Transcript Grouper Revenue Highlightsv2

Grouper Revenue Analysis
August 16, 2006
CONFIDENTIAL
Revenue Highlights
CONFIDENTIAL
page 2
Grouper Revenue Drivers
Base of Users
Drivers of Inventory
% Sold
Revenue (in $mm)
Revenue Type
Streams per unique
X
Total uniques
=
Total streams
% of inventory
(1)(2)
sold
X
Total Streams
=
Streaming ads sold
CPM
X
Ads sold
=
Revenue
In-Stream
CPM
X
Ads sold
=
Revenue
Banner and
Ad-words
CPM
X
Ads sold
=
Revenue
Sponsored
Search
Unique users for
Grouper.com
+
Embedded
unique user
Total unique
users
Page views per
unique
X
Total uniques
=
Page views
Ads sold per page
view
X
Page views
=
Ads sold
% of page views
searching
X
Page views
=
Searches
% of inventory sold
X
Searches
=
Ads sold
(2)
(2)
(1) % of inventory sold for in-stream ads assumes pre-roll ads are placed with only 1/4 to 1/3 of videos.
(2) % of inventory sold assumed to be highest in United States initially, Rest of World increases over time.
page 3
Grouper Revenue Assumptions
SPE Projected Base Case
FY2009
FY2008
FY2007
FY2006
Unique Users (000)
20,868
37,211
53,905
76,309
Grouper.com PVs/Unique
Total Page Views
15.9
899,709
25.7
3,385,164
32.9
7,621,476
33.5
12,506,356
Total Searches (as a % of Page Views)
171,474
797,981
1,941,754
3,251,652
10.1
1,534,921
16.6
5,967,725
21.7
12,003,384
22.4
17,543,578
Total Unique Users
Page Views (000)
Streams (000)
Streams/Total Uniques
Total Streams
Sell-Through / Inventory
1,300,661
40.0%
697,049
35.9%
191,649
24.0%
31,000
18.1%
Sponsored Search (from Searches)
% of Sponsored Search Inventory Sold
21,713,410
1.7
13,222,563
1.7
5,703,871
1.7
1,152,503
1.3
Banner / Ad-words (from Page Views)
Banner / Adwords Inventory Sold (per page)
4,455,878
25.4%
2,717,879
22.6%
999,854
16.8%
185,086
12.1%
In-Stream, incl. Embbeded (from Streams)
% In-Stream Inventory Sold
CPMs / Unit Prices
12.54
In-Stream CPMs (excl rev share) *
$
13.92
$
16.29
$
13.77
$
Banner / Ad-words CPMs
$
1.02
$
0.99
$
0.97
$
0.97
Sponsored Search CPMs
$
15.00
$
15.00
$
15.00
$
15.00
In-Stream Revenue
$
1,424
$
10,061
$
28,247
$
43,019
Banner / Ad-words Revenue
$
1,181
$
5,662
$
12,796
$
20,986
Sponsored Search Revenue
$
465
$
2,875
$
10,456
$
19,510
Total Revenue
$
3,070
$
18,598
$
51,499
$
83,515
Revenue (000)
Revenue by Territory , including Video and Banner / Adwords (000)
North America Revenue
$
1,674
$
8,887
$
21,675
$
35,303
Asia Revenue
$
181
$
1,050
$
1,978
$
3,002
Western Europe Revenue
$
221
$
1,406
$
3,569
$
5,666
ROW Revenue
$
35
$
230
$
503
$
758
* Represents gross In-Stream CPM, including revenue share to partners.
page 4
Market Demand for Online Advertising
CONFIDENTIAL
page 5
Market Support for Grouper Revenue Model
•
Grouper will derive advertising revenue through three distinct business models
– In-stream video ads
– Banners and ad-words on the Grouper.com website
– Sponsored searches
•
Recent deals validate the overall potential for advertising associated with both user
generate video and social networking sites
– Google / MySpace / Newscorp – Google will pay Fox Interactive Media $900M to
provide search and advertising for Fox Interactive sites
– Google / MTV – Google agrees to distribute video clips from MTV Networks over the
AdSense network
•
Market has demonstrated willingness to pay premium CPMs for streaming video ads
– Sony experience, independent analysts and industry experts have validated current
online video CPMs to be approximately $20 to $30 (1)
– In-line with traditional TV CPMs and positioned to benefit from growth of online
advertising spend
– Grouper model conservatively assumes CPMs to be from $12.50 to $16.30
(1)
Josh Bernoff, Forrester Research; Allie Savarino, SVP World of Worldwide Marketing, Unicast; Jeff Lanctot, VP of Media Buying, Avenue A Razorfish.
page 6
Google Strikes $900M Advertising Search Deal With MySpace and
Fox Interactive Media Sites
Deal Specifics

