horizon digital media & internet h1 2014

Digital Media & Internet

Quarterly Market Update: Q1 & Q2 2014

Contact Us

Mike Firmage

Managing Director

650.861.9090

[email protected]

I. Executive Summary (3)

II. Sector Trends (4)

III. M&A Overview (12)

IV. Market Performance (20)

V. IPO Overview (25)

VI. Deals Outlook (31)

Sandy Kory

Managing Director

650.776.8806

[email protected]

Allen Carey

Associate

415.635.7877

[email protected]

1821 Union Street San Francisco, CA 94123

1

Digital Media & Internet Industry Landscape

2

Diversified

Automation/Analytics/SaaS

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Marketing Technology Digital Media

B2C

Social Networking

Comparison Shopping

Traditional Media Gaming

Online Media

2014’Q1 and 2014’Q2 witnessed an improvement in the M&A activity, with deal volume increasing 16.2% y/y and 4.5% q/q in 2014’Q1 and further rising 16.6% y/y and 6.0% q/q in 2014’Q2.

The aggregate deal value increased 356.3% y/y and 69.4% q/q in 2014’Q1 whereas in 2014’Q2, it decreased 21.1% y/y and 43.6% q/q .

In the mid-market space, deal volume increased 56% y/y but declined 9.3% on q/q basis in 2014’Q1 while aggregate deal value increased 112.3% y/y and 1.7% q/q. 2014’Q2 was the busiest in

last 26 quarters with 54 mid-market deals. Aggregated mid-market deal value soared 65.3% y/y and 17.1% q/q in 2014’Q2.

Big ticket deals (>$500 mn) raised $29.8 bn through 10 deals in 2014’Q1 and $11.1 bn through 8 deals in 2014’Q2

In 2014’Q2 deals were priced at an average EV/EBITDA multiple of 14.7x, higher than 2014’Q1 average of 10.0x and the 26-quarter average of 12.1x

In 2014’Q2 deals were priced at an average EV/Revenue multiple of 3.0x, higher than 2014’Q1 average of 2.5x and the 26-quarter average of 2.6x

Executive Summary

3

Sector Trends

2014’Q1 & 2014’Q2 Digital Media & Internet M&A Activity

Market Performance & IPO Activity

S&P Software index is on a recovery mode with volatility at its lowest in the past year; decreasing volatility signals higher investor confidence. CBOE Volatility Index (VIX) fell to 11.7%, below

the one-year average. Increase in investor confidence and interest in the sector continues to stimulate market activity

2014’Q1 & 2014’Q2 remained a notable period for IPOs with 70 offerings that raised over $12.0 bn compared to $1.7bn raised through 30 offerings in the first two quarters of previous year.

2014’Q2 was the busiest quarter for IPO since 2008. The quarter witnessed 38 IPOs, nearly double compared to year-ago period

In 2014’Q2, IPOs exhibited an impressive performance compared to 2014’Q1, registering strong one-week gains, trending above the 26-quarter average. The pipeline is strong with more

than 20 announced IPOs

Disruptive technologies like cloud, big data, social media and embedded systems are making a paradigm shift in Business-Consumer ecosystem.

Businesses are seeking Everything-as-a-Service to remain innovative and improve business agility. Majority of businesses continue to remain inclined towards Software-as-a-Service as

evident from the highest adoption rate

E-commerce and m-commerce are gaining the ground; e-commerce market is expected to double while m-commerce market is expected to become around five-times by 2018

Internet advertising especially mobile advertising is becoming popular; Internet advertising would account for over one-quarter of total ad-spend by 2016

Marketers are increasing their spending on data & analytics and marketing automation to drive conversion rates and increase brand awareness. Marketers are using a multitude of platforms

to engage target audiences, with email, social media and mobile being the most preferred channels

II. SECTOR TRENDS

5

Cloud Computing

2012 2016E

Big Data Analytics

2012 2016E

$5.4 bn $48 bn

Social Media

Embedded Systems Mobile handset shipment Tablet shipment

2012 2016E

2012 2016E 2012 2016E 2012 2016E

1,482 mn 1,858 mn 85 mn 304 mn

Disruptive technologies making a paradigm shift in

Business-Consumer ecosystem

‘Digital Consumerism’ is radically changing the business environment

Source: KPMG, NASSCOM

$109 bn $206.6 bn 3,132 mn accounts 4,870 mn accounts

$1.2 tn $2.4 tn

Cloud computing and mobile technologies are top

two priorities for enterprises

6

Enterprises plan to increase spending on Cloud computing the most

Source: 2014 State of the Enterprise, Computerworld, February 2014

42%

38%

29%

29%

29%

28%

28%

27%

26%

23%

19%

17%

41%

48%

60%

56%

53%

57%

52%

57%

55%

62%

62%

67%

6%

6%

4%

8%

5%

7%

8%

8%

11%

4%

11%

10%

11%

8%

7%

7%

13%

8%

12%

8%

8%

11%

8%

6%

Cloud Computing

Wireless/ Mobile

Security Technologies

Virtualization

Business Analytics

Disaster recovery/ continuity planning

Collaboration tools/ social media

Unified communications

Application development,upgrades or replacement

Data management

Data center consolidation/optimization

IT/ network services management

Organization’s spending in 2014

Increase significantly/ Increase somewhat Remain the same Decrease significantly/ Decrease somewhat Not Sure

