Please see analyst certification (Reg. AC) and other important disclosures on page 5 of this report.

Think Entertainment: Gaming

Social Gaming: Revising Our Market Size EstimateTo Reflect Rapid Growth

THINK SUMMARY:Over the last six months, growth in social gaming has exceeded ourexpectations (DAU for the top five developers up 5x during this period), whichhas rendered our original market size estimates conservative. We estimate thecurrent market size for social gaming at about $60 million per month andexpect it to grow at approximately 45% CAGR over the next three years toreach $2 billion by 2012, driven by a combination of strong growth in usageand improving monetization.

KEY POINTS:• Usage of social games has taken off much stronger than we expected

(please see our report, "The Emergence Of Games As A Service" publishedon May 4, 2009). Daily Active Users (DAU) for the top 10 social gamingcompanies has increased more than 5x over the last six months, driven bythe viral nature of these games, aggressive marketing campaigns by a fewgaming companies, and emergence of a few new genres of games, mostnotably Farm and Aquarium games.

• The popularity of gaming on social networks is evident from the fact that 20of the top 25 applications on Facebook are games (as measured by MonthlyActive Users or MAU; source: Developer Analytics), compared with 16 of thetop 50 applications six months ago (as measured by MAU; source:Facebook). We believe that the usage (as measured by MAU) is even moreskewed toward games now compared with six months ago.

• Our conversations with a number of social gaming companies suggest thatthe monetization curve is concentrated to the large players—with only about3-5% of the active users directly paying for the games. The ARPU curve forthe direct paying users seems to resemble any other free-to-play onlinegame, i.e., heavily concentrated on the top users. Looking ahead, we believethat there may be some room for improvement in the conversion rate (fromactive users to active paying users) driven by availability/increasingpopularity of newer payment methods (e.g., Facebook credits, more prepaidcards, and mobile payments).

• We are seeing a pick up in indirect pay, i.e., users paying for the virtualcurrency by opting for advertisers' offers (lead generation for marketers suchas Netflix, Blockbuster, etc.) or taking online surveys. We estimate that theconversion rate could be slightly better for indirect paying users—at about4-5% (versus 3-5% for direct paying users) albeit with relatively lower ARPU.

• All in all, we estimate the current social gaming market size to beapproximately $60 million per month (run market of $720 million per year)and expect the market to grow at about 45% CAGR to reach $2 billion withinthe next three years.

Reason for Report:

Industry UpdateAtul Bagga

415-249-6362, abagga@thinkequity.com

October 16, 2009Industry Report

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Over the last six months, growth in social gaming has exceeded our expectations, which could render our original market size estimates conservative. We estimate the current market size for social gaming at about $60 million per month and expect it to grow at approximately 45% CAGR over the next three years to reach $2 billion by 2012, driven by a combination of strong growth in usage as well as improving monetization.

Social Gaming Growth Has Far Exceeded Our Expectations: Usage of the social games has taken off much stronger than we expected. Daily Active Users for the top 10 social gaming companies has gone up more than 5x over the last six months, driven by the viral nature of these games, aggressive marketing campaigns by a few gaming companies, and emergence of a few new genres of games, most notably Farm and Aquarium games.

Exhibit 1: Daily Active Users (Million)

Oct-09 May-09

Zynga 47.1 6.7

Playfish 12.1 4.7

Slashkey 5.8 1.8

Crowdstar 4.0 0.2

PopoCap Games 2.8 0.6

TwoFishes Interactive 2.1 0.2 TallTree Games 2.1 -

Playdom 1.9 0.4

Rawr! Games 1.8 -

Serious Business 1.2 0.4 Five Minutes 1.0 -

Total 81.9 15.0 Source: Developer Analytics

Exhibit 2: Monthly Active Users (Million)

Oct-09 Jan-09

Zynga 148.6 21.5

Playfish 56.9 19.2 Playdom 12.7 1.0

Total 218.2 41.7 Source: AppData.com/InsideSocialGames.com

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Industry Report

Games Are Now By Far The Biggest Category Of Applications On Facebook: The popularity of gaming on social network is evident from the fact that 20 of the top 25 applications on Facebook are games (as measured by Monthly Active Users or MAU; source: Developer Analytics), compared with 16 of the top 50 applications six months ago (as measured by MAU; source: Facebook). We believe that the usage (as measured by MAU) is now even more skewed toward games compared with six months ago. Exhibit 3: Top Games On Facebook – Now And Six Months Ago

