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SOFTWARE & SERVICES 14 JULY 2009
WEB 2.O WEEKLY
DAVID SHORE, CFA, MBA 416.860.6784
david.shore@researchcapital.com
Arun Thomas (Associate) 416.860.7666 
PANDORA RAISES $35 MILLION POST ROYALTY AGREEMENT
NEW ROYALTY AGREEMENT FOR WEBCASTING AND COPYRIGHT FIRMS
SoundExchange, a non-profit royalty collecting organization associated with the Recording Industry Association ofAmerica (RIAA), agreed this past week to a new deal regarding royalty rates for webcasting. Under the newagreement, large commercial webcasters will pay up to 25% of their revenue to copyright holders – well below the70% that could have been imposed under an earlier deal. While the deal was initially agreed to by three smallerInternet radio webcasters, Pandora Media, the third largest radio site (according to Alexa), also indicated that it wouldsign on to the agreement.
Online Media companies lead financing:
Two online media companies, Pandora (Internet Radio) and QuickPlay(Mobile Video), have secured the largest financing transactions thus far in July ($35 million and $12 million,respectively). Total capital raised so far in July is $66.1 million through eight transactions, averaging $8.3 million pertransaction. June closed with $180 million in financing on 36 transactions. The averages for the months of May(excluding the Facebook transaction) and June were $6.4 million and $4.7 million, respectively.
Financing Activity Last Three Months
4.78.36.40.020.040.060.080.0100.0120.0140.0160.0180.0200.0May-09 (excl FB)Jun-09Jul-09
   (   U   S   $  m   )
0.01.02.03.04.05.06.07.08.09.0
   (   U   S   $  m   )
TotalAverage
 
A weak price performance week:
The companies in our universe had weak stock price performances over the pastweek (for stocks with prices greater than $1) (Figure 6), with 30 companies showing negative returns on the week.Gravity (NasdaqGM:GRVY) led the group with a 33% return, while GungHo (3765-OSE) had the worst return,dropping 26.4% in the week.
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.researchcapital.comToronto 416.860.7600 Montreal 514.399.1500 Vancouver 604.662.1800 Calgary 403.265.7400 Regina 306.566.7550
 
 
 Page 2
THE WEB 2.0 UNIVERSE
Ninety two public Web 2.0 companies identified:
Our Web 2.0 universe contains 92 companies, with a combined marketcap of ~$52.5 billion (Figure 1). The average market cap for the group is ~$584 million (but a median of only $50.0million), with average trailing revenue of $153.8 million (median $53.6 million). The companies are also generallyprofitable, with a median EBITDA margin of 13.2%. On a valuation basis, the overall average is 5.3x trailing revenue(median 1.6x) and 9.2x trailing EBITDA (median 9.2x). Twenty of the companies have more than 500 employees.
Comparable Company Analysis > Web 2.0
Company NameLTM as ofTickerExchangeTradingCurrencyHQCurrentPriceUSD MarketCap ($m)USD LTM TotalRev ($m)USD LTM TotalEBITDA ($m)EBITDA%TEV/LTMRevenueTEV/LTMEBITDAEmployees