Enterprises consider cloud to be the most important area of investment, with 42% respondents planning to increase spending on cloud

computing in 2014

Wireless/ Mobile and Security technologies are the other areas that will attract spending, with 38% respondents planning to increase their

budget for wireless/ mobile and 29% for security technologies in 2014

Businesses are seeking Everything-as-a-Service

7

SaaS market to grow at a CAGR of 15.5% over 2011-15

Source: Everest Group Cloud Connect Enterprise Cloud Adoption Survey 2014; Gartner and IDC

22%

32%

26%

14%

19%

8%

35%

35%

18%

26%

14%

19%

15%

15%

29%

29%

37%

17%

17%

17%

27%

31%

31%

56%

Business Process as aService (BPaaS)

Hybrid Cloud (IaaS)

Public Cloud (IaaS)

Platform as a Service(PaaS)

Private Cloud (IaaS)

Software as a Service(SaaS)

Enterprise cloud adoption trends by cloud layer

Already Adopted

Adopt in near future

Adopt in distant future

No plans to adopt

SaaS has the highest adoption rate, with 56% of the respondents already using SaaS, while 38% plan to adopt in future

Overall, 94% respondents showed interest in SaaS, higher than any other cloud service, suggesting bright future prospects

SaaS market is expected to grow globally to $21.5 bn by 2015, with North America accounting for 64% of the global market share

7.7 10.0

12.9

2.8

3.9

5.4

1.1

1.6

2.2

0.3

0.5

0.7

2.3

1.1

0.5 0.2 2.9

1.5

0.6 0.2

20

11

N. A

me

rica

Euro

pe

Asi

a

Lati

nA

mer

ica

20

13

N. A

me

rica

Euro

pe

Asi

a

Lati

nA

mer

ica

20

15

E

SaaS Market Forecast

N. America Europe Asia Latin America

M-commerce to remain a catalyst for E-commerce

growth

8

545 638

752

882

1,024

1,179

1,346

11%

21%

27%

34%

41%

44%

47%

2012 2013 2014E 2015E 2016E 2017E 2018E

Global E-commerce Market ($ bn)

E-commerce M-commerce as a % of E-commerce

27 50 70 95 123 147 173 34

83

134

203

292

369

453

61

133

204

298

415

516

626

2012 2013 2014E 2015E 2016E 2017E 2018E

Global M-commerce Market ($ bn)

M-commerce via Smartphones M-commerce via Tablets

CAGR 47.4%

e-commerce to double while m-commerce market to 5x by 2018*

Source: Goldman Sachs E-commerce Research 2014; *Compared to 2013 levels

Global m-commerce market is expected to grow at a CAGR of

47.4% over 2012-18 to $626 bn

By 2018, m-commerce will account for more than 47% of the

total e-commerce market vis-à-vis 11% in 2012

Total m-commerce buyers are expected to reach 1,089 mn by

2018 from 210 mn in 2012; m-commerce per buyer is forecasted

at $575 in 2018 compared to $290 in 2012

Internet advertising to account for more than one-

quarter of the total ad-spend by 2016

9

42.4 51.8 63.2 74.4 12.8

13.5 14.2

15.1 49.0 55.7

63.1

71.1

2013 2014E 2015E 2016E

Internet Ad-spend by type ($ bn)

Total Display Classified Paid Search

Source: ZenithOptimedia; Note: Traditional medium includes television, newspaper, magazine, outdoor, radio and cinema

Mobile advertising is the fastest growing segment

Global ad-spend is forecasted to reach $537 bn by the end of 2014

Internet’s share of ad-spend is estimated to increase from 20.8% in

2013 to 27.1% by 2016;

Internet display is expected to overtake paid search by 2015

Mobile would become the fourth-largest medium of advertising by

the end of 2016

Mobile ad-spend is expected to reach $45.2 bn by 2016 compared

to $13.7 bn in 2013 (28% of total internet ad-spend in 2016 vs. 13%

in 2013 and 7.6% of total ad-spend in 2016 compared to 2.7% in

2013)

398.8 442.4

90.8

115.6 13.4

45.0

43.6

24.8

31.6

2013 Traditional DesktopInternet

Mobile internet 2016E

Global Ad-spend by medium ($ bn)

Traditional Desktop Internet Mobile internet

3.5% CAGR 8.4% CAGR

49.8% CAGR

Data & Analytics and Marketing Automation to be

the key areas of spending for marketers in 2014

10

Top Priorities for Marketers in 2014

Driving increased conversion rate

Increasing and improving brand awareness

Collecting, measuring and using behavior-based data

98% of marketers plan to increase or maintain their spend in 2014

Top 5 areas for increased spending

61%, Data &

Analytics

60%, Marketing

Automation

58%, Email

Marketing

57%, Social Media

Marketing

57%, Content

Management

65% of marketers believe driving subscriber engagement is their primary lifecycle challenge