Google Inc. will provide search and advertising for
News Corp.'s MySpace and other Fox Interactive
Media sites

Google will pay at least $900 million in advertising
revenue to News Corp. over the next four years in
an all-cash deal, provided traffic on the sites
reaches an undisclosed threshold

Google will install its search boxes and keyworddriven ads

Google also receives the right to sell directly any
display ads not sold by Fox
Views

Analysts estimate that the deal could bring
Google revenue (net of the $900 million paid to
News Corp) of anywhere from $50 million to $200
million

"Google needed to win this deal to lock up the last
remaining large and fast growing piece of traffic
on the Web today. One thing is certain: Yahoo
and MSN would have loved to sign News Corp.,
but could not make sense of a $900 million
guarantee.“
– Jordan Rohan, RBC, August 8, 2006

"While we have highlighted the potential
opportunity for Google on the display side for
some time, we feel that Google has made limited
progress on this front. We applaud this deal as an
example of how Google can leverage its
relationships and technology to grow an additional
revenue stream and monetization models.“
– Benjamin Schachter, UBS, August 8, 2006
page 7
The Google Deal Implies Strong Revenue Potential for Grouper
Deal Metrics
Implied Grouper Revenue Opportunity
Projected Revenue
Total Deal Revenue
Unique
Users (Avg)
Implied
Banner/Adwords
Banner/Adwords
In-Stream
Sponsored
Search
TOTAL
FY2006
8.8
$36.6
$1.2
$1.4
$0.5
$3.1
FY2007
29.0
$120.6
$5.7
$10.1
$2.9
$18.6
FY2009
45.6
$189.6
$12.8
$28.3
$10.5
$51.5
FY2009
65.1
$270.7
$21.0
$43.0
$19.5
$83.5
$900 MM
( $ millions)
Average Annual Revenue
$225 MM
MySpace Uniques
54.1 MM
Revenue Per Unique
$
4.16
page 8
Viacom Aggressively Pursues Stronger Position in Digital Space
Viacom’s MTV Networks Announces Intent
to Acquire Atom Entertainment for $200MM
Viacom Considers Bid for Bebo

Viacom announced on 8/09/2006 that they had
signed a definitive agreement to acquire
Atom Entertainment

According to the Financial Times, Viacom is
potentially evaluating an acquisition of Bebo, a
social network similar to MySpace

The acquisition would serve to further strengthen
Viacom’s presence in digital media

Bebo is the top site in Ireland and the UK


Atom Entertainment is a marketer and distributor
of broadband entertainment; formed by the 2001
merger of Internet Shockwave.com
and AtomFilms
25MM unique users worldwide as compared to
90MM for MySpace

It is rumored that BT (the telecom group) had
offered £300MM for Bebo

Bebo reportedly looking for greater than $1BN

In 2005, Atom acquired the online games portal
AddictingGames and the online video site
AddictingClips (1.7MM unique users)

