09 03 03 web 2.0 weekly

SOFTWARE & SERVICES 3 MARCH 2009

W E B 2 . O W E E K L Y

DAVID SHORE, CFA, MBA 416.860.6784

[email protected]

Arun Thomas (Associate) 416.860.7666

REVENUE GROWTH AT ONLINE GAMING COMPANIES

ONLINE GAMING COMPANIES REPORT Q4/08 RESULTS Several of the largest MMOG companies reported their Q4/08 results over the past week; including Shanda, Netease, and The9. As the following chart demonstrates, the MMOG market continued to grow on a sequential basis in Q4; demonstrating the resiliency of this market despite the current economic conditions. As our research shows, these types of companies continue to enjoy some of the largest market caps in our Web 2.0 universe.

MMOG Market

200.7

237.7

278.4

302.9

343.5

366.3

396.5 400.1

425.5

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

Q4/06 Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08

(US

D m

)

GA NCTY NTES PWRD SNDA SEHK:777*GA & SEHK:777 Estimates

This report has been created by Analysts that are employed by Research Capital Corporation, a Canadian Investment Dealer. For further disclosures, please see last page of this report.

www.researchcapi tal .com

Toronto 416 .860 .7600 Montrea l 514.399 .1500 Vancouver 604 .662 .1800 Calgary 403 .265.7400 Regina 306 .566 .7550

THE WE B 2 . 0 UNI VE RSE

85 public Web 2.0 companies identified: We have identif ied 85 public companies for our Web 2.0 universe, with a combined market cap of $27 bill ion. These include a wide variety of companies, including MMOG (Massive Multi-Player Online Gaming) companies, social networking software companies, media sharing companies, and social lending companies. See below for a summary of the ful l universe (Figure 1). The average market cap for the group is ~$320 mil lion (but a median of only $26.6 mil lion), with average trai ling revenue of $133 mill ion (median $39 mill ion). The companies are also highly profitable, with an average EBITDA margin of 17.9%. On a valuation basis, the overall average is 3.8x trai ling revenue (median 1.0x) and 8.1x trai ling EBITDA (median 5.6x). Eleven of the companies have more than 500 employees.

Comparable Company Analys is > Web 2.0

Company Name LTM as of Ticker Exc hange

Trading

Currency HQ

Current

Price

US D Market

Cap ($m)

US D L TM Total

R ev ($m )

USD L TM Total

EB ITDA ($m )

E B ITDA

%

TEV/LTM

Revenue

TEV/L TM

EB ITDA Employees

Acce lerize N ew Media, Inc. 9 /30/2008 ACLZ OTCB B US D United S tates 0. 31 8. 3 3.2 ( 4. 7) NM 4. 0x - 20

Actoz S oft Co. , Ltd. 9 /30/2008 A052790 K OS E KR W S outh Korea 10 ,450 58. 7 46. 5 8. 5 18 .3% 0. 8x 4.3x NA AQ Inte ractive, Inc. 12/31/2008 3838 TS E JP Y J a pan 32 ,900 18. 4 61. 9 5. 0 8. 0% - - NA

Associated Media Holdings Inc. 6 /30/2007 ASMH OTCP K US D United S tates 0. 00 0. 1 0.1 ( 2. 3) NM 8. 0x - 3 B igs tring C orp. 9 /30/2008 B SG C OTCB B US D United S tates 0. 02 0. 9 0.1 ( 2. 1) NM 31. 7x - 8

Beyond Commerce, Inc. 9 /30/2008 B YOC OTCB B US D United S tates 0. 64 26. 2 1.1 ( 7. 7) NM 26. 8x - 25

Br ight T hings plc 9/30/2008 AIM:B GT AIM G BP United K ingdom 0.02 2. 9 0.2 ( 1. 6) NM 12. 3x - 9

BroadW ebAs ia Inc. 9 /30/2008 BW BA OTCP K US D United S tates 0. 75 63. 7 0.0 ( 4. 6) NM - - 46 CDC Corp. 9 /30/2008 CHIN.A Na sdaqG S US D Hong K ong 0. 76 82. 0 428. 1 18 .8 4. 4% 0. 3x 7.4x 3 ,125

China G ateway Corpora tion 9/30/2008 CGW Y OTCB B US D United S tates 0. 00 0. 0 6.7 ( 6. 6) -98. 9% 0. 0x - 37 Chinese G amer International 9 /30/2008 G TS M:3083 G TS M TWD Ta iwan 133. 00 322 . 2 36. 7 17 .3 47 .1% 7. 3x 15. 5x NA

CornerWorld Corporation 10/31/2008 CW R L OTCB B US D United S tates 0. 15 7. 0 0.6 3. 1 506. 8% 13. 8x 2.7x NA DADA SpA 9/30/2008 CM:DA CM E UR Italy 5. 00 102 . 0 213. 3 34 .1 16 .0% 0. 7x 4.2x 574

DXN Holdings Bhd 11/30/2008 DXN K LS E MYR Ma lays ia 0. 33 20. 6 74. 5 9. 9 13 .3% 0. 5x 4.0x NA Digita lP os t Interactive, Inc. 9 /30/2008 DG LP OTCB B US D United S tates 0. 01 0. 4 0.4 ( 3. 3) NM 3. 2x - 11

Digita lT own, Inc. 11/30/2008 DG TW OTCB B US D United S tates 2. 75 74. 7 NM ( 2. 5) NM - - 3

Dolphin Digita l Media , Inc. NA DP DM OTCB B US D United S tates 0. 45 21. 9 NA NM NM - - 6 E olith Co. Ltd. 12/31/2007 A041060 K OS E KR W S outh Korea 520 15. 4 15. 9 ( 0. 0) -0 .3% 1. 0x - NA

E xtensions, Inc. 9 /30/2008 E XT I OTCP K US D United S tates 0. 20 18. 9 NM NM NM - - 2 F ina ncia l Media Group, Inc. 11/30/2008 FNG P OTCB B US D United S tates 0. 03 2. 0 6.8 1. 2 18 .3% 0. 2x 0.9x 22

F luid Mus ic C anada , Inc. 9 /30/2008 TS X: FMN TS X CAD United S tates 0. 50 20. 4 4.2 ( 8. 6) NM 1. 9x - 29 F rogs te r Inte ractive P ictures AG 6/30/2008 FR G XT R A E UR Germany 4. 05 12. 0 5.1 ( 3. 1) -60. 6% 2. 3x - NA

Gamania Digital E nterta inment Co. , L td. 9 /30/2008 6180 G TS M TWD Ta iwan 22. 40 97. 0 106. 0 17 .9 16 .9% 0. 7x 4.0x NA GameOn Co L td. 12/31/2008 3812 TS E JP Y J a pan 93 ,000 92. 3 76. 6 20 .3 26 .4% 0. 5x 1.7x NA

GeoS entric Oyj 9 /30/2008 G EO1V HL SE E UR F inland 0. 03 23. 5 5.2 (11 .9) NM 3. 6x - 92 Giant Interactive G roup, Inc. 9 /30/2008 GA NY SE US D China 6. 29 1, 495. 2 244. 8 155. 4 63 .5% - - 1 ,016

GigaMedia L td. 9 /30/2008 G IGM Na sdaqG S US D Ta iwan 5. 09 275 . 0 200. 5 48 .0 23 .9% 1. 0x 4.4x 975

Gravity Co., Ltd 9/30/2008 GR V Y Na sdaqGM US D S outh Korea 0. 69 19. 2 31. 2 6. 0 19 .2% - - 636

Gree, Inc. 6 /30/2008 TS E : 3632 TS E JP Y J a pan 4 ,400 1, 007. 8 30. 2 10 .9 36 .0% 31. 3x - NA GungHo Online Entertainment, Inc. 9 /30/2008 3765 OSE JP Y J a pan 117 ,000 137 . 4 104. 9 15 .4 14 .7% 1. 1x 7.3x NA HanbitS oft, Inc. 9 /30/2008 A047080 K OS E KR W S outh Korea 3 ,040 42. 4 44. 2 (11 .3) -25. 6% 0. 6x - NA

IAC/Inte rActiveCorp. 12/31/2008 IAC I Na sdaqG S US D United S tates 14. 80 2, 085. 3 1 , 445 . 1 64 .6 4. 5% 0. 2x 5.2x NA

IAS E ne rgy, Inc. 10/31/2008 IAS C .A OTCB B US D Canada 0. 08 5. 6 0.0 ( 0. 9) NM - - NA

IdeaE dge, Inc. 12/31/2008 OTCB B: ID AE OTCB B US D United S tates 0. 43 18. 2 0.0 ( 4. 6) NM - - NA is eemedia Inc. 9 /30/2008 IEE TS XV CAD Canada 0. 10 3. 8 1.1 ( 4. 3) NM 1. 1x - NA

J umbuck Entertainment P ty Ltd. 6 /30/2008 ASX :JMB ASX AUD Aus tra lia 0. 41 12. 8 9.9 4. 6 46 .0% 0. 9x 1.9x 72 J umpTV Inc. 6 /30/2008 TS X: J TV TS X CAD Canada 0. 36 31. 8 11. 5 ( 1. 8) -15. 3% 3. 5x - NA

Kaboose Inc. 9 /30/2008 TS X: KAB TS X CAD Canada 0. 41 44. 0 57. 6 4. 4 7. 6% 0. 9x 11. 6x NA K ingsoft Co. Ltd. 9 /30/2008 3888 S EH K HK D China 2. 51 347 . 4 106. 6 36 .0 33 .8% 2. 4x 7.1x 1 ,660

Lingo Media Corpora tion 9/30/2008 TS XV :LM TS XV CAD Canada 0. 95 9. 5 3.2 ( 1. 3) -42. 5% 3. 2x - NA LiveWorld Inc. 9 /30/2008 LVWD OTCP K US D United S tates 0. 06 1. 9 11. 7 ( 1. 2) -10. 1% 0. 1x - 73

LookS mart, Ltd. 9 /30/2008 LOOK Na sdaqGM US D United S tates 1. 18 20. 1 69. 5 ( 2. 6) -3 .7% - - 93

Magnitude Informa tion S ys tems Inc. 9 /30/2008 MAGY OTCB B US D United S tates 0. 02 7. 9 0.1 ( 3. 2) NM - - 13 Mixi, Inc. 12/31/2008 2121 TS E JP Y J a pan 359 ,000 564 . 2 120. 5 45 .8 38 .0% 3. 8x 10. 0x NA

Modern T imes Group Mtg AB 12/31/2008 MTG B OM SE K S weden 117. 50 843 . 5 1 , 434 . 5 229. 3 16 .0% 0. 9x 5.6x NA Moggle , Inc 12/31/2008 MMOG OTCB B US D United S tates 2. 00 72. 6 NM ( 1. 1) NM - - 3

MOK O.mobi L imited 6/30/2008 MK B ASX AUD Aus tra lia 0. 05 2. 3 1.3 ( 2. 0) NM 0. 9x - NA

NEOW IZ G ames Corpora tion 12/31/2007 A095660 K OS E KR W S outh Korea 30 ,350 185 . 7 114. 8 30 .8 26 .9% 1. 6x 5.8x NA

NetDra gon WebS oft, Inc. 9 /30/2008 777 S EH K HK D China 2. 93 199 . 7 95. 1 46 .2 48 .6% 0. 2x 0.5x 1 ,482 Netea se.com Inc. 12/31/2008 NTE S Na sdaqG S US D China 20. 45 2, 516. 4 450. 5 292. 9 65 .0% - - NA

NeXplore Corporation 9/30/2007 NX PC OTCP K US D United S tates 0. 95 53. 0 NM ( 4. 9) NM - - 19 Ngi G roup Inc. 12/31/2008 2497 TS E JP Y J a pan 20 ,980 26. 6 101. 0 31 .1 30 .8% - - NA

Northgate T echnologies L imited 12/31/2008 590057 B SE INR India 34. 20 22. 8 128. 7 22 .6 17 .6% 0. 2x 1.0x 286 Open T ext Corp. 12/31/2008 OTE X Na sdaqG S US D Canada 30. 57 1, 586. 6 769. 3 195. 0 25 .3% 2. 2x 8.8x 3 ,400

