My project with Professor Hosanagar last semester. The content is a bit dated, and there's WAY too many slides / info (muddled thinking) but thought this was a good first attempt as building an investment thesis and teaching myself about new sectors.
Still, helped me obtain an internship with Genacast Ventures, a study project with Andreessen Horowitz, and opened a lot of doors in the startup community.
More on me (shameless plug): http://www.linkedin.com/in/yujinchung
2. Special thanks for supporting this project!
• Professor Hosanagar, faculty sponsor
• Chris Farmer, advisor and fmr Bessemer Ventures
• Joshua Auerbach, Betaworks
• Gil Beyda, Genacast Ventures
• Carter Brokaw, Meebo
• Eric Von Coelln, Insidefacebook.com
• Ronny Conway, Andreesen Horowitz
• Art Chang, Tipping Point Partners
• Andrew Chung, Lightspeed Ventures
• Tsvi Gal, Exigen Capital, fmr Warner Music CTO
• Greg Fodor, Adtuitive CTO
• Jonathan Knee, Evercore Partners
• Moshe Koyfman, Spark Capital
• Justin Nesci, SocialMedia.com
• Trevor Oelschig, Bessemer Ventures
• David Pakman, Venrock
• Dustin Rosen, Mailroom Fund
• Douglas Shapiro, Time Warner, fmr Banc of America Securities
• Paul Vidich, Betaworks Advisor, fmr head of Warner Music Digital Strategy
2
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
3. Agenda
• Executive Summary / Thoughts on Investment & Acquisition
• Historical Analysis (2000-2009)
• Mobile Applications Industry Analysis
• Social Media Industry Analysis
3
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
4. Executive Summary
• Media conglomerate shareholder performance has largely underperformed due to poor acquisitions and inability to adapt to
open distribution model of the internet
• Most acquisitions driven by desire to acquire audience but not having expertise to retain or monetize audience
• Inability to innovate traditional content products leads to price erosion and declining sales windows
• Continued call for consumer payment via subscription (e.g. Hulu, paywalls for WSJ.com, etc.) are unlikely to be successful
• Recently announced magazine consortium represents new approach at preventing intermediary (e.g. YouTube) from
usurping audience
• Unclear if publishers have technical expertise to develop digital product to drive consumer willingness to pay
• New models of content aggregation, search optimization, and publishing by Demand Media and AOL may prove
profitable, but will likely litter the web with ―crap content‖
• Question remains of creating premium product / service for traditional content – closest proxy has been iTunes digital albums
• Mobile apps show great promise despite inherent structural challenges
• Ecosystem has recently evolved toward setting foundation for real, possibly sustainable growth:
• Monetization: emerging mobile advertising (Admob), micropayments (storefront)
• Feature-rich platforms (iTunes / Android / WebOS) on robust device hardware
• Data plans whose focus is away from carrier “walled gardens”
• Still no transparent scorecard for ―best‖ developers; closed ecosystem for dominant app distributor (iTunes); bandwidth
issues; and extremely low barriers to entry
• Investment framework can be based around native phone features, cloud computing infrastructure, and in-app
purchases
• Apple‘s purchase of lala may introduce robust cloud platform development AND improved social functionality for content
and applications
• Certain categories within social gaming are attractive for investment
• Emergent demand for less time-intensive, lower engagement, and gaming-as-a-service models
• High DAU/MAU or ―stickyness factor‖ above ~15% appears to represents sustainable audience for monetization
• Microtransactions and early advertising efforts (―cost per installation‖) have proven successful for Zynga and other
players
• Large opportunities remain as games evolve in sophistication and users become more open toward offering greater access
to profile data
4
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
5. Thoughts on Investment & Acquisition
Early Stage Growth Equity Strategic Acquisition
• Along with cloud computing, native • Developer business models still too • Strategic partnership and licensing more
features, and in-app purchases, smart fledging to be considered sustainable, advantageous given hit-driven nature of
developers will have instinct for anticipating so unlikely to find immediate growth business
iPhone feature release equity prospects • Opportunity for franchise game
Thesis: • Given time lag of app store approval, • Still, opportunities likely in 8-12 months branding still available (e.g. sports,
Cross Platform first to market presents real strategic for growth equity may include: Halo)
advantage by weakening competitive • Productivity, business, and • Strategic value-add through
• Winning on response reference verticals offer better marketing/promotion
ALL platforms, • Smule good example of developer who retention and pricing than other • But risks also follow as strategics
understands this dynamic (and recently categories likely to overprice for content from
not just A
closed Series B funding) • Proven game developers (e.g. legacy contracts and demand
platform
• Micromap updating also potentially Ngmoco, Geared by Bryan unrecoupable upfront royalties
• Mobile, Mobile
disruptive to incumbent GPS players Mitchell) with loyal fanbases, • Location awareness also presents new
online, AND • Waze is good example of user- proven sales, and expansive themes product development paths, e.g.
