Horizon Partners Q4 2013 Newsletter

Digital Media & Internet

Quarterly Market Update: Q4 2013

Contact Us

Mike Firmage

Managing Director

650.861.9090

[email protected]

I. Executive Summary (3)

II. Sector Trends (4)

III. M&A Overview (11)

IV. Market Performance (18)

V. IPO Overview (23)

VI. Deals Outlook (29)

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

Landscape of Digital Media & Internet Industry

2

Diversified

Automation/Analytics/SaaS

E

N

T

E

R

P

R

I

S

E

C

O

N

S

U

M

E

R

Marketing Technology Digital Media

B2C

Social Networking

Comparison Shopping

Traditional Media Gaming

Online Media

M&A activity in Digital Media & Internet slowed in 2013, with aggregate volume and value of deals declining 4.0% y/y and 8.7% y/y, respectively. However, in 2013’Q4, the volume and value

of deals rose 3.3% y/y and 12.1% y/y, respectively

In the mid-market space, deal volume decreased 9.2% y/y in 2013, while aggregate deal value fell 6.0% y/y. In 2013, Q4 was the busiest quarter with 43 mid-market deals, accounting for

more than 33% of all such deals during the year. The aggregate value of mid-market deals surged 46.5% y/y during 2013’Q4. In fact, the average value of mid-market deals continued to rise

in 2013, reaching $160 mn, its highest level since 2009

Big-ticket deals (>$500 mn) raised $51.8 bn in 36 transactions in 2013 compared with $56.8 bn through 38 deals in 2012

During 2013’Q4, deals were priced at an average EV/Revenue multiple of 2.7x , in line with the previous quarter but higher than the 20-quarter average of 2.5x

Executive Summary

3

Sector Trends

M&As in Digital Media & Internet in 2013

Market Performance and IPOs

The S&P Software index moved in tandem with the NASDAQ, but outperformed the S&P500; this indicates upbeat sector performance. The CBOE Volatility Index (VIX) fell to a near one-year

average of 14.7%. Improvement in investor confidence and interest in the sector continues to stimulate primary market activity

For IPOs, 2013 remained a remarkable period, with 82 offerings raising $8.5 bn compared with $5.6bn* through 64 offerings in 2012. In 2013, Q4 was the busiest quarter for IPO activity since

2008. The quarter witnessed 33 IPOs, nearly double compared with the previous quarter and around five times more than 2012’Q4

In 2013’Q4, IPOs exhibited impressive performance, registering the strongest one-day and one-week gains in the last 12 quarters and trending above the five-year averages. The pipeline is

strong with announced IPOs totaling more than $2.2 bn YTD**

Disruptive technologies such as cloud, big data, social media and embedded systems are causing a paradigm shift in the business-consumer ecosystem. Developments in online commerce,

mobile apps, social engagement, content marketing and video are redefining consumers’ online engagement and, thereby, creating new ways for businesses to connect with their audience

Marketers are perceiving content marketing as a vehicle for long-lasting consumer engagement and effective customer targeting. Content marketers are using a multitude of platforms to

engage target audiences, with social media being the most preferred channel

Companies offering content solutions are partnering with technology firms to deliver innovative offerings that enhance the users’ digital experience

Businesses are seeking cloud adoption in an Everything-as-a-Service era for continuous innovation and business agility to yield competitive advantage. Majority of businesses remain inclined

toward Software-as-a-Service, as evident from its high adoption rate

*2012 deal value excludes the $16 bn Facebook IPO; **Data up to February 13, 2014

II. SECTOR TRENDS

5

Cloud Computing

2012 2016

Big Data Analytics

2012 2016

$5.4 bn $48 bn

Social Media

Embedded Systems Mobile Handset Shipment Tablet Shipment

2012 2016

2012 2016 2012 2016 2012 2016

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

Disruptive technologies cause paradigm shift in

business-consumer ecosystem

‘Digital Consumerism’ is radically changing business environment

Source: KMPG, NASSCOM

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

$1.2 tn $2.4 tn

6

Digital Trends Reshaping the Way Businesses

Engage with Consumers

6

New ways in which consumers engage online and businesses connect with them

Source: Edison Research; Centre for Media Research; Kleiner, Perkins, Caufield and Byers

