gridley presentation at mobile: iab marketplace july 18, 2011

1

July 18, 2011

Crowne Plaza Hotel, New York City

Mobile Moves to Mainstreet:

Implications for the VC and M&A MarketLinda Gridley, President & CEO, Gridley & Company LLC

2

Global Mobile Internet Ecosystem Poised for

Breakout Growth

Mobile internet revenue by 2015 (1)

Mobile data plan revenue by 2016, at a 9% 2011-2016 CAGR (2)

Mobile commerce revenue by 2016, at a 39% 2011-2016 CAGR (3)

Mobile ad revenue by 2016, at a 44% 2011-2016 CAGR (4)

$198BN

$102BN

$31BN

$21BN

(1) Source: ABI Research (November 2010 )(2) Source: ABI Research (March 2011)(3) Source: Forrester (June 2011)(4) Source: Gartner (June 2011)

3

Mobile Usage is Core to U.S. Consumer

Identity

(1) Source: CTIA: The Wireless Association (December 2010)(2) Source: Pew Internet & American Life “Generations and their gadgets” (February 2011)(3) Source: Pew Internet & American Life Project Survey (July 2010)(4) Source: Pew 2011 State of the News Media Report (March 2011)

Mobile phone penetration currently, ~100% by 2013 (1)96%

27%

53%

Households that are wireless only (2)

U.S. mobile internet users who access internet at least once a day (3)

34% Adults use their phones to send or receive email (2)

47% Americans who use a mobile device to access local news and

information (4)

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Big Change in Expectations in Last 5 Years

Telephone

SMS

Ring Tones

Music

Computer

Newspapers,

Magazines,

Books

Snail

Mail

Video

Camera

Range

Finder

Game

Console

Alarm

ClockMusic

Player

Credit Cards,

Identity

Telephone

PDA

GPS,

Maps,

Compass

Camera

Watch

5

Summarizing the Mobile Ecosystem

Marketing/Advertising/

Analytics

Commerce / Payments

Content Social

Network

Hardware

Lo

ca

l

Pers

on

al

6

Mobile Landscape TodayMarketing/

Advertising/Analytics

Commerce / Payments Content Social

7

Mobile is a Marketer’s Dream

• Mobile phones are ubiquitous and immediate

• Highly attentive and captive audience

• Mobile = new targeting capabilities

– Location-based targeting

– Intent-based targeting

• More than 60% of mobile phone users comfortable with mobile

marketing (1)

(1) Source: InMobi and comScore Survey (August 2010)

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How Mobile is Changing E-Commerce

• Consumers carrying devices that know more about environment than they

do

• Ability to pinpoint shopper’s location and engage real-time

• Consumers using mobile devices at different points of the purchase cycle:

– Discounts and deals

– Product / experience discovery

– Store locator

– Comparison shopping and reviews

– Checkout

• Each point of the purchase cycle provides an opportunity to engage,

redirect, and add value to purchase decisions for shoppers

$$

Real time ads,

offers, etc.

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Mobile Connects Us More Than Ever Before

• Location-based socialization services, games, SMS, and IM are all in

development

– Social implications for real-time broadcast of location and intent

(1) Source: eMarketer (November 2009)(2) Source: Facebook Statistics (June 2011)(3) Source: Informa (March 2010)

Mobile social networkers globally by 2013 (1)600MM+

43%

250MM+

Percent of global web users who will access social networks by mobile (1)

Facebookmobile users as of June 2011 (2)

Mobile social networking revenues by 2013 (3)$1.0BN+

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Consumption of Mobile Content Growing

• Mobile music spend shifting: ringtone purchase to music access from the

cloud

• Mobile device improvements will spur growth in mobile gaming and

mobile video

Source: eMarketer (August 2010)

$1.1$1.5

$2.0$2.7

$3.1$3.5

US Mobile Content by Revenue ($BN)

2009 2010 2011 2012 2013 2014

Gaming

Video

Music

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Lots of Interest in Mobile from VC'sMarketing/

Advertising/Analytics

Commerce / Payments Content Social

Represents companies with at least $10MM in investments

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Lots of Interest in Mobile from VC's

Source: CapIQ, includes investments >$5MM

• Mobile investments this year may outpace 2010 + 2009

$641

$870

$385

$571

$1,101

$757$552

2005 2006 2007 2008 2009 2010 2011YTD

Private Placement Investments by Year ($MM)

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Where Has Capital Gone?