Game Developer MAU Rank

Oct-09 Apr-09 Oct-09 Apr-09

FarmVille Zynga 59.0 NM 1 NM

Mafia Wars Zynga 25.9 9.5 3 9

Pet Society Playfish 19.9 10.6 5 8

YoVille Zynga 19.5 5.3 6 18

Farm Town Slashkey 18.7 NM 7 NM

Texas HoldEm Poker Zynga 18.2 12.3 8 7

Restaurant City Playfish 16.6 NM 9 NM

Café World Zynga 15.9 NM 10 NM

MindJolt Games MindJolt 14.9 3.2 11 31

Happy Aquarium CrowdStar 12.4 NM 12 NM

Roller Coaster Kingdom Zynga 8.9 NM 15 NM

Fish World TallTree Games 8.4 NM 16 NM

Bejeweled Blitz PopCap Games 8.3 NM 17 NM

Country Story Playfish 7.8 NM 18 NM

FARKLE Viral 7.6 NM 19 NM

Barn Buddy TheBroth 6.6 NM 20 NM

My Fishbowl TwoFishes Interactive 5.2 NM 21 NM

(Lil) Farm Life Greenpatch Inc 5.2 NM 22 NM

Happy Farm Elex 4.0 NM 23 NM

Animal Paradise Rekoo 3.5 NM 24 NM

Geo Challenge Playfish 1.4 4.0 221 25

Word Challenge Playfish 3.6 3.5 113 29

Who Has The Biggest Brain Playfish 2.7 3.5 191 29

Bowling Buddies Zynga 1.8 3.7 167 33

Street Racing Zynga 2.0 2.7 91 36

Vampire Wars Zynga 3.8 2.6 50 39

Kidnap Context Optional 1.0 2.5 192 42

Friends For Sale Serious Business 6.6 2.2 37 44

Mob Wars Mob Wars 1.7 2.1 90 45

Poker Palace Trevor Smith 1.6 1.9 144 46 Minigolf Play Playfish 0.9 1.9 313 48

Source: Developer Analytics (as on 10/15/09) and Facebook (as on 04/21/09) Not Surprisingly, Conversion Rate (From Active Playing To Active Paying Users) Remains Pretty Small; We Expect Some Improvement With Availability/Increasing Popularity Of Newer Payment Methods: Our conversations with a number of social gaming companies suggest that the monetization curve is concentrated to the large players—with only about 3-5% of the active users directly paying for the games. The ARPU curve for the direct paying users seems to resemble any other free-to-play online game, i.e., heavily concentrated on the top users. Looking ahead, we believe that there may be some room for improvement in the conversion rate (from active users to active paying users) driven by availability/increasing popularity of newer payment methods (e.g., Facebook credits, more prepaid cards, mobile payments).

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Indirect Pay Contributing Almost 30-50% Of The Social Gaming Revenue: We are seeing a nice pick up in indirect pay, i.e., users paying for the virtual currency by opting for advertisers offers (lead generation for marketers such as Netflix, Blockbuster, etc.) or taking online surveys. We estimate that the conversion rate could be slightly better for indirect paying users—at about 4-5% (versus 3-5% for direct paying users) albeit with relatively lower ARPU. We Expect A 45% CAGR For Social Gaming Market Over The Next Three Years: All in all, we estimate the current social gaming market size to be about $60 million per month (run market of $720 million per year) and expect the market to grow at about 45% CAGR to reach $2 billion within the next three years. Exhibit 4: Market Size Estimate For Social Gaming

Current 2012E

Monthly

Annual

Run Rate

Population (million) 341 341 368

Internet Penetration (%) 74% 74% 77%

Internet Users (million) 252 252 284

Social Network Penetration (%) 63% 63% 70%

Social Network Users (million) 158 158 198

Gamers on Social Network (%) 30% 30% 40%

Gamers on Social Network (million) 47 47 79

Direct Paying Users (%) 3.0% 3.0% 5.0%

Direct Paying Users (million) 1 1 4 ARPU - Direct Paying Users ($/month) $20 $20 $25