Digital media publishers are increasing focus on optimizing website content and advertisements for mobile devices

31% growth in worldwide smartphone usage

100 hours of video/minute added on YouTube each day

5 mn photos added on Instagram each day

14x time spent online via mobile compared to desktop

102 bn app downloads in 2013 (up 60% from 2012)

2 bn user count crossed on Facebook

45% consumers searching for local products use mobile first

Consumer

Engagement…

…Is Driving Online

Media Trends

Marketing analytics solutions are being increasingly used to extract insights from digital information – documents, Tweets, posts, pictures and video

Online businesses and marketers are looking for innovative ways to engage with customers through mobile apps

Consumers frequently use digital word of mouth to make decisions; Social media and review sites become important for marketers

91% of in-house marketers use content marketing; Focus is shifting to the integrated use of multiple online platforms

Video content is increasingly becoming an important medium of communication with target audiences

New ways to access information: trend is emerging in wearable devices, such as Google Glass and Jawbone

Technology companies form partnerships to

enhance consumer experience

Content providers that help consumers navigate the marketplace are scouting innovative ways to enhance user experience

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

7

Select indicative partnerships

Allows restaurants on Locu to distribute menus and daily specials to Yelp

Facebook partners with PayPal to autofill billing info in mobile commerce apps

Google partners with VMware to deliver subscription Desktop-as-a-Service (DaaS)

Incorporate Yelp's listings and reviews of local businesses into results on Yahoo's search engine

Allows Facebook users to book restaurant reservations online

Visa rewards and discounts tie-up with Foursquare check-ins

Google partners with ComScore to offer real-time metrics for marketers

Source: Street Fight Insights, TechCrunch; The Wall Street Journal; The Next Web; MediaWeek

Content marketing – capitalizing on engagement

8

Increasing Influence of digital channels

1.3%

5.4%

4.1%

4.1%

11.4%

5.5%

14.0%

28.9%

25.3%

1.0%

3.9%

5.5%

6.9%

7.5%

9.0%

9.0%

12.9%

15.1%

29.2%

Other

Branded niche or verticalcommunities

Search Engine Optimization

Contextual targeting through adnetworks

Conversion rate optimisation

Marketing automation

Social CRM*

Big Data

Mobile Marketing

Content Marketing

Most Significant Commercial Digital Marketing Trends

2014

2013

Marketing companies are expected to spend $135 bn on new

digital marketing collateral in 2014

78% of CMOs believe custom content is the future of marketing

Internet advertising would constitute nearly 25% of the ad

market by 2015

The social commerce market is estimated at $30 bn by 2015

Leading global retailers are spending 20–25% of their advertising

budget on social media channels

Mobile technologies would be used to reduce cost of a financial

transaction by up to 80%

Nearly 90% of top global banks use social networking to achieve

customer engagement

Nearly 50% companies use content marketing strategies

33% of traffic from Google’s organic search results goes to the

first item list

B2B companies that blog generate 67% more leads than those

that do not

“Marketers will use dynamic content to deliver highly personalized

experiences to the right audience at the right time”

– WebDAM

*Newly added survey option

Source: Smart Insights User Survey 2013; KPMG; WebDAM; Chitika Insights

Upcoming Trends Driving Marketing Mix

Marketing technologies driven by content

marketers’ multi-platform focus

9

Social media continues to be at the top spot for content marketing

Soci

al M

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Lice

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Filin

gs

Pri

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Gam

es

87%

81% 80%

76% 76%

73% 73%

68%

64% 62%

51%

44%

40% 38% 38%

35% 34%

30% 28% 27% 26% 25% 25% 24%

22%

10%

Digital Media Traditional Print

Source: Content Marketing Institute B2B Marketers’ Survey 2014

14%

14%

14%

15%

16%

22%

22%

34%

40%

55%

73%

81%

85%

91%

Foursquare

Tumblr

Vine

StumbleUpon

Flickr

Instagram

Vimeo

Pinterest

SlideShare

Google+

YouTube

Facebook

Twitter

LinkedIn

% of B2B marketers using a social media sites to distribute content

% of B2B Marketers claiming to use a channel for marketing

Businesses seek cloud adoption in an Everything-as-

a-Service era

10

SaaS market to expand at a CAGR of 15.5% over 2011–15

Source: Everest Group Cloud Connect Enterprise Cloud Adoption Survey 2013; Gartner and IDC