offline generated map updating may be viable candidates for coupons, dating, dining, etc.
• Freemium model executed via in-app expansion capital • Online incumbents with broad
• Becoming a purchases showing early promise - • As mobile audiences achieve audiences, data, and other assets
part of your Tapulous (Tap Tap Revenge) , Ngmoco saturation, successful mobile may find acquisition for access to
life, not just (Eliminator) developers will need capital to mobile channel attractive
thrown away • Focus on churn, usage patterns, and expand online to social, real-time, • More likely opportunity through
• Tailored retaining early traffic; similar to social etc. speculated release of tablet devices
experience gaming, look for replication of • More robust form of monetization
based on development process and mastery of provided tablet offers innovative
device, but social, viral aspects native features
synched via • Developer space currently led by Zynga, • Mobile / online payments may be open • Media incumbents may continue
internet Playdom, and Playfish, to growth equity investment as business acquisitions similar to EA / Playfish
connection • Audience size, stickiness models mature given need to acquire • Zynga / Playdom unlikely to be
(DAU/MAU), and monetization carrier and distribution partners purchased except for extremely high
• New business efficiency are key metrics in evaluating • Somewhat validated by Boku’s prices
models players acquisitions of Paymo and other • Recent funding rounds and
• e.g. purchase • Concern now around ―spamming the small mobile payment players acquisitions have also set high
options mixed feed‖ • Looming giant Paypal presents price per unique (~$5/MAU)
Social
w/ localized • Virtual goods / in-game transactions market risk but also exit thesis • Social and display ad networks
Gaming
advertising continue to grow given evolving game • Bootstrapped developers interested in experiencing consolidation as well
optimized sophistication liquidity and expansion e.g. Playdom • Teracent / Google
against social • Live Gamer and Playspan are well- • Proven successes on social platform • AdLink / Hi-Media
data capitalized players with experienced but future growth from cross • SocialMedia.com / AdKnowledge
management platform (e.g. mobile, independent
• International perspective, e.g. Live URL) and cross-promotion of
Gamer’s purchase of N-Cash, Korean genre titles
payment solution provider
5
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
6. Agenda
• Executive Summary / Investment Frameworks
• Historical Analysis (2000-2009)
• Mobile Applications Industry Analysis
• Social Media Industry Analysis
6
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
7. The modern media conglomerate is typified by scale and
centralized ownership via the ―Mogul‖
Controlling Mogul / Revenue by Conglomerate
CEO Weighted Average Revenue CAGR
Across Conglomerate (2000-2008): 9.7%
Sumner Redstone /
Les Moonves
Rupert Murdoch /
Rupert Murdoch
/ Jeffrey Bewkes
Sumner Redstone /
Philippe Dauman
Roberts Family /
Brian Roberts
/ Jean-Bernard Lévy
/ Robert Iger
Billions
Source: Curse of the Mogul, Jonathan Knee; Boldface represents broadly held public companies; Vivendi values converted to dollars using historical exchange rate; 2000 value for 7
Viacom actually 2002; 2000 value for CBS actually 2003; substitutions made due to data availability
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
8. Their ownership expansion has been impressive, with
properties ranging from content to distribution
Distribution Content
Online
Satellite Radio
Cable TV Broad- Cable TV News- Content / Mag. Video Business Book Movie /
Broad- Broad- e-Comm. Music Sports
System casting Channel Network papers Social Publish. Games Info Publish. TV Studio
casting casting
Network
Source: Curse of the Mogul, Jonathan Knee 8
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
9. But their stock performance has been disappointing
Stock Price Performance Past Nine Years Stock Price Performance Past Three Years
(1/1/2000 – 8/31/2009) (5/16/2006 – 8/31/2009)
Conglomerate Avg: (47.5)
Conglomerate Avg: (31.8)
Note: Conglomerate average calculated as straight average of stock price performance 9
Source: Yahoo Finance; prices adjusted for dividends and stock splits;
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
10. Both the ―Mogul Effect‖ and the Internet
contribute to this underperformance
―Mogul Effect‖ (Internal) Internet (External)
Content Packaging Retail
