mobile ecosystem
TRANSCRIPT
ConfidentialConfidential
Gridley’s Mobile Industry Roadmap
April 2012
Toward Ubiquity in a Consumer Inspired Mobile World
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OverviewMobile finally arrived in 2011 because smartphone penetration increased dramatically and reached 48% at the end of the year. High smartphone penetration has been the critical element needed to transform the mobile ecosystem. High smartphone penetration was necessary for mobile to really take off because smartphones offer consumers a fundamentally different experience that includes true 24/7 convenience, hyper-local and targeted applications, and significantly enhanced connected functionality.
One important thing to note is that consumers, not businesses, have been leading the charge. This is the first time in history that a major technological shift has been led by the consumer, and its advent has several major implications. Consumers are now roughly 18 months ahead of businesses. As businesses begin to catch-up with consumers, we expect to see notable growth in several key areas including mobile advertising and point of sale applications. Other notable trends we saw in 2011 include:
• Mobile advertising really took off in 2011 due to increasing smartphone penetration, mobile Web use and related increases in ad inventory. Mobile advertising is now recognized as an opportunity for brands to engage consumers in a targeted manner, thereby improving returns;
• Smartphones are changing consumer shopping behavior and the in-store consumer experience because mobile phones are offering more pricing transparency, greater convenience, and product information. As of 3Q 2011, 49% of mobile consumers said they frequently used their smartphones while shopping;
• The ability to pinpoint a shopper’s location and engage real-time on a mobile device provides vast opportunities for retailers to convert shoppers;
• Large technology companies such as Google, Verizon, Apple, and eBay are trying to build integrated payment and marketing systems and will be a real threat to traditional payment and marketing leaders;
• The growing popularity of smartphones has led to a dramatic rise in mobile video. While 23 million mobile subscribers viewed video on their phones in 2010, 31 million used mobile video in 3Q2011, a 35% increase; and
• Social networking is becoming increasing popular on mobile devices and accelerating the growth of mobile. Android and iPhone users spend more time on Facebook than any other mobile application.
Source: Nielsen, (March 2012).
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OverviewWhile 2011 was a banner year for mobile, the rate of change will continue to accelerate in 2012. Falling hardware prices will continue to make smartphones and related applications more accessible to more people. By the end of 2012, over 60% of mobile phones will be smartphones. Mobile’s inherently geo-local uses should also foster the creation of a whole host of innovative new applications, and the media and commerce landscapes will continue to undergo profound changes.
Gridley's Mobile Industry Roadmap is a brief 10 page report focused on four major areas we think will offer the best near term opportunities: content, marketing and advertising services, m-commerce / services, and payments. The four areas have been chosen for different reasons, but all four have shown promise and we expect all will continue to drive value for the consumer.
We hope you enjoy this mobile roadmap and our perspectives. Please give us a call to discuss the content of this presentation.
Source: Nielsen, (March 2012).
Linda GridleyPresident & CEO
Pratik PatelDirector
Peg JacksonManaging Director
4
13%
48%
74%
56%
2%
29%
8%
27%
9%10%
46%
36%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2005 2006 2007 2008 2009 2010 2011
Africa Arab States Asia & PacificCIS Europe The Americas
Globally, Mobile Penetration is Significantly Higher than Penetration of Landline Phones or the Internet
Source: International Telecommunication Union, 2011
10%13%
39%
2% 1%
9%
15%
26%23%
46%
29%33%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2005 2006 2007 2008 2009 2010 2011
Africa Arab States Asia & PacificCIS Europe The Americas
53%
74%
143%
12%
27%
97%
23%
60%
120%
92%
52%
103%
0%
20%
40%
60%
80%
100%
120%
140%
160%
2005 2006 2007 2008 2009 2010 2011
Africa Arab States Asia & Pacific CIS Europe The Americas
Mobile phone penetration increased in the Americas from 52% in 2005 to 103% in 2011…
…while landline phone penetration decreased 3%.. . .. and Internet penetration increased to 56% or ~half mobile
Internet User Penetration RatesFixed Telephone Lines Penetration Rates
Mobile Cellular Subscriptions Penetration Rates
5
56%58%62%
66%
72%75%
77%81%
83%84%86%87%90%
79%
52%
50%
44%41%37%
35%
28%25%
23%21%19%
17%16%14%13%
10%
48%
2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 Feb '12
Feature Phone Smartphone
Conversion from Feature Phones to Smartphones Has Been Accelerating Over the Past Few Quarters……This trend is likely to continue as hardware costs continue to fall. By 2015, over 80% of US mobile users are expected to have smartphones, up from 48% at the end of 2011
US Smartphone Penetration(1) % of US Users with Smartphones(2)
(1) Source: The Nielsen Company.(2) Source: Goldman Sachs (June 2011).(3) Source: Forrester Research (2010).