7.7

8.8

10

11.3

12.9

2.8 3.3

3.9 4.6

5.4

1.1 1.3 1.6 1.9 2.2

0.3 0.4 0.5 0.6 0.7

2011 2012 2013 2014 2015

SaaS Market Forecast

North America Europe Asia Latin America

35%

21%

26%

17%

13%

6%

21%

25%

16%

18%

10%

15%

28%

33%

25%

30%

42%

23%

16%

21%

33%

35%

35%

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 enjoys the highest adoption rate, with 56% of the respondents

being existing users and 38% planning to adopt the service

Overall, 94% of the respondents showed interest in SaaS, higher than

any other cloud service, indicating bright prospects

The global SaaS market is expected to grow to $21.5 bn by 2015, with

North America accounting for 64%

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

728 707

636

559

477 475

523 558

699 701 678 690

782

732 757 757 761

802

742 730

678 716

766 754

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

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

M&A activity in Digital Media & Internet slows in

2013

In 2013’Q4, the volume of deals in the Digital Media & Internet space rose 3.3% y/y, but declined a marginal 1.6% q/q. On the other hand,

the aggregate deal value increased 11.4% q/q and 12.1% y/y

In 2013, the number of deals fell 4.0% to 2,914 from 3,035 in 2012 due to subdued performance in 2013’Q1 (678 deals). During the same

period, the aggregate deal value declined 8.7% y/y

The average deal raised $100 mn in 2013, maintaining the uptrend over the five-year average of $74 mn

12

Deal volumes decline marginally in latest quarter

Source: Capital-IQ; Note: Deals refer to announced , closed and effective deals

Average Annual Deal Value

Mid-market M&A activity decelerates in 2013;

ticket size continues the uptrend

Deal volume in the mid-market Digital Media & Internet space rose 22.9% y/y in 2013’Q4, but declined 9.2% y/y in 2013

The aggregate value of mid-market deals surged 46.5% y/y in 2013’Q4, but decreased 6.0% y/y in 2013

The average mid-market deal raised $160 mn in 2013, the highest since 2009

13

Mid-market deal activity surges to two-year high in latest quarter

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

37

40

35

27

14

24

33

28

23

36

46

41

51

47

43

36

31

43

32 35

25

29 31

43

0

5

10

15

20

25

30

35

40

45

50

55

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

$10.0

$11.0

$12.0


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

Average transaction size driven by large deals

In 2013, the number of transactions decreased in all three

segments

Big ticket deals (>$500 mn) raised $51.8 bn in 2013, down 8.5%

over the previous year

The average deal raised $99.9 mn in 2013, higher than any

comparable period in the past five years

14

High-value deals decline; 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

139

99

146 177

141 128

16

18

30 31

38 36

2008 2009 2010 2011 2012 2013

Deal Volume

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

15.3 20.4

46.8 48.6 56.6 51.8 20.6 16.0

21.2 28.2

21.8 20.5

7.6 5.3

7.0

7.8 8.3 6.8

2008 2009 2010 2011 2012 2013

Deal Values ($ bn)

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

2008, $43.8mn

2009, $57.4mn

2010, $83.2mn

2011, $87.3mn

2012, $96.6mn

2013, $99.9mn

30

40

50

60

70

80

90

100

110

120

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 activity marked by higher purchase multiples

In 2013'Q4, M&A deals entailed an average acquisition EV/Revenue multiple similar to that of the previous quarter and above the 20-quarter

average of 2.5x

The average revenue size of the acquired company declined sharply to $72 mn in 2013’Q4

