit and/or prepaid cards on the platform in advance. iii) Rapidly growing pre-paid solutions include Ininal Mastercard, Vodafone’s CepNakit Kart, Turkcell’s Cep-T Para Cart, Magir Kart, and Paysafecard. Ininal is the only independent player that offers reloadable prepaid cards with 90% market reach given its large merchant ecosystem and retail distribution system. iv) POS and merchants solutions include Paypal, PayU, Mikro Odeme/3pay, ipara, and multipaynet. Given the rising acceptance of eCommerce in Turkey and considerable room for growth in terms of Internet, mobile and credit card penetration, the payments vertical will continue to remain a competitive but exciting space.16 GP Bullhound LLP
  18. 18. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING Gaming Turkish gamers — a quarter of the population — are proud to call themselves gamers, and have always embraced gaming without limits. There was a point in 2008, however, when the Ministry of Finance banned Knight Online, Irvine-based K2 Networks’ micro-transaction- based F2P massively-multiplayer online game on the basis that, “there were thousands of people in Turkey that were becoming addicted to games and companies were earning profits without being taxed.” Knight Online was a victim of its success — the profits from Turkish players were reaching $1m a month. The ban was unfortunate, but the game’s popularity is an indicator of the very promising online gaming sector in Turkey. EXHIBIT 11: TURKEY’S GAMING POPULATION (2012) 76 m (100%) Total Turkish population 37 m (48%) Internet Population 22 m (29%) Active Gamers 11 m (15%) Paying Gamers Source: Newzoo Turkey is estimated to have approximately 22m active gamers, or 29% of its total population of 75.6m. Of these 22m, more than half are estimated by Newzoo to be spending money on games. EXHIBIT 12: MONEY SPENT ON GAMES IN 2012 - DISTRIBUTION Casual websites Console Social games 9% networks 24% 9% Mobile phones 10% PC/Mac boxed MMO games 12% 21% PC/Mac download 15% Source: Newzoo According to recent Newzoo research, the Turkish gaming market is estimated to reach $450m in 2012. Although more traditional genres (console, PC, and massively-multiplayer online games) still comprise the largest share (at 24%, 21% and 12% respectively), emerging platforms such as social networks and mobile Internet are already at 20% levels with projections for much higher growth and innovative vehicles, such as in-app purchases, for monetization.17 GP Bullhound LLP
  19. 19. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING EXHIBIT 13: GROW TH IN MENA INTERNET USERS 150m 70m 15m 2006A 2011A 2015E Source: Arabnet and Discover Digital Arabica In addition to Turkey, the Middle East and North Africa (MENA) region offers attractive conditions for gaming growth and a significant area of expansion for Turkish gaming companies. According to Arabnet and Discover Digital Arabica, in 2011 the MENA region had around 72m Internet users and is expected to have 150m by 2015, representing an annual growth rate of 21%. Turkey is also a young demographic; the average age is 28. Utilizing the new opportunities afforded by global app store distribution on social networks and Mobile Internet devices, small players in atypical locations have been developing gaming app revenues of a million dollars a day. Turkish gaming companies are becoming alert to such opportunities, and investors are on the lookout for those most likely to break through. PC/Console Gaming According to Newzoo, PC and console gaming currently occupies the largest share of the Turkish gaming market, estimated at around $170m each generating around $85m. Playstation 3 was the dominant console platform with 80% market share by hardware and software sales in H1 2012, with Xbox and Wii sharing the rest of the console market. On the PC and console gaming side, we cannot point to a successful Turkish game developer since the large global developers/publishers dominate the Turkish market. Top publishers are EA, Activision, Konami, Take 2, and UBISOFT. As per 2012 sales, Turkish players favored the following games the most: Pro Evolution Soccer, Fifa, Call of Duty, Medal of Honour, and Need for Speed. In addition to these multi-platform games, Diablo 3, Football Manager and Sims 3 were the most popular titles on PC. The only semi-Turkish global success story is German-based Crytec, led by three Turkish- German brothers, Cevat, Faruk, and Avni Yerli. The company is known for creating exceptionally high-quality games for the PC and next-generation consoles, powered by proprietary 3D-game technology CryENGINE. The company has been on an aggressive expansion spree over the last several years opening offices in the United States, Ukraine, South Korea and, most recently, in the founding brothers’ ancestral Turkey. It is worth mentioning that, Mr. Yerli recently announced that all Crytek games would be free-to-play going forward. It is rumored that the Company’s most recent free-to-play first person shooter game Warface — still in beta — is generating a few million dollars a month in Russia alone. MMO Games Massive multiplayer online (MMO) games in Turkey are hugely popular. According to Newzoo, more than one in five dollars spent on games in Turkey goes to MMO, higher than in many other countries. Turkey is estimated to have around 9.8m regular MMO gamers, 80% of whom are under 35. The share of paying MMO gamers is high at 46%, although average monthly spending is several times lower than in the US. 96% of MMO gamers play free-to-play and 27% play subscription-based MMO games. In revenue terms, free-to-play games take slightly more than half. Spending on MMO and console games at gaming cafes is estimated to add at least another $30m to the picture. The growth and popularity of MMO18 GP Bullhound LLP