Marketing/Advertising/Analytics

Commerce / Payments

Content Social

‘05-’07 ‘08-’10

$321 $359

‘05-’07 ‘08-’10

$356$375

‘05-’07 ‘08-’10

$173

$870

‘05-’07 ‘08-’10

$749

$1,579

$ in millions

Source: CapIQ, includes investments >$5MM

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Key Investment Themes to Date

• Wireless infrastructure driven

• Investment in SMS & basic marketing

• Investment in simple apps

• Investing into network effect themes

• Payment and Marketing led businesses getting majority of attention

2005 –

2007

2008–

TO

DA

Y

15

7

Key Investors in Mobile

Marketing/ Advertising Analytics

Commerce/ Payments

Content

Social

98

10

Current Investments in Mobile Digital Media

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Mobile M&A Will Explode as Models Develop

Source: CapIQ

• M&A is lagging behind investments, but it will come like a “tsunami”

M&A Volume by Year ($MM)

$429

$930$1,086

$419$443

$1,829

$719

2005 2006 2007 2008 2009 2010 2011YTD

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Marketing/Advertising/Analytics

Commerce / Payments Content Social

Selected Recent M&A Activity

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Where Have M&A Dollars Gone?

Marketing/Advertising/Analytics

Commerce / Payments

Content Social

‘05-’07 ‘08-’10

$236

$1,760

‘05-’07 ‘08-’10

$496

$86

‘05-’07 ‘08-’10 ‘05-’07 ‘08-’10

$590

$2,251

$ in millions

Source: CapIQ, Gridley estimates

Mostly small, undisclosed deals

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Key M&A Themes to Date

• Wireless infrastructure driven

• One off application acquisitions

• M&A at some scale

• Early marketing related transactions

• Beginning to expand beyond marketing oriented services

2005 –

2006

2007–

2008

2009–

TO

DA

Y

20

644

Acquirers in Mobile

Marketing/ Advertising

Analytics

Commerce/ Payments

Content

Social

9

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Mobile M&A Winner's Circle: eBAY

In store scanner

Nearby

Used, online

Online retail

Nearby

Used, online

Online retail

Virtual goods

Local Merchants / SMB

Any product

Discover Pay

Mobile Location based service

Retailer

At Home

• eBay as the strategic global commerce partner of choice

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Advice for the Audience

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Good News for the Investors: It’s Still Early

Source: Aite Group (November 2010)eMarketer (August 2010)Gartner (June 2011)Forrester (June 2011)

Sub $500MM

~ $2BN

~ $3BN

2011

~ $6BN

Payments Content Marketing Commerce

• 35% U.S. smartphone

penetration

– Price points will

continue to drop

• Innovation

• What is a mobile

device?

Comments:

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Advice for the Private Companies

• When buyers and investors go beyond “test dollars”, they will look

to the #1 and #2 players

• SCALE! – get some good blue-chip client case studies and maximize

your subscriber base

• Stickiness will give you leverage with buyers

• Stay ahead in innovation: you may be the leader now, but so was

MySpace

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To the Strategic Buyers: It’s Complicated

• Complex ecosystem with lots of entry possibilities

• Lots of strategic M&A coming – start looking now!

Commerce

Social

Content

Mkt / Adv /Analytics

Display

In app

Photo

Food

Events

Cities

PaymentsLocal

Shop

Measurement

In-store Payments

Games News

On Deck

Events

Music

Books

Video

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…And Competitive

Marketing/Advertising/Analytics

Commerce / Payments Content Social

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Contact us for an informative discussion.

Pratik Patel 212-400-9712

ppatel@gridleyco.com

Linda Gridley 212-400-9710

lgridley@gridleyco.com

QUESTIONS?