Between 2012 and 2013, the average acquisition EV/Revenue multiple fell to 2.6x from 2.7x, while the average revenue size of the target

company declined to $115.4 mn from $126 mn

15

Acquisition multiple higher than five-year average

Source: Capital-IQ; Note: Multiples based on non-cancelled deals with reported multiples only

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

204

43 92 59 42

163 175

65 45 87 64 50

104 114 82 70

62 46

194 202

73 103

214

72

-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)

2013’Q4: Announced transactions

16

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

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

Dec 20 Responsys Oracle Corporation Closed 1,566.6 194.3 8.2x

Dec 19 Dealer.com Dealertrack Technologies Announced 994.3 NA NA

Dec 19 Pacific Bell Telephone Company, 499,402 Square Foot Data Center

Carter Validus Properties Closed 134.5 NA NA

Dec 18 Sofort AG Klarna AB Announced 199.0 NA NA

Dec 18 NMTI Holdings Amadeus Americas Announced 500.0 NA NA

Dec 16 Total Specific Solutions (TSS) B.V. Constellation Software Closed 330.3 239.5 1.4x

Dec 12 Easynet Group MDNX Group Limited Closed 179.7 NA NA

Dec 11 Macromill Bain Capital Private Equity Closed 507.6 177.7 2.5x

Dec 09 ValueClick IAC Search Closed 80.0 NA NA

Dec 04 Stayz Pty Limited HomeAway Pty. Closed 194.8 22.9 8.5x

Dec 02 Digital Insight Corporation NCR Corp. Closed 1,650.0 330.0 5.0x

Dec 02 Alaric Systems Limited NCR Limited Closed 78.4 NA NA

Dec 02 Topsy Labs Apple Closed 200.0 NA NA

Nov 27 PT. Aprisma Indonesia Wirecard AG Announced 120.2 NA NA

Nov 26 Applied Systems Hellman & Friedman Announced 1,800.0 NA NA

Nov 22 Liazon Corporation Towers Watson & Co. Closed 215.0 NA NA

Nov 21 Scout24 Holding GmbH Hellman & Friedman Announced 2,021.2 NA NA

Nov 18 Unit 4 N.V. Advent International Corporation Announced 1,741.2 623.0 2.6x

Nov 14 MapMyFitness Under Armour Closed 150.0 NA NA

Nov 07 Delcam Autodesk Development B.V. Closed 264.6 74.8 3.1x

Nov 07 JobKorea Co. H&Q Korea Partners Co. Closed 90.0 NA NA

Select list

2013’Q4: Announced transactions

17

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

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

Nov 07 Living Social Korea Groupon Closed 260.0 NA NA

Nov 05 GXS Group Open Text Corporation Closed 1,165.0 487.0 2.4x

Nov 05 Celcite Management Solutions Amdocs Limited Closed 129.0 NA NA

Oct 30 Soluto Asurion Closed 130.0 NA NA

Oct 30 Aggregate Knowledge NeuStar Closed 119.0 NA NA

Oct 30 ServiceMesh Computer Sciences Corporation Closed 295.0 NA NA

Oct 30 iWeb Group Internap Network Services Corp. Closed 145.0 NA NA

Oct 28 RagingWire Data Centers NTT Communications Corporation Closed 350.0 85.0 5.2x

Oct 28 Shanghai SynaCast Media Tech. Co. Suning Commerce Group Co., Hony Capital (Beijing) Co.