Accelerize New Media, Inc.3/31/2009ACLZOTCBBUSDUnited States0.5515.2 4.1 (4.4)NM4.9x- 11Actoz Soft Co., Ltd.3/31/2009A052790KOSEKRWSouth Korea 25,800 169.8 88.2 19.2 21.7%1.6x7.4x NAAQ Interactive, Inc.3/31/20093838TSEJPYJapan 55,200 32.4 66.8 4.2 6.3%0.0x0.6x NAAssociated Media Holdings Inc.6/30/2007ASMHOTCPKUSDUnited States0.020.9 0.1 (2.3)NM19.2x- 3Bigstring Corp.3/31/2009BSGCOTCBBUSDUnited States0.042.1 0.1 (2.0)NM48.3x- 4Betawave Corporation3/31/2009BWAVOTCBBUSDUnited States0.092.6 8.4 (12.6)NM-- 53Beyond Commerce, Inc.3/31/2009BYOCOTCBBUSDUnited States0.4018.0 7.1 (9.5)NM3.2x- 69Bright Things plc9/30/2008AIM:BGTAIMGBPUnited Kingdom0.014.1 0.3 (1.8)NM15.2x- 9BroadWebAsia Inc.9/30/2008BWBAOTCPKUSDUnited States0.2319.5 0.0 (4.6)NM-- 46CDC Corp.3/31/2009CHIN.ANasdaqGSUSDHong Kong1.42150.7 389.9 30.8 7.9%0.4x5.3x 2,227Changyou.com Limited3/31/2009CYOUNasdaqGSUSDChina37.612,068.6 222.5 135.1 60.7%8.5x13.9x 628China Gateway Corporation9/30/2008CGWYOTCPKUSDUnited States0.020.3 6.7 (6.6)-98.9%0.0x- 37Chinese Gamer International3/31/2009GTSM:3083GTSMTWDTaiwan 430 1,089.6 55.7 31.2 56.0%18.4x32.9x NACLICKER Inc.2/28/2009CLKZOTCBBUSDUnited States0.021.3 7.2 2.4 34.1%0.1x0.3x 22CornerWorld Corporation1/31/2009CWRLOTCBBUSDUnited States0.063.9 1.3 NM NM4.1x- NACyberplex Inc.3/31/2009TSX:CXTSXCADCanada288.9 70.3 7.3 10.3%1.2x11.7x NADADA SpA3/31/2009CM:DACMEURItaly6.15139.1 234.4 34.3 14.6%0.8x5.5x 578DXN Holdings Bhd2/28/2009DXNKLSEMYRMalaysia0.3522.4 76.8 10.6 13.8%0.5x3.4x NADibz International, Inc.NADIBZOTCPKUSDUnited States0.000.0 NA NM NM-- NADigitalPost Interactive, Inc.3/31/2009DGLPOTCBBUSDUnited States0.043.0 0.7 (2.6)NM6.3x- 7DigitalTown, Inc.2/28/2009DGTWOTCBBUSDUnited States2.0054.2 NM (3.0)NM-- 3Dolphin Digital Media, Inc.3/31/2009DPDMOTCBBUSDUnited States0.4523.3 0.8 (3.7)NM31.3x- NAEolith Co. Ltd.12/31/2008A041060KOSEKRWSouth Korea 755 41.8 14.1 (3.3)-23.6%3.1x- NAExtensions, Inc.3/31/2009EXTIOTCPKUSDUnited States0.104.4 NM NM NM-- 2Fluid Music Canada, Inc.3/31/2009TSX:FMNTSXCADUnited States0.6529.5 5.0 (6.9)NM4.1x- NAFrogster Interactive Pictures AG12/31/2008FRGXTRAEURGermany11.5037.7 3.2 (6.1)NM11.2x- NAGamania Digital Entertainment Co., Ltd.3/31/20096180GTSMTWDTaiwan55.20252.6 124.9 20.7 16.6%1.8x11.1x NAGameOn Co Ltd.3/31/20093812TSEJPYJapan 102,000 106.6 79.5 18.8 23.7%0.5x2.3x NAGeoSentric Oyj3/31/2009GEO1VHLSEEURFinland0.0450.1 5.9 (15.3)NM7.8x- 108Giant Interactive Group, Inc.3/31/2009GANYSEUSDChina81,705.2 219.0 NM NM-- 1,570GigaMedia Ltd.3/31/2009GIGMNasdaqGSUSDTaiwan5.42295.5 183.6 NM NM1.2x- 751Gravity Co., Ltd3/31/2009GRVYNasdaqGMUSDSouth Korea1.4540.3 43.7 12.0 27.5%-- 469Gree, Inc.6/30/2008TSE:3632TSEJPYJapan 6,450 1,557.1 31.8 11.4 36.0%46.3x- NAGungHo Online Entertainment, Inc.3/31/20093765OSEJPYJapan 185,500 229.7 111.4 20.0 18.0%1.8x10.0x NAHanbitSoft, Inc.3/31/2009A047080KOSEKRWSouth Korea 4,325 72.4 52.7 (14.1)-26.8%1.1x- NAIAC/InterActiveCorp.3/31/2009IACINasdaqGSUSDUnited States16.112,431.3 1,406.4 42.6 3.0%0.4x12.8x 3,200IAS Energy, Inc.1/31/2009IASC.AOTCBBUSDCanada0.1510.5 0.0 (0.8)NM-- NAiseemedia Inc.3/31/2009IEETSXVCADCanada0.104.4 1.5 (4.7)NM2.4x- NAJumbuck Entertainment Pty Ltd.12/31/2008ASX:JMBASXAUDAustralia0.3814.6 13.9 5.2 37.2%0.7x1.9x 72JumpTV Inc.3/31/2009TSX:JTVTSXCADCanada0.7068.8 18.1 (12.0)-66.6%3.2x- 237KAB Distribution Inc.3/31/2009TSX:KABTSXCADCanada0.6376.1 71.1 8.5 11.9%1.1x9.6x NAKingsoft Co. Ltd.3/31/20093888SEHKHKDChina5.47766.3 129.1 52.0 40.3%5.5x13.7x 2,271Lingo Media Corporation3/31/2009TSXV:LMTSXVCADCanada1.1912.8 0.9 (1.5)NM13.2x- NALiveWorld Inc.3/31/2009LVWDOTCPKUSDUnited States01.7 11.4 (0.0)-0.4%0.1x- NALookSmart, Ltd.3/31/2009LOOKNasdaqGMUSDUnited States1.1419.5 60.7 (3.8)-6.3%-- 90Magnitude Information Systems Inc.3/31/2009MAGYOTCBBUSDUnited States0.014.1 0.1 (3.1)NM-- 14Mixi, Inc.3/31/20092121TSEJPYJapan 605,000 1,005.4 130.3 46.2 35.4%6.8x19.1x NAModern Times Group Mtg AB3/31/2009MTG BOMSEKSweden221.001,841.4 1,702.0 260.7 15.3%1.4x9.2x 2,969MOKO.mobi Limited12/31/2008MKBASXAUDAustralia0.074.7 1.1 (2.3)NM3.2x- NAMyriad Group AG12/31/2008MYRNSWXCHFSwitzerland4.7092.2 40.0 0.8 1.9%2.6x- 405NEOWIZ Games Corporation12/31/2008A095660KOSEKRWSouth Korea 31,000 249.1 189.0 50.8 26.8%1.3x4.7x NANetDragon WebSoft, Inc.3/31/2009777SEHKHKDChina5.69388.0 87.0 34.4 39.5%2.9x7.4x 2,426Netease.com Inc.3/31/2009NTESNasdaqGSUSDChina35.014,496.3 470.6 305.9 65.0%-- 3,109NeXplore Corporation9/30/2007NXPCOTCPKUSDUnited States0.5832.4 NM (4.9)NM-- 19Ngi Group Inc.3/31/20092497TSEJPYJapan 30,550 40.9 95.5 11.5 12.0%-- NANorthgate Technologies Limited3/31/2009590057BSEINRIndia29.0520.7 114.3 (26.8)-23.5%0.2x- NAOpen Text Corp.3/31/2009OTEXNasdaqGSUSDCanada36.001,894.4 782.6 199.2 25.5%2.5x9.8x 3,400Openwave Systems Inc.3/31/2009OPWVNasdaqGSUSDUnited States2.29190.8 197.2 (2.1)-1.0%0.4x- 630Perfect World Co., Ltd.3/31/2009PWRDNasdaqGSUSDChina28.781,399.8 228.2 124.6 54.6%0.2x0.4x 2,096PNI Digital Media Inc.3/31/2009TSXV:PNTSXVCADCanada1.4542.8 18.7 0.4 2.3%2.2x- NAQuepasa Corp.3/31/2009QPSAOTCBBUSDUnited States1.0012.7 0.1 (10.8)NM-- 74OAO RBC Information Systems12/31/2007RBCIRTSUSDRussia0.75104.0 144.6 18.9 13.1%0.0x0.2x NAShanda Interactive Entertainment Ltd.3/31/2009SNDANasdaqGSUSDChina51.813,459.3 570.2 260.9 45.8%0.0x0.1x 3,124Shutterfly, Inc.3/31/2009SFLYNasdaqGSUSDUnited States12.00302.1 215.2 28.3 13.2%1.1x8.3x 514SK Communications Co., Ltd.12/31/2008A066270KOSEKRWSouth Korea 9,050 289.6 175.7 11.4 6.5%1.6x25.3x NASNAP Interactive, Inc.3/31/2009STVIOTCBBUSDUnited States0.454.9 3.3 0.9 28.0%1.0x3.7x 11SNM Global Holdings9/30/2008SNMNOTCPKUSDUnited States0.000.0 2.0 (0.7)-34.8%1.1x- 33Social Media Venures, Inc.12/31/2008SMVIOTCPKUSDUnited States0.320.0 0.1 (0.1)-60.5%0.0x- NASocialwise, Inc.3/31/2009SCLWOTCBBUSDUnited States0.8034.7 0.0 (4.8)NM-- NASohu.com Inc.3/31/2009SOHUNasdaqGSUSDChina58.922,254.5 