Source: ExactTarget, 2014 State of Marketing

47%

46%

29%

68% of marketers believe email is core to their business

49% send more than 500,000 emails annually

42% rarely/never use responsive design

Email, social and mobile becoming the core of customer engagement

46% of marketers believe social media is core to their business

86% believe social efforts will or do provide ROI

57% have a dedicated social team

80% of marketers using mobile believe mobile efforts do or will provide ROI

30% are using location-based functionality

47% have an app

EMAIL SOCIAL MOBILE

Technology Companies Forming Partnerships to

Enhance Consumers’ Experiences

Content providers that help consumers navigate the marketplace are looking for innovative ways to provide a better user experience

Partnerships with emerging technologies allow technology companies to automate customer acquisition and monetization

11

Select indicative partnerships

Source: TechCrunch, Venturebeat, Auto123, Business Insider, The Verge, Marketing Land;

Allow users to identify songs and snippets and post them on Facebook

Allow LinkedIn users to scan business cards using Evernote app and connect directly on Linkedin

Allow viewers to vote real time during live TV shows

Enables Twitter to search its social media reputation in real time

Allows AOL's Mapquest users to access TomTom's digital map database

Enable payments to be made on any Facebook mobile app

Will allow users to book reservations from the app with very little user input

The two organizations offer co-branded campaigns for top shows and events

III. M&A OVERVIEW

13.3 15.1

8.9 6.3 6.1

12.2 14.5

8.8 6.1

21.3

29.7

17.8 16.8 16.9

32.3

18.5 21.5

24.6

20.4 20.3

8.5

27.5

20.4 22.8

38.6

21.7

728 707

636

559

477 475

523 558

699 701 678 690

782

732 757 757 761

802

742 730

678 716

766 754 788

835

0

100

200

300

400

500

600

700

800

900

$0

$5

$10

$15

$20

$25

$30

$35

$40

08'Q1 08'Q2 08'Q3 08'Q4 09'Q1 09'Q2 09'Q3 09'Q4 10'Q1 10'Q2 10'Q3 10'Q4 11'Q1 11'Q2 11'Q3 11'Q4 12'Q1 12'Q2 12'Q3 12'Q4 13'Q1 13'Q2 13'Q3 13'Q4 14'Q1 14'Q2

Deal Value in $ bn (LHS) Deal Volume (RHS)

Digital Media & Internet M&A Activity is at a five-

year high in the first two quarters of 2014

In 2014’Q1, deal volume in the Digital Media & Internet space rose 4.5% q/q and 16.2% on y/y basis while the aggregate deal value increased

69.4% from the prior quarter and was up 356.3% over 2013’Q1, primarily due to Facebook’s acquisition of Whatsapp for $19 bn in 2014’Q1

In 2014’Q2, the deal volume rose 6.0% q/q and 16.6% on y/y basis while the aggregate deal value decreased 43.6% from the prior quarter

and was down 21.1% over 2013’Q2

13

Deal volumes rise in the first two quarters of 2014

Source: Capital-IQ; Note: Deals refer to announced , closed and effective deals; Deal statistics refer to deals with disclosed values only

Average Annual Deal Value (LHS)

Facebook acquisition of WhatsApp ~ $19 bn

Record number of Mid-Market M&A deals after

three years

Deal volume in the mid-market Digital Media & Internet space rose 56% y/y but declined 9.3% on q/q basis to 39 in 2014’Q1 while deal

volume rose 86.2% y/y and 38.5% on q/q basis to 54 in 2014’Q2

Aggregate mid-market deal value soared 112.3% in 2014’Q1 over 2013’Q1 and 65.3% in 2014’Q2 over 2013’Q2

14

Highest number of deals in any given quarter in 2014’Q2

Source: Capital-IQ; Note: Deals in range $50-$500 mn are considered Mid Market Deals; Deal statistics refer to deals with disclosed values only

5.8

5.4 5.9

3.5

1.9

3.7

5.9

4.5

2.6

6.0

7.1

5.5

8.8 8.3

6.4

4.8 5.8 6.8

4.2 5.0

3.5

5.3 4.3

7.4 7.5

8.8

37

40

35

27

14

24

33

28

23

36

46

41

51

47

43

36

31

43

32 35

25

29 31

43

39

54

0

5

10

15

20

25

30

35

40

45

50

55

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

$11

$12


Deal Value in $ bn (LHS) Deal Volume (RHS) Average Annual Deal Value (LHS)

Average transaction size driven upward by large

deals

First two quarters witnessed increased transactions in mid-

market and big ticket deals

Big ticket deals (>$500 mn) raised $29.8 bn in 2014’Q1 and

$11.1 bn in 2014’Q2 aggregating to a total of $40.9 bn in

2014YTD, up 67.6% over the comparable period last year

The average deal size was $199 mn in 2014’Q1 and $100 mn in

2014’Q2. The average mid-market deal size was $192 mn in

2014’Q1 and $159 mn in 2014’Q2

15

Big ticket deals on the rise… Average transaction size reaches new high

Source: Capital-IQ; Note: Deal statistics refer to deals with disclosed values only

838

609 725 761 719

629

298

139

99

146 177

141 128

94

16

18

30 31

38

36

18

2008 2009 2010 2011 2012 2013 2014YTD

Deal Volume

Deals (<=$50 mn) Deals (~$50-$500 mn) Deals (>$500 mn)