Announced 422.3 NA NA

Oct 27 Decision Insight Information Group Europe DMG Information Announced 121.2 111.5 1.1x

Oct 24 Shanghai Youzu Information Technology Co. Susino Umbrella Co. Announced 635.8 NA NA

Oct 23 Wirtualna Polska SA Grupa o2 sp. z o.o. Closed 123.7 59.4 2.1x

Oct 16 Shang Game Co.. Ourpalm Co. Announced 133.5 1.2 NM

Oct 15 Supercell Oy SoftBank Corp.; GungHo Online Entertainment Closed 1,530.0 103.6 29.0x

Oct 15 TLO, LLC TransUnion Corp. Closed 154.0 NA NA

Oct 10 Shanghai 37wan Network and Technology Co. Wuhu Shunrong Auto Parts Co. Announced 321.5 NA NA

Oct 07 Beijing Tianya Co. NQ Mobile Announced 127.5 NA NA

Oct 03 Procurian Accenture Closed 375.0 140.0 2.7x

Oct 03 Service Repair Solutions Claims Services Group Closed 289.0 NA NA

Oct 01 The 41st Parameter Experian Effective 324.0 NA NA

Oct 01 Confio Software SolarWinds Worldwide Closed 103.0 15.4 6.7x

Select list

IV. MARKET PERFORMANCE

Promising market performance

19

S&P Software outweighs S&P500; decreasing volatility signals higher investor confidence

Source: Bloomberg; Returns calculated based on index level on February 21, 2014

S&P Software moves in tandem with NASDAQ, but outperforms S&P500

90

100

110

120

130

140

150

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

S&P 500 NASDAQ Composite S&P Select Software

Index Returns Last 3-month Last 6-month LTM

S&P 500 2.2% 11.8% 22.2%

NASDAQ Composite 7.4% 18.4% 36.1%

S&P 500 Software Industry Index 9.2% 17.6% 34.4%

Investor sentiments remain optimistic ahead of decreasing volatility

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

24.0%

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

CBOE Volatility Index Average Volatility

Volatility near one-year average; investor confidence expected to boost capital market activity

Trading comparables – digital media

20

Source: Capital-IQ; Note: All values as of February 21, 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 43.64 81.9% 3,467 3,382 2,320 2.6% 18.1% 1.5x 1.4x 8.0x 6.6x

Yahoo 37.29 89.4% 37,829 35,704 4,680 -3.1% 25.8% 7.6x 7.9x 29.6x 25.0x

Google 1203.79 99.3% 404,535 353,620 59,825 25.6% 30.1% 5.9x 5.1x 19.6x 13.7x

Trulia 30.73 58.3% 1,146 1,151 144 93.2% -4.1% 8.0x 4.7x NM NM

TripAdvisor 96.92 98.9% 13,785 13,671 945 21.8% 32.9% 14.5x 11.5x 44.0x 28.6x

Shutterstock 98.00 99.0% 3,437 3,227 236 39.9% 19.9% 13.7x 10.4x NM 45.9x

LinkedIn 192.62 74.8% 23,217 20,892 1,529 71.1% 10.9% 13.7x 9.9x NM 40.2x

Bankrate 19.86 85.8% 2,020 2,087 457 3.8% 23.7% 4.6x 3.9x 19.2x 14.0x

Demand Media 5.59 57.3% 477 421 401 13.0% 15.8% 1.0x 1.1x 6.7x 4.9x

Facebook 68.59 97.8% 174,887 163,914 7,872 45.6% 49.9% 20.8x 14.5x 41.7x 24.3x

Gannett 28.84 94.8% 6,572 7,985 5,161 -0.8% 20.2% 1.5x 1.3x 7.6x 5.4x

IAC/InterActiveCorp 74.36 97.8% 6,112 6,171 3,023 21.2% 18.0% 2.0x 1.9x 11.3x 9.6x