  20. 20. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING games has been driven by the same factors driving social gaming – a young population, high Internet penetration and usage, and rising disposable income - important for covering the cost of subscriptions. That said, ultimately MMO in Turkey, like MMORPGs, caters more to hardcore gamers than casual ones. Established in 2009, the leading Turkish MMO publisher is Joygame. Unlike social gaming company Peak Games, Joygame does not produce any titles, but localizes and publishes existing ones into the local market. However, the company truly shines when it comes to publishing foreign titles in Turkey, and the user metrics, revenue growth, and strong margin profile speak to this fact. The team spend days working on the graphics, language, local jargon, and analyzing user data as part of the localization process. The company currently has 15m registered users, 2.5m monthly active users and 400,000 daily active users. Wolfteam is the biggest title of Joygame and actually the most popular MMO first-person shooter (FPS) game in the region, estimated to be generating above $2m in monthly revenues. Joygame started out by publishing localized titles for the Turkish market only, but in 2011 it expanded its operations into MENA, first by opening an office in Egypt. Korea- based CJ E&M acquired 50% of Joygame in March 2013. Sobee is a truly Turkish multiplayer game development company founded by highly regarded video game developer Mevlut Dinc. Mr. Dinc moved to his homeland after developing global hits such as the First Samurai and Street Racer to share his wealth of knowledge with the Turkish game developers and gamers. The company develops server based multiplayer games that are available and customised for a Turkish audience. Social Network Gaming Social network gaming typically includes games that are played on social networks and/or have some type of social graph integration. These games are generally monetized through virtual currency, free-to-play and have strong virality components attached to them. Facebook, which went from 100m users in 2008 to 1bn in 2012, has been the main driving force in the surge of social network gaming. EXHIBIT 14: TOP FACEBOOK DEVELOPERS BY DAU (JAN 2013) Company Company Rank Name Country Rank Name Country Metrics Metrics MAU DAU MAU DAU 1 Zynga US 142.3m 16.5m 13 FreshPlanet US 10.2m 1.0m 2 UK 38.3m 4.7m 14 Rovio Finland 10.3m 1.0m 3 Electronic Arts US 17.4m 3.7m 15 Geewa Czech Rep. 10.1m 1.0m 4 Peak Games Turkey 11.8m 3.4m 16 Tetris Online US 5.1m 1.0m 5 Wooga Germany 21.6m 3.2m 17 Kiloo Games Denmark 5.0m 1.0m 6 Social Point Spain 21.3m 2.1m 18 SGN US 6.4m 1.0m 7 FunPlus Game China 9.8m 2.0m 19 6waves Hong Kong 2.2m 0.8m 8 Playdom US 7.4m 1.7m 20 THX Games Hungary 2.8m 0.7m 9 RockYou! US 2.9m 1.2m 21 Boyaa China 4.3m 0.7m 10 Playtika Israel 6.1m 1.1m 22 Digital Chocolate US 4.4m 0.5m 11 PlayQ US 5.6m 1.1m 23 Mynet Turkey 3.8m 0.5m 12 Miniclip.comz UK 6.1m 1.1m 24 Qublix Canada 3.6m 0.4m Source: Out of 32.4m Turkish Facebook users, 89% play games. After three years of operations, Zynga’s smash hit Farmville franchise is still the most successful franchise on Facebook, which speaks to the retention and monetization potential of successful social network games. Turkish people are participants in the success of Farmville - 1 out of 8 Internet users in Turkey plays Farmville.19 GP Bullhound LLP
  21. 21. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING The Turkish poster child of global social gaming is Istanbul-based Peak Games, a company which in little over three years has become the world’s fourth largest gaming company on Facebook by daily active users (DAUs). This is impressive, since DAU is a metric that measures highly engaged users and is a proxy for monetization potential. The company’s flagship title is Okey, a digital version of a popular Turkish tile-based game usually played with four people. After resounding domestic success with Okey, Peak released Turkey and MENA focused Happy Farm, a farming simulation game in the style of Zynga’s Farmville. While Happy Farm’s core mechanics are similar to Farmville’s, notable modifications include the use of Arabic instead of English, and characters in local dress (and the absence of pigs). Mynet is another Turkish company that gets a top-25 spot on Facebook’s developer leaderboard. Whereas Peak Games is a dedicated game development and