7.6 5.3 7.0 7.8 8.3 6.8 3.1

20.6 16.0

21.2 28.2 21.8 20.5

16.3

15.3 20.4

46.8

48.6 56.6 51.8

40.9

2008 2009 2010 2011 2012 2013 2014YTD

Deal Values ($ bn)

Deals (<=$50 mn) Deals (~$50-$500 mn) Deals (>$500 mn)2008,

$43.8mn

2009, $57.4mn 2010,

$83.2mn

2011, $87.3mn

2012, $96.6mn

2013, $99.9mn

2014YTD, $147.1mn

35

50

65

80

95

110

125

140

155

170

100 120 140 160 180 200 220

Ave

rage

De

al S

ize

($

mn

)

Deal Volume (Deals >$50 mn)

* Bubble Size reflects Deal Value (Disclosed deals > $50 mn)

M&A transactions marked by higher purchase

multiples

The average EV/ EBITDA multiple fell to 10.0x in 2014'Q1. It increased to 14.7x in 2014’Q2, above the 26-quarter average of 12.1x

The average EBITDA of the acquired company witnessed a steep increase to $128 mn in 2014’Q1 from $21 mn in the previous quarter; it

further increased to $185 mn in 2014’Q2

16

Acquisition multiple higher than the five-year average in Q2

Source: Capital-IQ; Note: Multiples based on non-cancelled deals with reported multiples only; Excluded the Targets with EV/EBITDA > 35

15.4

12.4 11.2

7.0

11.5 12.0 10.3 10.6

9.2

13.9 13.3

9.7

13.9 14.4

17.2

9.8 11.2

10.9

12.6 11.7

13.8

11.3 11.3

15.8

10.0

14.7

71 38

18 15 11 31

137

12 15 95 39 20 22

71 47

17

44

25

42 99 89

37

98 21

128

185

-800

-600

-400

-200

0

200

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

$18.0

$20.0


EV/EBITDA (LHS) Average Target LTM EBITDA(RHS)

M&A transactions marked by higher purchase

multiples

The average EV/ Revenue multiple fell to 2.5x in 2014'Q1, below the 26-quarters average of 2.6x. It rose to 3.0x in 2014’Q2

The average revenue size of the acquired company rose to the highest in last 26-quarters to $225 mn in 2014’Q1 from $72 mn in the previous

quarter; it fell marginally to $196 mn in 2014’Q2

17

Acquisition multiple higher than the five-year average in Q2

Source: Capital-IQ; Note: Multiples based on non-cancelled deals with reported multiples only; Excluded the Targets with EV/Revenue > 15

3.0

2.8

2.3 2.1 2.4

2.1 2.0 2.1

2.6 2.7

3.1

2.1

2.9

2.4

3.4

2.4 2.4

3.2

2.2

3.1

2.1

3.0 2.7 2.7

2.5

3.0

204

43 92 59 42

163 175

65 45 87 64 50

104 114 82 70

62 46

194 202

73 103

214

72

225 196

-800

-600

-400

-200

0

200

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0


EV/Revenues (LHS) Average Target LTM Revenues (RHS)

2014’Q2 Transactions

18

Source: Capital-IQ; Note: Deal list refer to deals with disclosed deal value only

Date Announced Target Acquirer Status Deal Value ($ mn) Target Rev. ($ mn) EV/REV. EV/EBITDA

June 26, 2014 39.net Longmaster Information & Technology Closed 104.4 17.2 6.1x NA

June 24, 2014 AdColony Opera Software Announced 350.3 52.8 6.6x 44.3x

June 24, 2014 Cegedim (Information Solutions and Customer Relationship Management Business)

IMS Health Holdings Announced 523.2 576.2 0.9x 6.0x

June 23, 2014 MICROS Systems Oracle Corporation Announced 5,262.5 1,337.9 3.4x 17.5x

June 18, 2014 ReadSoft Hyland Software Announced 201.6 119.6 1.7x 31.7x

June 13, 2014 Limelight Networks Tuition Build Announced 660.5 168.8 3.3x NA

June 11, 2014 Healthy Directions Helen of Troy Closed 195.0 145.0 1.3x 8.0x

May 12, 2014 Mercury Payment Systems NPC Group Closed 1,650.0 237.0 6.9x 17.7x

May 12, 2014 Pittsburgh Glass Works (Insurance and Services Division)

Claims Services Group Announced 280.0 58.8 4.8x 14.2x

May 6, 2014 ReadSoft AB Lexmark International Technology Announced 197.6 119.6 1.6x 31.7

April 21, 2014 Shanda Games Perfect World Announced 100.0 681.9 2.5x 5.6x

April 16, 2014 Square Enix Holdings SMBC Nikko Securities Announced 149.6 1,505.8 0.7x 6.6x

April 15, 2014 E-Learning John Wiley & Sons Closed 175.0 37.0 4.7x NA

April 15, 2014 24 ORE Software TeamSystem Closed 162.3 84.5 1.7x NA

April 8, 2014 Atlassian Pty T. Rowe Price Group; Dragoneer Investment Group Announced 150.0 149.0 NM NA