460.0 200.5 43.6%4.1x9.4x 3,197Spark Networks, Inc.3/31/2009LOVAMEXUSDUnited States2.4049.4 54.3 11.8 21.7%0.9x4.2x 183SpectrumDNA, Inc.3/31/2009SPXAOTCBBUSDUnited States0.157.3 0.1 (2.6)NM-- 7 Tencent Holdings Ltd.3/31/2009700SEHKHKDChina87.0520,272.6 1,203.7 576.8 47.9%18.3x38.2x 6,194 The Parent Company8/2/2008KIDS.QOTCPKUSDUnited States0.020.5 112.0 (13.5)-12.0%0.2x- 347 The9 Limited12/31/2008NCTYNasdaqGSUSDChina8.65232.0 249.9 84.2 33.7%-- NA TheStreet.com, Inc.3/31/2009TSCMNasdaqGMUSDUnited States261.1 67.0 1.9 2.9%-- 310 Total Sport Online AS3/31/2006TOSOOTCNONOKNorway0.030.1 2.1 (1.0)-50.6%4.6x- 16 Tree.Com, Inc.3/31/2009TREENasdaqGMUSDUnited States9.59103.5 215.6 (13.3)-6.2%0.4x- 700Uniserve Communications Corp.2/28/2009TSXV:USSTSXVCADCanada0.071.5 22.5 0.1 0.2%0.2x- NAUnited Online Inc.3/31/2009UNTDNasdaqGSUSDUnited States7.00585.1 811.2 177.3 21.9%1.1x4.9x 1,469UOMO Media, Inc1/31/2009UOMOOTCBBUSDCanada09.0 0.6 (0.5)-78.2%14.7x- NAValueClick Inc.3/31/2009VCLKNasdaqGSUSDUnited States10901.9 591.7 105.5 17.8%1.3x7.6x 1,189VOIS, Inc.3/31/2009VOISOTCBBUSDUnited States08.3 0.0 (1.1)NM-- 4Webzen Inc.3/31/2009WZENNasdaqGMUSDSouth Korea3.2838.9 22.0 (0.5)-2.4%-- NAWizzard Software Corporation3/31/2009WZEAMEXUSDUnited States0.5124.4 5.6 (5.3)-94.5%4.6x- 110Worlds.com Inc.3/31/2009WDDDOTCBBUSDUnited States0.157.9 0.0 (0.8)NM-- 1WoozyFly, Inc.3/31/2009WZYFOTCBBUSDUnited States0.152.6 NM NM NM-- NAWyndstorm CorporationNAWYNDOTCPKUSDUnited States0.101.8 NA NM NM-- NAXING AG3/31/2009O1BC XTRAEURGermany30.13221.6 52.8 16.5 31.2%3.2x10.3x 239YedangOnline Corp.12/31/2007A052770KOSEKRWSouth Korea 7,900 94.7 52.3 11.3 21.6%2.0x9.3x NAYnk Korea Inc.12/31/2008A023770KOSEKRWSouth Korea 6,200 25.3 10.9 1.1 10.5% - - NAZipLocal Inc.3/31/2009TSXV:ZIPTSXVCADCanada0.010.3 2.6 (2.0)-78.3%48.3x38.2x NAHigh20,272.61,702.0576.865.0%48.3x38.2x6,194Low0.00.0-26.8-98.9%0.0x0.1x1
Average583.6153.833.68.1%5.3x9.2x870
Median49.753.60.813.2%1.6x9.2x376
 
Figure 1. Web 2.0 Universe Summary Source. Capital IQ 
 
 Page 3
CAPITAL MARKETS ACTIVITY (M&A AND FINANCING)
Online Media companies lead financing:
Two online media companies, Pandora (Internet Radio) and QuickPlay (MobileVideo), have secured the largest financing transactions thus far in July ($35 million and $12 million, respectively). Totalcapital raised so far in July is $66.1 million through eight transactions, averaging $8.3 million per transaction. June closedwith $180 million in financing on 36 transactions. The averages for the months of May (excluding the Facebooktransaction) and June were $6.4 million and $4.7 million, respectively.
Financing Activity Last Three Months
4.78.36.40.020.040.060.080.0100.0120.0140.0160.0180.0200.0May-09 (excl FB)Jun-09Jul-09
   (   U   S   $  m   )
0.01.02.03.04.05.06.07.08.09.0
   (   U   S   $  m   )
TotalAverage
 
Figure 2. Financings, Last Three Months Source. Company reports 
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