Openwa ve S ys tems Inc. 12/31/2008 OPW V Na sdaqG S US D United S tates 0. 79 65. 9 199. 6 (10 .2) -5 .1% - - 627 Perfect W orld Co., Ltd. 9 /30/2008 PW R D Na sdaqG S US D China 8. 91 508 . 3 186. 6 99 .8 53 .5% - - 1 ,401 PhotoChannel Ne tworks Inc. 12/31/2008 TS XV :P N TS XV CAD Canada 1. 73 45. 0 15. 5 ( 0. 8) -5 .3% 2. 8x - NA

Quepasa Corp. 9 /30/2008 QPS A Na sdaqCM US D United S tates 1. 19 15. 1 0.1 (11 .8) NM - - 63 OAO R B C Informa tion S ys tems 12/31/2007 R B C I R T S US D R us s ia 0. 30 41. 6 131. 0 17 .1 13 .1% 0. 0x 0.1x NA

Shanda Intera ctive Ente rtainment L td. 12/31/2008 S NDA Na sdaqG S US D China 30. 76 2, 134. 2 521. 3 239. 5 46 .0% - - NA Shutterfly, Inc. 12/31/2008 S F LY Na sdaqG S US D United S tates 7. 84 197 . 2 213. 5 28 .4 13 .3% 0. 5x 3.8x NA

S K Communications Co. , Ltd. 12/31/2007 A066270 K OS E KR W S outh Korea 6 ,160 161 . 2 132. 0 12 .4 9. 4% 1. 2x 13. 0x NA SNAP Interactive, Inc. 9 /30/2008 S TVI OTCB B US D United S tates 0. 95 10. 1 2.3 0. 2 10 .1% 3. 9x 38. 9x 5

SNM G lobal Holdings 9/30/2008 S NMN OTCP K US D United S tates 0. 00 0. 0 2.0 ( 0. 7) -34. 8% 1. 1x - 33 S ocial Media V enures , Inc. 12/31/2008 S MVI OTCP K US D United S tates 0. 60 0. 0 0.1 ( 0. 1) -60. 5% 0. 0x - NA

Spark Networks , Inc. 9 /30/2008 LOV AMEX US D United S tates 2. 44 52. 3 60. 1 11 .7 19 .5% 0. 8x 4.1x 176 SpectrumDNA, Inc. 9 /30/2008 S PXA OTCB B US D United S tates 0. 10 4. 6 0.1 ( 2. 7) NM - - 7

T encent Holdings Ltd. 9 /30/2008 700 S EH K HK D China 44. 15 10 ,229.9 902. 5 447. 1 49 .5% 12. 2x 24. 7x 6 ,039

The P arent Company 8/2/2008 K IDS .Q OTCP K US D United S tates 0. 02 0. 4 112. 0 (13 .5) -12. 0% 0. 2x - 347 The9 Limited 12/31/2008 NCT Y Na sdaqG S US D China 10. 79 289 . 4 249. 5 84 .0 33 .7% - - NA

TheS treet.com, Inc. 12/31/2008 TS CM Na sdaqGM US D United S tates 1. 78 54. 1 71. 9 7. 7 10 .8% - - NA T ree .Com, Inc. 12/31/2008 TR E E Na sdaqGM US D United S tates 3. 93 36. 8 228. 6 (27 .0) -11. 8% 0. 2x - NA

Unis e rve Communications Corp. 11/30/2008 TS XV :U S S TS XV CAD Canada 0. 05 1. 0 23. 2 0. 1 0. 4% 0. 1x 31. 3x NA

United Online Inc. 12/31/2008 UNT D Na sdaqG S US D United S tates 4. 40 361 . 3 669. 4 153. 9 23 .0% 1. 0x 4.4x NA

UOMO Media, Inc 10/31/2008 UOMO OTCB B US D Canada 0. 07 6. 0 0.5 ( 0. 4) -91. 6% 13. 3x - NA VOIS , Inc. 12/31/2008 VOIS OTCB B US D United S tates 0. 75 5. 4 0.0 ( 1. 3) NM - - 4

W ebzen Inc. 12/31/2008 WZE N Na sdaqGM US D S outh Korea 0. 89 10. 6 18. 1 ( 1. 8) -10. 1% - - 330 W izza rd S oftwa re Corporation 9/30/2008 WZE AMEX US D United S tates 0. 54 24. 4 6.2 ( 6. 5) NM 3. 9x - 110

W oozyF ly, Inc. 9 /30/2008 WZYF OTCB B US D United S tates 0. 15 2. 6 0.0 NM NM - - 14 W orlds .com Inc. 9 /30/2008 WDDD OTCB B US D United S tates 0. 18 9. 4 0.1 NM NM - - 1

W ynds torm Corporation NA WYND OTCB B US D United S tates 0. 12 2. 2 NA NM NM - - NA XING AG 9/30/2008 O1B C XT R A E UR Germany 28. 77 188 . 3 39. 4 15 .3 38 .8% 3. 4x 8.8x 161 YedangOnline Corp. 12/31/2007 A052770 K OS E KR W S outh Korea 6 ,650 66. 2 43. 6 9. 8 22 .4% 1. 5x 6.7x NA

Ynk K orea Inc. 12/31/2007 A023770 K OS E KR W S outh Korea 3 ,545 5. 5 12. 4 ( 0. 9) -7 .6% 0. 4x - NA ZipL ocal Inc. 9 /30/2008 TS XV :ZIP TS XV CAD Canada 0. 02 0. 9 2.7 ( 3. 7) NM 0. 6x - NA

High 10 ,229.9 1 ,445 .1 447. 1 506. 8% 31. 7x 38. 9x 6, 039Low 0. 0 0.0 -27. 0 -98. 9% 0. 0x 0.1x 1

Average 320.7 133.2 29.0 17.9% 3.8x 8.1x 524Median 26. 6 39.4 0 .2 15 .3% 1. 0x 5.6x 73

Figure 1. Web 2.0 Universe Summary Source. Capital IQ

CAPIT AL M ARKET S ACT IV I TY (M &A AND F I NANCI NG )

Twitter raises $35 million: The largest Web 2.0 financing of the last three months remains the $35 mill ion raised by Twitter (Figure 2). Overall, there have been 25 financings announced in February, total ling $184.6 mill ion, or $7.4 mill ion on average. The average value for February was above the $7.0 mill ion average for January, with four financings over $15 mil lion in February (Twitter, Synthasite, Tremor Media, and Offerpal Media) vs. no deals over $15 mil lion in January. For additional details, see Figure 29 (at end of note).

Financing - Last Three Months

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Tw

itter

GoF

ish

Synth

asite

Tre

mor

Media

Aste

r D

ata

Syste

ms

Offerp

al M

edia

Imagin

iY

odle

Em

erg

ent G

am

e T

echnolo

gie

sA

dM

ob

Outb

rain

Virtu

Oz

NetS

helte

rB

lue K

ai

IMV

UN

ew

sG

ato

rG

o Inte

rnet M

edia

Rate

Poin

tD

EC

AN

urien

FooM

ojo

Taptu

Tvtr

ipS

cribd

One T

rue M

edia

SundayS

ky

Pla

y H

ard

Sport

sS

ocia

l Media

nJib

Jab

Xobni

Insid

eV

iew

Kew

ego

Fliq

zS

ocia

lMedia

Motio

nbox

Oodle

Superf

ish

Wam

ba

Snapm

ylif

eS

port

sblo

gs

Geni

Tagged

AboutU

sJackbe

ChakP

ak

Gbox

Tum

blr

TextD

igger

Pla

ydo

OneS

pot

Virtu

al F

airgro

und

Fetc

hD

og

Mix

po

Overlay.T

VE

-Glo

bal S

port

s N

etw

ork

7 B

illio

n P

eople

Fam

ilyLin

k.c

om

mE

go

Tripw

olf

Whis

tleB

ox

Mendele

yD

otB

luO

utr

ight

Tvin

ci

Filt

rbox

MM

O L

ifeC

ake F

inancia

lH

ubdub

Angie

's L

ist

Snooth

CoveritL

ive

Sto

ckT

wits

fav.o

r.it

Identi.

ca

Puls

e E

nte

rtain

ment

Clic

kpass

Meez

(US

$m

) Feb-09

Jan-09

Dec-08

Figure 2. Financings, Last Three Months Source. Company reports

Six SNS companies account for $28.7 million (combined) of capital market activity: Activity in February was busiest among social networking companies (Figure 3), with six companies combining for a total of $28.7 mill ion. There have also been four financings of video companies raising a total of $25.9 mill ion.

Capital Market Activity by Sector - February 2009

35.0

28.725.9

22.520.0

15.013.8

9.0

4.3 4.0 3.0 2.0 1.40.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Mic

roblo

g

Socia

l Netw

ork

s

Vid

eo

Aggre

gatio

n

Wik

i

Virtu

al G

oods

Gam

ing

Tra

vel

Searc

h

Virtu

al W

orl

d

Analy

tics

Fin

ancia

l Serv

ice

s

Com

ment/R

eputa

tion

1 6 4 4 1 1 2 1 1 1 1 1 1

(US

$m

)

# companies

Figure 3. Capital Market Activity, by Sector, February 2009 Source. Company reports

Average round size increases slightly: On a trail ing 12-month basis, total f inancing dollars inched up as of February 2009, with average round sizes increasing sl ightly as well (Figure 4).

LTM Financing

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0

4,000.0

Jul-05

Sep-0

5

Nov-0

5

Jan-0

6

Mar-

06

May-0

6

Jul-06

Sep-0

6

Nov-0

6

Jan-0

7

Mar-

07

May-0

7

Jul-07

Sep-0

7

Nov-0

7

Jan-0

8

Mar-

08

May-0

8

Jul-08

Sep-0

8

Nov-0

8

Jan-0

9

(US

$m

)

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

(US

$m

)

Total Average

Figure 4. Financings, Last 12 Months Source. Company reports

Cumulative total $5.6 billion: Overall, on a cumulative basis, Web 2.0 financings have totalled $5.6 bill ion, with the majority of the financing coming in late 2007 and the first three quarters of 2008 (Figure 5). Financing for the first quarter of 2009 has now passed that raised in the fourth quarter of 2008 – reversing the downtrend since the second quarter last year.

Web 2.0 Financing (cumulative)

35.5 38.8 20.1

87.237.5 33.5 18.2

41.9 57.8 77.4

135.6

82.8

145.7151.5106.6

319.4

947.2

712.7

1,313.3

524.9

338.5

399.4

0.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1

2003 2004 2005 2006 2007 2008 2009

(US

$m

)

0.0

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

6,000.0

(US

$m

)

Figure 5. Financing, Cumulative Source. Company reports

U.S. remains dominant: U.S. companies continue to dominate capital market activity – with almost 73% of f inancings/M&A involving U.S. companies (based on dollars) (Figure 6). Canadian companies generated under 1% of capital market activity based on dollar volume (Figure 6). Based on number of transactions, the U.S. leads with 72.2% of deals, while Canada is third in number of f inancings at 5.4% (Figure 7).

Financing/M&A by Country - LTM ($)

China

7.9%

Russia

1.7%

USA

72.6%

ROW

2.3%

France

0.7%

Canada

0.8%

UK

13.1%

Israel

1.0%

Financing/M&A by Country - LTM (#)

Israel

3.9%

Canada

5.4%

France

2.7%

UK

5.8%

ROW

10.0%

USA72.2%

Figures 6 & 7. Financing/M&A, by Country (LTM, $, #) Source. Company reports

Larger volume of early-stage funding (by count): Almost half of financings in the last 12 months are for early-stage companies (Angel/Seed or Series A) (Figure 8). Series B rounds are 28.9% of the total, with later-stage (Series D, E and PIPE) deals accounting for just 7.1%.