• Creative data production • Aggregation • Delivery to final customer
• Marketing / Promotion
• Wholesale distribution
• Inability to consistently choose ―hits,‖ • Lowered barriers to entry given • Pricing power is weakened in a
leaving revenue generation to be continued launches of improving online digital world
largely unscalable ventures
• Fast growth incentivizes new entrants • Release windows are shortened
to attack incumbents online as well
Mergers / Acquisitions
• Overpaying for acquisitions
• Overestimation of synergies
• Acquisition for growth, not strategic rationale
10
Source: Framework provided by Curse of the Mogul, Jonathan Knee
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
11. Market share volatility implies conglomerates are more
lucky than skilled in picking ―winners‖
Content Packaging Distribution
Poor M&A across the value chain
Absolute Market Share of Share Absolute Market Share of Share
Top Music Labels Change Top Movie Studios Change
2.7
0.9
4.7
8.0
4.6
0.8
6.8
9.7
2.5
4.8
5.6
5.8
Average: 5.2 Average: 4.5
11
Source: www.the-numbers.com; absolute market share defined as normalized market share of top studio / music labels; absolute share change < 4 implies share instability
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
12. Most conglomerate shareholders would have been
better off without big mergers / acquisitions…
Content Packaging Distribution
Share Price ($ / Share)
Mergers / Acquisitions
Source: ―Hey Big Media: The Jig is Up on Big Media Mergers,‖ Bank of America Securities, Douglas Shapiro, July 7, 2004
Assumptions behind analysis: 1) legacy businesses growing only at average secular growth rates over the period; 2) assumed that all free cash flow that would have been thrown off by these theoretical companies
would have been used only to pay down debt or accrued as cash 3) increased the share base of each by 4% per year to account for options issuance, a much more rapid rate of options dilution than actually occurred
(under the rationale that these ―hypothetical‖ companies would have experienced better stock performance over the period); and 4) to arrive at the current price of the hypothetical company, only the current multiple 12
of each company is applied, even though a better capital allocation track record over the last few years would have arguably resulted in a higher multiple.
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
13. …though they did help ―grow the empire,‖ these deals
generally hurt the share price…
Content Packaging Distribution
Mergers / Acquisitions
Acquisitions
Why they worked for
the mogul
Revenue impact +475% +159% +138% +239%
from deals
EBITDA impact +320% +162% +153% +233%
from deals
Why they didn’t • Cable network cashflow • While ABC / Fox Family • AOL-Time Warner • Decline of cable public
work for share would have been used performance suffered, synergies greatly market values (versus cash
holders more effectively to pay ESPN performed much overestimated paid for asset)
down debt or simply better than expected
accrued as cash • Additional capital deployed
(not included in purchase
price) to pay for upgrade
Share price impact (121%) +4% (150%) (27%)
from deals
Source: ―Hey Big Media: The Jig is Up on Big Media Mergers,‖ Bank of America Securities, Douglas Shapiro, July 7, 2004
13
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
14. …and yet these same firms continued to
engage in questionable acquisitions
Content Packaging Distribution
Mergers / Acquisitions
Deals
Bebo IGN CNET
• Overpaid for asset ($850M) relative to • Overpaid for asset ($650M) • Overpaid for asset in sole bidder
revenue ($20M) and EBITDA ($5M) at • CEO (then COO of Fox Interactive situation ($1.8B)
time of acquisition Media) left soon after acquisition • Executives admit having ―overpaid‖
• Now being actively sold off for asset
Outcome MySpace Last.fm
• Google search deals, while initially • Overpaid for asset ($280M)
lucrative, will not be renewed • Apparent competition with existing
• ―Lost‖ social network war to Facebook CBS online radio asset
• Repositioning site as music portal • Inability to monetize effectively
Growth equity thesis of “buying, then selling to eyeballs” largely unproven
Note: Curse of the Mogul; Newsblogs 14
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
15. The Internet has allowed the proliferation of open
distribution and socialization of content…
Content Packaging Distribution
Poor M&A across the value chain
Web 1.0 Web 2.0 Web 3.0?