April 7, 2014 Vocus GTCR Closed 480.6 186.3 2.4x NA

April 3, 2014 i:FAO Amadeus Corporate Business Announced 103.8 20.4 4.6x 14.0x

April 3, 2014 sociomantic labs dunnhumby Closed 205.7 100.6 2.0x NA

Select List Q2

2014’Q1 Transactions

19

Source: Capital-IQ; Note: Deal list refer to deals with disclosed deal value only

Date Announced Target Acquirer Status Deal Value ($ mn) Target Rev. ($ mn) EV/REV. EV/EBITDA

March 26, 2014 Fieldglass SAP Closed 1,000.0 NA NA NA

March 24, 2014 Nets Holding Advent International Corporation; ATP Private Equity Partners; Bain Capital Private Equity

Announced 3,140.1 NA NA NA

March 18, 2014 TravelClick Thoma Bravo Closed 930.0 NA NA NA

March 10, 2014 Serena Software HGGC Closed 453.3 183.0 NA NA

March 6, 2014 Encar Networks Limited carsales.com Announced 114.0 16.8 13.6x NA

February 27, 2014 Coastal Contacts Essilor International Closed 390.8 192.9 1.9x NA

February 26, 2014 Third Coast Holdings Wolters Kluwer Corporate Legal Services Closed 180.0 57.0 5.1x NA

February 19, 2014 WhatsApp Facebook Announced 19,467.7 NA NA NA

February 19, 2014 Coverity Synopsys Closed 375.0 NA NA NA

February 13, 2014 Transics International WABCO Europe BVBA Closed 136.4 71.2 1.6x 9.4x

February 13, 2014 TrueCar Anthem Venture Partners; Vulcan Capital; Andell Investments

Closed 121.1 134.0 NA NA

January 30, 2014 Accelrys Dassault Systemes Closed 746.4 168.5 4.1x NM

January 27, 2014 Shanda Games Shanda Interactive Entertainment; Primavera Capital Group

Announced 440.2 717.7 2.8x 5.6x

January 22, 2014 AirWatch Vmware Closed 1,540.0 NA NA NA

January 21, 2014 NEC BIGLOBE Japan Industrial Partners Closed 672.0 NA NA NA

January 16, 2014 TDX Group Equifax Closed 326.8 89.2 3.7x NA

January 16, 2014 Shanghai 2345 Network Technology Shanghai Hyron Software Announced 411.9 80.8 14.8x NA

January 13, 2014 Ideeli Groupon Closed 154.2 98.3 1.5x NA

January 2, 2014 Mandiant Corporation FireEye Closed 843.7 102.0 8.1x NA

Select List Q1

IV. MARKET PERFORMANCE

S&P Software index on a recovery mode with

volatility at its lowest in the past year

21

Decreasing volatility signals higher investor confidence

Source: Bloomberg; Returns calculated based on index level on July 9, 2014

S&P Software underperformed S&P500 index

90

100

110

120

130

140

150

07/13 08/13 09/13 10/13 11/13 12/13 01/14 02/14 03/14 04/14 05/14 06/14 07/14

S&P 500 NASDAQ Composite S&P Select Software

Index Returns Last 3-month Last 6-month LTM

S&P 500 5.4% 7.3% 19.4%

NASDAQ Composite 5.6% 6.3% 26.1%

S&P 500 Software Industry Index -0.5% -4.2% 13.0%

Investor sentiments remain optimistic ahead of low volatility

10%

12%

14%

16%

18%

20%

22%

07/13 08/13 09/13 10/13 11/13 12/13 01/14 02/14 03/14 04/14 05/14 06/14 07/14

CBOE Volatility Index Average Volatility

Volatility trading falls below 1-year average; Investor confidence expected to drive equity markets

Trading Comparables – Digital Media

22

Source: Capital-IQ; Note: All values as of July 9, 2014

Market data Operational Data Trading Multiples

Company % of 52 Market Revenues 2yr Rev. LTM EBITDA EV/Revenues EV/EBITDA

Name Share Price Week High Cap. EV LTM CAGR (%) Margin (%) LTM CY+1 LTM CY+1

All values are in $ mn, except share price and per share data

Digital Media

AOL 40.52 76.1% 3,239 3,273 2,365 4.2% 18.4% 1.4x 1.3x 7.5x 6.5x

Yahoo 34.85 83.5% 35,087 33,372 4,673 -3.2% 19.0% 7.1x 7.4x 37.6x 24.6x

Google 576.08 95.2% 391,018 342,138 62,294 24.8% 29.8% 0.0x 0.0x 0.0x 0.0x

Trulia 41.16 78.1% 1,520 1,529 174 102.3% -10.4% 8.8x 6.0x NM NM

TripAdvisor 103.52 93.1% 14,767 14,667 996 21.8% 32.3% 14.7x 11.9x 45.6x 29.5x

Shutterstock 77.20 74.9% 2,717 2,504 257 39.4% 18.2% 9.7x 7.8x NM 39.2x

LinkedIn 159.56 62.0% 19,428 17,127 1,677 64.9% 9.9% 10.2x 8.1x NM 32.6x

Bankrate 17.81 77.0% 1,865 1,919 485 3.8% 23.6% 4.0x 3.5x 16.7x 13.0x

Demand Media 4.57 64.0% 396 335 384 7.6% 8.3% 0.9x 0.9x 10.5x 7.0x

Facebook 64.97 89.5% 166,736 154,499 8,916 48.6% 52.3% 17.3x 13.0x 33.1x 20.9x

Gannett 32.11 98.9% 7,282 10,675 5,328 1.1% 20.0% 2.0x 1.8x 10.0x 7.3x

IAC/InterActiveCorp 65.87 81.7% 5,470 5,535 3,021 16.1% 17.5% 1.8x 1.7x 10.5x 9.2x