Financing by Type - LTM

PIPE

2.1%

Series A

37.7%

Series B

28.9%

Debt financing

2.5%

Series C

13.8%

Series D

4.2%

Angel/Seed

10.9%

Figure 8. Financing, by Type (LTM, #) Source. Company reports

Equity financings smaller over last 12 months: In the last 12 months, the average size of Series A, B, C, and D rounds have all been lower than the overall average (Figure 9). Note though that Angel/Seed rounds have been larger.

Average financing round size

3.3

41.9

8.8

5.8

11.4

18.4

23.8

11.3

2.5

38.1

6.87.4

12.0

29.3

34.9

11.3

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

Angel/Seed Debt financing PIPE Series A Series B Series C Series D Series E

(US

$m

)

LTM Average Size Overall Average

Figure 9. Average Size per Round Source. Company reports

CAPIT AL M ARKET S ACT IV I TY (P RI CE PE RFO RM ANCE )

Price Performance: Our Web 2.0 index (market-cap weighted) has closely tracked the performance of the NASDAQ composite index, although it has outperformed the index from mid 2008 until recently (Figure 10).

Web 2.0 Index Price Performance

0

20

40

60

80

100

120

140

3/3

/2008

3/1

7/2

008

3/3

1/2

008

4/1

4/2

008

4/2

8/2

008

5/1

2/2

008

5/2

6/2

008

6/9

/2008

6/2

3/2

008

7/7

/2008

7/2

1/2

008

8/4

/2008

8/1

8/2

008

9/1

/2008

9/1

5/2

008

9/2

9/2

008

10/1

3/2

008

10/2

7/2

008

11/1

0/2

008

11/2

4/2

008

12/8

/2008

12/2

2/2

008

1/5

/2009

1/1

9/2

009

2/2

/2009

2/1

6/2

009

3/2

/2009

NASDAQ COMP Web 2.0 (Market Cap Weighted)

Figure 10. Web 2.0 Price Performance Source. Capital IQ

NGI rebounds; Perfect World drops: NGI Group (2497-TSE) rebounded from its fal l last week to have the best performance in the group (for stocks with prices greater than $1) (Figure 11), increasing 22.1% on the week. Perfect World (PWRD-NasdaqGS) fel l the most, -27.0%.

1 Week Price Performance

-27.0%-20.2%

-18.4%-15.6%-15.1%

-13.5%-11.8%-11.7%-11.1%-11.1%-10.1%-9.8%-9.4%-8.5%-7.6%-7.2%-7.2%-7.1%

-5.4%-5.4%-4.3%-3.8%

-2.4%-2.4%-1.3%-0.8%

0.3%0.5%

2.2%3.5%3.9%4.0%4.6%4.8%4.9%

9.8%19.8%

22.1%

-30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0%

Perfect World Co. , Ltd.TheS treet.com, Inc .

The9 L imitedGigaMedia Ltd.Quepas a Corp.Y nk Korea Inc .

DADA S pAPhotoChannel Netw orks Inc .

Eolith Co. Ltd.Northgate Technologies L imitedNEOWIZ Games Corporation

HanbitS of t, Inc .K ings of t Co. Ltd.

S K Communications Co. , Ltd.United Online Inc .

XING AGGree, Inc .

LookSmart, Ltd.A ctoz S of t Co. , Ltd.

Tencent Holdings Ltd.Open Tex t Corp.

S handa Interactive Entertainment Ltd.Mix i, Inc .

S park Netw orks , Inc .Tree.Com, Inc .

IAC/InterA ctiveCorp.Y edangOnline Corp.

Frogs ter Interactive Pictures AGGameOn Co Ltd.

AQ Interactive, Inc .Gamania Digita l Entertainment Co. , Ltd.

Giant Interac tive Group, Inc .NetDragon WebS of t, Inc .

S hutterf ly , Inc .Modern Times Group Mtg A B

Neteas e.com Inc .Chines e Gamer International

Ngi Group Inc .

Figure 11. 1-Week Price Performance Source. Capital IQ

INDUST RY NE WS (P ART NE RS HI PS, F I NANCI AL RES UL TS, NE W P RO DUCT S )

Key DevelopmentsCompany Headline Notes

NetDragon WebS oft, Inc.

(SE HK :777)

Ne tDragon W ebso ft Inc. Launches New E xpans ion Pack

for Zero O nline - 'E xpa nding Horiz ons '

NetDragon W ebS oft Inc . launched a new C hines e language expans ion pa ck ' E xpanding Horizons' -for Zero O nline. F ollowing the la unch of

the previous e xpa ns ion pack 'C ore S torm' in O ctober 2 008, 'E xpa nding Horiz ons ' provides a new 'robot combine' function which pla ye rs can

utilize to crea te their own pe rfec t trans formers and experie nce unprecedented and amazing enjoyment. Ze ro Online is the first 2.5D

MMOR P G developed in C hina that is s et in a s c ie nce-fiction univers e with robot a va tars . It was well received by players both in C hina and

overse as ma rkets since its launch in Apri l 2007 .

The9 L imited (NasdaqGS :NCTY) T he9 Limited R eports Unaudited C ons olida ted E a rnings

R e su lts for the F ourth Quarter and F ull Y ea r E nded

De cembe r 31, 2008 ; A nnounces Impa irment C harges

T he9 Limited reported una udited cons olidated e arnings res ults for the fou rth quarter and full ye ar ended De cember 31, 2008 . F or the quarter ,

the company reported ne t revenue s were CNY 40 5.1 million ($59 .4 million), re pres enting a 1% decreas e f rom CNY 408. 4 million ($ 59.9

million) in the third quarter of 2008 and 4% decreas e f rom C N Y 4 23.7 million ($6 2.1 million) in the fourth qua rter of 2007 . Net income was

CNY 44. 4 million ($6 .5 million), repres enting a dec re as e of 55% from CNY 98.4 million ($1 4.4 million) in the third quarter 20 08 a nd 4 8% from

CNY 86. 0 million ($1 2.6 million) in the fou rth quarter 2007. F ully diluted ea rnings per s hare a nd per ADS for the fourth qua rter of 2008 was

CNY 1.6 2 ($0.2 4) , compared to C NY 3 .56 ($ 0.52 ) for the third quarter of 2008 and CNY 2. 93 ($0 .43) for the fourth quarte r of 2 007, or the

fourth qua rter of 2 008, non-G AAP a djusted net income was CN Y 1 23.1 million ($1 8.0 million) compared to that of CNY 177.3 million ($26 .0

million) for the pre vious quarter and CNY 176.9 million ($25 .9 million ) for the s ame pe riod of las t year. T he company reported fully diluted

non-G AAP ad jus te d ne t income per s ha re was CNY 4. 49 ($0 .66) , compa red to CNY 6.4 1 ($0.9 4) for the third quarter o f 20 08 a nd C N Y 6 .02 P erfec t World Co., L td.

(NasdaqGS :PWR D)

P erfect W orld to L aunch Large-S ca le C losed B eta

T es ting for 'B attle of the Immortals

Pe rfect W orld C o. Ltd. announce d that it will launch large -s cale c lose d be ta tes ting for its fi rst mys terious adventure MMOR PG , 'Ba ttle of the

Immorta ls '. 'B a ttle of the Immorta ls ' g ives players an gaming experience of vis iting mysterious his toric s ite s such as A tla ntis , the B ermuda

T riangle, the E gyptia n P yramids , E a ster Is la nd a nd the Maus oleum of Empe ror Q in as a n online adventu re r. T he game blends elements of

E a stern and W es te rn cultures . T he game runs on the 'C ube' engine developed by P erfect W orld, which has many unique fe atures to bring

game players new in-game experience . T he game's s pe cia l fea tures s uch a s his to rical sites e xploration, turf wa rs a nd the S aint A rmor

S ys tem cater to ga me rs with diff erent interes ts.

MOK O.mobi L imited (AS X:MKB ) MOK O .mobi L imited S igns a n A greement with R elia nce

Communications , I ndia

MOKO .mobi L imited a nnounced that it has s igned a n agre ement with R eliance Communica tions . MOK O .mobi wil l be localis ed for the Ind ian

ma rk et and will work with ke y cr icketing identitie s including Damien Martyn, MOKO .mobi's o ffic ial C r icket R eporter, to e nhance its appe a l,

prov ide unique content, a nd partic ipate in competitions to help drive us er growth.

The P arent Company

(OTCP K :K IDS.Q)

T he Pa re nt C o. W ins A pproval for A s se ts S a le Judge B rendan Linehan S hannon of the U .S . B ank ruptcy C ourt approved the domain name s ale of T he P arent C ompany on F ebruary 2 4,

2009 . A ccording to the order, Domain E quity LL C would purchas e doma in names hobbies .com and itoys .com for $ 0.1 million.

The P arent Company

(OTCP K :K IDS.Q)

T he Pa re nt C o. F i les for C as e C onversion T he P arent C ompany filed a motion for conversion of its C ha pter 1 1 ba nk ruptcy ca se to a C ha pter 7 on February 20, 2009 . T he debtor s tated

that it no longer ha s a s ource of financing to fund the C hapte r 11 a dminis trative expens es . C onve rting the cas e to a C hapte r 7 would be in

the bes t inte re st of the creditors as there is no bene fit to creditors from continued a ccrual of fee s and expens es .

Netea se.c om Inc.

(NasdaqGS :NTES )

Ne tE a se .com Inc . R eports Unaudited E a rnings R es ults

for the Fourth Qua rter and F ull Y ear E nded De cember

31 , 20 08

NetE as e. com Inc. reported unaudited earnings res ults for the fourth quarte r and full year e nded December 3 1, 20 08. T otal revenue s for the

fourth qua rter of 2 008 were R MB 8 01.7 million ($1 17.5 million) , compared to R MB 622 .1 million ($91. 2 million) for the fourth qua rte r of 2 007.

Net profit for the fourth quarter o f 20 08 to taled R MB 575 .9 million ($ 84.4 million) or R MB 0.18 per diluted s hare, compa red to R MB 389.8

million ($57 .1 million) R MB 0.1 2 pe r dilute d s hare for the fourth quarter of 2007 . During the fourth quarte r of 20 08, the C ompany reported a

net foreign e xchange los s of R MB 22.0 million ($3 .2 million ) unde r Other, net, compa re d to R MB 30 .2 million ($ 4.4 mill ion) for the fourth

quarte r of 2 007. NetE as e reported bas ic a nd d iluted earnings per America n depos itary s ha re of R MB 4.4 9 and R MB 4 .46, re spectively, for

the fourth qua rter of 2 008. T he C ompany reported bas ic and dilu ted earnings pe r ADS of R MB 3. 21 a nd R MB 3.01 , res pective ly , for the

fourth qua rter of 2 007. P rofit afte r tax was R MB 57 5.8 million and total net R evenue was R MB 7 91.2 million a gains t prof it a fter tax of R MB

389. 8 mil lion and tota l net revenues of R MB 596 .3 mill ion for the s ame period in the la st ye ar. T ota l revenues for the year 2 008 were R MB 3P hotoChannel Network s Inc .

(TSXV:PN)

P hotochannel Network s Inc . R eports F inancia l R es ults for

the F irs t Quarter E nded December 3 1, 2 008

PhotoChanne l N etwork s Inc . reports its f inanc ia l res ults for the f irs t quarter of fis ca l 2009 fo r the period ended December 31 , 2008. N et prof it

of C AD 9 40,6 44 vers us a los s of CAD 1,08 2,60 0 for the compa ra ble period of fis ca l 2 008. R ecord revenues of CAD 7.2 million, up 67% year-

over-year . E arnings per s hare (E PS ) of C AD 0.03 ve rs us a loss per share of C AD 0.0 3 for the compa ra ble period of fis ca l 2 008. Non-G AAP

adjus ted E a rn ings per s hare (E P S ) of CAD 0.08 versus CAD 0.00 for the comparable period of fisca l 20 08.

