Horizon Digital Media & Internet H1 2014

Digital Media & Internet
Quarterly Market Update: Q1 & Q2 2014

Contact Us
Mike Firmage
Managing Director
650.861.9090
mfirmage@horizonpartners.com
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
skory@horizonpartners.com
Allen Carey
Associate
415.635.7877
acarey@horizonpartners.com
1821 Union Street San Francisco, CA 94123
1

Digital Media & Internet Industry Landscape
2
Diversified
Automation/Analytics/SaaS
ENTERPRISE
CONSUMER
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

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 a
Service (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
2011
N. America
Europe
Asia
Latin
America
2013
N. America
Europe
Asia
Latin
America
2015E
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 $13.7 bn in 2013 (28% of total internet ad-spend in 2016 vs. 13% in 2013 and 7.6% of total ad-spend in 2016 compared to 2.7% in 2013)
398.8
442.4
90.8
115.6
13.4
45.0
43.6
24.8
31.6
2013
Traditional
Desktop
Internet
Mobile internet
2016E
Global Ad-spend by medium ($ 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

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
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 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, $147.1mn
35
50
65
80
95
110
125
140
155
170
100
120
140
160
180
200
220
Average Deal Size ($ 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
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
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
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
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

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
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
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
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
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

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
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 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%
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
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%
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
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
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
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

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

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