WebMD Health 51.74 97.1% 1,953 2,127 536 0.2% 16.2% 4.0x 3.7x 24.5x 13.7x

Yelp 71.36 70.1% 5,114 4,714 263 67.2% 0.5% 17.9x 12.9x NM NM

Zillow 133.37 91.7% 5,268 4,959 225 70.2% -2.9% 22.1x 16.0x NM NM

j2 Global 50.23 89.3% 2,389 2,355 541 25.5% 42.2% 4.4x 4.0x 10.3x 9.3x

RetailMeNot 23.17 47.5% 1,245 1,088 231 NA 30.9% 4.7x 3.9x 15.3x 11.0x

Netflix 443.00 93.1% 26,557 25,789 4,621 17.3% 7.4% 5.6x 4.7x NM 42.6x

Mean 7.6x 6.0x 18.5x 17.8x

Median 5.1x 4.4x 12.9x 13.0x

Min 0.0x 0.0x 0.0x 0.0x

Max 22.1x 16.0x 45.6x 42.6x

Comparables

Trading Comparables – Marketing Technology

23






Marketing Technology

Adobe Systems 71.57 95.8% 35,597 33,773 4,105 -2.7% 18.2% 8.2x 8.1x 45.2x 31.4x

Constant Contact 32.00 95.4% 1,004 874 296 14.9% 10.3% 3.0x 2.6x 28.7x 14.5x

Demandware 60.00 73.0% 2,153 1,899 115 37.5% -14.8% 16.5x 12.8x NM NM

Bazaarvoice 7.81 67.9% 606 561 168 25.9% -17.7% 3.3x 3.1x NM NM

Brightcove 9.53 58.6% 306 286 116 28.5% -0.9% 2.5x 2.2x NM NM

Jive Software 8.11 44.5% 571 465 153 32.9% -39.6% 3.0x 2.7x NM NM

Web.com 27.47 72.8% 1,417 1,962 511 42.6% 19.2% 3.8x 3.3x 20.0x 11.4x

Rocket Fuel 23.47 32.6% 825 636 277 NA -4.8% 2.3x 1.5x NM NM

Salesforce.com 54.60 81.5% 33,524 34,938 4,405 33.9% -0.7% 7.9x 6.5x NM 37.0x

LivePerson 10.01 65.7% 543 463 183 14.6% 3.5% 2.5x 2.3x NM 21.6x

Marketo 27.21 60.5% 1,102 991 108 NA -39.1% 9.1x 7.0x NM NM

OpenTable 103.00 96.9% 2,427 2,310 198 16.9% 30.4% 11.6x 10.2x 38.4x 26.8x

Priceline.com 1,236.37 89.7% 64,825 59,970 7,133 24.7% 37.6% 8.4x 7.1x 22.4x 17.7x

ReachLocal 7.11 49.2% 205 132 517 14.4% 0.9% 0.3x 0.3x 28.3x 47.2x

Mean 5.9x 5.0x 30.5x 25.9x

Median 3.6x 3.2x 28.5x 24.2x

Min 0.3x 0.3x 20.0x 11.4x

Max 16.5x 12.8x 45.2x 47.2x

Comparables

Trading Comparables – Other Notable Companies

24






Other Notable Companies

Amazon.com 329.97 80.9% 151,841 146,322 78,123 23.3% 4.9% 1.9x 1.6x 38.6x 22.5x

Apple 95.39 98.5% 575,170 550,737 176,035 11.2% 32.8% 3.1x 3.0x 9.5x 8.9x

AVG Technologies 19.91 75.0% 1,049 1,018 396 15.9% 35.0% 2.6x 2.6x 7.3x 7.2x

eBay 50.93 85.3% 64,546 60,830 16,561 15.6% 29.6% 3.7x 3.3x 12.4x 9.9x

IBM 188.42 93.8% 190,716 225,137 98,827 -3.9% 25.4% 2.3x 2.3x 9.0x 8.4x

Intuit 81.06 98.3% 23,012 20,878 4,426 5.0% 33.9% 4.7x 4.5x 13.9x 11.0x

Oracle 40.26 93.2% 179,354 165,271 38,275 1.5% 43.7% 4.3x 4.2x 9.9x 8.5x

SAP AG 78.66 91.6% 93,882 93,484 23,303 7.8% 34.4% 4.0x 3.9x 11.6x 11.3x

Microsoft 41.67 98.5% 344,211 280,019 83,347 6.8% 38.5% 3.4x 2.9x 8.7x 8.7x

Mean 3.3x 3.2x 13.4x 10.7x

Median 3.4x 3.0x 9.9x 8.9x

Min 1.9x 1.6x 7.3x 7.2x

Max 4.7x 4.5x 38.6x 22.5x

Comparables

V. IPO OVERVIEW

Digital Media & Internet IPO accelerate to record

highs in the first two quarters of 2014

IPOs in the Digital Media & Internet space reached to its highest levels since 2008 in 2014’Q2. Number of IPOs nearly tripled to 32 in 2014’Q1

vis-à-vis 10 in 2013’Q1 while IPOs nearly doubled to 38 in 2014’Q2 compared to 20 in 2013’Q2