Acces s China Holding L td.;

S handa Interactive E ntertainment

L td. (NasdaqGS :SNDA)

S handa P artne rs with S ha ngha i S to rm to C o-ope ra te

Y uyan O nline

S handa Intera ctive E nte rtainme nt L td. a nnounced that it has es ta blis hed a s trategic cooperation with S hanghai S torm Information

T echnology C o. Ltd. (A cces s C hina Holding L td. ) . P urs uant to the s trategic cooperation , S handa G ames Limited will ope ra te Y uyan Online,

which S hanghai S torm will a ls o continue to ope ra te. I n addition, S handa Online Holdings L imite d will open its unified pla tform to support the

operation of the game.Netea se.c om Inc.

(NasdaqGS :NTES )

Ne teas e. com to O pen Be ta T e st of T ianx ia II Nete as e. com Inc . will launch an open beta te st of T ianx ia II , its f irs t free -to-play 3D online game , in the third quarter of 2009. T ianx ia II is

NetE as e's f irs t game that charges use rs for virtual equ ipment. I t was promoted in 2 007. T ianxia II 's a lpha tes t began las t ye ar. T he

re des igned ve rs ion wa s expe cted to fa vor more players . B es ides promoting proprie tary games , NetE a se is a ls o try ing to win the operating

right of S ta rC ra ft II , a trilogy of milita ry sc ience fiction rea l-time s trategy v ideo games developed by B lizz a rd E nte rtainment, which is als o the

developer of the popula r MMOR P G W orld of W arc ra ft (W oW ). T he compa ny currently operates s ome games like F antas y W es tward

Journey , W e stward J ourne y Online I I , W es twa rd J ourney 3, and F ly for Fun.

Guideposts , Inc.; W izzard

S oftware Corporation

(AME X:WZE )

W izz ard Media S igns C ontent Dis tribution Agre ement

with G uidepos ts , Inc

W iz z ard S oftwa re C orporation (W iz za rd Media ) a nnounced that it has s igned an a greement with G uidepos ts I nc . T he firs t a udio and video

podcas ts to be ma de a va ilable under this agre ement will be 'Mys terious W ays . ' T he s erie s is availa ble in iT unes , Zune Ma rketpla ce and in a

W iz z ard Media player on the G uidepos ts webs ite a t http://www.guidepos ts .com/mwvideos /mwvideos . Hos ted and narrated by G uideposts

editor in chief E dwa rd Grinna n, 'Mys te rious W a ys ' a re true pers onal ta les of wonderme nt a nd ins pira tion about re a l people experiencing

moments when G od's pre se nce unexpectedly re vea ls its elf in the ir lives .

S handa Interactive E ntertainment


S handa I nteractive E ntertainment Ltd. R eports

C ondensed C onso lidated Unaudited E arnings R es ults for

the F ourth Quarte r a nd F ull Y ear E nded December 3 1,

20 08

S handa Intera ctive E nte rtainme nt L td. reported condensed cons olidated una udited earnings res ults for the fourth quarter a nd full year ended

December 31 , 20 08. F or the quarte r, the company reported ne t revenue s of C N Y 1 ,015 .2 million , repres enting an increa se of 4 2.1% from

CNY 714 .2 million in the third qua rter of 2007 . Income from operations for the fourth quarter of 2008 was CNY 413.1 million compared to

CNY 278 .9 million in the sa me period of 20 07. Non-G AAP net income in the fourth quarte r of 2 008 wa s C NY 356 .9 mil lion, an increa se of

15.3% from C NY 309.6 mill ion in the fourth quarter of 2007, a nd a n incre as e of 2.4% from C NY 348 .4 million in the third quarter of 2008 .

Non-G AAP earnings per diluted ADS in the fourth quarter of 2008 were C N Y 5 .14, compared with C NY 4.20 in the fou rth quarter of 2007 and

CNY 4.7 8 in the third quarter of 2008. Ne t income in the fou rth quarter of 2008 was CNY 34 2.7 million compared to C NY 2 92.6 million in the

fourth qua rter of 2 007. E arnings per diluted AD S in the third quarter of 20 08 we re CNY 5.1 4, compared with C NY 4. 20 in the third quarter of

2007 . F or the fu ll year ended December 31 , 20 08, the compa ny reported net re ve nues of C NY 3, 569. 1 million, re pres enting an increas e of 4S handa Interactive E ntertainment


Update to S ha nda Inte ra ctive E nterta inment L td. ’s E qu ity

B uyback on December 31 , 20 08

As o f Decembe r 3 1, 2 008 S handa Inte ra ctive E nte rtainment Ltd. has repurchas ed 4,6 10,3 66 ADS s.

B etawave Corporation

(OTCB B :BWAV)

G oF ish C orpora tion will C hange its T icker to B WAV from

G OF H

E ffec tive F ebruary 27, 2009, G oF ish C orpora tion will change its OT C BB s tock ticke r s ymbol to B WAV from GOFH.

Digita lPos t Interac tive, Inc.

(OTCB B :DGLP )

DigitalPost Inte ra ctive Inc. S igns C us tom S oftware Deal Digita lP os t Interac tive Inc . a nnounced that it has s igned a de al with a cus tomer. T he contra ct ca lls for DigitalP ost Inte ra ctive to build a

custom implementa tion of W eb 2.0 tools ets utiliz ed within a bus ines s to bus ines s (B 2B ) s oftwa re applica tion. I f a l l performance metrics a re

me t, the agre ement is worth $165 ,000 with the poss ibil ity o f additional contrac ts availa ble a fter a s ucces sful firs t phas e impleme ntation. T he

product is s cheduled to be complete d be fore the end of the s econd quarte r of 20 09.

G iant Interactive G roup, Inc .

(NYS E :GA); Intel C orporation

(NasdaqGS : INTC )

G iant L aunches O nline Game Hardware Acces sing

P la tform with Intel

G iant Interactive G roup Inc . announced that it has launched a frontier web game hardware a ss es s ing pla tform with Inte l C orporation. T he

platform, open s ource for other web game operato rs , will be cra fted by G ia nt into an indus try mode l for online game hardwa re as se ssment.

United Online Inc.

(NasdaqGS :UNTD)

Unite d O nline Inc . has file d a S he lf R egis tration in the

amount o f $1 5.60 million.

United On line I nc . ha s filed a S helf R egis tration in the amount of $15. 60 million.

ZipLoca l Inc. (TS XV :ZIP ) ZipLocal Inc. R eports E a rn ings R es ults for the S econd

Qua rte r and S ix Months E nded December 31 , 200 8

ZipL ocal Inc . reported earnings res ults for the s econd qua rter and s ix months e nded December 3 1, 2 008. F or the qua rte r, the company

reported adjus ted E B IT DA los s by $1, 305, 989 a s compared to the s ame pe riod in the prior year . Net revenues for the thre e months ended

December 31 , 20 08 we re $734,165, repres enting a dec reas e of $2 73,8 92 (or 2 7% ) from $1, 008, 057 as recorded in the same period in the

prior yea r. Net los s for the three months ended D ecember 31, 2008 was $ 703,2 72 or $0.0 1 pe r share, compared to a los s of $ 1,98 5,41 3 or

$0.0 3 pe r share, for the same period in the prior year. F or the s ix months , the company reported a djusted E B IT DA loss was $ 414, 546

re pres enting an improveme nt of $34 3,82 9 from $758,3 75 for the three months e nded S eptembe r 30, 2008 . Net revenues we re $1, 494,1 01,

re pres enting a de crea se of $724 ,887 or 33% from $2, 218, 988 as recorded in the same period in the prior ye ar. Net loss wa s $1,6 52,0 94 or

$0.0 2 pe r share, compared to a los s of $ 3,22 4,56 8 or $0 .06 per s hare, for the s ame period in the prior yea r.

Figure 12. Key Developments Source. Capital IQ

VAL UAT IO N

MMOG companies lead market cap charts: Seven companies in our Web 2.0 universe top US$1 bill ion in market capitalization (Figure 13). Sixty-three of the 85 (same as last week) companies have market caps under US$100 mil lion, with 26 (vs. 27 last week) under $10 mil lion. Online gaming companies dominate the top of the l ist with four of the top six by market cap.

Market Cap (USD m)

0.00.00.00.10.40.40.90.91.01.92.02.22.32.62.93.84.65.45.55.66.07.07.98.39.49.510.110.612.012.815.115.418.218.418.919.220.120.420.621.922.823.524.426.226.631.836.841.642.444.045.052.353.054.158.763.765.966.272.674.782.092.397.0102.0137.4161.2185.7188.3197.2199.7275.0289.4322.2347.4361.3

508.3564.2

843.51007.8

1586.62085.32134.2

2516.4

1495.2

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000

S NM Global HoldingsS oc ia l Media V enures , Inc .China Gatew ay Corporation

A s s oc iated Media Holdings Inc .The Parent Company

Digita lPos t Interactive, Inc .B igs tring Corp.Z ipLocal Inc .

Unis erve Communications Corp.L iveWorld Inc .

Financ ia l Media Group, Inc .Wynds torm Corporation

MOKO.mobi L imitedWoozyFly , Inc .

B right Things plcis eemedia Inc .

S pectrumDNA , Inc .V OIS , Inc .

Y nk Korea Inc .IA S Energy , Inc .UOMO Media , Inc

CornerWorld CorporationMagnitude Information S ys tems Inc .

A cceleriz e New Media , Inc .Worlds .com Inc .

Lingo Media CorporationS NAP Interactive, Inc .

Webz en Inc .Frogs ter Interactive Pictures AGJumbuck Enterta inment Pty Ltd.

Quepas a Corp.Eolith Co. L td.IdeaEdge, Inc .

AQ Interactive, Inc .Ex tens ions , Inc .Gravity Co. , L tdLookSmart, L td.

Fluid Mus ic Canada, Inc .DXN Holdings Bhd

Dolphin Digita l Media , Inc .Northgate Technologies L imited

GeoS entric Oy jWiz zard S oftw are Corporation

Beyond Commerce, Inc .Ngi Group Inc .JumpTV Inc .

Tree.Com, Inc .OAO RBC Information S ys tems

HanbitS of t, Inc .K aboos e Inc .

PhotoChannel Netw orks Inc .S park Netw orks , Inc .NeXplore CorporationTheS treet. com, Inc .A ctoz S oft Co. , L td.B roadWebAs ia Inc .

Openw ave S ys tems Inc .Y edangOnline Corp.

Moggle, IncDigita lTow n, Inc .

CDC Corp.GameOn Co Ltd.

Gamania Digita l Enterta inment Co. , L td.DADA S pA

GungHo Online Enterta inment, Inc .S K Communications Co. , L td.NEOWIZ Games Corporation

XING AGS hutterf ly , Inc .

NetDragon WebS of t, Inc .G igaMedia Ltd.The9 L imited

Chines e Gamer InternationalK ings oft Co. L td.United Online Inc .

Perfect World Co. , L td.Mix i, Inc .

Modern Times Group Mtg ABGree, Inc .

G iant Interactive Group, Inc .Open Tex t Corp.

IAC/InterA ctiveCorp.S handa Interactive Enterta inment Ltd.

Neteas e.com Inc .Tencent Holdings Ltd.

Figure 13. Market Cap Ranking Source. Capital IQ

TEV/Revenue (LTM) averages 3.8x: The overall average TEV/Revenue (LTM) multiple for our group is 3.8x – up from 3.6x last week (Figure 14). However, this is skewed by Gree (3633-TSE) at 31.3x and Bigstring (BSGC-OTCBB) at 31.7x.

The median is only 1.0x. Note that we exclude multiples greater than 50x. Thirty-three of the companies have multiples under 1.5x.

TEV/LTM R evenue (x)

0.0 0.1 0.1 0.20.2 0.2 0.2 0.2 0.2 0.3 0.40.5 0.5 0.5 0.6 0.6 0.7 0.70.8 0.8 0.9 0.9 0.9 0.9 1.01.0 1.0 1.1 1.1 1.1 1.2

1.51.6 1.9 2.22.3 2.4 2.8

3.23.2 3.4 3.5 3.6 3.8 3.9 3.94.0

7.38.0

12.212.313.313.8

26.8

31.331.7

Average, 3.8

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Social Media Venures, Inc.

LiveWorld Inc.

Uniserve Communications Corp.

Financial Media Group, Inc.