Streaming ???
Downloads ???
File-sharing ???
Social Networks ???
Ease of content sharing leading to loss of willingness to pay
Lower barriers of entry over time
15
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
16. …leading to weakening pricing power…
Content Packaging Distribution
Poor M&A across the value chain
Average Music Retail Pricing Average Advertising Revenue per Hour
Average Retail Book Pricing Average Price per DVD Title
16
Source: RIAA; BlackArrow; Fordham University, Marketing Department; MPAA 2007 Industry Report
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
17. …and shorter content release windows.
Content Packaging Distribution
Poor M&A across the value chain
Median period of Album Release “Heat Period”* Movie Studio Release Windows
Source: National Association of Theater Owners (NATO); Soundscan 17
* ―Heat Period‖ defined as length of time album sales stay above 20% of initial peak volume
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
18. Thoughts on adapting in today‘s environment
Content Packaging Retail
• Creative data production • Aggregation • Delivery to final customer
• Marketing / Promotion
• Wholesale distribution
• Focus on areas with potential product • Leverage viewer base, e.g. hybrid • Deeply integrate with Social
extensions less sensitive to erosion professional, for low cost content Network Platforms
• Products with merchandise • Search optimize, and eventually • Facebook Connect, Twitter
extensions ―social optimize,‖ content for API, Friend Connect
discovery
• Increase product placement • Additional API‘s as
and other embedded ads launched: foursquare,
gowalla, etc.
• Control content creation and • Develop consumer-focused data
acquisition costs strategy
• Recognize devaluation of content and • Build relationship on
accept depressed pricing access, not ownership
Mergers / Acquisitions
• Streamline business (not corporate) development process
• Accelerate dealflow and deal signing
• Goals are new partners AND new learning
• Accelerate rights expansion and terms with content makers
• Engage in experimental deals with innovative but unproven players
Source: Framework provided by Curse of the Mogul, Jonathan Knee
18
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
19. Demand Media: Next Gen Media Conglomerate?
Generates revenue by focusing on search and volume
Content
Valuation Algorithm
• Determines what articles to produce
• Estimates search term‘s Lifetime Value
User Knowledge Engine
Packaging
+ • Generates title ideas by combing through search
queries that have included that term
• Reviews term and converts to real title
Upload
Freelance writer spots title and writes article • Copyeditor reads article, makes fixes, and
uploads back to Demand Studios
Publishing /
Discover y / Analytics
Distribution
Search-based Publishing
• Tied to Google adwords and SEM / • Article appears on Demand Media's
SEO rankings network of sites and partners
• Verticalized distribution based on
audience interest
Monetization
• Ad clicks result in revenue generation
for Demand Media and Google
Source: Wired
19
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
20. Betaworks: focuses on funding and operating
on real-time startups
Verticalized Distribution
Verticalized
Discovery / Packaging Distribution
Analytics
Content From USER
Search /
Discovery
Content
From USER
Verticalized
Retail
Source: Betaworks site 20
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
21. The next generation of the web is becoming
more Social, Mobile, & Real-Time
Internet Era
Traditional
Portal Search Social Mobile
(TV / Radio /
(Yahoo / AOL) (Google) (Facebook / Twitter) (iPhone/ Android)
Newspaper)
Content • Passive • Passive • Active • Interactive, user • Wide range of
Control • Professional • Specialized • User generated generated developers
Discovery • Mass • Prominent page • Search-driven • Recommendation • iTunes / Android app
marketing placement • Reference store
• Word of mouth • Other apps (e.g.