% of US Users with Tablets (3)
Accelerating User Growth
Accelerating User Growth
1-3%1-3%
50/5050/50
8%
15%
20%
25% 25%
2011 2012 2013 2014 2015
48%
64%71%
77% 81%
2011 2012 2013 2014 2015
2-7%2-7%
6
The More Developed Japanese Market Gives a Hint of What To Expect in the US in the Next Few Years
Mobile Activities in the U.S., EU5, and Japan by % Share of Total Mobile Users
Source: comScore MobiLens, 3 month average ending December 2010, Japan data for December 2010 only
23%
21%20%
18%17%
16% 16%
10% 10%
8%7%
7%6%
4%
25%
15%
26%
13%14%
12%
25%
8%
7%7%
5% 5% 6%5%
16%
32%
16%17%
4%
18%
13%
17%
10%
14%
4%
9%
23%
3%
Games Search CaptureVideo
Maps InstantMessaging
Sports Info Music FinancialNews / Stock
Quotes
RestaurantInfo
TrafficReports
Classifieds Online Retail TV / Video TravelService
U.S. EU5 Japan
In the future, US consumers will probably spend more time viewing videos and TV, searching, and accessing financial news and traffic reports using their mobile devices
Poised for Growth
Poised for Growth
Poised for Growth
Poised for Growth
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Sources: (1) Chetan Sharma (January 2011), (2) eMarketer (September 2011)
Breakdown of US Mobile Ad Spending ($MM)(2)
Relative Efficacy of Mobile vs. Other Advertising Media (1)
Mobile Ads Are More Targeted, Making them More Effective and Compelling Than Other Media
$633
$1,600
$1,767
$396
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
2010 2011 2012 2013 2014 2015
Messaging Display Search Video
US Mobile Ad Spending ($MM)(2)
100 90 70 80 80Mobile
50 50 80 40 60Internet
50 30 9010
20TV
4010
2010
10Print
6010
4010Radio
Reach Targeting Engagement Viral Transaction
$4,396
$3,381
$2,523
$1,802
$1,226
$743
79%
65%
47%
40%34%
30%
2010 2011 2012 2013 2014 2015
0 %
1 0 %
2 0 %
3 0 %
4 0 %
5 0 %
6 0 %
7 0 %
8 0 %
9 0 %
8
52% 51%
34%
21%17%
7%1%
Found it online for abetter price
Found it at anotherstore for a better price
Saw a negative reviewabout the item
Bought a similar iteminstead
It was not available in-store
No longer needed item Nove of the above
12%
3%
18%
24%21%
24%
10% 9%
1%
13-15 16-17 18-19 20-24 25-34 35-44 45-54 55-64 65+
Source: KPMG.
% of Age Group Interested in Mobile TransactionsConsider Mobile Payments Mainstream
9% consider mobile payments mainstream
globally today
9% consider mobile payments mainstream
globally today
83% believe mobile payments will be
mainstream globally within the next four years
83% believe mobile payments will be
mainstream globally within the next four years
Source: Yankee Group.
Reasons for In-Store Purchase Abandonment Among US Smartphone Users
Mobile Phones Are Creating New In-Store Purchasing Behavior and Transforming Payments
Source: comScore, US Smartphone User Survey (July 2011).
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7.6
3.22.7 2.6
1.5
Retail or conveniencestore
Vending machine Public transportation Grocery store Restaurant
Large Companies Are Trying to Build Integrated Payment and Marketing Systems
Most Trusted Brands in Mobile Payment
Location of Mobile Wallet Purchases in Japan (MM)
Source: comScore MobiLens (December 2010).
39.6% 35.9% 35.8% 34.3%
24.6% 22.9% 22.3%19.5%
17.0% 15.5%12.1%
Visa MasterCard American Express PayPal US Postal Service Apple Microsoft Google Motorola eBay Facebook
It is currently unclear who will ultimately develop the most successful integrated payment and marketing system, however, it is clear that someone will succeed
Source: Ogilvy and Mather (2011).Source: Ogilvy and Mather (2011).
Total Global Payments Revenue Growth ($BN)
2011
$240 billion2011
$240 billion
2015 $670 billion2015 $670 billion
Source: Juniper Research (July 2011).(1)Includes mobile payments for digital and physical goods, money transfers and NFC.