This deal would follow acquisitions of other online
entities, including: NeoPets, XFire, Y2M,
GameTrailers.com and IFILM
page 9
Blue Chip Companies Are Advertising on Traditional and UserGenerated Video Sites
Traditional
Advertisers
User Generated
Advertisers
Intel, Oscar Meyer, Hershey's,
Moviefone, Kraft, I Can't Believe It's
Not Butter
Snickers, Altoids, Playstation, Virgin
Mobile (w/text message contest),
Axe, Nike, Puma
Suave, Tylenol, Zyrtec, Disney,
Pampers, Swiffer, Bounty, Mr. Clean
Ads by Google, E-Bay, True.com,
classmates.com, heavy.com,
Blockbuster Online
Dr. Pepper, Chili's, Superpages,
Neosporin, Mazda, Benadryl,
Lipitor, State Farm
Sierra Mist, University of Phoenix
Online, Cingular, Chili's, Universal
Studios
AT&T, Nike, Neutrogena, Above The
Influence, Pepsi, Kohl's, Clairol,
Neutrogena, Target
Dodge, Honda, Air Force, Toyota,
FOX Searchlight, AllTel
page 10
Online Video CPMs Are Currently $20-$30, In-line with Traditional TV
CPMs and Positioned to Benefit From Growth of Online Ad Spend
Industry Commentary
•
Josh Bernoff, Forrester analyst
“…the driving force of the online video market is advertising…advertisers are paying $25 per
thousand users who see their online commercials, more than they pay for network
television”
•
Allie Savarino, SVP World of Worldwide Marketing at Unicast
“…while rich media ads on average cost around $10-20 on a cost per thousand basis the
video commercials cost around $25-30 for the same rate… a comparable cost with
advertising on a US television network to the same number of television viewers for a 15- to
30-second spot.”
•
Jeff Lanctot, VP of media buying at Avenue A Razorfish
“Advertisers are now paying about $20 to $30 a CPM for a 15-second spot that pre-rolls a
broadband video… one reason advertisers are warming up to Web broadband content is
because they can interact with consumers.”
page 11
Television CPMs Have Grown to Reach $23.50, Initial Online Video
CPMs Are At a Similar Level
CPM Pricing Trends
5 yr CAGR: 5.4%
$30.00
$25.00
$20.00
$16.60
$18.10
$19.00
$19.20
$20.30
$22.30
$23.50
$14.60
$15.00
$10.00
$5.00
$0.00
1998
1999
2000
CBS
2001
ABC
NBC
2002
FOX
2003
WB
2004
2005
Average CPM
Source: Nielson Media Research.
page 12
Consumer Time is Shifting Online and Drove 50% Annual Growth in
Online Ad Spending Over the Last Three Years
Media spending does not yet
reflect consumption
Advertising dollars are shifting online to
address the current gap
1999
2003-’05 US
Advertising
1999
Other
14%
Magazines
4%
Newspaper
6%
Games
2%
Network TV
24%
Internet
2%
Cable TV
19%
Radio
29%
Today
2005
Other
Magazines
11%
4%
Newspaper
5%
Network TV
20%
Games
2%
Contribution to Growth
CAGR
Television:
TV Stations
1.5%
2%
Cable Networks
15.6%
19%
Cable MSOs
8.1%
3%
CBS Net, FOX Net
5.8%
9%
Total Television
7.0%
34%
Magazines
8.9%
5%
Newspapers
3.4%
11%
Radio
0.2%
0%
Outdoor
7.1%
5%
Online
50.4%
45%
Total
8.4%
100%
Traditional Media
5.1%
55%
Online
50.4%
45%
Total
8.4%
100%
SUMMARY
Internet
6%
Cable TV
25%
Radio
27%
page 13
Internet Advertising is Forecast to Grow 22% Annually through 2009,
Reaching 25% of the $115BN Domestic Advertising Market
Overall ’05 – ’09 Projected CAGR: 10.1%
Broadcast ’05 – ’09 Projected CAGR:
4.9%
Cable/Sat ’05 – ’09 Projected CAGR: 11.4%
Online ’05 – ’09 Projected CAGR: 22.3%
$140
TV & Online Advertising Spend
US $ (Billions)
Broadcast Netw orks
Cable Netw orks
Online
114.9
$120
106.0
95.1
$100
87.6
78.3
$80
71.7
57.9
$60
$40
$20
60.7
63.2
6.0
7.3
14.7
16.3
36.6
40.0
2001
12%
7.1
14.2
28.2
24.1
20.0
16.1
12.6
9.6
29.7
24.3
26.9
33.4
18.9
21.7
44.0
47.2
48.2
53.3
43.2
52.2
39.6
2002
2003
2004
2005
2006
2007
2008
2009
10%
12%
13%
16%
18%
21%
23%
25%
$0
Online %:
Source: Veronis Suhler, 2005
Note: Cable/satellite growth expected to be driven by increasing audience share of prime time ratings, ability to target within
specific demographic groups, improved sales system; broadcast growth expected to be driven by sustained ratings and ad rates,
continued appeal as optimal means to reach large audiences
page 14
Growth in Demand for Online Advertising is Driving 25% Annual
Growth in Banner Ad CPMs
Using Yahoo! as a proxy for the global Internet, both traffic and CPMs continue to rise as
the Internet becomes a significant play for advertisers.
$3.50
2 yr CAGR: 25.6%
450,000
2005 Avg CPM $2.64
$3.00
400,000
2004 Avg CPM $2.33
$2.50
350,000
300,000
250,000
$2.00
2003 Avg CPM $1.64
$1.50
200,000
150,000
$1.00
100,000
$0.50
50,000
0
Avg. Mktg. Serv. Revenue / 1,000 Pages
(RPM)
Yahoo Global Monthly Unique Visitors (MM)
500,000
$0.00
Q1:03 Q2:03 Q3:03 Q4:03 Q1:04 Q2:04 Q3:04 Q4:04 Q1:05 Q2:05 Q3:05 Q4:05
Global Monthly Unique Visitors (000's) (a)
Line 3
Line 5
Avg. Mktg. Serv. Revenue / 1,000 Pages (RPM)
Line 4
page 15