Tree.Com, Inc.

Northgate Technologies Limited

The Parent Company

IAC/InterActiveCorp.

NetDragon WebSoft, Inc.

CDC Corp.

Ynk Korea Inc.

GameOn Co Ltd.

Shutterfly, Inc.

DXN Holdings Bhd

ZipLocal Inc.

HanbitSoft, Inc.

DADA SpA

Gamania Digital Entertainment Co.,

Actoz Soft Co., Ltd.

Spark Networks, Inc.

Jumbuck Entertainment Pty Ltd.

Kaboose Inc.

Modern Times Group Mtg AB

MOKO.mobi Limited

Eolith Co. Ltd.

United Online Inc.

GigaMedia Ltd.

SNM Global Holdings

GungHo Online Entertainment, Inc.

iseemedia Inc.

SK Communications Co., Ltd.

YedangOnline Corp.

NEOWIZ Games Corporation

Fluid Music Canada, Inc.

Open Text Corp.

Frogster Interactive Pictures AG

Kingsoft Co. Ltd.

PhotoChannel Networks Inc.

DigitalPost Interactive, Inc.

Lingo Media Corporation

XING AG

JumpTV Inc.

GeoSentric Oyj

Mixi, Inc.

Wizzard Software Corporation

SNAP Interactive, Inc.

Accelerize New Media, Inc.

Chinese Gamer International

Associated Media Holdings Inc.

Tencent Holdings Ltd.

Bright Things plc

UOMO Media, Inc

CornerWorld Corporation

Beyond Commerce, Inc.

Gree, Inc.

Bigstring Corp.

Figure 14. TEV/Revenue Ranking Source. Capital IQ

TEV/Revenue (LTM) by country/exchange: We have also calculated multiples based on where the companies are listed or domiciled. Figure 15 shows the average TEV/Revenue multiples by stock exchange. The OTCBB has the largest number of companies (20), trading at an average multiple of 10.8x (up from 8.0x from last week). On a geographic basis, the United States has the most companies (37), trading at an average of 5.1x revenue (up from 3.9x from last week) (Figure 16). Ten of the companies are Canadian (average 3.1x revenue).

Average TEV/LTM Revenue - By Exchange

0.20.20.50.7

0.90.90.91.01.11.61.92.12.42.83.64.0

5.0

10.8

11.9

12.3

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

AIM

TS

E

OT

CB

B

SE

HK

GT

SM

HLS

E

XT

RA

AM

EX

TS

X

OT

CP

K

TS

XV

OS

E

KO

SE

OM

NasdaqG

S

AS

X

CM

KLS

E

BS

E

NasdaqG

M

1 5 20 3 2 1 2 2 3 8 5 1 7 1 11 2 1 1 1 5

(x)

# Companies

Average TEV/LTM Revenue - By Country

0.3 0.20.50.70.90.9

1.0

2.83.03.13.6

5.05.1

9.2

12.3

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Unite

d

Kin

gdom

Japan

Unite

d

Sta

tes

Chin

a

Fin

land

Canada

Taiw

an

Germ

any

South

Kore

a

Sw

eden

Austr

alia

Italy

Mala

ysia

Hong

Kong

India

1 6 37 8 1 10 3 2 9 1 2 1 1 1 1

(x)

# Companies

Figures 15 & 16. TEV/Revenue Ranking (Exchange, Country) Source. Capital IQ

TEV/EBITDA (LTM) averages 8.1x: The average multiple for the 31 companies with positive EBITDA (and multiples under 100x) is 8.1x LTM EBITDA (8.2x last week), led by SNAP Interactive’s (STVI-OTCBB) 38.9x multiple (Figure 17). Nineteen of the companies have EBITDA multiples under 7x. The median multiple is 5.2x.

TEV/LTM EB ITDA (x)

0.5 0.9 1.0 1.7 1.9 2.73.8 4.0 4.0 4.1 4.2 4.3 4.4 4.4 5.2 5.6 5.8

6.7 7.1 7.3 7.48.8 8.8

10.011.6

13.0

15.5

24.7

31.3

38.9

A verage, 8.1

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0


Financial Media Group, Inc.


GameOn Co Ltd.


CornerWorld Corporation

Shutterfly, Inc.

DXN Holdings Bhd

Gamania Digital Entertainment Co., Ltd.


DADA SpA


United Online Inc.

GigaMedia Ltd.




YedangOnline Corp.

Kingsoft Co. Ltd.

GungHo Online Entertainment, Inc.

CDC Corp.

XING AG

Open Text Corp.

Mixi, Inc.

Kaboose Inc.

SK Communications Co., Ltd.



Uniserve Communications Corp.


Figure 17. TEV/EBITDA Ranking Source. Capital IQ

TEV/EBITDA (LTM) by country/exchange: Figure 18 shows the average TEV/EBITDA multiples by stock exchange. The OTCBB has the largest number of companies (20), trading at an average multiple of 14.2x, while companies on the TSXV have the highest multiples (31.3x). On a geographic basis, the United States has the most companies (37), trading at an average of 8.6x EBITDA (Figure 19). Ten of the companies are Canadian (average 17.2x EBITDA).

Average TEV/LTM EBITDA - By Exchange

0.11.01.94.04.14.2

5.65.65.97.37.48.89.810.811.6

14.2

31.3

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

TS

XV

OT

CB

B

TS

X

SE

HK

GT

SM

XT

RA

KO

SE

OS

E

TS

E

NasdaqG

S

OM

CM

AM

EX

KLS

E

AS

X

BS

E

RT

S

5 20 3 3 2 2 7 1 5 11 1 1 2 1 2 1 #N/A

(x)

# Companies

Average TEV/LTM EBITDA - By Country

1.91.0

4.04.2

5.66.37.47.48.08.68.8

10.8

17.2

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

Canada

Chin

a

Germ

any

Unite

d

Sta

tes

Taiw

an

South

Kore

a

Hong

Kong

Japan

Sw

eden

Italy

Mala

ysia

Austr

alia

India

10 8 2 37 3 9 1 6 1 1 1 2 1

(x)

# Companies

Figures 18 & 19. TEV/EBITDA Ranking (Exchange, Country) Source. Capital IQ

P/E (LTM) averages 13.9x: The average multiple for the 31 companies with positive earnings (and multiples under 100x) is 13.9x LTM EPS (down from 14.6x last week), led again by TheStreet.com (TSCM-NASDAQ) 57.3x multiple (Figure 20). Eighteen of the companies have P/E multiples under 10x. The median is just 8.1x.

P/E LTM (x)

0.9 1.4 1.6 1.7 1.8 2.7 2.9 3.4 4.1 5.3 5.7 6.4 7.3 7.7 8.1 8.9 9.3 10.2 11.5 12.0 13.015.6

19.0 20.2

26.9

32.4 33.5

44.3

56.1 57.3

Average, 13.9

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

The9 Limited

Giant Interactive Group, Inc.


Netease.com Inc.

Shanda Interactive Entertainment Ltd.


LookSmart, Ltd.

Worlds.com Inc.

DXN Holdings Bhd



DADA SpA


Ngi Group Inc.

GigaMedia Ltd.

YedangOnline Corp.

GameOn Co Ltd.

Kingsoft Co. Ltd.

Gamania Digital Entertainment Co., Ltd.




XING AG


Mixi, Inc.

Open Text Corp.


Shutterfly, Inc.


TheStreet.com, Inc.

Figure 20. P/E Ranking Source. Capital IQ

P/E (LTM) by country/exchange: Figure 21 shows the average P/E multiples by stock exchange. The OTCBB has the largest number of companies (20), trading at an average multiple of 29.8x. On a geographic basis, the United States has the most companies (37), trading at an average of 26.4x earnings (Figure 22). Ten of the companies are Canadian (average 32.4x EPS).

Average P/E - By Exchange

1.62.7

4.15.36.47.311.3

13.214.7

15.816.5

19.0

29.8

30.1

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

NasdaqG

M

OT

CB

B

XT

RA

SE

HK

GT

SM

TS

E

NasdaqG

S

KO

SE

AS

X

CM

AM

EX

KLS

E

OM

BS

E

5 20 2 3 2 5 11 7 2 1 2 1 1 1

(x)

# Companies

Average P/E - By Country

2.74.1

6.47.07.3

11.313.2

14.719.0

26.4

32.4

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Canada

Unite

d

Sta

tes

Germ

any

Japan

Taiw

an

South

Kore

a

Austr

alia

Chin

a

Italy

Mala

ysia

Sw

eden

10 37 2 6 3 9 2 8 1 1 1

(x)

# Companies

Figures 21 & 22. P/E Ranking (Exchange, Country) Source. Capital IQ

UP CO MI NG EVE NTS

Upcoming EventsE vent Date Location Webs ite

Web 2.0 C anadian L eade rs hip S erie s - Ga ming Ma rch 3 T oronto http: //web2le aders hips eries . iglooevents .net/

E ngage! E xpo Ma rch 10-11 New Y ork www. enga geexpo.com

Me sh 200 9 April 7-8 T oronto www. mes hconference. com

Figure 23. Upcoming Events Source. Company reports

Earnings C alendarCompany Date & Time Quarter Conf Call Details

G ia nt I nteractive G roup, Inc . (NY S E :G A) T hurs day , Ma rch 05, 2009 8:0 0 AM (E S T ) Q4 2008 8 6-10-800 -1 30-0399

S park Networks , I nc . (AME X: LOV ) T hurs day , Ma rch 05, 2009 1:3 0 P M (P S T ) Q4 2008 1 -8 77-857 -6 173

Figure 24. Earnings Calendar Source. Company reports

C omparable C ompany Analys is > Web 2.0

P ric e P erformance

Company Name Currenc y Tic ker E xchange USD Market Cap ($m) Current Price 1 Wk 1 Mth 3 Mth 6 Mth 1 Yr 52 Week

Acce leri ze N ew Media, Inc. US D ACLZ OTCBB 8.3 0 .31 -11 .4% -11.4% -22. 5% -48. 3% -55. 7% -60 .3%

Actoz Soft Co. , Ltd. K R W A052790 K OS E 58. 7 10, 450 -5. 4% -7. 1% -8 .7% 16 .1% 21.5% -25 .9%

AQ Inte ractive, Inc. J PY 3838 TS E 18. 4 32, 900 3 .5% -6. 0% -0 .9% -74. 7% -84. 1% -88 .8%As sociated Media Holdings Inc. US D AS MH OTCPK 0.1 0 .00 -72 .0% -72.0% -53. 3% -93. 6% 27.3% -97 .2%

Bigstring C orp. US D BS GC OTCBB 0.9 0 .02 21. 4% 0 .0% -22. 7% -75. 4% -92. 3% -92 .4%

Beyond Commerce, Inc. US D BY OC OTCBB 26. 2 0 .64 -1. 5% -28.9% -44. 3% -77. 9% -59. 0% -80 .6%

Br ight Things plc G BP AIM:B G T AIM 2.9 0 .02 -7. 8% 20. 5% 80 . 0% -17. 3% -46. 1% -64 .0%

BroadWebAs ia Inc. US D BWB A OTCPK 63. 7 0 .75 -25 .7% -25.7% -25. 7% -42. 3% NM -75 .0%

CDC Corp. US D CHIN.A Na sdaqGS 82. 0 0 .76 -3. 8% -3. 8% -6 .2% -70. 9% -79. 1% -81 .9%China G ateway Corpora tion US D CGW Y OTCBB 0.0 0 .00 -33 .3% -33.3% -80. 0% -94. 4% -99. 7% -99 .7%

Chinese G amer International TW D GTS M: 3083 G TSM 322 .2 133 .00 19. 8% 47. 3% 63 . 0% 71 .6% 24.3% -1. 5%

CornerW orld C orporation US D CWR L OTCBB 7.0 0 .15 -63 .4% -40.0% -25. 0% -76. 9% -89. 3% -89 .7%