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Electronics, Clothing, and Food Currently Dominate M-commerce
Company
Recent Moves
• Mobile commerce makes up more than $1 billion in sales
• In 2011, people purchased $5 billion of goods on eBay using their mobile devices
• Launched Goggle Wallet • Dipped its toe into mobile payments by introducing EasyPay
Future Trends
• Tapping into 80% of the retail market that is not online by going mobile
• In 2012, eBay projects this will rise to $8 billion
• PayPal expects to see $7 billion in mobile payment volume in 2012
• Using Google Wallet to gain meaningful traction
• Captive share of search and mobile reach has high leverage potential
• Could easily introduce its own digital wallet
Source: ComScore/Millennial Media Mobile Retail Study (2010).
mCommerce Items Purchased
The ability to pinpoint a shopper’s location and engage real-time on a mobile device provides vast opportunities for retailers to convert shoppers
Total U.S. Mobile Commerce Revenue Growth ($BN)
$3.5
$6.7
$11.6
$17.2
$23.7
$31.0
2010 2011 2012 2013 2014 2015
Source: eMarketer (November 2011).
29%26%
21% 21% 21%19% 19%
17%15% 14%
31%
Electro
nics
Clothin
g/Acc
esso
ries
Food
Enter
tainm
ent/T
ickets
Airplan
e Tick
ets
Books
(Non
-Dig
ital)
Hotel
Stays
Flowers
Tools/
Auto/
Indu
strial
Sports
/Fitn
ess
Car Ren
tals
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Key M&A Themes
• Wireless infrastructure driven
• One off application acquisitions
• M&A at some scale
• Early marketing related transactions
• Beginning to expand beyond marketing oriented services
• More focused on marketing networks
2005
– 2
006
2007
– 20
0820
09–
Tod
ay
12
Mobile Ecosystem
Mobile Coupons
e-Commerce Mobilizers
Payments
Digital InventoryRewards / CLOs
Bar Code Scanners
Marketing Services Integrated Systems
Social
Mobile Discovery
Marketing and Advertising ServicesMarketing and Advertising Services ContentContent M-Commerce / ServicesM-Commerce / Services PaymentsPayments
Mobile Ad Networks
AnalyticsDSPs Exchanges
M-Commerce Tech
Content
Gaming
Video
Services
Gridley Overview
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Gridley OverviewGridley & Company, a New York-based boutique investment bank, provides advisory services to companies in the Information Services industry
Leading Boutique • Sharp focus provides clients with valuable strategic insights and perspectives
• Specialize in Internet Services, Digital Media & Marketing Services, Data Services, Financial Technology, and SaaS & Outsourcing Services
• Founded in 2001 • Headquartered in New York, NY
Strong Reputation • Strong industry reputation on assignments led by senior bankers• Experienced, bulge-bracket trained M&A bankers – The “A” Team
Trusted Advisor • Thoughtful ideas – not just logical combinations• Deliver value to buyers, sellers, and investors alike• Broad industry network developed over 25+ years with industry leaders,
emerging growth companies, and senior investors
Gridley & Company
15
INDEPENDENT ADVICE
INTEGRITY
Gridley’s Differentiated Strategic ApproachOur broad network allows us to discern important trends early in their development, advise clients on the best strategies to profit from those trends, and execute successful transactions
Strong Network of Relationships
• Split time 1/3, 1/3, 1/3 between strategics, VC/PE firms, and private company CEOs
• Built our business by visiting over 400 companies a year annually for 10 years
• Have set up over 1,000 one-on-one “meet and greet” meetings at our annual January conference
INDEPENDENT ADVICE
INTEGRITY
Well-Known Thought Leadership
• Often hired by public company leaders to advise them on major growth initiatives
• Approximately 25% of business is retained, strategic buy-side work for industry leaders and selected PE investors
• Use industry overviews to effectively guide strategic buyers and PE investors
Ability to Strategically Position Companies Impressive Track Record
• Spend more time than our competitors on the strategic positioning of our clients
• Work together to optimize market positioning
• Offer strategic insights based on our understanding and perspective of the industry
• Over 25 year history of successfully completing transactions
• Clients like us and the job we do
• Goal is 100% referencable clients
• “No client gets left behind”