Chorus)
Monetization • Classified ads • Banners ads • Text ads • Social ads • Purchase
• Mass-market • Light targeting • Targeted based on • Targeted via social • Subscription?
• Generic • Light context search relevance • Mobile advertising
• Contextual to • Contextual on
previous behavior relationship
• Virtual goods
• Microtransactions
Data lag • Days • Hours • Minutes • Real-time • Real-time
Analytics • Broad samples • Pageviews • Uniques • Uniques • Geo-targeted /
• Focus groups • Uniques • Duration • Retweet location-based
• Cost per • Cost per Action • Relevance
Thousand 21
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
22. Agenda
• Executive Summary / Thoughts on Investment & Acquisition
• Historical Analysis (2000-2009)
• Mobile Applications Industry Analysis
• Social Media Industry Analysis
22
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
23. Apple‘s release of the iPhone and iTouch have
been met with groundbreaking growth
23
Source: Mary Meeker, ―Economy and Internet Trends‖ Oct 20, 2009
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
24. AT&T DataTraffic has surged, implying underlying
demand for bandwidth consumptive applications
24
Source: Mary Meeker, ―Economy and Internet Trends‖ Oct 20, 2009
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
25. iTunes simplifies the act of mobile purchase…
25
Source: Mary Meeker, ―Economy and Internet Trends‖ Oct 20, 2009
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
26. …leading to the growth of a paid mobile ecosystem
26
Source: Mary Meeker, ―Economy and Internet Trends‖ Oct 20, 2009
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
27. Morgan Stanley estimates mobile app market to be
$5.3B by 2012
27
Source: Admob; Yankee Group
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
28. iTunes App Store has become a fast growing
ecosystem, with over 83,000 applications
100,000+
83,438
75,069
65,173
55,047
44,869
37,366
29,743
22,820
17,422
Source: 148apps.com 28
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
29. Pricing spans a variety of points, though nearly
half of all App Store applications priced at $0.99
iTunes App Store Pricing
Source: 148apps.com; as of Sept ‗09
29
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
30. Categories vary by loyalty and frequency of use
Frequency vs. Retention
News
Sports Medical
Business
Social
Utilities
Books Networking Weather
Frequency of Use
Health Care /
Finance Fitness
Travel
Per week
Entertainment Games
Music Reference
Productivity
Education
Lifestyle Navigation
30 Day Retention
Source: 148apps.com; as of Sept ‘09; size of bubble denotes # of apps offered
30
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
31. Pricing and Retention appear to be correlated
Retention vs. Pricing
Books
Weather Navigation • Subscription model
News
possible?
Games Sports Productivity
Education
Finance Business
• Focus on verticals
30 Day Retention
Reference
Health Care
/ Fitness Music
Social Travel
Networking
Utilities
• Developers should focus on
Entertainment
creating sustainable process
around frequent app release
Lifestyle
• Cross-sell apps aggressively
Avg Price
31
Source: 148apps.com; Flurry.com; as of Sept ‘09; Medical category excluded (avg price: $7.90, retention: 43%)
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
32. Gaming apps are fragmented and hit driven,
with high turnover among the top ten lists
iPhone Paid App Rankings (Apps in April - June)
iPhone Paid App Rankings (lasting three months or later)
iPhone Paid App Rankings (Apps lasting three months or longer)
Fragmentation Apps do not sustain ranked
placement for more than three months 32
Source: Distimo
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
33. iFund developer recipients focus on interactivity
and gaming
Name Category Description Unique Features
Booyah Location-based Booyahs are topnotch industry vets from a wide range of entertainment, media, • User engagement through "real-life" games
Social Network and technology fields who have combined their talents to create something and "boo-yah" moments, which are then
larger than themselves. At Booyah, we believe that we can inspire personal recorded and tracked as data
discovery and change lives. We spend our days thinking of ways to catalyze
mass action, and we spend our nights turning those dreams into reality.
Texting Your friends, family, and even the family cat (if they can do so)...can text the • Enabling txt as notification technology for
keyword of your TXTsite to the GOGII phone number, 60611, and they access, content, and referral
immediately receive the TXTsite, which consists of the information that you
placed on it, with menu choices. From here, they can choose to receive text
(Gogii) updates, link to a website, download a video, or forward the site to a friend. It's
like navigating a website, but all in text.