DADA SpA E UR CM:DA CM 102 .0 5 .00 -11 .8% -16.7% -22. 7% -56. 5% -59. 8% -69 .1%

DXN Holdings Bhd MYR DXN K LS E 20. 6 0 .33 4 .8% -7. 0% -17. 5% -15. 4% -34. 0% -41 .1%Digita lP ost Interactive, Inc. US D DGLP OTCBB 0.4 0 .01 -25 .0% -70.0% -85. 0% -90. 0% -97. 8% -98 .2%

Digita lTown, Inc. US D DGTW OTCBB 74. 7 2 .75 37. 5% -8. 3% 37 . 5% -35. 3% 19.6% -54 .9%

Dolphin Digita l Media , Inc. US D DPDM OTCBB 21. 9 0 .45 -9. 6% -35.7% -43. 8% -42. 3% NM -60 .2%

Eolith Co. Ltd. K R W A041060 K OS E 15. 4 520 -11 .1% 1 .0% -8 .8% -13. 3% -58. 6% -70 .6%

Extensions, Inc. US D EXT I OTCPK 18. 9 0 .20 0 .0% 33. 3% 281 .0% 100.0% 33.3% -80 .2%

F inancia l Media Group, Inc. US D FNGP OTCBB 2.0 0 .03 -6. 3% 0 .0% -75. 0% -95. 4% -87. 5% -96 .9%F luid Mus ic Canada , Inc. CAD TSX :FMN TS X 20. 4 0 .50 0 .0% 61. 3% 31 . 6% -72. 2% NM -75 .5%

F rogste r Inte ractive P ictures AG E UR FR G XTR A 12. 0 4 .05 0 .5% -18.0% 5.7% -42. 0% -27. 2% -47 .1%

Gamania Digital E nterta inment Co. , L td. TW D 6180 G TSM 97. 0 22 .40 3 .9% 3 .9% 72 . 3% 3.5% -25. 1% -39 .4%

GameOn Co L td. J PY 3812 TS E 92. 3 93, 000 2 .2% -23.5% -38. 8% -26. 4% -22. 5% -43 .1%

GeoS entric O yj E UR GE O1V HL SE 23. 5 0 .03 -25 .0% 0 .0% -25. 0% -50. 0% -57. 1% -66 .7%

Giant Inte ractive G roup, Inc. US D GA NY SE 1,495.2 6 .29 4 .0% 4 .8% 2.9% -28. 1% -38. 6% -63 .4%GigaMedia L td. US D GIGM Na sdaqGS 275 .0 5 .09 -15 .6% -22.5% 15 . 2% -54. 8% -73. 4% -74 .4%

Gravity Co., Ltd US D GR V Y Na sdaqGM 19. 2 0 .69 -1. 4% -10.4% 6.2% -53. 1% -60. 3% -65 .5%

Gree, Inc. J PY TSE :3632 TS E 1,007.8 4, 400 -7. 2% -27.4% NM NM NM -30 .2%

GungHo Online Entertainment, Inc. J PY 3765 OSE 137 .4 117, 000 -3. 9% 2 .6% 11 . 4% -40. 9% -31. 2% -73 .1%

HanbitS oft, Inc. K R W A047080 K OS E 42. 4 3, 040 -9. 8% -3. 0% 8.2% -6 .2% -51. 0% -57 .5%

IAC/Inte rActiveCorp. US D IAC I Na sdaqGS 2,085.3 14 .80 -0. 8% 0 .7% 2.8% -12. 6% -62. 1% -70 .7%IAS E ne rgy, Inc. US D IASC .A OTCBB 5.6 0 .08 281.0% 166.7% 100 .0% -63. 6% -70. 4% -77 .1%

IdeaE dge, Inc. US D OTCB B :IDAE OTCBB 18. 2 0 .43 7 .5% -4. 4% -75. 4% -80. 8% -61. 5% -84 .8%

is eemedia Inc. CAD IE E TS XV 3.8 0 .10 5 .6% 5 .6% 46 . 2% -40. 6% -78. 2% -78 .4%

J umbuck Entertainment P ty Ltd. AUD AS X: JMB ASX 12. 8 0 .41 0 .0% -14.6% -4 .7% -25. 5% -41. 4% -47 .4%

J umpTV Inc. CAD TSX :J TV TS X 31. 8 0 .36 -10 .0% -5. 3% 1.4% -57. 1% -53. 2% -71 .9%

Kaboose Inc. CAD TSX :K AB TS X 44. 0 0 .41 6 .6% -11.0% 47 . 3% -43. 0% -70. 0% -82 .7%

Kingsoft Co. Ltd. HK D 3888 S EHK 347 .4 2 .51 -9. 4% -8. 1% 17 . 8% -15. 2% 5 .9% -41 .8%

Lingo Media Corpora tion CAD TSXV:LM TS XV 9.5 0 .95 5 .6% -9. 5% -8 .7% -48. 9% -31. 7% -56 .8%

LiveWorld Inc. US D LVWD OTCPK 1.9 0 .06 50. 0% 20. 0% 20 . 0% -76. 0% -72. 7% -92 .0%

LookS mart, Ltd. US D LOOK Na sdaqGM 20. 1 1 .18 -7. 1% -13.9% -22. 4% -60. 9% -66. 9% -75 .4%

Magnitude Informa tion S ys tems Inc. US D MAG Y OTCBB 7.9 0 .02 -14 .3% -10.4% 5.9% 5.9% 63.6% -48 .6%

Mixi, Inc. J PY 2121 TS E 564 .2 359, 000 -2. 4% -29.6% -44. 2% -54. 2% -57. 7% -69 .8%Modern T imes Group Mtg AB S EK MTG B OM 843 .5 117 .50 4 .9% -17.8% -13. 9% -66. 2% -69. 6% -74 .1%

Moggle , Inc US D MMOG OTCBB 72. 6 2 .00 0 .0% 0 .0% 33 . 3% NM NM 0.0%

MOK O.mobi L imited AUD MKB ASX 2.3 0 .05 12. 5% -10.0% 12 . 5% 18 .4% -8.2% -36 .6%

NEOW IZ G ames Corpora tion K RW A095660 K OS E 185 .7 30, 350 -10 .1% 30. 8% 82 . 3% 52 .5% -20. 1% -24 .1%

NetDra gon WebS oft, Inc. HK D 777 S EHK 199 .7 2 .93 4 .6% 7 .7% 3.5% -41. 3% -73. 3% -78 .5%

Netea se. com Inc. US D NTES Na sdaqGS 2,516.4 20 .45 9 .8% 7 .6% 15 . 1% -20. 4% -1.1% -24 .7%NeXplore Corporation US D NXP C OTCPK 53. 0 0 .95 90. 0% 5 .6% -25. 2% 75 .9% NM -34 .5%

Ngi G roup Inc. J PY 2497 TS E 26. 6 20, 980 22. 1% -45.2% -60. 0% -77. 3% -86. 2% -88 .3%

Northgate T echnologies L imited INR 590057 B SE 22. 8 34 .20 -11 .1% -12.3% -33. 9% -88. 2% -91. 3% -93 .7%

Open Text Corp. US D OTE X Na sdaqGS 1,586.6 30 .57 -4. 3% -12.7% 13 . 8% -12. 6% 2 .2% -21 .8%

Openwave S ys tems Inc. US D OPW V Na sdaqGS 65. 9 0 .79 -3. 5% 8 .4% 49 . 2% -46. 9% -60. 5% -72 .3%

Perfect W orld Co., Ltd. US D PWR D Na sdaqGS 508 .3 8 .91 -27 .0% -39.8% -49. 8% -64. 4% -67. 1% -73 .4%PhotoChannel Networks Inc. CAD TSXV:PN TS XV 45. 0 1 .73 -11 .7% 3 .6% 54 . 5% -48. 8% -50. 1% -58 .3%

Quepasa Corp. US D QP SA Na sdaqCM 15. 1 1 .19 -15 .1% -35.4% -44. 4% -63. 4% -58. 3% -65 .6%

OAO R B C Informa tion S ys tems US D R BC I R TS 41. 6 0 .30 3 .4% -50.0% -80. 0% -96. 2% -97. 1% -97 .2%

Shanda Intera ctive Ente rtainment L td. US D SNDA Na sdaqGS 2,134.2 30 .76 -3. 8% 5 .7% 25 . 8% 6.4% -4.6% -19 .6%

Shutterfly, Inc. US D SFL Y Na sdaqGS 197 .2 7 .84 4 .8% 18. 6% 15 . 6% -22. 8% -47. 5% -56 .4%

SK Communications Co. , Ltd. K R W A066270 K OS E 161 .2 6, 160 -8. 5% -16.8% 45 . 3% -39. 0% -63. 1% -69 .5%SNAP Interactive, Inc. US D STV I OTCBB 10. 1 0 .95 -5. 0% -5. 0% 28 . 6% 6.7% 18.8% -13 .6%

SNM G lobal Holdings US D SNMN OTCPK 0.0 0 .00 -66 .7% 150.0% -99. 3% -99. 8% -100 .0% -100 .0%

Social Media V enures , Inc. US D SMV I OTCPK 0.0 0 .60 -52 .0% -55.6% -50. 0% 140.0% NM -88 .0%

Spark Networks , Inc. US D LOV AMEX 52. 3 2 .44 -2. 4% -0. 4% -14. 4% -43. 1% -47. 9% -50 .0%

SpectrumDNA, Inc. US D SP XA OTCBB 4.6 0 .10 -5. 0% -5. 0% -54. 8% -83. 9% NM -84 .2%

Tencent Holdings Ltd. HK D 700 S EHK 10 ,229 .9 44 .15 -5. 4% -8. 8% 2.7% -34. 3% -6.0% -38 .7%The P arent Company US D KIDS .Q OTCPK 0.4 0 .02 -36 .0% -46.7% -98. 0% -99. 1% -99. 7% -99 .7%

The9 Limited US D NCTY Na sdaqGS 289 .4 10 .79 -18 .4% -28.6% -7 .8% -42. 0% -46. 5% -62 .1%

TheS treet.com, Inc. US D TSCM Na sdaqGM 54. 1 1 .78 -20 .2% -34.8% -42. 4% -75. 0% -79. 3% -81 .2%

T ree .Com, Inc. US D TR EE Na sdaqGM 36. 8 3 .93 -1. 3% -1. 0% 99 . 5% -52. 2% NM -64 .6%

Unise rve Communications Corp. CAD TSXV:US S TS XV 1.0 0 .05 -37 .5% -37.5% -72. 2% -76. 2% -86. 5% -88 .9%United Online Inc. US D UNTD Na sdaqGS 361 .3 4 .40 -7. 6% -28.1% -21. 7% -59. 3% -57. 7% -64 .8%

UOMO Media, Inc US D UOMO OTCBB 6.0 0 .07 -12 .5% -12.5% -41. 7% -81. 6% -89. 6% -91 .3%

VO IS , Inc. US D VO IS OTCBB 5.4 0 .75 87. 5% 150.0% 0.0% -81. 3% NM -86 .6%

W ebzen Inc. US D WZE N Na sdaqGM 10. 6 0 .89 -21 .1% -42.9% 11 . 3% -61. 0% -73. 4% -80 .0%

W izza rd S oftwa re Corporation US D WZE AMEX 24. 4 0 .54 -16 .9% -23.9% -57. 8% -56. 8% -77. 5% -80 .4%

W oozyF ly, Inc. US D WZY F OTCBB 2.6 0 .15 0 .0% 0 .0% NM NM NM -96 .3%

W orlds .com Inc. US D WDDD OTCBB 9.4 0 .18 0 .0% -18.2% 20 . 0% -40. 0% -45. 5% -60 .0%W ynds torm Corporation US D WY ND OTCBB 2.2 0 .12 -4. 0% 0 .0% -40. 0% -80. 0% NM -85 .9%

XING AG E UR O1BC XTR A 188 .3 28 .77 -7. 2% -5. 7% 19 . 9% -15. 4% -28. 1% -38 .3%

YedangOnline Corp. K R W A052770 K OS E 66. 2 6, 650 0 .3% -8. 7% 12 . 7% -2 .2% -28. 8% -47 .0%