WebMD Health 47.57 92.5% 1,860 1,987 515 -4.0% 16.4% 3.9x 3.5x 23.6x 12.9x

Yelp 91.82 94.7% 6,383 5,993 233 67.3% 1.0% 25.7x 16.7x NM NM

Zillow 78.88 76.6% 3,090 2,795 198 72.9% -2.8% 14.1x 9.5x NM NM

j2 Global 48.95 87.0% 2,245 2,192 521 25.6% 43.3% 4.2x 3.7x 9.7x 8.5x

RetailMeNot 43.00 98.6% 2,268 2,143 210 61.5% 33.7% 10.2x 7.9x 30.3x 21.6x

Netflix 432.23 98.0% 25,850 25,181 4,375 16.8% 6.3% 5.8x 4.7x NM 44.6x

Mean 8.8x 6.6x 20.9x 20.4x

Median 6.8x 4.9x 19.4x 14.0x

Min 1.0x 1.1x 6.7x 4.9x

Max 25.7x 16.7x 44.0x 45.9x

Comparables

Trading comparables – marketing technology

21






Marketing Technology

Adobe Systems 68.22 98.3% 33,878 32,219 4,055 -1.9% 19.0% 7.9x 7.9x 41.8x 30.4x

Constant Contact 28.00 85.1% 859 735 285 15.4% 10.7% 2.6x 2.3x 24.1x 12.5x

Demandware 74.71 97.6% 2,585 2,310 104 35.4% -15.8% 22.3x 16.0x NM NM

Bazaarvoice 7.32 63.7% 539 465 176 45.1% -20.0% 2.6x 2.6x NM NM

Brightcove 9.37 57.7% 270 233 110 31.5% -1.4% 2.1x 1.8x NM NM

Jive Software 7.91 42.8% 548 448 146 37.3% -41.0% 3.1x 2.6x NM NM

Web.com 35.69 96.9% 1,701 2,250 492 57.2% 19.8% 4.6x 3.8x 23.1x 13.1x

Rocket Fuel 53.96 75.1% 1,891 1,804 241 132.1% -2.8% 7.5x 4.2x NM NM

Salesforce.com 63.59 98.4% 38,345 40,099 3,760 34.1% -0.5% 10.7x 9.9x NM NM

LivePerson 13.35 87.6% 723 631 178 15.6% 3.2% 3.5x 3.1x NM 29.0x

Marketo 38.76 86.1% 1,521 1,401 96 72.1% -42.2% 14.6x 10.4x NM NM

OpenTable 76.21 87.1% 1,787 1,673 190 16.7% 33.1% 8.8x 7.4x 26.5x 19.6x

Priceline.com 1,315.65 98.7% 68,601 63,750 6,793 24.9% 37.6% 9.4x 7.6x 25.0x 19.2x

ReachLocal 10.62 61.1% 295 215 514 17.0% 4.4% 0.4x 0.4x 9.6x 8.7x

Mean 7.2x 5.7x 25.0x 18.9x

Median 6.0x 4.0x 24.5x 19.2x

Min 0.4x 0.4x 9.6x 8.7x

Max 22.3x 16.0x 41.8x 30.4x

Comparables

Trading comparables – other notable companies

22






Other Notable Companies

Amazon.com 346.76 85.0% 159,255 152,944 74,452 24.4% 4.8% 2.1x 1.7x 43.1x 22.2x

Apple 525.25 91.3% 468,517 444,712 173,992 16.7% 32.5% 2.6x 2.4x 7.9x 7.6x

AVG Technologies 18.46 69.5% 1,005 993 407 22.3% 33.2% 2.4x 2.6x 7.4x 7.7x

eBay 54.59 94.1% 70,675 65,773 16,047 17.4% 29.7% 4.1x 3.6x 13.8x 11.0x

IBM 182.79 84.7% 198,483 227,272 99,751 -3.4% 24.4% 2.3x 2.3x 9.4x 8.2x

Intuit 77.24 98.1% 21,883 21,051 4,129 2.4% 31.4% 5.1x 4.5x 16.2x 11.0x

Oracle 38.10 98.3% 171,351 159,021 37,552 1.1% 43.4% 4.2x 4.0x 9.8x 8.2x

SAP AG 79.54 89.2% 94,933 97,014 23,159 8.7% 32.7% 4.2x 4.0x 12.8x 11.0x

Microsoft 37.98 97.4% 315,261 255,964 83,433 7.6% 38.1% 3.1x 2.9x 8.0x 8.1x

Mean 3.3x 3.1x 14.3x 10.5x

Median 3.1x 2.9x 9.8x 8.2x

Min 2.1x 1.7x 7.4x 7.6x

Max 5.1x 4.5x 43.1x 22.2x

Comparables

V. IPO OVERVIEW

IPO activity in Digital Media & Internet rebounds in

2013

In 2013’Q4, number of IPOs in the Digital Media & Internet space reached the highest level since 2008. The quarter witnessed 33 IPOs, nearly