Remote control Stay connected in real-time to what matters most—family, property, home, • Remote access, broadband home
and business—from anywhere in the world, anytime, day or night. management
Location-based On the intersection of mobile and the physical world. Its goal is to drastically • Unclear, though founders have strong
improve the experience of consumers on that intersection. gaming and software development
experience
Gaming The iPhone can give you all the gaming goodness from arcade to adventure, • Robust, high end gaming
from puzzle to platformer & from shooter to sudoku - but it can also give you • Traditionally high price points but recently
games that you've never seen before - Alternate & augmented reality games, released in-app purchases for virtual goods
mobile social experiences, games that use multi-touch, accelerometers, gps, and microtransactions
the camera, your media and your friends to bring you amazing new • Rapid release model
experiences.
Location-based Pelago is committed to developing innovative products that bring the power of • User engagement through everyday
Social Network online information to everyday life in the physical world. Their flagship product, celebration
Whrrl v2.0, lets people capture and share the stories of their lives, one moment
at a time.
Music ID The launch pad to our success has been our core music recognition • Premium and free models (freemium)
service technology that enables anyone with a mobile phone to identify music that is • No content licensing
playing - even under noisy conditions - wherever they are, simply by
Shazaming it. This clip is run through our database of over 8 million tracks
(which extends back to the '50s) to find an exact fingerprint match. 33
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
34. Cloud data / processing + native iphone features + in-
app purchases = Preliminary Investment Thesis
Cloud Computing Native Features In-app purchases
Photo Video
Compass
+ Music
Location
awareness +
Voice recognition
Touchscreen
(Heavy Data / Processing Requirements)
Txt/MMS (Pseudo subscription / service model)
Accelerometer
Voice
Mobile App
Investment Framework
34
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
35. Structure brainstorming identifies virtual tag, real-time translation,
and micro-windowed mobile coupons as having potential
Native Features Cloud Features
Location /
Vertical Multimedia Touchscreen Voice Cloud Processing / Data Possible Concepts
Compass
Games x x Virtual tag / virtual easter egg hunt
Travel x x x Local, interactive maps for malls, parks, etc.
Education x Digital flipcards
Utilities x x Visual authentication
Utilities x x Visual transcription
Utilities x x Remote control webcam and monitoring
Music x x Song identification (Shazam)
Sports x Real-time, location-based rooting
Productivity x x X Real-time language translator
Productivity x x x Voice / language transcription
Business x x Real-time, micro-windowed mobile coupons
Healthcare & Fitness x x Augmented reality workouts
News x x Real-time, hyperlocal news
Location-based social networking
Social Networking x x x
(Foursquare)
Finance x x Digital payment and authentication
Emergency alert; health insurance and e-
Medical x x
record access
35
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
36. Agenda
• Executive Summary / Thoughts on Investment & Acquisition
• Historical Analysis (2000-2009)
• Mobile Applications Industry Analysis
• Social Media Industry Analysis
36
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
37. Social networking is a global phenomenon…
37
Source: Mary Meeker, ―Mobile Internet Themes,‖ Dec 2009
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
38. …with social gaming becoming an emerging
sub-industry for Facebook app developers
38
Source: Mary Meeker, ―Mobile Internet Themes,‖ Dec 2009
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
39. In only two years, the social gaming Market is
estimated to grow to $2.2B; the virtual goods
market is estimated to grow to $2.0B…
2012: $2.2B 2012: $2.0B
2013: $2.4B 39
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
40. …with room to grow as users shift their time and
advertisers shift their spend to internet applications
Lag driven by:
• Challenges in
managing spend and
performance in a
variety of mediums
(vs. lump sum
payment to a mass
aggregator like a TV
station)
• Low costs of social
media distribution and
tracking
• Still relatively new
(even considered
experimental), spend
not yet formalized as
line item in CMO
budgets
40
Source: Mary Meeker, ―Mobile Internet Themes,‖ Dec 2009; Knowledge@Wharton
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
41. The Social Gaming Ecosystem is robust with roughly
300 firms and $1.5B invested across multiple categories
Social Gaming Firms Venture Capital Dollars ($MM)
N=308 Total: $1.5B* invested
Source: Social Gaming Summit 2009, Crunchbase, Company Websites, Press Releases, LinkedIn profiles of founders 41
*Over past three years
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
42. While many categories have been funded,
entrepreneurs continue to start firms
Total Number of Firms
61 20 15 10 5 8 4 4 5 3 6 2 3 3 2 3 2 2 1 1 Total
Firms
Funded
Firms
Unfunded
Firms
Source: Social Gaming Summit 2009, Crunchbase, Company Websites, Press Releases, LinkedIn profiles of founders
42
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.