Ynk K orea Inc. K R W A023770 K OS E 5.5 3, 545 -13 .5% -8. 2% -28. 3% -60. 9% -81. 3% -82 .2%

ZipL ocal Inc. CAD TSXV:ZIP T S XV 0.9 0 .02 200.0% -25.0% 50 . 0% -81. 3% -92. 3% -93 .2%

High 281.0% 166.7% 281 .0% 140.0% 63.6% 0 .0%Low -72 .0% -72.0% -99. 3% -99. 8% -100 .0% -100 .0%

Average 320.7 0.8% -5.4% -3.0% -41.3% -49.5% -66.2%

Median -4. 0% -8. 3% -4 .7% -48. 9% -58. 3% -70 .7%

Figure 25. Price Performance Source. Capital IQ

Comparable Company Analys is > Web 2.0Valuation Multiples

Company Name

P rimary

E xchange Ticker

USD Market

Cap ($m)

TE V/L TM

R evenue

TEV/ NTM

R evenue

TEV/LTM

EB ITDA

TE V/NTM

EB ITDA P /LTM E P S P /NTM E P S P /TangBV

Acce lerize N ew Media, Inc. OTCBB ACL Z 8 . 3 4 .0x - - - - - -

Actoz S oft Co. , Ltd. K OS E A052790 58 . 7 0 .8x - 4 .3x - 13. 0x - 1. 3xAQ Inte ractive, Inc. T S E 3838 18 . 4 - - - - - - 0. 3x

As sociated Media Holdings Inc. OTCPK ASMH 0 .1 8 .0x - - - - - -B igs tring C orp. OTCBB B SG C 0 . 9 31. 7x - - - - - -

Beyond Commerce, Inc. OTCBB B YOC 26 . 2 26. 8x - - - - - -

Br ight T hings plc A IM A IM:B GT 2 . 9 12. 3x - - - - - -BroadW ebAs ia Inc. OTCPK B WBA 63 . 7 - - - - - - -

CDC Corp. Na sdaqGS CHIN .A 82 . 0 0 .3x 0. 3x 7 .4x 5 .9x - 10 .7x -China G ateway Corpora tion OTCBB CGWY 0 . 0 0 .0x - - - - - -

Chinese G amer International G TSM G TSM:3083 322 . 2 7 .3x - 15. 5x - 20. 2x - 6. 6x

CornerW orld Corporation OTCBB CWR L 7 . 0 13. 8x - 2 .7x - - - -DADA SpA CM CM:DA 102 . 0 0 .7x - 4 .2x - 6. 4x - -

DXN Holdings Bhd K LS E DXN 20 . 6 0 .5x - 4 .0x - 4. 1x - 0. 5xDigita lP os t Interactive, Inc. OTCBB DG LP 0 . 4 3 .2x - - - - - -

Digita lT own, Inc. OTCBB DG TW 74 . 7 - - - - - - -

Dolphin Digita l Media , Inc. OTCBB DP DM 21 . 9 - - - - - - -E olith Co. Ltd. K OS E A041060 15 . 4 1 .0x - - - - - -

E xtensions, Inc. OTCPK E XT I 18 . 9 - - - - - - -F ina ncia l Media Group, Inc. OTCBB FNGP 2 . 0 0 .2x - 0 .9x - - - -

F luid Mus ic C anada , Inc. T S X TS X:FMN 20 . 4 1 .9x 1. 3x - - - - 1. 7x

F rogs te r Interactive P ictures AG XTR A FR G 12 . 0 2 .3x - - - - - 1. 2xGamania Digital E nterta inment Co. , L td. G T SM 6180 97 . 0 0 .7x - 4 .0x - 11. 5x - 1. 5x

GameOn Co L td. T S E 3812 92 . 3 0 .5x - 1 .7x - 9. 3x - 1. 2xGeoS entric Oyj HL S E G E O1V 23 . 5 3 .6x - - - - - 5. 3x

Giant Inte ractive G roup, Inc. NY SE G A 1 , 495 . 2 - - - - 1. 4x 13.1x 0. 3x

GigaMedia L td. Na sdaqGS G IGM 275 . 0 1 .0x 1. 0x 4 .4x 4 .0x 8. 1x 7. 5x 2. 6xGravity Co., Ltd Na sdaqGM G R V Y 19 . 2 - - - - - - -

Gree, Inc. T S E T S E :3632 1 , 007 . 8 31. 3x - - - - - 15 . 4xGungHo Online Entertainment, Inc. OSE 3765 137 . 4 1 .1x - 7 .3x - - - 41 . 9x

HanbitS oft, Inc. K OS E A047080 42 . 4 0 .6x - - - - - 1. 6x

IAC/Inte rActiveCorp. Na sdaqGS IAC I 2 , 085 . 3 0 .2x 0. 2x 5 .2x 2 .0x 15. 6x 23.5x 1. 0xIAS E nergy, Inc. OTCBB IAS C .A 5 . 6 - - - - - - -

IdeaE dge, Inc. OTCBB OTCB B :IDAE 18 . 2 - - - - - - 13 . 4xiseemedia Inc. T S XV IEE 3 . 8 1 .1x - - - - - 1. 4x

J umbuck Entertainment P ty Ltd. ASX AS X: JMB 12 . 8 0 .9x - 1 .9x - 7. 3x - 1. 6xJ umpTV Inc. T S X TSX :J T V 31 . 8 3 .5x - - - - - 2. 3x

Kaboos e Inc. T S X T SX:K AB 44 . 0 0 .9x 0. 8x 11. 6x 5 .8x - - -

K ingsoft Co. Ltd. S EHK 3888 347 . 4 2 .4x - 7 .1x - 10. 2x - 2. 3xLingo Media Corpora tion TS XV T SXV : LM 9 . 5 3 .2x - - - - - -

LiveWorld Inc. OTCPK LV WD 1 .9 0 .1x - - - - - 0. 9xLookS mart, Ltd. Na sdaqGM LOOK 20 . 1 - - - - 2. 9x - 0. 7x

Magnitude Informa tion S ys tems Inc. OTCBB MAG Y 7 . 9 - - - - - - -

Mixi, Inc. T S E 2121 564 . 2 3 .8x - 10. 0x - 26. 9x - 4. 4xModern T imes Group Mtg AB OM MTG B 843 . 5 0 .9x 0. 9x 5 .6x 6 .2x 2. 7x 5. 8x -

Moggle , Inc OTCBB MMOG 72 . 6 - - - - - - -MOK O.mobi L imited ASX MKB 2 . 3 0 .9x - - - - - 1. 6x

NEOW IZ G ames Corpora tion K OS E A095660 185 . 7 1 .6x - 5 .8x - 12. 0x - 7. 1x

NetDragon WebS oft, Inc. S EHK 777 199 . 7 0 .2x - 0 .5x - 5. 7x - 1. 1xNetea se. com Inc. Na sdaqGS NTE S 2 , 516 . 4 - - - - 1. 7x 10.6x 0. 5x

NeXplore Corporation OTCPK NXP C 53 . 0 - - - - - - -Ngi G roup Inc. T S E 2497 26 . 6 - - - - 7. 7x - 0. 4x

Northgate T echnologies L imited B SE 590057 22 . 8 0 .2x - 1 .0x - 1. 6x - -

Open T ext Corp. Na sdaqGS OTEX 1 , 586 . 6 2 .2x 2. 0x 8 .8x 7 .6x 32. 4x 11.9x -Openwave S ys tems Inc. Na sdaqGS OPWV 65 . 9 - - - - - 26 .4x 0. 9x

Perfect W orld Co., Ltd. Na sdaqGS PWR D 508 . 3 - - - - 0. 8x 4. 4x 0. 3xPhotoChannel Ne tworks Inc. T S XV TS XV : PN 45 . 0 2 .8x 1. 9x - 6 .0x - 22 .4x 9. 9x

Quepasa Corp. Na sdaqCM QP SA 15 . 1 - - - - - - 6. 2x

OAO R B C Informa tion S ys tems R TS R BC I 41 . 6 0 .0x - 0 .1x - - - -S handa Intera ctive Ente rtainment L td. Na sdaqGS SNDA 2 , 134 . 2 - - - - 1. 8x 10.5x 0. 8x

Shutterfly, Inc. Na sdaqGS S FLY 197 . 2 0 .5x 0. 5x 3 .8x 3 .4x 44. 3x - 1. 1xS K Communications Co. , Ltd. K OS E A066270 161 . 2 1 .2x - 13. 0x - - - -

SNAP Interactive, Inc. OTCBB S TV I 10 . 1 3 .9x - 38. 9x - 56. 1x - 7. 4x

SNM G lobal Holdings OTCPK S NMN 0 .0 1 .1x - - - - - -S ocial Media V enures , Inc. OTCPK S MV I 0 . 0 0 .0x - - - - - -

S park Ne tworks , Inc. AMEX LOV 52 . 3 0 .8x - 4 .1x - 5. 3x - -SpectrumDNA, Inc. OTCBB S PXA 4 . 6 - - - - - - 5. 0x

T encent Holdings Ltd. S EHK 700 10 , 229 . 9 12. 2x - 24. 7x - 33. 5x - 13 . 3x

The P arent Company OTCPK KIDS .Q 0 . 4 0 .2x - - - - - -T he9 Limited Na sdaqGS NCTY 289 . 4 - - - - 0. 9x 7. 1x 0. 1x

TheS treet.com, Inc. Na sdaqGM T SCM 54 . 1 - - - - 57. 3x - 0. 5xT ree .Com, Inc. Na sdaqGM TR E E 36 . 8 0 .2x 0. 2x - - - - 0. 6x

Unise rve Communications Corp. T S XV TS XV:US S 1 . 0 0 .1x - 31. 3x - - - -

United Online Inc. Na sdaqGS UNTD 361 . 3 1 .0x 0. 7x 4 .4x 2 .9x - 6. 7x -UOMO Media, Inc OTCBB UOMO 6 .0 13. 3x - - - - - -

VO IS , Inc. OTCBB VO IS 5 . 4 - - - - - - 14 . 1xW ebzen Inc. Na sdaqGM WZE N 10 . 6 - - - - - - 0. 0x

W izza rd S oftwa re Corporation AMEX WZE 24 . 4 3 .9x - - - - - -

W oozyF ly, Inc. OTCBB WZYF 2 . 6 - - - - - - -W orlds .com Inc. OTCBB WDDD 9 .4 - - - - 3. 4x - -

W ynds torm Corporation OTCBB W YND 2 . 2 - - - - - - -XING AG XTR A O1B C 188 . 3 3 .4x - 8 .8x - 19. 0x - 5. 2x

YedangOnline Corp. K OS E A052770 66 . 2 1 .5x - 6 .7x - 8. 9x - 4. 1x

Ynk K orea Inc. K OS E A023770 5 . 5 0 .4x - - - - - -ZipL ocal Inc. T S XV TSX V:ZIP 0 . 9 0 .6x - - - - - -

High 10 , 229 . 9 31. 7x 2. 0x 38. 9x 7 .6x 57. 3x 26.4x 41 . 9x

Low 0 . 0 0 .0x 0. 2x 0 .1x 2 .0x 0. 8x 4. 4x 0. 0xAverage 320.7 3.8x 0.9x 8.1x 4.9x 13.9x 12.4x 4.3x

Median 24 . 4 1 .0x 0. 8x 5 .2x 5 .8x 8. 1x 10.6x 1. 6x

Figure 26. Valuation Comparison Source. Capital IQ

Comparable Company Analys is > Web 2.0S ummary by Country

Company Name US D Market Cap ($m) Avg US D Market Cap ($m ) US D LTM Total R ev ($m ) US D LTM Total EB ITDA ($m) E B ITDA %

United S tates 37 China 17 ,720 .4 C hina 2, 215. 0 United S ta tes 3 ,115 .3 C hina 1,40 1.1 C hina 49.2%

C anada 10 Unite d S tate s 3 ,345 .1 S weden 843. 5 C hina 2 ,757 .0 S weden 22 9.3 Aus tra lia 46.0%

S outh Kore a 9 J apan 1 ,846 .8 J apa n 307. 8 S weden 1 ,434 .5 C anada 18 6.3 T a iwan 29.3%