Market Opportunity - Direct Paying Users ($ million) $28 $340 $1,191

Lead Generation (Offers/Surveys) Penetration (%) 4.5% 4.5% 6.0%

Lead Generation Users (million) 2.1 2.1 4.8

Avg Number of Lead Gen/User/Month 3.4 3.4 3.4 ARPU/Lead Gen ($/month) 3.7 3.7 4.4

Market Opportunity - Indirect Paying Users ($ million) $27 $324 $868

Ad Supported Users (million) 47 47 79

Hours Game Play/Week 5 5 5

Ads Served/Hour Game Play 20 20 20

Total Ads Served (billion) 21 248 413 CPM $0.25 $0.25 $0.30

Market Opportunity - Ad Revenue ($ million) $5 $62 $124

Social Gaming Market Size ($ million) $60 $726 $2,183 Source: ThinkEquity estimates

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Important Research Disclosures

Analyst CertificationI, Atul Bagga, hereby certify that all of the views expressed in this research report accurately reflect my personal views about the subjectsecurities and issuers. I also certify that no part of my compensation was, is, or will be directly or indirectly related to the specificrecommendations or views expressed in this research report.

The analyst(s) responsible for preparing this report has/have received compensation based on various factors, including the firm's totalrevenues, a portion of which is generated by investment banking activities.

Rating Definitions

Effective October 7, 2009, ThinkEquity LLC moved from a four-tier Buy/Accumulate/Source of Funds/Sell rating system to a three-tierBuy/Hold/Sell system. The new ratings appear in our Distribution of Ratings, Firmwide chart. To request historical information, includingpreviously published reports or statistical information, please call: 866-288-8206, or write to: Director of Research, ThinkEquity LLC, 600Montgomery Street, San Francisco, California, 94111.

Buy: ThinkEquity expects the stock to generate positive risk-adjusted returns of more than 10% over the next 12 months. ThinkEquityrecommends initiating or increasing exposure to the stock.

Hold: ThinkEquity expects the stock to generate risk-adjusted returns of +/-10% over the next 12 months. ThinkEquity believes the stockis fairly valued.

Sell: ThinkEquity expects the stock to generate negative risk-adjusted returns of more than 10% during the next 12 months. ThinkEquityrecommends decreasing exposure to the stock.

Distribution of Ratings, Firmwide

ThinkEquity LLC

IB Serv./Past 12 Mos.

Rating Count Percent Count Percent

BUY [B] 120 67.40 14 11.67HOLD [H] 51 28.70 2 3.92SELL [S] 7 3.90 0 0.00

This report does not purport to be a complete statement of all material facts related to any company, industry, or security mentioned. Theinformation provided, while not guaranteed as to accuracy or completeness, has been obtained from sources believed to be reliable. Theopinions expressed reflect our judgment at this time and are subject to change without notice and may or may not be updated. Pastperformance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express orimplied, is made regarding future performance. This notice shall not constitute an offer to sell or the solicitation of an offer to buy, nor shallthere be any sale of these securities in any state in which said offer, solicitation, or sale would be unlawful prior to registration orqualification under the securities laws of any such state. This research report was originally prepared and distributed to institutional clientsof ThinkEquity LLC. Recipients who are not market professionals or institutional clients of ThinkEquity LLC should seek the advice of theirpersonal financial advisors before making any investment decisions based on this report. Additional information on the securitiesreferenced is available upon request. In the event that this is a compendium report (covers more than six ThinkEquity LLC-coveredsubject companies), ThinkEquity LLC may choose to provide specific disclosures for the subject companies by reference. To requestmore information regarding these disclosures, please call: 866-288-8206, or write to: Director of Research, ThinkEquity LLC, 600Montgomery Street, San Francisco, California, 94111. Stocks mentioned in this report are not covered by ThinkEquity LLC unlessotherwise mentioned. Member of FINRA and SIPC. Copyright 2009 ThinkEquity LLC, A Panmure Gordon Company

October 16, 2009Industry Report