IPOs raised a total of $5.7 bn in 2014’Q1 compared to $0.6 bn in 2013’Q1 while IPOs raised $6.3 bn in 2014’Q2 vis-à-vis $1.1 bn in the same

period previous year

The average capital raised through IPO stood at $190 mn in 2014’Q1 and $180 mn in 2014’Q2

26

IPO activity surges to its highest since 2008 in 2014’Q2

Source: Capital-IQ; Note: 2012’Q1 deal value exclusive of the $16 bn Facebook IPO; Deals refer to effective, closed and announced IPOs not withdrawn till date

3.2

0.7 0.2 0.4

0.2 0.1

1.9

1.1 1.7

2.8

0.9

3.1

1.8

3.4

0.7

2.4 2.4

0.5 2.5

0.2 0.6

1.1

2.2

4.6

5.7 6.3

19

25

7

10

6 5

14

10

22

22

15

32

21

28

22

25

29

17

11

7

10

20 19

33 32

38

0

5

10

15

20

25

30

35

40

$0

$1

$2

$3

$4

$5

$6

$7


Deal Value in $ bn (LHS) Deal Volume (RHS)

Investor confidence gradually recover in Tech IPOs

27

Investors prospered over notable 1-Week Gains in Q2 IPOs after modest returns in Q1

Source: Capital-IQ; Note: Deals refer to effective, closed and announced IPOs not withdrawn till date

23% 24%

1%

30%

39%

77%

33%

9%

19%

29%

52%

28% 33%

20%

35%

28%

43%

34% 33%

21%

33% 37%

47% 50%

32%

21%


Avg. 1-Day Return (%)

29%

18%

-6%

22% 23%

121%

28%

12% 20%

25%

61%

29% 29% 22%

29% 20%

52%

38%

28% 25%

52%

38%

53% 56%

23%

38%


Avg. 1-Week Return (%)

IPOs one-day performance in the last 12 quarters

2014’Q2 IPO Avg. 1-Week gain continue to persist above 26-quarter average after declining in

2014’Q1

26-Quarter Average 32%

26-Quarter Average 34%

Closed IPOs in 2014 (1/2)

28

Source: Capital-IQ

Date Announced Company Offering Size ($ mn) IPO Price/Share ($) 1-Day Performance (%) Business Description

June 23, 2014 Tian Ge Interactive 207.3 0.7 8.3 Operates live social video platform

June 19, 2014 3P Learning 265.8 2.4 (14.0) Provides online education products

June 17, 2014 Viadeo 33.4 23.4 (17.0) Provides social networking services

June 16, 2014 Smartgroup Corporation 106.4 1.5 (9.7) Provides salary packaging administration services

June 13, 2014 Worldline 781.3 22.3 NA Provides electronic payment and transactional services

June 12, 2014 IMImobile 51.0 2.0 11.3 Develops mobile engagement software and solutions

May 26, 2014 Serko 19.1 1.0 (13.6) Provides computer software solutions for travel bookings

May 26, 2014 Gentrack 86.1 2.1 3.8 Develops, integrates, and supports enterprise billing and customer management software solutions

May 23, 2014 Xunlei 87.8 12.0 24.2 Operates a consumer Internet platform for digital media content

May 22, 2014 Zoopla Property Group 596.4 3.7 6.8 Operates online property portals

May 19, 2014 iSentia Group 265.1 1.9 19.1 Provides media intelligence solutions through SaaS model

May 6, 2014 Marimedia 50.2 2.6 1.3 Offers online advertising solutions

May 5, 2014 Markit 1,283.3 24.0 NA Provides configurable enterprise software platforms

May 2, 2014 Kinaxis 92.2 11.9 0.2 Provides cloud-based sales and operations planning, and supply chain applications

April 10, 2014 Zendesk 100.0 9.0 49.2 Provides software-as-a-service customer service platform

April 7, 2014 MobileIron 100.0 9.0 22.4 Develops and provides an information technology platform

April 3, 2014 TrueCar 70.0 9.0 NA Provides internet-based information, technology, and communication services

April 2, 2014 Cheetah Mobile 168.0 14.0 NA Offers mission critical applications

March 25, 2014 BAIOO Family Interactive 195.8 0.3 (17.7) Develops and operates online virtual worlds for children

March 17, 2014 JUST EAT 597.3 4.3 8.9 Operates an online marketplace for restaurant delivery

Select List 2014’Q1 & 2014’Q2 Closed IPOs

Closed IPOs in 2014 (2/2)

29

Source: Capital-IQ

Date Announced Company Offering Size ($ mn) IPO Price/Share ($) 1-Day Performance (%) Business Description