double compared with 2013’Q3 and around five times more than 2012’Q4

The average IPO raised $139 mn in 2013’Q4 compared with just $26 mn in 2012’Q4

For IPOs, 2013 remained a remarkable period, with 82 offerings raising $8.5 bn (with an average of $103 mn) vis-à-vis $5.6bn through 64

offerings (with an average of $88 mn) in 2012

24

IPO activity in 2013’Q4 accelerates to highest level since 2008

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

19

25

7

10

6 5

14

10

22

22

15

32

21

28

22

25

29

17

11

7

10

20 19

33

0

5

10

15

20

25

30

35

$0

$1

$1

$2

$2

$3

$3

$4

$4

$5

$5


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

Remarkable IPO performance

25

Investors benefit from impressive one-day and one-week gains in 2013'Q4

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


Avg. One-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%


Avg. One-Week Return (%)

I n 2013‘Q4, IPOs register best average one-day performance in the past 12 quarters

In 2013’Q4, IPOs register avg. one-week gains of more than 2x that in 2012’Q4

20-Quarter Average 35%

20-Quarter Average 38%

IPO activity remains strong, led by record offerings

26

Source: Capital-IQ

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

Dec 12, 2013 Care.com 90.95 17.00 - Online marketplace for family care

Dec 02, 2013 econtext Asia Limited 57.88 0.46 - Online payment services and e-commerce solutions

Nov 25, 2013 MoPowered Group 6.5 1.62 -2.5% SaaS solutions for online retailers and e-commerce businesses

Nov 25, 2013 iBuy Group Limited 32.77 0.28 - Operates e-commerce websites focused on flash sales

Nov 22, 2013 JQW 10.93 1.15 7.5% Business-to-business e-commerce platform

Nov 22, 2013 Link Mobility Group 4.88 3.58 -19.6% Mobile services and solutions

Nov 20, 2013 Arria NLG 167.5 1.60 65.7% Software development for NLG and SaaS services

Nov 18, 2013 Veda Group Limited 310.89 1.14 40.0% Business intelligence services

Nov 18, 2013 Vocation Limited 230.44 1.72 - Education and training services

Nov 13, 2013 China Binary Sale Technology Limited 9.29 0.08 15.0% Online transaction services

Nov 11, 2013 GameAccount Network 35.88 2.18 8.2% Online gaming

Nov 08, 2013 O-uccino 4.77 34.01 88.6% Housing information services

Nov 05, 2013 EU Supply 7.96 0.36 7.3% E-commerce solutions to construction industry

Nov 05, 2013 V-cube 37.34 31.98 82.1% Visual communication platform

Nov 04, 2013 Autohome. 132.94 17.00 - Online automobile information

Nov 04, 2013 Nine Entertainment Co. Holdings Limited 571.57 1.86 -3.4% Media and entertainment

Nov 01, 2013 Hottolink 12.32 26.29 130.0% Social media data solutions and data processing application

Oct 28, 2013 Rightster Group 32.56 0.96 20.0% Online video distribution and marketing network

Oct 23, 2013 Allied Architects 11.02 16.63 130.0% Social media marketing services

Oct 22, 2013 Sungy Mobile Limited 78.54 11.22 - Mobile internet products and services

2013 closed IPOs

IPO activity remains strong, led by record offerings

27

Source: Capital-IQ

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

Oct 14, 2013 Freelancer Limited 13.97 0.47 220.0% Freelancing, outsourced and crowd sourcing services

Oct 03, 2013 Twitter 1,820.0 26.00 72.7% Online social networking and micro-blogging service

Oct 01, 2013 Wix.com 127.05 16.50 -1.2% Web development platform

Sep 30, 2013 Qunar Cayman Islands Limited 166.67 15.00 81.4% Online travel e-commerce platform