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Strategic Thought Leadership is Well Known
• Highly respected quarterly newsletter about industry trends and corporate finance/M&A activity
• Received by over 2,200 industry CEOs and CFOs, investors, and financial sponsors
• Business Insider: IGNITION
• OMMA Display
• Capital RoundTable
• SIIA Midmarket Growth Conference
• IAB Marketplace: Mobile
• OMMA Mobile
• Upstream Seller Forum
• Digital Hollywood NYC: Media Disruption
• ad:tech NYC 2010
• Digital NY
• January Conference
• Mobile in May
• Annual Golf Outing
• AdTech Cocktail Party
Quarterly Newsletter:The Compass
IndustryGuides
FrequentIndustry Speaker
Gridley Hosted Events
17
Our Team is Experienced, Focused, and Trained for Success• Gridley’s bankers are experienced, bulge-bracket trained bankers – The “A” Team
• Recent additional hires add execution capability and further outreach
Team Member Background
Linda GridleyPresident & CEO
• 25+ years relevant banking experience • Prior firm experience at Lehman Brothers, Furman Selz, and ING Barings• In depth knowledge of marketing services sector
– Successful sale transactions with KBM, M/A/R/C Group, PRIMIS, Communifx, and Digitaria• Frequent industry conferences circuit speaker
Peg JacksonManaging Director
• Extensive knowledge and experience in digital media and technology sectors as venture capitalist• Managing Director at NeoCarta Ventures. Served on boards including Data Synapse (Acquired by Tibco),
Silverpop, and Zoom Systems• Vice President of Business Development at NBC. Responsible for investments including Tivo, Preview
Travel (acquired by Microsoft), Whowhere (acquired by Lycos), Wink (acquired by Liberty)
Pratik PatelDirector
• 9 years banking experience, 5 years covering software and digital media sectors• Prior firm experience at JPMorgan
Maura O’NeillVice President
• 7 years banking experience, extensively working with media and marketing services companies• Prior firm experience at Lehman Brothers and CDG Group
Michael LambeVice President
• 7 years transaction experience, executing transactions for leading private equity firms• Prior firm experience at Harris Williams & Co.
Feng HongAssociate
• 3 years tech banking experience • Prior firm experience at Credit Suisse
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Selected Recent Gridley Transactions
Gridley clients include industry leaders and premier emerging growth companies
Advisor
Undisclosed
Acquired byWPP Group plc
Advisor
Undisclosed
Acquired byISIS Equity Partners, Inc.
Advisor
$138,000,000
AcquiredModem Media, Inc.
Advisor
Undisclosed
Acquired byValassis
Communications, Inc.Advisor
$58,000,000
AcquiredPerformics, Inc.
Advisory Communications
Advisor
Acquired by
Systems, Inc. (ACS) d/b/a
Undisclosed
ARAG Group
Advisor
Acquired byChannel Intelligence, Inc.
Undisclosed
Advisor
Acquired byMinicom Digital Signage
Undisclosed
Advisor
Acquired byOversee.net
Undisclosed
Advisor
Acquired by
TeleTech Holdings
Undisclosed $20,500,000
Advisor
Acquired by
The Dolan CompanyAdvisor
Acquired byWPP Group plc
Undisclosed
Advisor
AcquiredM3 Mobile Marketing
Undisclosed
Advisor
Acquired byMDC Partners Inc.
Undisclosed
Advisor
AcquiredPepperjam
Undisclosed
Advisor
AcquiredSilverlignGroup Inc.
Undisclosed $20,000,000
Placement Agent
Investment byTZP Group LLC
Acquired byRoper Industries, Inc.
Advisor
$367,000,000
Advisor
$157,000,000
Acquirede-Dialog, Inc.
Advisor
AcquiredFetchBack Inc.
Undisclosed
Advisor
SAS
Undisclosed
Acquired by
Advisor
Undisclosed
Acquired bySchulman, Ronca, &
Bucuvalas, Inc..
Advisor
Acquired by
Undisclosed
Quest Software
UndisclosedEmail Business of
Advisor
Sold to
One to One Interactive, Inc.Sold to
Ad Serving Business of
Advisor
Undisclosed
Aegis plcCo-Manager
$113,189,337
Secondary Offering
Issued Fairness Opinion
$17,450,000
Acquired byVerisign
PrePay Intelligent Network Solutions Business Unit of
Advisor
Undisclosed
Parthenon Capital LLCSold to
$55,200,000
Follow-On Offering
Co-Manager
Undisclosed
Acquired byAlliance Data Systems, Inc.
Advisor
Undisclosed
Acquired byCarlson Marketing Group
Advisor
Marketing One to One, Inc. d/b/a
Advisor
GfK
Undisclosed
Acquired by
Gridley & Company LLC10 East 53rd Street, 24th Floor
New York, NY 10022212.400.9720 tel212.400.9717 fax
Twitter: @gridleycowww.gridleyco.com