March 14, 2014 Weibo 285.6 17.0 NA Operates as a social media platform

March 12, 2014 Leju Holdings 100.0 10.0 NA Provides online-to-offline (O2O) real estate services

March 10, 2014 Paycom Software 99.7 15.0 2.3 Provides a cloud-based human capital management software solution delivered as software-as-a-service

March 7, 2014 XLMedia 69.1 0.8 32.7 Provides marketing services to online gambling operators

March 3, 2014 Five9 70.0 7.0 NA Provides cloud software for contact centers

March 3, 2014 OPOWER 115.9 19.0 NA Provides cloud-based software to the utility industry

February 28, 2014 GrubHub 192.6 26.0 NA Provides an online and mobile platform for restaurant pick-up and delivery orders

February 24, 2014 Everyday Health 100.1 14.0 (3.6) Provides online health information solutions

February 21, 2014 2U 119.3 13.0 7.5 Provides cloud-based SaaS solutions for nonprofit colleges and universities

February 18, 2014 Borderfree 80.0 16.0 25.0 Provides cross-border ecommerce solutions

February 17, 2014 Minnano Wedding 40.6 27.4 14.8 Manages a wedding review site

February 13, 2014 Aerohive Networks 75.0 10.0 NA Designs and develops cloud-managed mobile networking platform

February 12, 2014 Q2 Holdings 100.9 13.0 16.7 Provides cloud-based virtual banking solutions

February 10, 2014 Amber Road 96.1 13.0 NA Provides global trade management solutions through SaaS model

February 4, 2014 The Rubicon Project 101.6 15.0 33.9 Provides advertising automation solutions

February 4, 2014 Manx Telecom 256.3 2.3 12.7 Provides communication solutions

January 31, 2014 Coupons.com 168.0 16.0 87.5 Operates a digital promotion platform

January 30, 2014 JD.com 1,780.0 19.0 10.0 Online retailer

January 30, 2014 Paylocity Holding 119.8 17.0 41.4 Provides cloud-based payroll and human capital management software solutions

January 21, 2014 Sabre 627.2 16.0 NA Provides technology solutions to the travel and tourism industry

Select List 2014’Q1 & 2014’Q2 Closed IPOs

IPO Pipeline Encouraging

30

Source: Capital-IQ

Announced IPOs

Date Announced Company Logo Offering Size ($ mn) IPO Price/Share ($) Business

June 30, 2014 Yodlee 75.0 NA Operates a technology and applications platform that provides digital financial services in the cloud

June 19, 2014 Tiange Technology 212.9 NA Provides online video and entertainment platform along with community and social networking web site

June 19, 2014 8common 3.3

0.2 Develops and distributes software solutions

June 9, 2014 GoDaddy 100.0 NA Focuses on the design and development of cloud-based technology products

June 4, 2014 Travelport Worldwide 100.0 NA Provides distribution, technology, payment, and other solutions for travel and tourism industry

May 29, 2014 Voyage Group 89.8 23.6 Engaged in online commerce, online media, point and e-money, online advertising, online research, and mobile solution businesses

May 6, 2014 Alibaba Group Holding 1000.0 NA Online retailer

VI. DEALS OUTLOOK

Optimistic Outlook for Deals

32

Tuck-in acquisitions and consolidation among players to drive deal activity in 2014

Source: Mtech Advisors, KPMG; *Excluding Facebook IPO; **Data up to July 9, 2014

Innovative technology companies remain hot targets

Emerging innovative players in the Digital Media and Internet space would continue to lure large companies due to rapidly changing technology platforms

The trend in acquisitions at high multiples is expected to continue, as companies rush to acquire one-of-a-kind technologies or companies that are complimentary to their business, which might significantly broaden the business offerings

Increasing adoption of cloud computing and mobile technologies by enterprises

Enterprises will continue to investment in cloud adoption in 2014, to maintain competitiveness while under pressure to cut costs in the current environment

Cloud computing, mobile technologies, converging technologies and data analytics would be the key trends driving the M&A activity in 2014

Data analytics and marketing automation will be the primary tool

The prevalence of data analytics and marketing automation is accelerating, thereby making such companies attractive targets

Substantial increase in interactive/digital marketing agencies in the past five years could also lead to consolidation among industry players

M-commerce to drive e-commerce market

M&A activity among E-commerce players is expected to increase as result of consolidation with stronger/ bigger online retailers acquiring similar companies which will expand their geographic reach

As companies rush to gain control over the broad mobile value chain, the need for vertical and horizontal integration of mobile capabilities would drive M&A activity in new segments like payments and mobile commerce

Vibrant Primary Market Activity

Capital market activity is expected to further accelerate in 2014 after rebounding in 2013 from weak offerings witnessed in 2012*

The IPO market looks attractive with more than 20 IPOs with offerings over $2.2 bn** in pipeline, including IPO of China’s online retailer, Alibaba.com

33

Digital Media Interactive Marketing Mobile Software

horizon digital media & internet h1 2014

Economy & Finance

2014q1 average

quarter average

market activity2014q1

2014q2in 2014q2 deals

xin 2014q2 deals

periodin 2014q2

midmarket deals

year average