Sep 27, 2013 58.Com 187.0 17.00 41.9% Online classified advertisement services

Sep 23, 2013 OzForex Group Limited 416.0 1.89 28.0% Online foreign exchange services

Sep 18, 2013 Criteo SA 250.56 31.00 14.2% E-commerce solutions provider

Sep 09, 2013 Endurance International 252.61 12.00 - Cloud-based solutions for small- and medium-sized businesses

Sep 06, 2013 Macromac 0.8 0.16 50.0% Mobile messaging platform

Aug 26, 2013 RingCentral 97.5 13.00 - SaaS solutions for business communications

Aug 16, 2013 Rocket Fuel 116.0 29.00 93.5% Artificial-intelligence digital advertising solutions

Aug 14, 2013 Benefitfocus 130.78 26.50 102.1% Cloud-based solutions for insurance carriers

Aug 14, 2013 Chegg 187.5 12.50 - Student-first connected learning platform

Aug 13, 2013 CentralNic Group 10.83 0.85 19.1% Domain name registry services

Jul 31, 2013 RapidCloud International 1.55 0.83 28.7% SaaS solutions for web and mobile applications

Jul 23, 2013 99 Wuxian Limited 18.88 0.38 12.5% Mobile online marketplace

Jul 09, 2013 Somoto 5.64 84.81 - Internet monetization solutions for website owners and software developers and cloud computing solutions

Jul 08, 2013 Cvent 117.6 21.00 - Online events and meetings

Jul 02, 2013 YuMe 46.13 9.00 - Digital video brand advertising solutions

Jul 01, 2013 Control4 Corporation 64.0 16.00 - Automation and control solutions for the connected home

2013 closed IPOs

Encouraging IPO pipeline

28

Source: Capital-IQ

2014 announced IPOs

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

Feb 13, 2014 Aerohive Networks

75.0 - Cloud-enabled Wi-Fi and routing solutions

Feb 12, 2014 CBG Holdings

138.0 - Online banking software for financial institutions

Feb 10, 2014 Amber Road

75.0 - Trade management solutions through SaaS platform

Jan 31, 2014 Coupons.com

100.0 - Digital promotion platform

Jan 30, 2014 JD.com

1,500.0 - Online retailer

Jan 30, 2014 Paylocity Holding Corporation

115.0 -

Cloud-based payroll and human capital management software solutions

Jan 21, 2014 Sabre Corporation

100.0 - Technology solutions provider to travel and tourism industry

VI. DEALS OUTLOOK

Optimistic outlook for deals

30

Tuck-in acquisitions and key technological trends to drive deal activity in 2014

Source: Mtech Advisors, KPMG; *Excluding Facebook IPO; **Data up to February 13, 2014

Emerging innovative technology companies remain hot target

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

The trend of acquisition at high multiples is expected to continue

Marketing automation and cloud computing to be key drivers

The marketing structure is becoming increasingly automated. Rising focus by digital marketers and local companies on automating certain aspects of the workflow is expected to be one of the major drivers of M&As

Converging technologies, cloud computing and data analytics would be the key trends driving M&A activity in 2014

Consolidation among Marketing Agencies

There has been a substantial increase in interactive/digital marketing agencies in the past five years

Such businesses will continue to experience consolidation, similar to the “dot com” experience a decade ago

Industry-Focused and Content Marketing Companies to Garner Interest

Companies with an industry-specific focus (healthcare, insurance, retail, communications and financial services among others) will attract much strategic investor interest

Given the increased focus by enterprises on content marketing, an opportunity exists for vendors with proven track records and quantifiable ROI across multiple channels such as search, display/web, social, mobile, e-mail, video

Strong activity in primary market

Capital market activity is expected to accelerate in 2014, after rebounding in 2013. In 2012*, the offerings were weak

The IPO market looks attractive with 16 IPOs YTD** with more than $2.2 bn in the pipeline, including an IPO by China’s online retailer JD.com

31

Digital Media Interactive Marketing Mobile Software

Date post:	13-May-2015
Category:	Economy & Finance
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Horizon Partners Q4 2013 Newsletter

Economy & Finance