43. More funding does not necessarily translate into
bigger user bases (1 of 2)
Firm Funding Investors Description CEO MAU DAU DAU / MAU
Playdom $43M NEA, Lightspeed, Norwest Playdom is game developer with a focus on social, online games. The John 14,416,661 2,119,342 14.7%
company has a number of popular titles on the iPhone, Myspace, and Pleasants
Facebook.
Zynga $39.0 Reid Hoffman, Avalon Zynga is a network of gaming applications built off of classic games like Mark 185,624,645 53,399,185 28.8%
Ventures, Clarium Capital, Poker, Battleship, and Attack!. The games are found on social networks like Pincus
Foundry Group, Pilot Group, Facebook and Bebo.
Union Square Ventures, Peter In addition to making their own games, the company has created a network
Thiel, Bob Pittman, Andy which allows third party developers to become part of the Zynga network.
Russell, Brad Feld, Kleiner
Perkins,
playfirst $26.5 Mayfield, Trinity Ventures, PlayFirst is a casual gaming startup, based out of San Francisco. is focused John Welch 3,185 174 5.5%
Rustic Canyon Partners, DCM on creating ―shared casual game experiences around lasting original brands‖
that includes game play ―rich in story and character.‖ PlayFirst titles include
Wedding Dash, Chocolatier, and Dream Chronicles.
Playfish $21.0 Accel Partners, Index Playfish is a creator of social games for friends to play together over social Kristian 60,212,645 13,381,393 22.2%
Ventures platforms such as Facebook, MySpace, Bebo, Google, iPhone and Android. Segerstrale
Each of the company‘s seven games has been a top 10 hit on Facebook,
including Pet Society, which is the platform‘s most popular game and enjoyed
by more than 11 million people every month.
Challenge $14.5 Sequoia, Globespan Challenge Games creates online social games that are fun and easy to play Andrew 1,983 159 8.0%
Games whether you‘re a serious or casual gamer. Tapping the capabilities of social Busey
networks, Challenge Games helps people play with and against friends.
Citizen $10.0 Radar Partners Citizen Sports offers a number of web applications that allow for interaction Mike Kerns 1,159,016 98,937 8.5%
Sports between fans. They also are the creators of Protrade.com, where users can
buy, sell, and trade their favorite sports figures as they try to win money.
SuperSecret $10.0 Freestyle Capital, Opus SuperSecret.com is an online social game for tweens who are ready to move Ted Barnett NA NA
Capital on from Club Penguin or Webkinz, but are too young for World of Warcraft or
Facebook. The company actively involves tweens in product design to create
an engaging experience available online, and its proprietary World Builder™
platform allows SuperSecret to quickly and easily expand game content to
keep up with the imagination and skills of its tween audience.
RotoHog.com $8.0 Allen & Co., DFJ Dragonfund, RotoHog.com is the provider and developer of fantasy sports with current Kelly 443 8 1.8%
Mission Ventures, SCP partners like NBA.com, Turner Digital, Pro Football Weekly, LG Electronics Perdew
Worldwide, Jeff Fluhr and Grupo RBS in Brazil. RotoHog is a product of Sports Composite DE, is
privately held, and based in Los Angeles, CA.
43
Source: Social Gaming Summit 2009, Crunchbase, Company Websites, Press Releases, LinkedIn profiles of founders; MAU: Monthly Avg Users; DAU: Daily Avg Users
This information is confidential and was prepared by Yujin Chung for an independent study project sponsored by Professor Hosanagar. It is not to be referenced, published, or presented without Mr. Chung‘s prior written consent.