China 8 Ca nada 1 ,734 .1 T a iwan 231. 4 C ana da 884 .6 United S tates 13 7.6 J apan 25.7%

J apa n 6 S wede n 843 .5 C anada 173. 4 J apan 495 .0 J apan 12 8.4 Unite d S tate s 23.1%

T aiwan 3 T a iwan 694 .2 Ita ly 102. 0 S outh K orea 458 .7 T aiwan 8 3.2 I ndia 17.6%

Aus tra lia 2 S outh K orea 564 .9 G erma ny 100. 2 Hong K ong 428 .1 S outh K ore a 5 3.4 S wede n 16.0%

G erma ny 2 G ermany 200 .3 United S tates 90. 4 T aiwa n 343 .2 Ita ly 3 4.1 I ta ly 16.0%

Ma lays ia 1 I ta ly 102 .0 Hong K ong 82. 0 Italy 213 .3 India 2 2.6 Mala ys ia 13.3%

Hong K ong 1 Hong K ong 82 .0 S outh K ore a 62. 8 R us s ia 131 .0 Hong K ong 1 8.8 R uss ia 13.1%

F inla nd 1 R uss ia 41 .6 R us s ia 41. 6 India 128 .7 R us s ia 1 7.1 S outh K orea 5 .8%

Ita ly 1 F inland 23 .5 F inla nd 23. 5 Malaysia 74 .5 G erma ny 1 2.3 Hong K ong 4 .4%

United K ingdom 1 India 22 .8 India 22. 8 G ermany 44 .5 Malays ia 9.9 G ermany -10 .9%

India 1 Mala ys ia 20 .6 Ma lays ia 20. 6 Austra lia 11 .2 Aus tra lia 2.6 C a nada -17 .3%

S weden 1 Aus tralia 15 .1 Aus tralia 7. 6 F in land 5 .2 United K ingdom -1.6 Unite d K ingdom NA

R us s ia 1 Unite d K ingdom 2 .9 United K ingdom 2. 9 United K ingdom 0 .2 F in land -1 1.9 F inland NA

Grand Total 85 G rand Tota l 27,259.8 G rand Total 320.7 G rand Total 10,525.1 G rand Total 2,323.1 G rand Tota l 17.9%

Figure 27. Comparison by Country Source. Capital IQ

Comparable Company Analys is > Web 2.0S ummary by Exc hange

Company Name US D Market Cap ($m) Avg US D Market Cap ($m ) US D LTM Total R ev ($m ) US D LTM Total EB ITDA ($m) E B ITDA %

OT CB B 20 S E HK 10 ,776 .9 S E HK 3, 592. 3 OM 1 ,434 .5 Nas da qG S 1,21 4.8 OT CB B 69.0%

Nas da qG S 11 Na sdaqG S 10 ,101 .5 NY S E 1, 495. 2 Nas daqGS 484 .9 S E HK 52 9.4 NY S E 63.5%

OT CP K 8 T S E 1 ,709 .4 Nas da qG S 918. 3 S E HK 368 .1 OM 22 9.3 AS X 46.0%

K OS E 7 NY S E 1 ,495 .2 OM 843. 5 NY S E 244 .8 NY S E 15 5.4 S E HK 44.0%

T S E 5 OM 843 .5 T S E 341. 9 CM 213 .3 T S E 11 3.0 G T S M 32.0%

Nas da qGM 5 K O S E 535 .2 G T SM 209. 6 R T S 131 .0 K OS E 4 9.3 T S E 27.8%

T S XV 5 G T S M 419 .2 O S E 137. 4 BS E 128 .7 G T SM 35.2 Na sdaqG S 26.1%

S EHK 3 OTC B B 286 .0 CM 102. 0 OS E 104 .9 CM 34.1 AME X 19.5%

T S X 3 X T R A 200 .3 XT R A 100. 2 Nas daqGM 83 .9 B S E 2 2.6 B S E 17.6%

AME X 2 Na sdaqGM 140 .7 K OS E 76. 5 T S E 78 .0 R T S 1 7.1 OM 16.0%

XT R A 2 OTC P K 137 .8 R T S 41. 6 K L S E 74 .5 OS E 1 5.4 CM 16.0%

ASX 2 OS E 137 .4 AME X 38. 3 G T SM 71 .3 XT R A 1 2.3 OS E 14.7%

G T SM 2 CM 102 .0 T S X 32. 1 KOS E 58 .5 K LS E 9.9 K LS E 13.3%

K LS E 1 T S X 96 .2 Nas da qGM 28. 1 AME X 33 .1 AME X 5.2 R T S 13.1%

HLS E 1 AME X 76 .7 HLS E 23. 5 T S X 24 .4 AS X 2.6 K OS E 6 .2%

OS E 1 T S XV 60 .1 B S E 22. 8 XT R A 22 .3 A IM -1.6 Na sdaqGM 0 .9%

CM 1 R T S 41 .6 K LS E 20. 6 OT C PK 21 .0 T S X -5.9 T S X -3 .9%

B S E 1 HL S E 23 .5 O TC P K 17. 2 T S X V 9 .1 T S X V -1 0.1 X T R A -10 .9%

Nas da qCM 1 B S E 22 .8 Nas da qCM 15. 1 AS X 5 .6 Nas da qCM -1 1.8 T S XV -15 .8%

NY S E 1 K LS E 20 .6 O TC B B 14. 3 HLS E 5 .2 HLS E -1 1.9 OT CP K -29 .4%

A IM 1 AS X 15 .1 T S XV 12. 0 OT C BB 1 .4 Nas da qGM -1 7.6 A IM NA

OM 1 Na sdaqCM 15 .1 AS X 7. 6 AIM 0 .2 OT C PK -2 7.2 Na sdaqCM NA

R T S 1 A IM 2 .9 A IM 2. 9 Nas daqCM 0 .1 OT C BB -3 6.5 HL S E NA

Grand Total 85 G rand Tota l 27,259.8 G rand Total 320.7 G rand Total 133.2 G rand Total 2,323.1 G rand Tota l 17.9%

Figure 28. Comparison by Exchange Source. Capital IQ

Financing - Last Three Months (US$ m)Month Company Name Country Angel/Seed Debt financing PIPE Series A Series B Series C Series D Series E Grand Total

Dec-08 GoFish USA 22.5 22.5

NetShelter Canada 11.1 11.1

Blue Kai USA 10.5 10.5

Taptu UK 9.9 9.9

FooMojo USA 9.9 9.9

Scribd USA 9.0 9.0

Superfish Israel 5.3 5.3

Tagged USA 5.0 5.0

Snapmylife USA 5.0 5.0

Jackbe USA 5.0 5.0

ChakPak India 5.0 5.0

Tumblr USA 4.5 4.5

Playdo Sweden 4.3 4.3

Overlay.TV Canada 3.8 3.8

DotBlu USA 2.0 2.0

Angie's List USA 1.0 1.0

StockTwits USA 0.8 0.8

Dec-08 Total 5.0 22.5 31.9 49.2 1.0 5.0 114.6

Jan-09 Aster Data Systems USA 17.0 17.0

Yodle USA 13.0 13.0

AdMob USA 12.5 12.5

VirtuOz France 11.4 11.4

IMVU USA 10.0 10.0

NewsGator USA 10.0 10.0

Go Internet Media USA 10.0 10.0

DECA USA 10.0 10.0

Nurien Korea 10.0 10.0

RatePoint USA 10.0 10.0

One True Media USA 9.0 9.0

SundaySky Israel 8.0 8.0

Play Hard Sports USA 8.0 8.0

JibJab USA 7.5 7.5

Xobni USA 7.0 7.0

InsideView USA 6.5 6.5

Kewego France 6.2 6.2

Fliqz USA 6.0 6.0

Motionbox USA 6.0 6.0

SocialMedia USA 6.0 6.0

Sportsblogs USA 5.0 5.0

AboutUs USA 5.0 5.0

Geni USA 5.0 5.0

Gbox USA 5.0 5.0

E-Global Sports Network USA 3.5 3.5

mEgo USA 2.5 2.5

Tripwolf Austria 2.5 2.5

Hubdub UK 1.2 1.2

Snooth USA 1.0 1.0

CoveritLive Canada 1.0 1.0

Identi.ca Canada 0.2 0.2

Meez USA

Jan-09 Total 4.7 45.2 73.9 82.2 10.0 216.0

Feb-09 Twitter USA 35.0 35.0

Synthasite South Africa 20.0 20.0

Tremor Media USA 18.0 18.0

Offerpal Media USA 15.0 15.0

Imagini UK 13.5 13.5

Emergent Game Technologies USA 12.5 12.5

Outbrain Israel 12.0 12.0

Tvtrip France 9.0 9.0

Oodle USA 5.6 5.6

TextDigger USA 4.3 4.3

OneSpot USA 4.2 4.2

Mixpo Canada 4.0 4.0

FetchDog USA 4.0 4.0

Virtual Fairground Netherlands 4.0 4.0

7 Billion People USA 3.0 3.0

FamilyLink.com USA 2.9 2.9

WhistleBox USA 2.3 2.3

Mendeley UK 2.0 2.0

Outright USA 2.0 2.0

Tvinci Israel 1.6 1.6

Filtrbox USA 1.4 1.4

MMO Life Netherlands 1.3 1.3

Cake Financial USA 1.3 1.3

fav.or.it UK 0.7 0.7

Feb-09 Total 7.3 24.8 76.4 58.6 12.5 179.5

Grand Total 12.0 5.0 22.5 101.9 199.4 141.8 5.0 22.5 510.1

Figure 29. Financing, Last Three Months Source. Company reports

RELEVANT DISCLOSURES APPLICABLE TO: NONE

L IST OF D IS CLOS URE TE RMS :

1. None applicable.

ANALYST CERTIFICATION

Each analyst of Research Capital Corporation whose name appears in this report hereby certif ies that (i) the

recommendations and opinions expressed in this research report accurately reflect the analyst’s personal views and (ii)

no part of the research analyst’s compensation was or will be directly or indirectly related to the specific conclusions or

recommendations expressed in this research report.

In format i on about Research Capi ta l Corpora t i on ’s Rat i ng Sys tem, the dis t r i bu t i on o f our research to c l ien ts and the percen tage o f recommendat i ons whi ch are in each o f our rat i ng ca tegor i es i s avai labl e on our web si te a t www. researchcapi ta l . com.

The in format i on con tai ned i n th i s report has been drawn f rom sources bel i eved to be re l i able but i t s accuracy o r comple teness is no t guaranteed , nor i n p rovi d i ng i t does Research Capi ta l Corpora t ion assume any responsib i l i ty o r l iabi l i ty . Research Capi ta l Corpora t ion , i t s d i recto rs , o f f i cers and o ther employees may, f rom t ime to t ime, have posi t ions i n the secur i t ies ment i oned herein . Conten ts o f th i s report cannot be reproduced i n who le or i n par t wi thou t the expressed permissi on o f Research Capi ta l Corporat i on. (U.S. Ins t i tu t ional Cl ien ts — Research Capi ta l U.S.A. Inc. (a whol l y owned subsid i ary o f Research Capi ta l Corpora t ion) accep ts responsib i l i t y fo r the contents o f th i s repor t sub jec t to the terms & l imi tat i ons se t out above . F i rms o r i ns t i tu t i ons recei v i ng th i s repor t should e f fect t ransact i ons in secur i t i es d i scussed i n the repor t through Research Capi ta l U.S.A. Inc. , a Broker-Dealer Regis te red wi th the Uni ted Sta tes Secur i t ies and Exchange Commissi on) .

Toronto 416.860.7600 Montreal 514.399.1500 Vancouver 604.662.1800 Calgary 403.265.7400 Regina 306.566.7550

www.researchcapital.com

09 03 03 web 2.0 weekly

Economy & Finance

actoz s

e olith c

lpotcb bus dunited s

na s daqg s us dt

r e s ul t sseveral

na s daqg s us dhong

c dc c orp

bsgc otcb bus dunited