localization studio, Mynet is a diversified Internet media company with a massive user base on its web portal, mobile apps and Facebook, from which online games can be distributed. Mobile Internet Gaming In terms of the number of new games in development, media consumption and monetization, mobile Internet is the current rising star in the Turkish gaming landscape. Despite local complaints with regard to the lack of local developer talent (those who can write code in objective C or Unity) we expect to see more and more high quality games developed in Turkey targeting local and global mobile audiences through Mobile Internet devices such as iPhone, iPad, and Android. EXHIBIT 15: TOP 15 GROSSING IPHONE GAMES IN TURKEY (JAN 2013) Turkish Developer Localised Smaller than 50MB Free-to-Play 1 8 15 14 Source: Apple iOS and Google Play App Stores Although there are a large number of Turkish game developers offering their games on the Turkish app store, only Peak Games finds itself a spot in the top 15 grossing rankings with its highly successful mobile game, Okey Plus. Out of 15 top-grossing games, eight of them are localized for Turkish players, which shows the importance of localization. Two other important points to highlight from our analysis concern the file size and business model. When a mobile game is more than 50 megabytes, consumers cannot download it on the fly, through 3G mobile networks, which creates significant friction. Numbers speak to this fact. 14 of the 15 top-grossing games on the Turkish app store are less than 50 megabytes. In terms of the business model, all of the 15 top-grossing games are free-to-download and monetize through in-app purchases. Finland-based Supercell has the perfect recipe. The company’s highly successful social mobile games, Clash of Clans and Hayday — which are both localized, less than 50 megabytes, and free-to-play — have been consistently ranked first and second in the top-grossing charts in the last few months. Turkish mobile game developers have not only achieved some domestic success, but global recognition as well—with studios such as FUGO, Duello and Picnic Hippo achieving good traction in a very short time. Founded in 2009, FUGO has been a global name in mobile gaming through its popular word challenge game Wordz, which has been distributed in 35 languages downloaded over five million times. Duello, a developer of casual mobile games for20 GP Bullhound LLP
  22. 22. GP B ULLHOUND – T URKISH I NTERNET REPORT – T URKISH COFFEE : GET I T W HILE I T’ S B REWING all ages, was founded in 2010 and has accumulated over 17m installations to date, over one million paid downloads and close to 3m monthly active users through its popular iSlash franchise. Moreover, it has already reached profitability with no outside financing, and is preparing to roll out additional titles to capitalise on its success to date. Picnic Hippo, which was founded in 2011, has also become a global success story with Bucketz, a simple and humorous touch screen game which has been featured by Apple on 146 app stores worldwide and is the number one ranking game by iPhone Quality Index, a site which condenses critical opinion on apps from across the web into a definitive score. All of these studios have produced innovative, popular and internationally accessible titles. They are also small and lean, with no more than ten staff each. Licensed Online Betting Turkey has a complicated relationship with gambling. Although betting is officially illegal under Turkish law, licensed online betting is permitted in a number of selective cases including the state lottery (Piyango), sports betting (Sportoto) and gambling on horse racing. The national lottery is something of an institution for Turkish people and forms a billion dollar market. Soccer and horse racing are also highly popular - and the sports lottery generates in excess of $1.5bn yearly, with track-side betting bringing in around $700m. The sports lottery has been the primary driver behind the shift in Turkey towards betting online – unsurprising given that the Internet provides a constant stream of sports news and insight. Licensed online players are estimated to represent approximately 15% of total betting spend, and growing. The leading “legal” players are, Nesine, Tuttur, Oley, and Birebin. Similar to the United States, several changes have been made to Turkish gambling laws in the last decade making it illegal for gambling companies to target Turkish citizens with their products. While there are no legally-licensed Internet gambling websites operating out of the country, foreign operators continue to target Turkish players. Betsson, for example, received more than a quarter of its revenue from Turkey last year. In addition, Sportingbet recently sold its highly popular Turkish bookmaking service to GVC Sports for approximately $200m, despite attempts from Turkish regulations to stop the sale. The Turkish government has recently announced its intention to sell Sportoto - its only legal sports betting organization - as part of a privatization bid expected to raise in excess of $10bn.21 GP Bullhound LLP